4 Predictions For Silicon Beach Real Estate For 2022

I don't have a crystal ball and every time we think we have the virus beat, we get a reminder to tone down our ego, but I do read tons of financial news and I do have a knack for finding smart people to follow and read. I would call my analysis more "predictive analytics" than "taro cards" but hey, they don't have fun graphics for analytics. 😁

With that, here are my predictions for 2022.

1. Silicon Beach Real Estate Supply Will Remain Tight

This prediction boggles even my mind. I've been expecting for six months that sellers will get the memo about prices and put their homes up for sale, but it has happened. I suspect it's something of a chicken and egg quandary, but the problem has been persistent and everything I'm reading says to expect more of the same in 2022.

In fact, the California Association of Realtors is forecasting a drop in sales over 2021 of 5.2%, although slightly higher than 2020. This drop is not for lack of interest in buying. It is a direct consequence of not enough properties offered for sale. 

2. No Foreclosure Wave Is Coming To Silicon Beach

Many thought financially strapped families would face the same foreclosure threats as happened with the Great Recession. The big difference this time, however, is that homeowners have significant accumulated equity we didn't have in 2008. We also didn't have the forbearance programs in 2008 we did this time around.

The latest data from the Mortgage Bankers Association shows that homeowners are, for the most part, successfully exiting forbearance:

• 38.6% of participants left the program paid in full

• 44% negotiated work-out repayment plans

• .6% sold or gave their property to the bank

• 16.8% left the program still in distress

The good news is that most homeowners have more than enough equity to sell their homes as a last resort. This is particularly true in Silicon Beach where we enjoyed tremendous equity growth in 2020.

Now, I do not wish anybody to be faced with selling their home because they can't make their house payments, but the option is there for most Silicon Beach homeowners, so don't expect to see any kind of wave of distressed homes to hit the market and drag down prices. It could conceivably happen in other places, but it's not happening in West Los Angeles and the Beach Cities, without some super freak of nature occurring.

3. Silicon Beach Home Prices Will Continue To Climb

Lay people are so sure prices can't keep climbing (or are at least super stressed by the idea), but here's the thing. Money is still relatively cheap and we still have more buyers than sellers. That is a simple Economics 101 recipe for continued rising prices. The consensus is they will rise slower, but continue rising, nonetheless.

And given the density of Los Angeles, we have housing choices. Priced out of Venice? Mar Vista or Westchester might be your ticket. Priced out of Westchester? Inglewood and West Adams are very trendy choices right now at a lower price point. People will just keep going until they can find their price point. Real estate is a great investment and smart people will keep going until they're "in."

And here's a new wrinkle I've been starting to watch. With inflation, people are starting to look at moving their investment dollars from the stock market into real estate. I don't know yet what price point this move will impact most, but any extra buyer competition is going to be painful.

4. Mortgage Interest Rates Are Going To Rise

I've seen interest rate forecasts all over the board. And is it any wonder? We should all have whiplash trying to keep track of the pandemic and its impact on our economy. The highest prediction I've seen for 2022 is 4%, and I think the consensus lands at about 3.75% by the end of the year. 

As you'll see from the graph below, 3.75% just gets us back to our pre-pandemic levels. And if you don't buy before 3.75%, it's not going to be because I didn't tell you to. 😁

5. Sellers Keep The Upper Hand

And now for a bonus prediction because we like to under-promise and over-deliver! 😎

With more buyers than sellers in the market, we will continue to see sellers in the superior bargaining position. Buyers will need extra talented real estate agents in their corner, they'll need their financial i's dotted and t's crossed and they'll want to lead with their best offer. 

What Next For Silicon Beach Real Estate Buyers In 2022?

First, don't expect to sit on the sidelines and wait for prices to come down. It's not happening in 2022, and there aren't any indications at this point that it's happening in 2023, either. And meanwhile, if you do sit out until 2023, you'll lose out on a lot of equity. Once prices soften, it will happen only because the benefits of home ownership are lagging for some reason.

We are here to help you strategize your highest and best outcome in 2022. Please take advantage of our no obligation 30-minute consultation by booking a time here. If you want something even less formal than a casual meeting, take advantage of our digital office hours where we man a zoom call for drop in’s. It’s getting crazy expensive to wait. Let us help you with a strategy to get your move on now.