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2019: SoCal Residential Real Estate – Reading the Tea Leaves

aerial view of city buildings
Photo by Jamie McInall.

2019 has arrived and as usual with lots of prognosticators out there ruminating on how things will go in this coming year. For potential home sellers in SoCal, here are five data-based takeaways to kick off the New Year:

  1. Residential Real Estate Cooling Off in SoCal – after 6 years of a strong seller’s market here in Los Angeles, a couple of factors have combined to cool the market down. First, prices have risen so much that housing affordability has hit a new low – meaning that less and less people can afford to buy at current prices. Second, interest rates have been creeping up (although they have softened a bit at year end), which also affects affordability and home pricing.
  2. Repairs & Staging Are A Must: If  you are planning on selling this year – You will need to put your property’s best foot forward. Invest the money in painting your home, and do any necessary repairs that you have been procrastinating on; staging an empty home, or decluttering and making your home look as good as possible, will be critical. With less buyers out there and the balance shifting from seller to buyer, you need to remove any possible hurdles to your home being an enticing place to live. If it’s a house, spend some energy on curb appeal to make your home pull people in.
  3. Pricing Accurately: Have your real estate agent dig into the comparable sales to make sure that you are priced right. Overpricing in this market will lead to no offers, which leads to a property sitting on the market for a long time, which leads to people wondering what’s wrong with it. In this market the wise seller will price realistically.
  4. Seriously Consider All Offers: Do not reject the first offer out of hand if it is way below your expectations. Negotiate and see how strong the buyer’s interest is. And consider all the terms: an all-cash offer which closes in two weeks with minimal conditions, may be worth the lower profit, than trusting in a higher offer with financing that is not solid. If you are needing to sell this year, then be realistic – if you have owned your property for at least three years, your values are up and you have done well: be willing to take a fair and reasonable offer. Greed can kill deals and leave sellers floundering with a stale property.
  5. Keep An Eye On Interest Rates: Every uptick in the lending rate for a 30-year mortgage causes a downward pressure on the number of buyers who can afford to buy, and in turn will lead to downward pressure on sales pricing. We are already at a ten-year low in affordability, and wages although increasing modestly in 2018, are still stagnant compared to real estate appreciation.

For Potential Home Buyers, here is the outlook for 2019:

  1. Smaller Buyer Pool: If you are in the market now, the good news is that the number of buyers you are competing against has shrunk, so your chances of bagging the home you have been dreaming of, has increased.
  2. Protect Yourself Against Increasing Interest Rates: If you are all-cash, then skip past this bullet item. But if like most buyers, you are looking at borrowing, pay close attention to the loan rates floating around, and if you are thinking of buying this year, get your lender to give you a loan rate-lock to protect you against interest rate increases before you buy. At the end of 2018, interest rates were up at 4.50% percent, but with some of the political and global turmoil factoring in, lenders have softened their rates slightly. The likelihood is strong that lending rates will rise in 2019, so shop around and secure a loan now while the interest rates are softer.
  3. Offer Pricing: In Los Angeles, every neighborhood has its own micro-trends. If you are looking in the super-hot neighborhoods like Venice or Highland Park, look at how quickly other homes have been selling, and how close or over asking price they are closing at. Look to see if there is some price softening happening in the neighborhood you are interested in. Be practical in your offer: If you love the property, and would be disappointed to not secure it, writing a low-ball offer (unless you come in all cash and few conditions), will not win you points with the seller. On the other hand, if it’s a home that has been on the market for a while, then you can put some pricing pressure on the seller. Your agent should be able to talk to the listing agent to gauge how motivated the seller is, and what numbers will likely work. If on the other hand, it’s a rare penthouse unit in high demand or a perfect turnkey A+ property, there will still be lots of interest, and a low-ball offer will not serve you.

Natalie Bergman is a licensed realtor with Architecture8, who has worked in residential real estate for 10+ years. 

Playa Del Rey has been one of the hottest neighborhoods on the Westside, as people flock to the newly rebranded “Silicon Beach” area for tech jobs.

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