Redfin: “Is This a Housing Market, or a Soviet Grocery Store?”

18 Apr

I’m going to borrow the title of a recent Redfin blog for this post.  Why?  Because I don’t think I could come up with a snappy headline that could come close to capturing the reality of the current market here in Los Angeles.

Many buyers are taken by surprise that their offer was not accepted (or even countered), or that their favorite home went into escrow while they were pondering whether to write up an offer.  This makes sense, of course:  for the past several years, media reports have continued to drive home the point of how terrible the housing market is.

Here in Los Angeles, however, the market has taken a significant turn over the past 12 months.  I encourage you to take a minute and read the link, but here’s a quick rundown of Redfin’s report.  And trust me: the numbers can be felt in the “real world” of real estate.

So here’s the gist:  Over the past year, home prices have been remained relatively stable.  This has brought many new buyers, buoyed by a sense of security that home prices have largely finished falling as well as continued low interest rates, into the marketplace.  Per Redfin, March 2012 saw a 24.6% spike in home sales in Los Angeles proper compared to February 2012; this is consistent with a month-to-month countywide increase of 25%.

And that’s good news for everyone, right?  Well, that’s only part of the story.  Home inventory has been shrinking considerably for the past 12 months.  Inventory in L.A. city limits was down 16.7% from February 2012, and a whopping 38.7% from March 2011.  Nearly every city in L.A. County had similar numbers.   This translates into fewer days on the market for most properties, and a more highly competitive bidding situation for buyers.

Of course, national projections are for an increase in foreclosures as lenders–who have lately slowed their pace of reclaiming distressed properties due to robo-signing scandals, among other reasons–begin to step up their efforts to foreclose on delinquent mortgages.   The true extent of this in the local marketplace is unclear, since major lenders and loan servicers have also been making efforts (some more sincerely than others) to improve the process for review and approval of short sales.  This may lead to a future increase in inventory, but in the meantime, buyers should expect heated competition for the best properties and the best neighborhoods.

So what shall a buyer do?  In fast-paced markets, a few pointers:

1.  Do not expect a screaming deal.  In fact, a full-price offer may not always be adequate.  I recently submitted an over-full-price offer for a condo buyer in West L.A. who was planning to finance with 20% down, only to learn that they were beat out by not just one but five all-cash offers.  This is not uncommon.

2.  When you see a property you like, act fast!  This means we should view the property as soon as possible.  If you like it, submit your offer quickly.  You may not be the first or the only offer, but it’s definitely better to be there early than too late.  On a similar note, I very strongly advise buyers to have pre-approval (NOT just pre-qualification) lined up with their preferred lender before viewing properties.  If you happen to find the right place, you’re in a better position to submit a quick bid. (If you are in need of a lender, I have several highly knowledgeable and responsive mortgage consultants who have served my past clients very well.)

3.  Come in strong.  By that I mean submit your most reasonable offer, or depending on the situation, even your “highest-and-best” offer.  In many cases, buyers do not have the luxury of making a lower offer with the expectation that the seller will counter back at a lower price than they may have been willing to make.  Of course, be wary of offering too high on an overpriced property–especially if you are financing.  A very strong offer is more than just about the price, of course, so we should look at the overall picture of the offer you are considering and discuss possible creative ways to make yours look more lucrative in comparison to any others that may have come in.

For sellers?  If you need to sell your home, and are in a position to do so, this is probably the most favorable time in the past several years for you to do so.  It’s important, though, to be sure your home is priced competitively–even aggressively–in order to get multiple bids quickly.  The faster you can start collecting offers on your home, the more you will be able to take command of the transaction.  Homes that come on the market overpriced still run the risk of languishing, only to later sell at a more significant discount.

If you want to discuss your particular buying or selling situation, please feel free to contact me.

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