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Saturday, Jun 10, 2023

Condo Inventory Boost Not Expected to Affect Prices

The supply of condominiums available for sale in the San Fernando Valley has spiked dramatically in recent months surpassing the 1,000 unit mark. But don’t expect any bargain prices anytime soon. Experts say there’s no indication that a bubble is about to burst in the market despite the increased inventory. Rather they say, the record prices condominiums are commanding are persuading potential sellers to cash in while the getting is good. And while the supply levels have increased, there is still insufficient inventory to meet the demand. “The numbers a year ago reflected a severe lack of inventory,” said John Karevoll, an analyst with research firm DataQuick. “The numbers we have today are probably even a bit low, but they’re closer to the norm, so it just means the buyers out there are going to have more of a choice than they had a year ago.” According to the Southland Regional Association of Realtors, the number of active condominium listings in the San Fernando Valley jumped to 1,053 in September, a nearly 118 percent increase over the same period last year. The numbers have been creeping up for some months after several years when listings for condo resales hovered around 300 to 500 units. Some developers of new condominiums say they are watching the market closely to see whether the additional inventory is absorbed. “If the supply continues to increase, demand will end up falling off, and you’ll see prices coming down,” said Paul Daneshrad, CEO of StarPoint Properties LLC. Leveling off? But rather than a sign of weakness, most others say the recent increases are a correction, which may moderate the frenetic pace of appreciation seen in the area in recent years, but does not reflect any reversal on the way. “We escalated with our prices so quickly, we’re bound to get to a point where we’re going to level off,” said Michelle Wolkoys, managing director for real estate research and consulting firm The Meyers Group. For one thing, the increased inventory does not mean enough inventory to satisfy demand, especially since single family home prices continue to escalate. The median price of a single family home in the Valley reached $490,000 in September, nearly 25 percent more than the median price of a Valley home a year earlier. At those levels, many first time home buyers have been priced out of the market, and their only option is a condominium, where median prices now stand at $305,000, according to the Southland Regional Association of Realtors. “We expect the condo market to outperform the resale house market because of the appreciation,” said Karevoll at DataQuick. “That does push buyers down a notch, and there will be more pressure on the condo market than there was before.” Condominiums have always represented the entry level purchase for homebuyers, but when the real estate market took a dive in the mid-1990s, many were able to bypass condos and go straight to single family home ownership. Karevoll and others say that the market is simply returning to more traditional dynamics. Many of the potential sellers that have added to the inventory in recent months have done so because they fear that the price levels are peaking, and they hope to sell before the market tops out. In that sense, they may be right, many say. The rapid pace of appreciation in home values, for single family product as well as condominiums seems to be leveling off, experts say. More demand But that does not mean prices will actually decrease, because demand is continuing to outstrip supply and because the new product coming onto the market will continue to push prices upward. “I don’t think prices will go down because it wasn’t just supply and demand,” said Joseph Yoon, development manager for Millennium Enterprises, which builds new condos. “A lot of trends increased condo prices. It was materials, insurance and things like that. And the fact that new ones cost so much means existing owners know they can get that much more for similar product. It sets a new comparable and everything goes along with that trend.” Although the prices appear to be stabilizing somewhat, condominium prices are still escalating even as the number of listings has increased. For example, September’s median of $305,000 is virtually flat against the prior month, when the median price of a condominium in the Valley was $307,000. But in September, 2003, the median price for a condo was $259,900, reflecting an annual increase of more than 17 percent, according to the Southland Regional Association. At the same time, there has been little letup in the number of sales. Some 426 condos closed escrow in September, 2004, compared to 413 in September, 2003, the association reported. Still, the recent shifts could bring some good news to buyers. With the added inventory, the time it takes to sell a condo has lengthened, from an average of about 17 days to about 30 days now. And many are predicting the market will return to what they call more normal dynamics. For several years now, a buyer in the market for a condominium might have to select from just one to three properties,” said Barry Burnett, the owner of Burbank based residential brokerage Barry Burnett Realty Inc. Now the choices are likely to be greater. “The norm would have to be that the buyer would have the ability to assess from 10 to 15 properties instead of one to three if they were fast enough,” Burnett said.

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