Best Time to Buy - When Rates Are High, When Market Crashes, 20 Years Ago

If you can't see that a market has crashed, or can't stomach rates that have doubled since last year, and missed the boat 20 years ago, then you're not ready to buy, and may never buy.

But fortune favors the brave, because those who bought back in the 90s when rates were about 8.5%, were rewarded very handsomely whether they sold at the 2007 height, or kept the property, refinanced in 2005, then again in 2021, or ended up selling in 2021-2022 and used those doubled profits to buy a house of their dreams with a huge down payment in 2024. So you can "play" the real estate market and win.

NAR Settlement - Several Changes in the Real Estate Industry

 News that will affect the real estate industry is happening--largely affecting the buyer's side of things. This is all subject to court approval, and could take months to go into effect. 

The main takeaways are:

• Listing agents can no longer offer buyer's broker compensation on any MLS boards
• Buyer's Broker compensation offers can still be made (Meaning offers may be made to seller asking for Buyer's broker compensation)
• Buyers must now sign a Buyer's Rep form with an agent before any real estate activity is done
• Commissions will continue to be negotiable via contracts and Buyers may ask Sellers for their Broker's compensation

The new laws are not yet set in stone but expected to go to into effect in July 2024, but more details to follow as things solidify, get modified, added, deleted, etc.

I have to ask, is this any different from how attorneys operate? Or a CPA? Or if you hire any specialist? 

How will this affect all sides? Some possible scenarios:

• Buyers may be hurt the most because on top of the high real estate prices, they're going to have to pay for a buyer's agent if they want representation (this is basically how it's worked in NY). Of course buyers don't have to use a buyer's agent at all, but then buyers will likely pay more for the house because there won't be negotiating done on their behalf. 
• Sellers and even seller's agents can choose to pay buyer's agents or not. This will become a negotiating point but will likely continue to remain competitive. 
• VA and FHA loan buyers will likely lose out the most because they won't have the extra funds to pay for a buyer's agent.
• Sellers could end up with less buyers because many buyers won't be able to afford to pay a buyer's agent. 
• Sellers may still have to pay a buyer's agent to remain competitive in a slow market.
• Commissions may be allowed to be listed on non-MLS websites.
• Buyer's agents and buyers may only want to buy properties in which a Seller is offering compensation the buyer's agent, so that the buyer doesn't have to pay the buyer's agent.
• Listing agents may be asked to draft offers for buyers, but again, a buyer's representation agreement is now mandatory.
• More buyers may pay for and hire an attorney to draft up an offer. 
• Property values likely won't change much if at all, with extra being charged to the buyer.
• Buyers will scramble to buy before July 2024 to avoid the possibility of paying a buyer's agent
• Who pays the buyer's agent, if any are involved? Seller, Buyer, or BOTH. No longer is it being offered by the listing agent.

Be Ready Now, Don't Start Getting Ready

Whether you've decided to sell or buy, one of the most important things in this market is to be ready to go NOW. Not "about to get ready" or "planning to get ready". By then, it will already be too late. 

Buyers who are ready with a preapproval or proof of all cash funds are able to make an offer the moment they see something they want to buy. So many buyers lose out on great propertie because they're not ready with their documents.

Sellers too, who should be listing at an opportune window, miss out on busy buying months just because they didn't hustle to remove clutter, paint that living room, or repair the front door dent. These things matter, and the sooner you get it ready, the better.

DTLA Deals of the Month

Santee Village - Cornell Loft #201

Mills Act for up to 70% off property taxes

1130sf - 1 bed 1 bath 1 parking space

Corner unit

$525K

https://www.themls.com/mlslistingphoto/listing/slideshow/#/23-314105

Eastern Columbia Loft #403

Mills Act for up to 70% off property taxes

940sf - 1 bed 1 bath 1 parking space

East facing unit

$499K

https://www.themls.com/mlslistingphoto/listing/slideshow/#/23-336555

Flower Street Loft #302

1188sf - 1 bed 2 bath 2 parking spaces

$624,999

East facing unit

https://www.themls.com/mlslistingphoto/listing/slideshow/#/23-339649

Home Sales Declined in 2023, Expected to increase in 2024

Spring of 2024. That's when rates may noticeably ease, and therefore open up the market to more buyers. Right now there's no inventory and not much affordability. 

The sweet spot is in homes bought in 2008 and 2022 and either held, or doubled their value in 2017, and tripled their value in 2021-2022.

1 in 3 Buyers in Major US Cities Made All-Cash Purchases

7% interest rates? Not a thing for 1 in 3 buyers. According to Redfin, a large amount of homes were purchased with cash. No doubt many of these buyers will refinance once the rates drop.

https://www.redfin.com/news/all-cash-homebuyers-september-2023/

Mortgage Rates Drop for First Time This Year

Finally, a small drop in mortgage rates down to 7.5%. This will bring some buyers back to the market, and keep prices steady despite the holiday slowdown.

https://www.cnn.com/2023/11/09/homes/mortgage-rates-november-9/index.html

Mortgage Rate or Sales Price -- Choose One

In just about any market, you have to choose between a low interest rate and a high price, or a high interest rate and a low price. It's just the way of housing supply and demand.

Between 2020-2022, the interest rates were low, but prices were astronomically high. We're talking overbidding by 25-30% in some cases. Ridiculous--just to get a rate that you're going to refinance down the line, pay off or end up selling before the 30 years is up? The wiser thing to do is to buy at a discount and refinance later. 

You buy a property worth $1M for $1.3M, at a 3% interest rate. You're paying nearly $3750 a year more on property taxes.

You buy a property worth $1M for $950K, at a 7% interest rate. You're paying $4375 LESS a year in property taxes, and also get a tax write-off on the mortgage interest, so you end up paying about the same (or less per month if you put a bit more down to offset) as the $1.3M house. Not only that, you'll end up refinancing when mortgage rates drop, or having enough equity in the shorter term future to cash out or trade up. 

“Outperforming the majority of investors requires 

doing what they are not doing.” 

- Sir John Templeton

Buying Now Means Holding for 5 Years

Despite interest rates near 8%, prices have not come down much. If you're going to buy now, expect to hold for at least 5 years.

As they say in real estate, "the best time to buy real estate was 5 years ago."

Rare Opps + Deals in DTLA

1100 Wilshire #2610

680sf - $559K

5 Parking spaces, yes, 5 reserved spaces come with this 1 bed/1 bath loft-style condo with spectacular city views. Building has it all: rooftop deck, pool, panoramic views, hot tub, outdoor dining, gym, media room 24/7 front desk security, dog run, etc. 

849 S. Broadway #307

Eastern Columbia Lofts

1110sf - $849K

Rare balcony unit and 14'+ ceilings. This spectacular Art Deco building has it all. Rooftop pool, 24/7 security, Gym, lobby, courtyard, and Mills Act tax savings. 1 parking space w/ EV Charger

1111 S. Grand #613

Elleven Lofts

930sf - $595K

Beautifully maintained east-facing loft with dedicated parking space w/ EV Charger, rare valuable deeded storage unit.