Median home prices jumped double digits in 2013 as demand grew and supply dwindled. While many markets across the nation saw the real estate industry prosper last year, 2014 is expected to hold much more sustainable growth. But the key to true growth is in the hands of builders. In areas where available properties were at a minimum in 2013, home builders were boosting prices more than anticipated, which when coupled with rising mortgage rates, left builders surprised with the slowing demand.
In highly attractive areas of California, such as Beverly Hills, the median single-family home value fell in the latter half of the year while the inventory was simultaneously falling, a trend that is not often seen. According to statistics from Altos Research, a California-based data analytics company, the market began trending toward sellers in October 2013. The Market Action Index, which measures the local conditions to determine whether buyers or sellers are benefiting with 30 being the neutral point, was at 36.01. While it isn’t leaning too far into the zone of seller’s delight, it is gradually drifting further away from the hands of buyers.
However, with just about 144 properties available on the market as of January 24, the inventory in Beverly Hills is just a small pool. So what does this say about the conditions in Beverly Hills? Demand for luxury homes in the area may just have some people waiting to build rather than buy pre-owned homes.
“Builders are working hard to deliver homes in communities [where] home buyers want to buy,” Brian Jones, co-portfolio manager for the real-estate securities group at asset manager Neuberger Berman said. “Builders themselves have faced some challenges in terms of access to lots in the best communities.”
Cautious, Yet Optimistic for the Future
Just at the start of the year, the median single-family home value climbed to the highest seven-day average since August, but the weighted 90-day average shows prices around $3.53 million, which is lower than the weighted average for last February.
“The subdued level of home building in Nevada, Arizona, California and Florida is primarily a legacy of the glut of cheap, distressed homes [that] flooded the market during the recession and crowded out home builders,” Paul Diggle, an economist at Capital Economics wrote in a research note. “Now that this inventory is being worked through, we think that home building will enjoy a resurgence in these states.”
Looking ahead, the spring selling season will hopefully be coupled with a healthy home construction market so residents looking to move upwards can do so and those waiting for the right price shift can act accordingly to move the market along.
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(all data current as of 10/22/2017)
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