“Price is what you pay; value is what you get.”

While there is no way for me to know where your property is located, how many square feet your property is, the size of the lot your property sits on or the improvements you have made to your property I can state with confidence that you paid less for it than what you would get for it in today’s market. In other words, your home’s value is at an all time high because of three reasons.

 

Sales Prices

The 2008 financial crisis saw median sales prices in the San Fernando Valley fall an unprecedented 28.6% from the year before – more than the price plunge during the Great Depression of 1929. In 2007, home value’s were at a historic high; this high was surpassed in 2017 and has only continued to rise. Home values are higher now than ever before. The graph below, produced by data from the Southland Regional Association of Realtors (a governing board of the National Association of Realtors) highlights median sales prices in the San Fernando Valley over the last 20 years.

 

Inventory

The law of supply and demand states if there is a decrease in supply while demand remains the same then prices tend to increase. As illustrated in the below graphs, inventory in the San Fernando Valley has decreased in comparison to this time last year, therefore, we can conclude that in today’s real estate market there is a decrease in supply/inventory. What do we know about demand in today’s market?

Interest Rates

Supply is an indication of seller’s listing their property on the market; demand is a reflection of buyer activity in the market. We know that less sellers are listing their property; what do we know about buyers? Over the last 12 months the FDIC has reduced mortgage interest rates to a historic low of 3.75%, a reduction that has spearheaded buyer activity in the real estate market. In other words, regardless of the high prices, there is strong demand to buy in today’s real estate market because of low interest rates.

New homebuyers have justified the high sales prices because they have been able to secure 30 year fixed loans at incredibly low interest rates and purchase properties at near, if not above, the same rate as this time last year (as seen by the graph below). Subsequently, less properties are hitting the market while roughly the same number of properties (if not more) are being sold—the law of supply and demand.

What does this mean for home value and homeowners thinking about selling?

The combination of low inventory, historically low interest rates and record high sales prices have created market conditions that could not be more perfectly suited for a seller to collect top dollar for their home. If you are a homeowner thinking about selling, whether your motivation is to upgrade or to downsize, THE TIME IS NOW. While the existence of highs and lows in a market are inevitable, predictions about the extent and timing of each phase in the cycle are not as dependable. Everyone knows it’s a seller’s market, the question becomes for how much longer until we see the other side of the cycle. It is in the best interest of office and our current president — on the cusp of a re-election opportunity — to create a perception of a strong economy, to provide consumer confidence and to make our dollar feel strong by allowing Americans to feel good about the value of one of their biggest investments — their home. Timing is key. I believe advantageous sellers will reap big rewards over the next 6-10 months because market conditions beyond Summer of 2020 are uncertain.

ADDED NOTE : the market is especially suited for a homeowner who has intentions of selling their home and upgrading to a new home in the luxury market ($1,500,000 +). Studying the luxury market I have been seeing price reductions of 20% or more at a much higher frequency compared to recent years.