On October 28, 2006 The LA Times had an article on page 2 that should have been on page 1. Permits issued in September were the fewest since 1996. September is when builders are setting up projects for the spring. This means that there will be a lot fewer new homes for sale in March, April and May which is our traditional buying season.
Builders still buying home sites are no longer willing to look at properties that are not premium locations. Marginal locations on busy streets or smaller lots are not being sought. In the beach cities this translates to a slowdown in sales of many older smaller homes on buildable lots. In Manhattan Beach you are seeing more starter homes on the market under $1,000,000 as builders are no longer competing with ordinary homebuyers. Currently there are 14 homes listed from $798,000-$989,000 that would have been bought by builders a year ago. The same is true for buildable lots in Redondo Beach. Builders are being very selective in their purchases.
Most of you may not think a drop in new construction permits means much but a drop of almost 50% is very important and will have a big impact on the future housing market. As builders sell off their existing inventory they will not be replacing it on as large a scale as in past years. Potential buyers who want new construction may not find as much available. Most people considering a new home in our area have an existing home to sell. If they can't find something to buy they won't be putting their current home on the market. Buyers may see inventory decrease in the next 6 months.
Right now there are 42 new homes for sale in Manhattan Beach. In January the number could easily drop to 32 new homes for sale; that's only 5 sales a month in November and December. If builders are not replacing inventory as it sells it won't take long for the inventory of new homes to be depleted.
The same is true for new townhomes in Redondo Beach. The total inventory level has been almost constant since June. There are usually 120-130 townhomes available in North Redondo. Current inventory is 121 properties. Only 33 are new construction. Since October 1, 2006, 12 new construction units have closed escrow and 8 are now pending. However in the same period only 10 new construction units came on the market. That translates to 20 going off the market with 10 replacements. If this trend continues there will be few new construction units on the market in the Spring and overall inventory will be down.
All of you who are thinking of buying but are waiting for prices to fall another 25% might find youselves out of luck. Prices have dropped about 5-10% in the South Bay and they seem to be leveling off. I know every bubble blog writer is saying prices will go down to 2000 levels and REALTORS know nothing about real estate markets. Here's what REALTORS know that bubble blog writers don't.... Most people buy a home to live in for a minimum of 5-7 years. No matter what the state of the market.. good, bad or neutral.. people buy and sell homes. A good deal is what you get after you buy. Most people who are waiting for the market to come down aren't really buyers... if they were they would have bought in 2000... oh but... in 2000 they were waiting for the market to go back to 1995 prices and in 1995... you get the idea.
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