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Real Estate Tug-of-War?

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Why is the market at an impasse? Today, I’m going to tell you about it.

Hey, Scott Himelstein with the Scott Himelstein Group. Welcome back to our vlog. So today I’m discussing with you why we have this impasse in our real estate market and essentially it’s a tug of war between buyers and sellers, not just in Porter Ranch but in all of Los Angeles.

So, buyers, you can understand why a buyer may not want to buy right now. The reason why they’re not looking to buy as much right now, as we’ve talked about and everybody knows unless you’ve been hiding underneath the biggest rock ever is that interest rates right now are above 7%. So as opposed to 3.25% at the beginning of the year, the affordability is just simply not there for the buyer. So the buyer pool right now has shrunk considerably.

Then you have the sellers. So for the sellers, what we’re finding is that if they don’t get the price they want, they’re just taking the home off the market. The majority of the sellers don’t have to sell because they bought the home either a long time ago or their interest rate is really low, so there’s no need for them to really to actually sell unless, and the big key is unless, they actually have a life event, maybe it’s a job transfer, a divorce, maybe they have to move closer to the grandkids, or maybe they’re even moving out of state to retire. So those are the reasons why the sellers usually have to sell. Otherwise, what we’re finding right now is the sellers will put the house on the market and they’re going to say, well hey, look you guys as the buyers, you don’t want to pay the price that I want, then I’m just going stick to my guns and I’ll either take the home off the market or I’ll rent it out. That’s what we’re seeing. They don’t have to sell the property right away, they’re going take their sweet time.

So recently we wrote an offer for one of our buyers that was a little bit under the list price and the house had been sitting on the market for 120 days. We wrote $75,000 underneath the list price. Now, the home needed a ton of work on it and the comparables were starting to show where we wrote the offer was exactly where the seller probably needed to be to get an offer. The seller pretty much didn’t budge from where the list price was and so as a result our buyer decided to move on to another property. So, that property still continues to sit 120 days plus on the market.

So, what does that mean for buyers and sellers?

Well, for buyers, you know, it’s not like it was before. You know, obviously without the affordability, it’s not going be very likely that buyers are going or willing to outbid each other with seven and a half percent interest rates. Now at three and a half percent interest rates that gave the buyers the financial affordability and luxury to be able to outbid one another.

So, for sellers, you know, maybe you get 18 showings over the course of two, three weeks, or a month but you’re not going to get five or six offers anymore. So you have to be priced right and accordingly. So the difference now is now to buyers who are out there right now, they’re willing to be patient. They’re not going to say, hey Scott we have to be in a home this week or we must find a house right away. They understand that they can take their time, they can look at different houses. They don’t have to write an offer overnight.

So, this whole dynamic has changed. And just like for the sellers, the sellers are going ti say, hey, you know what, we’re not going to budge on where we want to accept an offer at and so the sellers, they’re going to either take the home off the market or they’re going to wait it out patiently. We’re starting to have some of our clients tell us, well, hey you know what, we’ll just wait till the spring. Now, if you’re a seller, that may not be the best idea especially if interest rates continue to rise; but that’s the mindset we’re starting to see from sellers.

So, you have this impasse in the market where you only have 8,000 properties for sale in all of LA County, which is extremely low. And as we get into the Fall and Winter months here right now, you’re seeing the inventory already decrease seasonally. As we get to November and December, you’re going to see some of the sellers take their homes off the market as well. So it’s a very weird dynamic in which you have the inventory dropping significantly, yet you don’t have as many sales. So that’s why you have this tug of war taking place right now in our local real estate market here in Southern California.

I’m Scott Himelstein with the Scott Himelstein Group. Feel free to reach out. (818)396-3311, (818)396-3311. And thanks for watching our vlog.


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