In the past few months, the stage may have been set for a possible nationwide real estate recovery. The Federal Reserve has determined to do everything possible to maintain 60-year low levels of interest rates for the next two years. Lenders have finally begun to loosen up underwriting standards for the approval of home financing. Many lenders are now willing to provide financing with 20% down in price ranges they had been limiting to 25% down. The widely-expected flood of foreclosure properties has never occurred in the Palisades. Many potential sellers have chosen to remain on the sidelines until prices show signs of increasing, thus limiting the inventory of homes available for buyers to select from.

As we begin the year 2012, the number of homes available for sale in Pacific Palisades is quite low.  There are only 70 homes on the market, which is 22 percent less supply than at the beginning of last year. 

We are often asked by both sellers and potential buyers what the various expenses are in the process of their sale or purchase of a home. The following is a summary of the traditional distribution of expenses associated with these transactions. It should be noted that many of these items can be negotiated by both parties as part of the Purchase Agreement, excluding some expenses that may be required by the City or the buyer’s lender to be paid specifically by the seller.

“An agent said that we should hire him because he would be a “fiduciary” agent. He explained that this meant he would give us all of the information we would need to make decisions and answer any questions about the sale of our home. Wouldn’t all agents do that?”  -    A longtime Santa Monica homeowner

We have often been asked what actions can be taken to maximize the benefit of the home marketing process. In considering these requests from a broad perspective, it became clear that many of the issues and challenges can be anticipated and handled effectively before they become problems to be overcome.

Generally speaking, there are three critical areas of concern in the acquisition or sale of a property. They are shelter, safety and financial security. The emotional and economic importance of each of these factors assumes priority in each of our lives on a distinctly individual basis. The influence of each factor shifts to reflect the changes in our lives and it may become necessary for us to let go of previously held positions in order to move forward. As the economics of the real estate market continues to shift, we are best served by a willingness to adjust to realities rather than to hold on to our former expectations.

How do we determine the “value” of the shelter, safety and financial security a home gives us? For both the buyer and the seller, it may help to consider the long-range picture.

“How can I tell if an agent is honest, sincere, and most appropriate?”

-  A long-time Santa Monica homeowner

Previous subjects we have covered in this column include the value of working with a buyer’s agent, some of the risks of buyers being represented by the seller’s agent, and home searching on one’s own versus with the assistance of a real estate agent.

It is almost impossible to perfectly time either the purchase or sale of any asset, especially real estate. Often when price movements have reached extreme highs or lows, they are about to change direction. With current average prices being 25-35% off from their 2007 peak, they are certainly far closer to a bottom if not already at that level.

As we enter the final quarter of 2011, and take a look at the Palisades market so far this year, some noteworthy observations can be made. There have been some recent articles in different publications that report “another dip in home prices due to high foreclosure rates and weak demand.” Another suggested that, “home prices in a majority of the nation’s largest metropolitan areas posted fresh lows” earlier this year, but that in many areas prices appeared to be somewhat more stable. The creator of a widely-followed index of real estate values which that quote was based on felt there was a chance of a continuing decline in home prices.  However, their index showed serious weakness in cities such as Atlanta, Chicago, Miami, Detroit, Las Vegas, Phoenix and similar areas. They also noted that the Los Angeles area was down less than two percent from last year.