1Q 2003 - THE SANTA MONICA REAL ESTATE MARKET STAYS STRONG

Home and income property sales are up. Condo sales are down. Land sales stayed the same…that’s what happened with property in Santa Monica in the first three months of 2003. According to the Multiple Listing Service, a total of 240 Santa Monica properties changed hands – the high seller was a 28-unit apartment building on San Vicente, which went for  $7,500,000. The bargain bottom property was a 2-bedroom 1-bathroom condo near the freeway that went for $124,900.

Although sales are down a bit from 2002, prices continue to rise. For the first three months of 2002, 247 properties changed hands, the high sale of first quarter 2002 was a single family residence for $5,500,000 the low was a condo for $48,600.

“Traditionally, the first quarter as not as active as the remainder of the year. But, because of the low mortgage rates, there seems to be the same activity as last year at this time, ” observed John McIntyre, Vice President of Boardwalk Realty. “As we enter the second quarter, activity is still strong and multiple bidding is a frequent occurrence in the Santa Monica marketplace. If interest rates stay at their current level, we should see this activity continue for the remainder of the year.”

California home sales are contrary to the rest of the country. According to the National Association of Realtors, the rate of home purchases fell 8.1% in February to the slowest rate since August 2000. The Commerce Department noted that sales were down in every region of the country except the West.  The first quarter is traditionally the slowest time of year for home sales. The fact that our country is at war is also keeping people from making property purchase decisions.

"What effect will the invasion of Iraq have on home sales? Not very much over the short term. Some buying activity may get deferred, but that will be temporary and the market will catch up again after a few weeks,” observed Marshall Prentice, president of DataQuick information services, which specializes in real estate news and information.
“Long term effects are harder to anticipate. The cost of the war will certainly add to the federal budget deficit which in turn could bring interest rates up."

Nationally, mortgage and loan applications remained relatively unchanged, but there is a growing skepticism for the real estate market. The recently released International Monetary Fund study titled “When Bubbles Burst” found housing booms in industrial countries, such as the one experienced in the United States in the last two years, have been followed by busts 40% of the time. (Housing prices have to decline 14 percent to qualify as a bust.) The study stated that “housing price busts were found to occur less frequently than stock market busts in industrial countries, but they tended to last almost twice as long and have greater economic consequences.”

Median home prices in the United States have skyrocketed in the last two years, climbing more than 13 percent, according to National Association of Realtors statistics. Santa Monica residents have watched their real estate market balloon since the city lifted rent control restrictions on January 1, 1999. In many areas around town property prices have more than doubled.
A rise above and beyond the national average has been true throughout Southern California. In Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties, and in the Southland, prices are continuing to rise. According to DataQuick, in February, a total of 22,516 new and resale houses and condos were sold throughout the region. That’s up 0.1% percent from 22,484 properties for February last year.