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.

Life, Interrupted; Real Estate, Still High

Seriously, what is going on? Stock market is up, real estate is up, employment is down, confidence in the economy is down, and the world is a really uncertain place, yet real estate activity continues. Even in a pandemic, people need a place to live. Whether you're employed or not, you need shelter, and you have so many groups of people who are going through different things and are keeping real estate activity going and propping up prices.

What I've been witnessing recently:

1. People downsizing into rentals after selling their homes

2. Couples cohabitating to save money

3. More people converting to roommate situations

4. People panic selling

5. People selling with the equity to buy

6. People buying because of low interest rates

7. People wanting home offices

8. People moving around because they work from home

9. People holding on to wait out the storm before selling

Interest Rates Still Amazing for Buyers

While prices are high, they are plateauing in some areas and combine that with low interest rates, it's still better to buy than rent. At least you can build equity over time. At least you can rent out the place if you need to, and rents in LA are high. At least you can write off some of the property expenses. At least you can have stability from rising rents and unpredictable Landlords.

Areas that are exciting because of changes, new development, public transportation access, and overall a range in prices:

1. DTLA of course! Still one of the most desirable areas because of the FWY access, public transportation is growing in the area, and many companies are relocating to DTLA:

2. West Adams is a huge Transportation Priority Zone. Tons of development happening along Adams Blvd, and spillover from Culver City and Mid City plus some beautiful Craftsman & Spanish gems are making this neighborhood a good buy.

3. Highland Park has been happening for a while. And it's still going strong because of the amazing stock of homes (many that still need polishing, which means there's still room for growth and value), a very small amount of apartment housing (most are SFRS), hillside views and interesting topography, access to Goldline, and the fact that it's sandwiched between the best of the eastside areas like Pasadena, DTLA, Eagle Rock, Frogtown.

Sad Facts About Current LA Real Estate

1. You will likely have to overbid to be in the running

2. Rents are super high everywhere

3. Cash buyers are lowballing and Sellers are taking the bait (but then Sellers do a multiple counter back and drive the price right back up)

4. Unless your budget is about 1Mil (Eastside) and 2Mil (Westside), you will likely be getting a less than perfect looking house

5. Prepare to downsize from what you originally wanted

6. Prepare to expand your search into areas you never thought you'd venture into

7. Prepare to submit noncontingent offers

8. Expect to forego any requests for repairs--Sellers are basically not wanting to deal with buyers who pick apart the property

9. Prepare yourself for a possible rejection or what seems to be an unreasonabl counteroffer to your offer

Tax Reform & Real Estate - Basic Things You Need to Know

Overall thoughts: Buyers getting a loan of more than $750k will be hit. This will affect the sale of properties with loans above this amount as some buyers may have become reluctant.

1. Effects on the immediate housing situation:

2. Current homeowners are in the clear. But from 2018 on, anyone buying a new home will only be able to deduct the first $750,000 of their mortgage debt. That's down from $1 million. This $750,000 is across multiple homes, not per home. So if you wanted to buy two homes with a 500k mortgage each, you will have 1Mil in mortgage debt, and you can only deduct 750k of that.

3. Homeowners who sell their house for a gain will still be able to exclude up to $500,000 (or $250,000 for single filers) from capital gains, so long as they're selling their primary home and have lived there for two of the past five years.

Rental and Sales Prices Going Up in 2016

It's 2016, and there's no sign of a housing slowdown according to a UCLA's economist, David Shulman. Rents are expected to climb by 4.5% this year over last year, and housing prices are expected to rise 6% over last year. What's causing the rise in prices is low inventory of homes for sale as owners are holding on for even higher returns. And the recent rise in interest rates are keeping some renters out of the sales market for longer.

The reality is that first time buyers are frustrated. The upside is that interest rates, while up from last year, are still pretty low in general. 2017 could have another interest rate hike which is why some buyers who plan to hold onto their property for a while are buying now before things get worse.

Game Changing Development For Southpark

First it was L.A. live. Then came Evo, Luma, and Elleven that changed the area.  The next significant condo developments to change the area in the next few years and increase values for the surroundings:

1. METROPOLIS - 18-story hotel, 38 story condo, 40 - story condo,  56-story condo with luxury retail space.

2. FIG CENTRAL - 53-story and 38-story towers with luxury condos and the Roberto Cavalli  Hotel.

3. CIRCA - Two 35-story towers with approx 650 luxury apartments for lease.

4. 1020 S. FIGUEROA - 42-story,  650 unit condos and 32-story W Hotel.

5. TEN 50 - 25-stories, 121 boutique style condos.

Why DTLA is So Hot

The real estate situation in downtown these days can be summed up in two ways: Homeowners are thrilled at the rising prices and buyers are frustrated at the rising prices. Many are wondering when the prices will go down. In my opinion, prices won't go down because prices are similar to the prices in 2007. The same condo bought in 2007 is still around the same price now, if not a bit higher. It's as if prices have stood still for nearly a decade. Now, if you bought in the golden window of 2010-2012 like I advised most of my buyer clients to do (as well as myself), and you still own that property (myself included), then you killed it.

So why is DTLA showing signs of bigger increases than other parts of LA? A few reasons:

1. DTLA is still way more affordable than the Westside. $2500 per month in downtown will get you a highrise condo with a pool, spa, front desk security, parking, and dog run. In the Westside, the same price will get you a 3-story late 60s walkup with carpets and a 90s kitchen.

2. DTLA condos have character. You get a lot more character in a historic former bank building that is designated with the Mills Act than with a 70s aluminum-windowed box. Where else in L.A. can you find such a high concentration of historic buildings?

3. DTLA walkability & transportation. With markets (including Whole Foods), bars, restaurants and shopping centers springing up all around, it's getting easier and taking less time to stroll over to run errands and just enjoy nightlife without thinking of the drive home. Uber and Lyft is highly concentrated in DTLA, and costs about $6 to get from any point within downtown. Plus the Metro will take you straight to Santa Monica soon--it already goes to Culver City and Hollywood!

4. DTLA is just beginning. You know when investors from New York and San Francisco start to snatch things up, things are happening. Savvy investors have seen areas like SoHo, Brooklyn, SoMa go from blight to some of the most expensive real estate in the world. And they are buying up trophy buildings and attracting a new type of retail and commercial clientele. The Ace Hotel is a prime example. Soon after you had Acne, APC, Oak, Aesop and Tanner Goods follow.

5. DTLA and rent control. Investors, this is for you. The fact that so many people spend their hard earned money on a duplex that generates what's essentially 1980s income is beyond me. Because nearly all residential property in DTLA was developed into residential housing well after 1978, rent control rules don't apply. This makes downtown a very nice place to invest.

Can You Believe, Prices Haven't Risen in 8 Years?

Here's the reality: prices have risen since 2010. A lot. Then why are so many people clamoring to buy homes, often overbidding?

Because we're barely starting to match 2007 prices. So, look at it this way: prices have not gone up in about 8 years. The price people paid in 2007 is actually more than what people are paying now, which is why some people are still holding on until prices rise even more.

California Housing Forecast for 2015

Good news for homeowners: according to a study by the California Association of Realtors, the annual median price for 2014 rose 9.8 percent year over year and will further increase by 7.1 percent in 2015.

Snatched Up Within the Last 30 Days

Things are moving in DTLA. Good stuff is moving fast. If you missed out, better luck next time.

Douglas Loft #4B

Barker Block #540

EVO #2304

655 Hope #1002

Eastern Columbia #1005

Biscuit Lofts #305

Gallery Loft #2

Luma #1102

El Dorado Loft #707

El Dorado Loft #1106

To Buyers: What Not to Do in a Sellers' Market

Some sad situations that buyers get themselves in today's seller's market: Bidding 10% below asking on a well priced loft at the Eastern Columbia building? Good luck with that. Asking  the seller to patch up a couple of nail holes on the wall and repaint the place when the property is a short sale? Laughable. Waiting until the last minute to get a preapproval on a loft at Barker Block? Silly. Know the market, know the buildings, know how to navigate and work the process, or get an agent who does, otherwise you just might lose out on the property.

DTLA props under 300k...

Back in 2012, and even the early part of 2013, you were still able to find several lofts for under $300k. Sure they were small, mostly in buildings without parking or amenities, but they were out there. Present day, there are just 2. One is in a building with lending issues, and the other is TINY and borders skid row. You'll have to venture to the surrounding areas or up your budget. It seems that $400k is the new $300k. Next year, prices are expected to continue to rise.

Pros & Cons of Buying During the Holidays

Do I wait til 2015 or do I take the plunge now? Some pros and cons to buying at this time of year. Surprisingly, it's mostly pros.

PROS

• Less competition with other buyers because many will wait until next year
• Interest rates are slated to increase in 2015
• Close before December 31, and get awesome tax breaks in time for 2014 taxes
• Spot things you might not otherwise see such as leaks due to rain
• Get deals on properties that have been sitting on the market
• Sellers can get desperate if they want to close before the end of the year

CONS

• Less inventory than say, spring or summer
• Properties may not initially look as good if the weather is drab or raining

2015 Median Prices Expected to Rise 5.8%

According to the California Association of Realtors (C.A.R.), the housing median price is anticipated to increase by 5.8% in 2015. From 2013 to 2014, there was an increase of 11.8%, and DTLA was overall higher than the state average.

Spacious Arts District Industrial Loft with Luxe Touches - Barker Block #333

True live/work loft for sale in the Barker Block building. Designed by The KOR Group, the building boasts a lovely rooftop pool and gym--both with views for miles, courtyard areas and an art exhibition tunnel. Plus it's directly across the street from Urth Cafe, perfect for that morning coffee run. The spacious warehouse loft features more than 1700 sf of space and upgraded finishes and hardware throughout. Huge original wood post and beams, white oak wood floors, 2 bedroom or office areas, open space kitchen and living area. Listed at $1,050,000 for 1720 sf of livable, workable space. Walkable businesses include Bestia, Stumptown Coffee, Wurstkuche, Urban Radish, Zinc, and many. Includes 2 assigned parking spaces.

The Thing About Pricing to Sell...

We're approaching a slow time in downtown. Holidays are near, people are resolving to look again next year, and inventory is low. This also means that properties are sitting on the market longer. And when properties sit, it doesn't look good. Which is when price drops happen. And that gives buyers hope that prices can be dropped even further. Moral of the story if you're putting your place on the market? Know the cycles of real estate, and price accordingly.

Rents in So Cal Going Up and Up

According to USC's Lusk Center, rents in So Cal will steadily climb for the next two years. Expected rises will be around 8%--this is usually means metro areas of LA, the OC and San Diego will go up even higher than 8%. If you're in a rent control area, you can either stay put or buy an investment. If you're planning on renting, get locked in now before things go up. If you're planning on renting out your home, you're in luck!

The Rush to Buy - 2 Reasons in DTLA

Pickings are slim in DTLA these days. The inventory hovers around 90 condos available for sale at any given time. And a small portion of that is senior citizen housing, so the number is actually less than 90. With such low supply, it's no wonder prices are as high as ever. This low inventory (fueled by tons of investors from NYC, SF, overseas) is one of the reasons buyers are snapping up the prime units (higher floor, corner unit, views, doorman, pool, patio, etc.). The second reason is rent control. Most buildings in DTLA (in fact nearly all) are not subject to rent control laws, meaning landlords can increase rents upon every lease renewal. Why do you think so many people have investments here?

Net Worth of Homeowners vs. Renters

According to a study by the Federal Reserve Survey of Consumer Finances, all other things being equal, "median homeowners had nearly $200,000 in net worth as compared to $5000 for renters."

Sidebar: Yes, we know that many homeowners were under water on their mortgage when the bubble burst in 2009. However, many of these same homeowners that held on for 4 years (yes, until 2013) saw their homes go right back to where they bought at the "height."

A successful landlord once said to me: "Paying a mortgage is like paying rent, except that you own the property and you can sell it for a profit once it appreciates, which it always does over time." 

The point is, whether you buy at the height or the bottom, if you hold on to property long enough, chances are, your home will have equity because over time, property values always go up. It's really that simple. I don't know anyone who hasn't thought to themselves, "I wish I had bought back then."

Sidebar: While buying property is one of the oldest, tried and true ways to wealth, you should do it smartly. This means putting 10-20% or more down--which I always advise my buyer clients. This helps provide instant equity.