If you read the news headlines you would think the sky is falling in our local Los Angeles real estate market. I am so frustrated by the overdramatization that I recently made a presentation to my associates at the Senior Specialists Group to address just this topic. Consumers, especially Seniors, should base decisions on facts not headlines. I am a Senior Certified Specialist Broker.
Here are a couple of recent dramatic headlines:
8 Places in California Where Home Prices Have Plummeted – Yahoo.com
Housing Market Collapse Could Push Home Prices Down 20% In Major Markets Like Dallas And Los Angeles, Experts Predict – Forbes.com
But that is not what is going on in my area of Los Angeles County (San Fernando Valley) or adjacent Ventura County (Conejo and Simi Valleys). Unfortunately these sensational headlines scare both Buyers and Sellers into pausing on major decisions until they feel comfortable that the market feels stable. Being uncomfortable with uncertainty is impacting their decisions on real estate which impacts both their lifestyle and finances.
Here is the information I presented to provide a clear picture of our local real estate market. On this graph of the Residential Median Sale Price in the San Fernando Valley since 2018 I inserted horizontal lines for the Feb 2023 median price vs the Jul 2020 median price when the 30 year fixed rate fell below 3% for the first time. So what the news organizations are reporting as the real estate market “plunging and collapsing” is really reverting towards the median prices pre July 2020 drop in interest rates. In 2018 30 year mortgage rates moved between 4.5 to 5.3% and in 2019 dropped to about 4%. If the market is really dropping we should be well below prices at 5.3% rates but we aren’t.
We are in transition to our present situation, around 6.5 – 7%, which is more reasonable, sustainable and based on supply and demand rather than the artificial purchase behavior caused by artificially low interest rates during Covid pandemic.
If you are concerned about how the general economy will impact the real estate market then consider this information from CoreLogic one of the most respected data providers. The first statement is especially true in Southern California.
“Most homeowners are well positioned to weather a shallow recession. More than a decade of home price increases has given homeowners record amounts of equity, which protects them from foreclosure should they fall behind on their mortgage payments.” – Molly Boesel – Principal Economist for CoreLogic
“In November 2022, 2.9% of mortgages were delinquent by at least 30 days or more including those in foreclosure. This represents a 0.7 percentage point decrease in the overall delinquency rate compared with November 2021“.
And here are the December 2022 figures from CoreLogic: The nation’s overall delinquency rate for December was 3%. The rate for early-stage delinquencies – defined as 30 to 59 days past due – was 1.4% in December 2022, up slightly from December 2021. The share of mortgages 60 to 89 days past due was 0.4%, also up from December 2021. The serious delinquency rate – defined as 90 days or more past due, including loans in foreclosure – was 1.2% down from 1.9% in December 2021.
The Real Estate market is different than others such as the stock or crypto markets because you can’t sit on the sidelines in the same manner. You need some type of housing and unless you want to stay in a hotel or RV you are going to own or lease a residence. And the local Los Angeles rental market is also currently expensive.
Rental housing: The average cost of rent for a one-bedroom unit in Los Angeles is roughly $2,500, which represents an approximate 17% increase from 2021 – Forbes.com
I regularly work with families selling their parents’ home. For the post war generation it was much more common for couples to marry, purchase a home and stay in the home for 40 or 50 years. I love hearing the stories of how the couple shopped for homes and really wanted the $10,000 house but it would stretch their budget so they bought the $8000 house. I smile as I prepare to list the home for $800,000 – $900,000 even though it hasn’t been recently updated and probably has some deferred maintenance.
And then there are the tax savings. When the owners sell the home they benefit from the capital gains exclusion on primary residences (limits apply) or their families benefit from the step up basis when inheriting the property. This is on top of the tax savings from the tax deductions for mortgage interest and property tax they may have realized over the many years they have owned the home.
Just so you know I practice what I preach. I purchased my home at the end of 2009 after the 2008 downturn, rode through the 2010-2012 years of uncertainty and now my house is worth 2.5 times what I paid for it. Even with taxes, insurance and basic maintenance my total payment is about what I paid for rent in 2009. And I love my house which fits me perfectly.
If you want to buy real estate in the 2023 now is the time to learn about what type of loan you can qualify for and want to use for your purchase.
Who to Call
For a free consultation on your home’s value, how to prepare your home to sell or the real estate market in general call me at (818)570-1144 or email [email protected] or visit https://janeybishop.com
SRES, CPE, CPRES, RCSD, CDRE
Senior Real Estate Specialist Certified Divorce Real Estate Expert Certified Probate Expert Certified Probate Real Estate Expert Real Estate Collaborative Specialist – Divorce
