2020 - The Year That's Good for Selling and Buying

2019 was a good time to sell.

It doesn't always happen this way, but sometimes, the sweet spot for selling and buying collide. 2020 is the year where this is the case. Real estate prices are largely unscathed, and interest rates are low. Both sellers and buyers win. 

2021 is going to be a good time buy. Price will have slowed (at least I think anyway!) and interest rates will still be low. In fact, I think through 2022 will be a good time to buy.

How Not to Give in to a Softening Housing Market

Been a while between posts because it's been busy. The buying and selling activity in most parts of LA has hardly softened. Yes, there are some price drops for properties that trying to gouge. For instance, if you're trying to price a house in Highland Park for $1000/sf, that's going to sit for a while. But price it around $750/sf, then you're right where things should be.

Tips for the new year:

1. If you want to buy a house that is hugely overpriced compared to comps, then go ahead and try a lowball offer. The outright rejection activity isn't happening as much, and you're likely to at least get countered.

2. If you want to sell for over the comps, go ahead, but prepare to do a few things before listing. Such as remodeling a few things. I just sold a house in West Adams for the highest price/sf because I had told the Seller to paint the house in trendy colors. It worked. It looked like a new house, which it wasn't, but it did the trick.

3. If you're budget isn't amazing, then considering a cosmetic fixer. Borrow less, and have more to spend on cosmetic fixes and increase the value.

4. If selling fast is your goal, then price it slightly under comps, and either paint the exterior or interior of the place or change out the bathroom sinks. These are generally inexpensive things that often get you triple your money back in sales price.

Buying vs Selling in a Changing Market

ARGUMENTS FOR SELLING:

1. We've reached another height

2. There are talks of plateauing and possibly even microdips in the market

3. You have amazing equity and can upgrade from the starter pad to a forever home

Words of wisdom when selling: Be patient and smart. You will have to have your home in great shape and priced right with a local realtor who knows what's up in the area.

ARGUMENTS FOR BUYING:

1. Rents are through the roof, and still going up due to high demand and low supply

2. Why pay your landlord's mortgage?

3. Population in LA keeps growing

Words of wisdom when buying: Look at the big picture. Inventory is low, and it's still a seller's market. So bid wisely. Do not nitpick about overbidding 5k here, 5k there. Over a 30 year fixed, that's like $3/mo. And try to be less emotional about the things that can be changed, such as ugly carpets.

Housing Shortage. People Moving to LA. Prices Up.

There have been a few articles floating around about people moving out of L.A. due to the expensive housing market. This may be true, but does the city feel any emptier? Certainly not to me.

If anything, it feels way more crowded everywhere in the city than it did 5 years ago. More cars, more people, more crowds everywhere. And lately, half of my clients are from out of town. They are moving from places like NY, SF and the OC. Many are moving for jobs. Many are moving for a different pace of life. In my experience, more people are moving to LA than ever before.

And there is a housing shortage, and when there’s a shortage of anything, what happens to the price? It goes up.

Still a Seller's Market

While "days on the market" are averaging about 30-45 days in DTLA, it's still a seller's market. The problem lately is that sellers are pricing too high. They think that the price of their condo is 25-50k more than the market value. This is causing buyers to disregard those properties or low ball. The worst scenario is when in escrow, the appraised value is lower, so the seller is often "forced" to lower the price or the buyer backs out. Not a good situation.

That said, properties are still selling though they aren't being snapped up within days.

We're at the highest price points in the last 10 years so is it a good time to sell? If you've made a killing, then yes, it might be time.

It's Been a Long Real Estate Wave in DTLA, and Still Going

Crazy to think that prices have been increasing in DTLA (and most of LA for that matter) for about 270 weeks straight. Prices went up exponentially between 2012-2014, then less exponentially from 2015-2017. But still, prices kept going up.

In downtown, even with all the construction of condos and the increase of apartments for rent, the fact remains, there's still not enough inventory to buy, causing demand to remain high. True, properties are sitting on the market longer, average about 60 days, mainly due to the higher prices and lending restrictions, but they do sell in the end.

DTLA has reached a critical mass where now I'm getting contacted by DTLA homeowners who want to buy a second property as an investment. People who already own in the area want to own another, and that's hugely telling. It's a desirable place to live, and the rents are even more desirable.

One key change from about 7 years ago: You'd buy an $900k property and expect to rent it out at $2000/mo. Now, you buy a $900k property and expect to rent it out for about $3500/mo.  The math pencils out much better.

Hence the influx of people from NYC, Chicago, SF buying either a second home or investment property because it's still affordable compared to those areas. And yet it's reminding them of Brooklyn, SF's Mission or Wicker Park in Chicago a few years ago. Heck, even Detroit...nuff said.

Why are Prices Still High?

Seriously, doesn't it seem like prices aren't stopping their climb? Because no one is selling. Inventory is super tight and as usual, there are too many buyers.

Here are some reasons why:

1. Believe it or not, some people are still underwater on their mortgages. From the height of 2007, there are a good number of homeowners who borrowed way over their limits and are just barely getting into the black now, but with the costs of selling (transfer taxes, escrow fees, etc), they will still be in the negative. That Echo Park home bought in 2007 for $750k is now worth 815k. After selling fees, you're netting about 0.

2. They can't afford anything else after the sale. Prices are high, and in a high market, unless you really downsize from a single family to a condo, or to Phoeniz AZ, you really aren't making a difference in your expenses. Plus rents are ridiculously high now. It's almost cheaper just to stay put, which is what so many are doing. You can sell your Miracle Mile house you bought in 2007 for 950k for 1.1MM. You've made 150k plus whatever down you put in. That's great, but cut 70k in selling fees. What are you going to upgrade to? Not much. You're going to have to either buy a small 80s style condo in West LA or a studio with a doorman in DTLA for about 600k.

3. Boomers and Empty Nesters, the ones with the homes with lots of equity, who should downsize, are not selling because their children (well into their 30s) are still living with them.

4. Rents are super high. Recession or not, rents have stayed strong in LA. When the housing market collapsed beginning in 2008, the amount of renters increased. To be a renter these days (unless you've lived in that 1940s RSO pad in Santa Monica since 1980 and are now paying $600/mo), is tough. More renters are trying to buy because they are realizing that just adding $200-$300 extra per month could get them a mortgage instead. Hence, more buyers to the market.