What’s Happening in the Northeast LA Real Estate World Now?

The Northeast LA real estate market is an ever-changing beast.  Here are the main elements of what’s driving our market today:

Increased Interest Rates

The big news in the real estate market is that rates have jumped up quickly. Most of the market volatility is stemming from speculation that the Fed will eventually be discontinuing its QE3 program. Rates have increased approximately 1% across the board on all products.

Although no one really likes higher interest rates, it is normal in a recovering real estate market to see rates rise. Also slightly higher rates will allow new lenders to enter the arena making for a more efficient market through increased competition. However, rates are still at historical lows compared to the 13.4% 30 years ago! The market is filled with opportunity and we cannot emphasize the importance of good strategic advice with access to innovative products to thoughtfully structure the right solution for clients.

Increased Inventory

The number of homes for sale in Northeast Los Angeles has definitely increased in the last few weeks including homes for sale in Eagle Rock. We are now averaging about 30 homes currently for sale in Eagle Rock. While significantly higher than the 12 we had earlier this year, we are still a far cry from the 75 homes for sale back in 2010. Highland Park real estate is warming up.  In Highland Park we are averaging about 40 homes active on the market, compared to 159 back in 2009. We are still seeing multiple offers on our listings.

Instead of perhaps attracting 10-15 offers, we are receiving 5-6. This of course depends on pricing strategy and what else is available when we come on the market.

The under $500,000 market continues to move very quickly. We received 10 offers on our one bedroom listing at 1915 Chickasaw (listed for $389,000). A house on Avenue 54 in Highland Park received 60 offers (listed for $299,000) and sold for 33% over asking price.

Increased Average Sales Price

The average sold price in Eagle Rock in June 2013 was $590,000, which continues the upward trend we’ve been experiencing. That’s 7.5% higher than the average of $549,000 in June 2013, and 27.4% higher than the average of $463,000 in June 2009.

In Highland Park the average sales price has reached $439,000, which is 44.9% higher than the average in June 2009, and 17.7% higher than the average of $373,000 just last year.

What does this mean for you?

This is still the best time to sell your home that we’ve seen in the last 5 years. While we are not experiencing the dramatic price spike that we saw earlier this year, prices have gone up considerably year over year. With more inventory available, the ability to move up into a bigger home, or downsize, while selling your home is more achievable. Our sellers are getting strong prices for their homes. Our buyers are starting to see more opportunities in the market.

The Home Buyers’ Real Estate Market Update for Northeast Los Angeles

After almost vertical price increases beginning at the first of the year, summer has brought a small lull in the market. We are actually seeing a number of price reductions appearing all across our Los Angeles marketplace, including Northeast Los Angeles real estate (Eagle Rock, Highland Park, Echo Park) and the Westside (Santa Monica, West Los Angeles).

Why? As prices jumped up, more homeowners who had been waiting for the market to “recover” put their homes on the market and our inventory of homes for sale increased from breathtakingly low to just very low. This, coupled with an uptick in mortgage interest rates, caused buyers to step back and think. Properties that came on the market priced to take into account the expected price increase all of a sudden seemed a little overpriced. Only the very best properties are still going in crazy multiple offer bidding wars (best in this case can mean an incredibly well done or well located house, or incredible deal for a house.) Those homeowners who have less than the best are finding that they are not going to be swept along with the buyer stampede as they had hoped.

We are also seeing a couple of interesting trends in how escrows are going. There seems to be an uptick in the number of escrows falling out, and largely over some aspect of buyer remorse. I’ve heard from escrow officers that they are averaging 30% fallout in the escrows they have. Why? Buyers are hugely afraid of overpaying. At the same time, there is much less willingness on the part of the seller to put up with renegotiating the price over conditions that come up during the inspection period. There is also less and less tolerance for letting contingencies drag on past their due dates.

What to make of these trends? Buyers now have an opportunity to be a little more thoughtful about the home they purchase as long as they are willing to shop in the second tier of homes for sale (the best of the best still go for the most.) But once they go into escrow, buyers need to be more business-like in their behavior and keep up their end of the contract, or they might just be bounced out of escrow by a more business-like seller.

Straight Talk on Current Interest Rates for NE Los Angeles Real Estate

If you are one of the multitudes of buyers of checking out real estate in Northeast Los Angeles, there are things you must understand about current interest rates before throwing your hat into the market. Areas such as Highland Park, Atwater Village and Mt. Washington are heating up and you will want to be armed with knowledge about interest rates before securing a mortgage loan.

When looking for a lender to work with in the buying process, buyers tend to focus on who can give them the lowest rates. This isn’t necessarily the best way to choose your lender. Here is straight talk from a lender regarding current interest rates:
 
During a fixed escrow period of 30 days, a lender really only has about 10-15 days in which to “lock” an interest rate.  Therefore, small variations of 0.125% from lender to lender aside, the rate is basically going to be what it’s going to be.  

Buyers should understand that the rate they are going to get is actually more a function of the date they go into escrow and not really the lender they chose.  From lender to lender, the rates are going to be pretty comparable.

Don’t believe everything you read on line – bankrate.com, Google “rates” and most online searches for interest rates are driven by one thing: advertisements.  These sites are notorious for bait and switch tactics and/or profiling the best possible scenario for which 90% of our clients don’t qualify.  Not sure what your personal experience has been with online advertisements, but if I bought stuff based on internet ads, I would have six-pack abs with no work required, a million dollar check coming to me weekly from Nigeria and would look like Brad Pitt.  Needless to say, none of these have come true yet… I’ve tried .

Best way for novices to track rates – I pay thousands of dollars a year to get updates from Mortgage Market Guide, Barry Habib and Mortgage Toolbox type websites.  Generally, these companies give great guidance on when to lock.  I read technical reports and track rates across several different lenders on a weekly basis.  That being said, the first thing I do every day when I wake-up is check the 10-year treasury.  Simply go to http://www.Money.com and look at the 10-year treasury-yield on the upper right hand corner.  If that number is green (going up), then we are generally in a rising interest rate environment.  If that number is red (going down), then we are generally in a declining interest rate environment.  A bank’s margin for profit is usually 1.75% – 2.25% above this number.  As of today the 10-year yield is at 2.88.  Adding the bank’s margin gives us a rate range between 4.63% to 5.13% – which is fairly accurate.  This is oversimplifying a very technical process… but it’s a good starting point.  

What does Page 1, Section 3-C-1 REALLY mean – On page 1 of the purchase contract you will find the verbiage “Loan will be a fixed (or adjustable) mortgage and the rate shall not exceed “.  This clause is here to protect the buyer and should be reviewed by listing agents.  As of today I would put 5% on this line.  The buyer needs to know they can cancel if rates jump unexpectedly and they are suddenly in a spot where they cannot afford the mortgage.  The seller needs to know that this rate is not unreasonably low, and this gives the buyer a way to back out of the transaction should the buyer not qualify for the most attractive rates.  This section has gone widely overlooked for the last 10 years as we have been in a declining interest rate environment.  In an increasing rate environment, special attention needs to be given to this section for the foreseeable future.

I have found that different lenders offer different programs, different staff, and different ways of working that truly can make a big difference in qualifying for and completing a loan. That’s why I only recommend a few lenders of the many I have worked with over the years.