Early Signs of a Prosperous 2012
by Nick Segal on January 23, 2012Is it me or is everyone out there experiencing a different, more exuberant energy and optimism about this New Year? Could it be that the perception of our economy is recovering based on reality? Normally, perceptions move markets. In this case, the housing market correction may be sneaking up on everyone before they have the wit to realize it.
Three weeks into 2012, at Partners Trust, we are experiencing activity in the Los Angeles Real Estate housing market reserved for May, June and July and we love it. Multiple offers in price ranges from $600,000 to $3,000,000 are popping up from Santa Monica Canyon to the Hollywood Hills. And if you try to find a “reasonably” priced piece of dirt to build on, expect 2 to 5 offers easily from both developers to owner-users.
So why is this happening? I think there are a host of reasons that point to a Los Angeles economy that is finding more stable ground and a perception that perhaps we are at or very close to the bottom of our housing market correction.
Consider that interests for loans are priced from the high 2% rates to the low 4% range. Now that dirt is no longer cheap, we must come up with a new phrase to sum up the super low rates to borrow money. Most recently reported in the Los Angeles Times, the “jobless rate falls to 11.1% in California” with more jobs for “white-collar industries and construction.” Still too high, we’re seeing a jobs recovery and that is most reassuring.
As economists will profess, the key to an economic recovery hinges on housing and construction. Perhaps the new world order is that a recovery can ignite without housing, bringing it up in its wake. In another report from the LA Times, Alejandro Lazo reports that “home sales rose nationally in December, marking the third consecutive month that the market has shown improvement.”
Cash is funding more purchases (roughly 1 in 3 purchases) as well because the returns found in many other investments are below that of the cost of the money to borrow, so why not use the cash?
I’m not saying that we won’t potentially see further decline in home prices across the nation, but in our backyard called Los Angeles, based on the indicators we’re seeing in the trenches, we are seeing a far rosier picture being created.
How is your industry faring as the year gets started? Are you seeing signs of positive recovery in your arena? We’d love to hear your perspective.
And in an election year, count on the powers that be to present our economy in as healthy a vantage point as possible.
Nick, you bring such great information to our current buyers and sellers. Just the other day I spoke with an out-of-state cash investor regarding income property in the Conejo Valley. It is happening, we are seeing it in many markets across Los Angeles.
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