Current State of the Playa Vista Market
It has been a wild 2+ years, but all good things must come to an end sooner or later. Exit the major supply and demand imbalance that has led to 30-40% price increases since the beginning of 2012 and enter market equilibrium. What a crazy thought that is as we have been going through dramatic boom and bust cycles for the past dozen years. First came the sub-prime years from 2002-2007, then the music stopped from 2008-2011, then money became irresistibly cheap fueling new price highs from 2012-present. Now as housing affordability becomes a challenge and many sellers and investors who are pleased with their recent gains cash out, supply threatens to exceed demand for the first time in several years.
This new market will be very different from the end of the last boom in 2007. For one, most people who have purchased in the past 5 or 6 years have skin in the game, lots of it. Low down payment loans are few and far between, and those that do exist require unfathomable amounts of documentation, so most buyers have been putting down 20%+ since Fannie and Freddie backed loans became the norm again. Secondly, the recent rapid price gains have given even more equity to those who purchased at discounted prices, so very few people are going to be walking away from 30-40% equity in their homes, especially with the low interest rates that are attached to their loans. Even if supply and demand factors turn very much in favor of buyers, we will not see the large numbers of foreclosures and short sales that massively accelerated price declines last time. Finally, with rents having increased 15% or more during this time, the alternative of renting vs. owning is far from attractive.
In Playa Vista, this trend is becoming clear. In January-March, it was rare to see more than 10 resales on the market at any given time. Since May, it has been no less than about 25. Some of this is the summer selling season, but more of it has to do with buyers now lacking urgency or there just being fewer of them than before. Interest rates are still amazing, but if there are many more properties to choose from, the urgency decreases across the board and buyers negotiate harder, reducing the number of accepted offers. As more homes are listed than are sold, this trend is compounded.
The new homes being built in phase II have led to more sellers in the currently constructed homes looking to move, thus increasing inventory. This may lead to a slight price correction in the Playa Vista market prior to the market at large, however it still remains a good time to buy, especially if you are planning to stay in the home for several years. Interest rates are at one year lows and any correction is unlikely to be severe, especially as Playa Vista gains prestige in terms of Los Angeles housing locations, Playa Vista Elementary and the proposed middle school attract families, and the “Silicon Beach” job market remains strong.