I have been studying all the comparative market data across neighborhoods on the Westside, to see what the market is doing, year over year. Here’s one interesting graph to take a look at. According to Zillow’s Real Estate Market Reports calculated 11/2/09, Los Angeles home values were up 0.5% compared to August and down 7.2% compared to September 2008.
The graph below shows various local neighborhoods during the same time period, compared to Los Angeles overall. With the exception of Beverly Glen, the Westside is still trending downward. The high end of the market is responsible; it’s been sluggish overall, with many properties expired or withdrawn.
What does this mean to you? First of all, the recent uptick in values in Los Angeles overall can be attributed to the flurry of first time home buying in response to the $8000 first time homebuyer tax credit. The latest annual National Association of Realtors Profile of Home Buyers and Sellers found that the share of first-time homebuyers rose to 47 percent of all home sales, compared with 41 percent in the 2008 study — with 55 percent of first-time buyers using a Federal Housing Administration (FHA)-insured loan and 8 percent using the Veterans Affairs (VA) loan program. Especially during September and early October, below $729,000, we saw multiple offers and dramatic drops in levels of inventory. With news of the tax credit extension, some of the buying pressure is off, but inventory has not yet risen, due in part to a seasonal slowing.
What’s on the horizon? That depends. Are you a buyer, seller, or investor?
Are you a home seller?
If you need to sell in 2010, you should consider several impending factors that will affect the marketplace. Here is what I’m advising my clients. Interest rates are at record lows. If, as predicted, they rise after the first of the year, then buying power decreases, and your home also decreases in value. Right now, because we have demand in excess of supply, we have a short term seller’s market. While prices may not have risen, there is still the opportunity to find a well qualified buyer, and obtain terms that are favorable to you as a seller. There is a raft of “shadow inventory” coming on the market in the first quarter of 2010. This inventory will be your direct competition. The advantage to you? A bank- owned home rarely shows as warmly, as cared for, as an owner occupied home. You have time, now, in the month of December, to get a jump on the market. Prepare to market your home now, and be ahead of the competition.
Concerned about the value decrease on your home? Don’t forget that you can take advantage of lower interest rates and lower prices on the property you buy, allowing you to come out ahead in the long run.
Are you getting ready to buy?
You have the advantage of the extra buying power afforded by those low interest rates, and the renewed tax credit. And remember, the tax credit is not just limited to first time homebuyers; move up buyers can take advantage as well. Values abound; the home you could have bought 3 years ago will cost you less both in real dollars and in monthly investment, giving you the opportunity to get a house instead of a townhome, a slightly better neighborhood or school district, those granite counter tops and family room that you always wanted, or getting the home with the 2 car garage and pool now instead of waiting until your next move.
Worried about whether or not the market has bottomed out? Read my thoughts on “timing the bounce in 2010”, and remember that this historical “perfect storm” has created home affordability levels of record highs. We’d love to help you analyze your financial status, including your credit scores and various buying scenarios, to help you determine if 2010 is the year for you to own a new home.
And what if you are considering investing?
Once you own one home, the idea of owning another home as a money investment might become a viable option. With it being general knowledge that the real estate and housing market is at all time affordability levels, it might be time to invest in real estate. This takes strategy and a long term plan. Don’t be tempted to go into markets or properties that you don’t understand. However, if you have some fortitude and some patience, now might be an excellent time to invest in real estate. Leases are still strong, because many people who can’t afford to buy or are concerned about volatility still must have a place to live. Buying value now, even in the form of a bank owned home that needs repairs will reap large dividends when the market rebounds.
Many people who invest in real estate may be in a hurry to pay off, but remember; you are using rental income to help subsidize the mortgage payment. If you truly have a long-term horizon, you can rest easier knowing that someone else is paying more of the interest and principal each month than you. For rental properties or investment real estate, make sure you are also leveraging all of the tax benefits of depreciation and valid expenses. Remember, fortunes are made at the bottom of the market, not at the top.