Now that the pace of home sales is slowing dramatically, while home prices begin to dip, the only home sellers in the market are those who are moving out of the area. #dtla #sellhome #realestate
This includes homeowners who are downsizing to save money or moving to a new job. After several years of rapid prices increases, most homeowners are happy with their homes and happy with their careers at the moment. Most are not even contemplating a home sale. But for those who are thinking about moving, many are still in the mindset of an increasing real estate market, which is now the opposite of reality. The number of property transactions has tumbled by 12%, taking down home values.
As the market changes, home sellers must re-educate themselves on the realities of today’s real estate, and thus be prepared to make wise decisions and effective strategies to fulfill their goals. The first item to learn is that there are only about 1/5 as many buyers in the market looking for a home today as compared to several years ago. The next item to learn is that home prices are generally not going up, but are beginning to fall in many instances. The final notion to remember is that it is taking longer on average to sell a home, especially if the sellers does not consider the first two points, and the home is not priced accordingly. Today, we must consider the costs of a slower home sale.
Most home sellers are paying a mortgage. In Downtown Los Angeles, for example, the monthly expense for home is nearly $3,000 including mortgage, interest, taxes and HOA homeowners association dues. This is the amount that home sellers must calculate as the cost of a slow home sale, especially if the unit is vacant. A unit that is being lived in may afford more time to sell, but a vacant home is often easier to sell and sells faster on average than a lived-in home. A lived in home that takes longer to sell also costs the seller money, but especially time and delays in reaching the seller’s goals as it frustrates the seller’s reason for selling. The overhead equates to about $100 per day in excess costs to the seller for each day that it takes to sell the home. The average loft condo unit in Downtown L.A. currently takes more than 60 days total to sell: about 31 days of showings, plus an average of 30 more days for escrow.
For home buyers, more opportunities appear due to the shifting market.
Taking Advantage of a Slow Housing Market
If someone asked you if you would rather purchase a home for $600,000 or $560,000 you would probably say $560,000. Why spend more than you have to? Yet, in reality, because we tend to look at what others are doing when making our decisions, many people purchase when prices are higher, because everyone else is buying and avoid buying when prices are lower (during slow housing markets), because no one else is buying. Concerns about further depreciation have also kept many people from purchasing homes during slow markets. However, by recognizing the opportunities slow housing markets present prospective buyers can break away from the pack and take advantage of good deals.
Opportunities
Buying during a slow housing market is advantageous for many reasons:
Sellers often set their asking prices lower than the prices of similar houses that sold months before. Sellers are also often more willing to offer other allowances, such as paying for closing costs, leaving appliances, and doing repairs.
Sellers are more likely to accept offers for less than the asking prices, unlike during a hot housing market, where the buyer may have to offer more than the asking price to get a home.
Because it is less likely for condos and houses in a slow market to get multiple offers, buyers have more time to search before deciding whether or not to make an offer. They do not have to make a hasty offer on a home they are not sure about because they are concerned someone else will make an offer on it first.
There tends to be an increased availability of foreclosed properties, which are usually priced low.
How to know if housing market is slow
You may be asking yourself, “How do I know if the market is slow or not?” There are several signs to look for. Drive around the neighborhood and see if there are any “Reduced Price” signs on the homes for sale. See how long the “For Sale” signs stay up at homes. Is it two weeks or two months? Look in the local newspaper. If the housing market is slow often the newspaper will write about it. Also, look in the real estate classified section and see how many people are advertising a price reduction. A helpful real estate agent should be able to do much of the work. Real estate agents have access to a listing service that shows how long homes have been on the market and if there have been any price adjustments. Some top local agents have access to unlisted homes, called “pocket listings,” which are often the most amazing properties and the best deals.
Further depreciation
One of the reasons that many people avoid purchasing a home in a slow housing market is because they are worried the value of the home will depreciate further. No one wants to purchase a $500,000 home, only to have it be worth $480,000 a month later. Unfortunately, while home buyers can usually tell if a market is slow or not, they cannot tell when the bottom will hit. People who wait for the rock bottom prices often actually wait too long, thus purchase when prices are on the rise. If you are planning to stay in the home for several years, then further depreciation does not need to be a major concern. You are getting a better deal than many people who have bought before you, and long-term the value of your home will in all likelihood rise.
When to avoid buying
While a slow housing market presents a good opportunity for many buyers, buying is not necessarily the best choice for everyone. If you are planning to flip a house (buying a fixer-upper and renovating and selling it quickly) or only have it for a year or two before selling, it may be best to wait, because it is possible that home prices will depreciate further short-term. Regardless of the condition of the housing market, it is never a good idea to buy a home when a buyer cannot afford the mortgage payments. Even when prices are dropping, in high-cost areas purchasing a home is still not affordable for many people. Creating a budget can help you to determine how much house you can afford and if purchasing a home now is right for you.
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Copyright © This free information provided courtesy L.A. Loft Blog and LAcondoInfo.com with information provided by Corey Chambers, Realty Source Inc, BRE#01889449 We are not associated with the homeowner’s association or developer. For more information, contact (213) 880-9910 or visit LAcondoInfo.com Licensed in California. All information provided is deemed reliable but is not guaranteed and should be independently verified. Properties subject to prior sale or rental. This is not a solicitation if buyer or seller is already under contract with another broker.
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