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Current State Of The Northeast Los Angeles Real Estate Market - 2012
Total Articles: 31
By Tracy King
In case you haven’t heard, the real estate market has changed dramatically in the last few months. In Eagle Rock 90041, there were 16 active single family home listings as of November 19, which is the lowest number I’ve seen in the Multiple Listing Service ever. There are 49 active listings in 90065 (which includes homes for sale in Glassell Park, Mt. Washington, Sagamore Park), 47 in 90042 (which includes Hermon and Monterey Hills), and 25 South Pasadena homes.
Even more interesting is that the Months of Inventory number has gone down by 80 to 90 % in most market areas. This is the number of months it would take to sell all the currently listed homes at the current rate that homes are selling in that area.
Both of these numbers indicate that we are well into red-hot Seller’s Market territory, which is commonly believed to be less than 4 months of inventory. When this situation occurs, prices usually go up. And they are going up, but with much agony from several fronts.
Let’s look at this objectively:
Interest rates continue to be historically low, in general, well under 4%. There is very little on the market to choose from.
While prices are going up and competition for good properties is fierce, average sales prices are still as much as 20% below what they were in 2007.
Homeowners who are motivated to sell right now have the opportunity to sell quickly (if their property is priced attractively) and probably for more than they would have gotten in the previous 4 years.
So what is the problem? I think we have an epidemic of buyer’s remorse sweeping our neighborhoods. We have a very fast-moving market: if you don’t jump on a property and make a competitive offer right away, you will lose out on the chance to buy it. So after a buyer has missed out in a few multiple offer go-rounds, s/he learns to jump in fast and offer high.
Then, in the inspection period, any issues can be negotiated or the escrow can be cancelled with no penalty. A buyer feels that this is perfectly fair because s/he has had to jump through so many hoops just to have the opportunity to buy the house that the seller will just have to put up with it.
We had one buyer recently cancel before she had even done an inspection, and two days later came back and asked to be let back in to the deal. She admitted that she had been listening to her friends advice and they had frightened her into backing out, but then she realized she really did want the house.
The seller, on the other hand, feels that even the highest offer doesn’t come close to what they might have gotten in 2007. In many cases, they refinanced or bought in 2007 and are taking a loss in order to move on in their lives. The top 5 reasons why people move haven’t changed: Job change, relationship change, income change, more or fewer children, death.
As a listing agent, I do my best to minimize the impact of these dynamics on my sellers. One idea has been for the seller to do an inspection up front, so the buyer can have a good idea what the condition of the property really is. We have done this many times over the years and have found that it does help, but buyers more and more seem to feel that anything that doesn’t show up on the seller’s inspection but does on their own inspection automatically should be paid for by the seller. Many buyers’ agents have decided that their value is to negotiate big credits for their buyers. Of course we want to do the best we can for our clients, but when the zeal for “getting the most back” results in the escrow cancelling, is that really doing such a good job? As the available listing inventory shrinks every day, sellers are going to become less worried about having the escrow cancel because they are often getting higher prices with the second and even third buyer. Buyers today are in danger of either being priced out
of the market completely or of just not being able to find another property that they like that is available.
In conclusion, we don’t know what the future brings. Will the market go up or down in the spring? There are so many variables, some that we know, many that we don’t. If you find a home that you love and it is in your price range, go for it. Remember that no home is perfect, even new construction.
There are always problems to be fixed. But put fixable problems in perspective with finding a home that is in a good location and that fits your needs. I spoke recently with a buyer who closed escrow on one of our listings in July. We had had multiple offers and their agent had done a great job of helping them be the winning bid.
They had paid $46,000 over asking with no appraisal contingency, the property appraised for less than their purchase price and they made up the difference in cash. But we didn’t talk about that. All she could talk about was how thrilled they were to be in their home, how great the neighborhood is, how lucky they were to get the house. I have seen them many times over the last few months with their new baby in the stroller, walking with their dog all over the neighborhood, big smiles on their faces. So what is more important to you, negotiating every penny you can, or actually buying a house you will enjoy living in?
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