After a two-year housing boom caused mainly by record low borrowing costs, the Los Angeles real estate market is now cooling down. There has been a decrease in house purchases and an increase in the number of homes for sale.
Bidding wars have become less prevalent as a result of fewer buyers and more inventory but though buyers may have an easier time, the housing market is still an extremely clever way to create generational wealth.
Whilst the word recession may have connotations of fear and worry, it’s more about normalising the economy so that everyone benefits in the long term. We have entered a normal housing market which, believe it or not, is something that could be of benefit to both home buyers and sellers.
The main shift we see in a normalised market is the abundance of inventory which after a few incredibly competitive years is a welcome relief as it allows buyers to feel less pressure into purchasing something that is not quite right for them. For the first time in years home buyers have the ability to stand their ground when it comes to pricing and exchanges. Purchasers have previously been racing to ‘snap up’ homes that they may not have been so keen on if there wasn’t such fierce competition. The market’s slower pace may seem unsettling but it’s actually a far more enjoyable process.
As a buyer you have more opportunity to take your time and ask for things like closing costs and potential repairs rather than desperately trying to exchange before the property is no longer available. That being said, regardless of the current economic shift property sales in Los Angeles is still very much a sellers market.
When the property market of a particular region is balanced it means that there is enough buyer demand to equal seller supply. So based on these dynamics, the real estate appreciation rate in Los Angeles is predicted to remain slightly skewed towards sellers. The demand against inventory will no doubt add pressure on the prices but the property values in the Los Angeles housing market will continue to appreciate over the next 12 months. It will be at a smaller pace as compared to the past two years but property remains a great way to accumulate generational wealth despite the current climate.
Right now is in fact a perfect time to sell for home-owners that are looking to upsize or move to a more desirable location. After a decade of appreciation a property could have potentially captured a gross amount of equity which can be rolled into a bigger and better home that is now less expensive. You would also have more opportunity to find your dream home from the now larger pool of inventory!
(Speak to a certified public accountant about the possibility of also deferring taxes – 500k if married and 250k if single)
It’s important to remain focused and not pay attention to hearsay both from news publications and social events. Los Angeles sprawls through the mountains, it’s huge, each micro market has its own characteristics. What you are reading about other markets doesn’t necessarily relate to your area.
Now is as good a time as any to keep well connected with your agent about your property portfolio.