Recently, I have been asked a few questions regarding the market and thought it would be a good idea to gather them up and address them.
A: The Westside/South Bay markets definitely softened and depreciated some in the 4th quarter, especially when 30 year mortgage rates were around 5% (20% increase year over year) and the stock market was in a correction mode. However, things have picked up quite a bit over the past few weeks with mortgage rates retreating to ten-month lows and wiping out much of the interest rate increase that stalled out the market. Some properties that did not sell in the 4th quarter and were then taken off the market during the holidays and re-introduced after the New Year at the same price point immediately sold with some receiving multiple offers. Overall, we have shifted from the strong seller’s market over the past six years to a more normalized market with a slight lean toward the seller in price points below $5M. This will continue to be the case as long as 30-year mortgage rates stay south of 4.8%. Despite the drop in rates, the ultra-luxury market is typically favoring the buyer with current tax laws (no longer able to write off property taxes) not helping the seller’s cause.
Q: How do the proposed affordable housing guidelines proposed by the new governor look to impact investment in real estate?
A: Housing supply is limited in Southern California. The new affordable housing regulations may take some builders out of new housing development because of the lack of profitability but new homes/condo will still be in demand. New housing starts still significantly lag behind what was being built before the great recession. The supply will not match the overall needs for the job growth on the Westside of Los Angeles. The change in density zoning around the LA Metro route will provide for more housing units, but on the whole, the demand for existing homes will remain high. The one area to keep an eye on in terms of “over-building” is Downtown Los Angeles where developers do not have to battle restrictive building height requirements and this has led to quite a few luxury high-rise projects that will be hitting the market over the next few years.
Q: Where would you spend your dollars when getting ready to sell your house?
A: It is amazing what a fresh coat of paint will do. Consulting with a designer/stager to make the house appeal to a broader audience is also money well spent. Depending on the situation, you may only need to paint, accessorize and de-clutter but a full staging is optimal. With a bigger budget, updating flooring, the kitchen and master bath-room provide the most bang for the buck.
Q: How important are open houses to sales? Is it more important to have a well-connected and experienced realtor/agent or great open house, which will get my property sold at the best price in a timely fashion?
A: Since over 85% of sales involve a cooperating broker, it is really important to work with an agent that has a great reputation and known within the real estate industry for being positive to work with. The good agents like to avoid those with less than stellar reputations. A great agent will assist in every aspect of creating maximum visibility.
Open houses are important to have, especially early on in the process when the property has maximum visibility. The most serious buyers will ask for a private showing if an open house is not available, but most home shoppers usually plan on seeing inventory on Sunday afternoons and over 40% of buyers’ state they first saw the property they purchased at an open house.