The Los Angeles County market is a tale of alternate realities. On one side you have the seller, who in many cases is stuck in a quixotic – but unrealistic – dream that prices haven’t changed since the surges of 2021 and 2022. Then, on the other side, you’ve got the buyer, who reads the click-baity, distorted headlines about pummeling prices then expects home values to languish at record lows.
The truth is, we’re somewhere in the middle.
A low-ball offer isn’t going to cut it and an overpriced house won’t work, either. However, this push and pull between the alternate realities of buyers and sellers has got the residential real estate market in a stalemate.
Despite these differing viewpoints, the condominium market is currently booming, especially condos in the lower price ranges, with multiple offers per property and condos flying off the proverbial street-shaped shelves. I attribute this boom to our affordability problem; a well-priced, affordable condominium will attract those need-to-move buyers who simply don’t have anywhere to go.
As much as the condominium market is booming, the luxury market has slowed down dramatically, especially in the last four weeks. Inventory is up, so there’s more selection, and buyers believe they have time to find the best deal, which means a perfectly priced home is more important than ever. In the ultra-high-end luxury market (homes priced at $20 million and over), we’re seeing complacency and a lot less activity. I was helping a client the other day with estate planning and I ran a report for properties valued between $10 million and $20 million in the Beverly Hills 90210 post office – just the post office, not even all of Beverly Hills – and there were 39 properties, 31 were active and 8 sold in the last six months. Can you believe it? There are 31 houses on the market just in that area, which I’d say is due to cash buyers who have the means and resources to take their time and wait for their best option.
Beyond ultra-high-end luxury, one of the biggest hurdles to a well-priced home is educating a seller on what that definition of “well-priced home” should be. Some sellers are still hanging onto those comparables from a year and a half ago, and the numbers are simply irrelevant in today’s real estate market where there’s more selection and buyers are super picky. Some sellers are also hesitant to do work on their house, thinking that buyers will be enticed with the property “as is” when really, it’s the combination of price and condition that helps a house stand out among increasing selection. We’re no longer in an ask-any-price, don’t-have-to-do-anything-to-the-home market. Today, you’ll need to have your house looking its absolute best while priced according to recent comparables.
When talking about the market, a wise man (hi, Steve) recently told me: “Don’t start the morning with negative thoughts!”
I couldn’t agree more. There’s no sense in harping on what isn’t, and it’s more productive to focus on what is. I’ve always said every kind of market has its ups and downs, its advantages and disadvantages – and this one is no different.
The dramatic slowdown of the past four-to-six weeks hasn’t stopped properties from selling. We typically see the market take a holiday hiatus starting in mid-November then experience a holiday hangover and finally pick back up in late January or early February, except this holiday season I think things will be different. (Has anything been what we expected this year?!) The holidays are such a fantastic time to list a home. Inventory will invariably go up in January and February when people start putting their houses back on the market (often at a lower price), so listing now and throughout the holiday season means standing among far less competition when buyers are looking for their next home.
And let’s talk about those buyers. Almost-8% interest rates have shrunk the buyer pool significantly, but if it’s an amazing opportunity – priced right and in a great location – the buyers will buy. The other trend I’ve been seeing is buyers who aren’t writing offers based on the market, and are instead submitting lowball offers (or what would be considered lowball offers), which in reality might come closer to the real price than a seller might be willing to admit. It’s why price is key in our market right now. I don’t care if your home is sitting on top of a four-lane freeway, if the price is right, it’ll sell.
Here’s my take: A home doesn’t stay on the market just because that one magical, mystical perfect buyer hasn’t walked through the door yet or the photos weren’t right. A home sits on the market because it’s overpriced and savvy buyers know it, which brings me back to my point about how crucial it is to nail the pricing of a home for sale. As long as you have good internet exposure, a solid marketing plan, seriously great-looking photos and a home in good condition, it will sell. If you don’t have that combination of things, it won’t. This is true in any market but even truer today.
Despite staying positive, I do believe positivity must be tempered with reality. In today’s market, the sense of urgency is pretty much gone and people are disappointed with interest rates and how they’ve risen. Buyers are taking their time, and are frustrated with what they can afford. For example, a buyer who qualified for a $2.1 million home a year ago now qualifies for a $1.6 million property, even though prices haven’t gone down by the same amount. The National Association of REALTORS® reported that housing affordability, measured in part by the Housing Affordability Index, experienced double-digit declines from year-ago figures though notably, the last report recorded no month-over-month decreases, as the index remained flat this past month. Still, buyers aren’t happy that houses haven’t gone down in price as much as the amount of house they can now afford, and it’s causing them to hesitate on their purchases unless they absolutely need to move. Sellers can no longer play the game of, “Oh, let’s price it high and see if anyone is interested.” In this affordability climate, buyers aren’t interested in anything but a great house in solid condition with a fair price.
I don’t have a crystal ball to know what will happen next but I do predict interest rates will stabilize this year and could potentially come down a little bit next year, as long as expectations about price are properly set. Price has become the No. 1 most important factor due to declines in housing affordability and higher interest rates. We need now is a drop in overpriced listings. There are plenty of overpriced properties on the market. We need more realistically priced properties on the market. The minute we see that I predict people will feel more hopeful and comfortable buying, and the market will start picking up.
I’ll end on this note: Part of the negativity in this market is perpetuated by the media and constant headlines about a crashing market or freefalling home prices that just aren’t true. The market isn’t crashing; the market is regulating, and while this regulation has caused alternate perceptions among buyers and sellers, everyone is starting to see real estate in terms of this new reality, and for anyone listing or searching for a home, that’s a very good thing.
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Andrew Manning • REALTOR® • Berkshire Hathaway HomeServices California Properties • DRE: 00941825 • 818-380-2147 • andrew@andrewmanning.com