Besides the fact that inventory is once again on the rise (up 7.4% from December to January), I want to emphasize the effect artificially restricted supply has on prices.
You see, although the number of listings is creeping up again, inventory versus last year is still down 9%. With fewer quality properties on the market (dragged-out foreclosure processes, HAMP-style government schemes, buyers taking properties off the market betting things will improve, etc.) demand for those few-and-far-between quality properties is high. That's just simple economics.
And so, despite offering above full asking price on numerous houses, many would-be buyers still aren't having much luck. Which feeds even more into perceptions that the market is hot and on its way up again, in turn injecting a dose of panic ("Buy now or be priced out forever!"), thereby encouraging buyers to bid more before they get left behind for eternity, thus helping seemingly crazy prices maintain stickiness.
Nobody knows what the future holds, but I still fail to see how higher interest rates, increasing supply, elimination of incentives, stricter lending rules, and incredibly high underemployment numbers equals a swift housing market recovery.
Maybe someone can explain it to me.
El Bee,
ReplyDeleteCould not agree more.
We visited LA (currently living in UK but moving back this summer) and looked at 17 lofts in LB, downtown LA, WeHo & the Westside. While there was reasonable levels for viewing (we only wanted a loft) it was obvious that prices were maintaining at unrealistic levels in LA for the most part.
Mid way through our visit a unit came up in Walker Building and we put an offer in the same day. It was a REO and our offer was accepted within 24hrs (we put in $5k over asking as it was in great condition and we have tracked Walker for a long time and units do not come up that often)
The closing experiance was not easy for sure. The bank had zero interest in doing anything but offloading which was fine (although we did have to eat some cost for locks, minor issues which a private seller would normally fix/do) The hardest part by far was the loan - unreal to be honest. We put down close to 50%, excellent credit and proff of earnings over the last 2 years etc. and it still took nearly 3 weeks in the inderwriting stage - so frustrating.
Anyway, we closed and look forward to moving in May. Very much looking forward to LB living and enjoying the So Cal sun after 3 years away in the cold of NW Europe.
Thanks for the blog as well; great reading over the last couple of years and some useful insight.
cheers,
Simon
El Bee,
ReplyDeleteI think there are still a few knife catchers that are impatient and are jumping at anything that falls into the top of their affordibility lap in the mid to high end... also numerous properties get an offer an after a week or two, either the contigencies or the appraisal end up killing the deal, sending the property back onto the market... this spring seasonal session will be very interestng to watch.
This is why I want to see hard times continue. Obviously there isn't enough pain out there for people to sober up, so I say hit em with some more hard times.
ReplyDeleteYou got a state that is bankrupt, and besides the record breaking taxes and lack of opportunities, real estate is still being priced at high levels.
F the people dumb enough to keep screwing up the market. Let them pay, and let them suffer.
Agreed, prices are still too high, still way too little inventory=still years from anything resembling a bottom. This, said as a recent homebuyer. Couldn't agree more with the experience of Simon above about the problems in underwriting and getting loans these days as well. My advice: keep your money in the bank if you are looking for a good deal. Interest rates will start to rise sometime in the next 12 months, and then look out below...
ReplyDelete