NEWS ARTICLE FROM THE SANTA MONICA DAILY PRESS

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Home market stays strong
By Daniel Archuleta | Published  02/7/2008 | Local |
Home market stays strong
By Daniel Archuleta
Managing Editor

CITYWIDE As the real estate market continues to show signs of weakness, Santa Monica’s property values continue to persevere through what has become a protracted decline across the nation.

Local experts have varying opinions as to why, but they do all agree that the primary strength of the area’s market comes down to the old saying — location, location, location.

The demand to live in one of the area’s premiere cities continues to propel prices upward while many communities across Southern California — and the country for that matter — are seeing their values plummet as the number of available properties goes up due to both foreclosures and the fallout caused by adjustable rate mortgages pricing people out of their own homes. This hasn’t been the case in Santa Monica.

There have been few foreclosures in the area during the past fiscal year and many buyers looking to finance a purchase are often affluent and have little problems securing a loan.

“In the premium areas you are always going to have that effect. In those areas there will always be demand,” said Paul Habibi, a lecturer at UCLA’s Anderson School of Management. “Beachfront properties have always been more insulated against downward trends in the market.”

Quality schools, top-notch shopping, the proximity to the coast and plentiful employment opportunities have buoyed values with the average median home price in Santa Monica being $950,000, according to the California Association of Realtors. Single family homes are selling for an average of $1,691,750, while condos are fetching an average of $783,000.

The density of the area also plays a role in strong housing values.

“There is a limited amount of space for property,” said Larry Weiner, owner of Flans & Weiner Inc. “There is a lot of money chasing property on the Westside. Whenever you have a lot of demand it keeps prices going up.”

Some believe that the relative low number of properties currently available in the area keeps prices down. Habibi’s take is that with less volume comes increased demand. Considering that many potential buyers consider Santa Monica a desirable place to live and raise their families, there will continue to be plenty of suitors for the scant number of properties on the market.

“When volume is low, it is usually harder to find a bargain in a particular market,” Habibi said. “Even at the height of the recent real estate boom, there wasn’t much volume being swapped.”

At the apex of the market’s activity in 2004, there were 333 transactions, according to the Multiple Listings Service. There were just 270 transactions in 2007 and many in the industry believe that number will again decrease in 2008 if current trends continue throughout the year.

“Things have been pretty slow as far as mortgages go. Buyers want to know the value of a property before they place an offer,”
said Drake Goosby, the owner of Santa Monica-based Goosby Valuation. “The same goes for investors. There is not a lot of turnaround in properties in the area right now.”

Goosby said that the decrease in activity is partly due to tepidness by prospective buyers. He believes that negative media coverage of the real estate market has buyers nervous about future home values.

He recently was contracted by a foreign investor who had no plans to buy now, but wanted to gauge the market for potential purchases later in the year depending on what direction the market is headed at the time.

“I’m hearing people say wait until the election is over. They want to see how the recession is going to pan out before jumping into the market,” Goosby said. “I don’t think people are worried about the market bottoming out, but people just want to make sure before they purchase.”

With potential buyers weighing their options more carefully these days a reversal of the area’s market fortunes may be inevitable.

Local real estate agent Simon Salloom has noticed a slight decline since August of 2007. While the overall numbers were positive last year, he has witnessed a definite slow down in the local market.

“It hasn’t been too remarkable, but there has been a slight dip,” Salloom said. “But then again, there hasn’t been many foreclosures in the area so things continue to look positive.”

While Santa Monica may be in for a soft landing, the rest of the state should brace for a possible protracted decline. UCLA’s Habibi thinks things will have to get worse before the market begins to see a rebound.

“I sense that there is going to be a continued decline for the next year to 18 months before we see a stabilization,” he said. “Investors have fared better in premium neighborhoods that are coastal, so it remains to be seen if these areas will ever see a decline.”

 

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