The days of offering below asking price and having full contingencies have seemed to slip away. As a licensed luxury real estate agent in Los Angeles, I’ve seen an incredible supply vs demand effect on our current housing market. Open houses (at a humble price of 1mill or less) swarm with clients ready to offer up at least 100k over asking, which still results in counter offer wars and waiving most or all contingencies. For a seller this market is prime, for a buyer it can be very difficult. The aftershock of the pandemic, momentarily stalled the housing market, but now we are seeing a rise in the desire to buy. One of the reasons for this is the historically low interest rates incentivizing home purchasers.
Bidding wars
Southern California home prices in general skyrocketed especially in the LA area. One auction I recently represented a client, and the house went for a million dollars over asking price in a bidding war when it started off at an asking price of under $800,000. What was surprising is that although it offered prime real estate location value, it came with an unknown impending lawsuit and possible geo issues as well. That didn’t stop one persistent woman who actually raised her paddle against herself, in which the auctioneer said, “we already have your bid ma’am.“ My client started the bidding process, as first paddle up, but surely didn’t end the last, nor would I have ethically advised him to. We are now on his sixth house and sixth offer in six months (fingers crossed this one is accepted) bare in mind we offered well over asking with a significant amount down, incredible credit, proof of funds and loan pre approval letter, but that hasn’t taken the cake regardless lately. Needless to say, it takes a good negotiator and well equipped buyer that’s ready to compete with the big boys to buy a house these days.
When I flip, you flip, we flip
Many people have been very successful in the high end residential flip niche of real estate in this current market, seeing as the inventory is so low, and the mark up is so high. If the right agent gets a hold of a good off market property to the right fix and flip investors it can be a very lucrative business endeavor indeed.
Any real estate agents have noted their clients “throwing in the towel” with offer after offer being outbid. Many reputable analysts foresaw home gains moderating, because most people’s pockets cannot continue giving in to the continued price appreciation at the 20% levels seen earlier this year. The competitiveness of the market presented an unencouraging atmosphere for the moderate home buyer. Some analysts say next year it may cool down, but that’s no guarantee, the same as we cannot bank on another vaccine booster or political scandals swarming our media. There is no real expectation, at least in the near future, of the inventory problem being resolved. CAR also reported that the housing demand would continue to rise statewide in less expensive areas because of remote working, and mortgage rates would rise slightly but remain relatively low.
My final thoughts…..
My advice to homeowners that were or are considering selling, to strike while the iron is hot! Especially with a lot of people in California ready to pack up and move to other states with less political restrictions, lower costs of living, and cheaper taxes. Also homeowners should consider rental opportunities such as Airbnb. There is a major rise since covid, and of course holidays and the rates are really elevated beyond previous expectations. Of course that comes with the management aspect as well as cleaning fees, damages and risk of crazy party throwers, but if the price is right and the linens and toiletries aren’t made of gold, it can put more than a pretty penny in most people’s pockets.