6 Current Realities In Real Estate That Might Surprise You

Can you remember back to this time last year? Real estate was on fire and it looked like 2020 was going to be a banner year!

Then the news about COVID broke, followed by rounds of stay at home orders and lots of questions about our economy and what would happen. Congress passed a huge stimulus bill, flooding money to the people and businesses. Mortgage forbearance and rent moratoria were the order of the day.

Were we looking at another 2008 meltdown?

Fortunately not. The Great Recession of 2008 was triggered by real estate fraud. Our real estate market fundamentals were strong and a health pandemic wasn't going to impact those fundamentals.

So, what happened in the last 12 months? Six very interesting developments.

1. Housing Inventory Evaporated

Uncertainty in the job market and the fear of having strangers in their homes put a huge pause on people wanting to move. Heck, I'm sure people didn't need one more thing on their plate as we all adjusted to our new normal.

Fast forward almost a year and everybody is settling in to new routines and feeling the limitations of their current homes. Inventory is still constrained, but virtual tours and other safety measures are starting to get traction.

As the pandemic wears on and people increasingly feel the limitations of their current homes, we'll see more and more inventory hit the market.

Another recent development that will start to work its way into the market is the passage of Prop 19, which allows certain homeowners to move and take their low tax basis with them to their next property.

In the meantime, sellers who list while inventory is still constrained will enjoy a first mover advantage and command the highest prices.

2. Interest Rates Are Low, Low, Low

One of the tools available to regulators when our economy is troubled is to lower interest rates to encourage borrowing to get the economy moving. We had what we thought were great interest rates a year ago in the 4's, but today, we're in the 2's! 😳

Low rates mean buyers can buy more for the same money. Rates at current levels can't, however, be sustained. Heck, we don't want them to stay this low long-term. We want our economy to get back on its feet, and as it does, rates will start creeping back up.

What does this mean for home buyers and sellers in Silicon Beach?

For home buyers, the time to buy is NOW. None of us know how fast and how soon rates will rise, but it will happen and it might happen fast.

For home sellers, most will also be buyers on the other side, but even as sellers, you always want the biggest possible pool of buyers competing for your property to drive up the price. As rates rise, fewer buyers will come into the market and the power will shift away from sellers and toward buyers.

3. There Are So Many Buyers Out There Right Now

Buyers in Silicon Beach aren't stupid. They are usually highly educated, skilled professionals. They understand low interest rates and how they work in buyers' favor. This is an opportunity and they know it. Not to mention that many apartment and condo dwellers are feeling the space limitations and density of their current situations and longing for backyards.

Put that together with the fact that lots of people are foregoing fancy vacations and other expensive habits and have more resources for down payments and closing costs. And more time to research down payment alternatives.

All of this adds up to a whole lot of buyers out shopping right now.

4. Homes Are Selling Very, Very Fast

For Silicon Beach home buyers, this means be ready! Don't even think about shopping without having your loan pre-approval (if you need a loan to buy) in place and having a trusted buyer's agent on your team.

Think you can stroll into an open house and ask the listing agent to submit your offer? First, there are no open houses right now. Second, it often works against the buyer financially to submit an offer through the listing agent.

For Silicon Beach sellers, it's important to know that homes are selling fast for a couple of reasons: (1) you may not need to (or even have time to) make major repairs before listing; (2) you are in the driver's seat regarding pricing and contingencies; and (3) you need an exit plan sooner rather than later. Most buyers are going to want into their new home right away.

The market is moving fast and all the parties need to be prepared if they want to succeed.

5. Prices Are Still Climbing

How high can we go? Prices in Silicon Beach have been on an eye-popping run up for a number of years. People have been telling me for at least two years that we're topped out. I just smile politely.

Prices will always be decided by supply and demand. In Silicon Beach, we are all built out. As long as we have no new supply and people still want to compete for homes (the demand), prices will continue to rise.

At some point, more and more people will list and the scales may tip, but for now. prices are only going in one direction and the pandemic has not changed that.

6. People Are Fleeing Big Cities Like LA

People are finding that their employers have a bigger appetite for working from home, which broadens choices for where home can be. This statement pops up a lot in the mainstream media, but it appears overblown.

I am hearing about more and more people picking up second homes in more remote locations and spending their pandemic time in those homes, but they aren't abandoning their primary homes.

Common wisdom is that eventually we will all spend some portion of the week back in the office where we can collaborate in person with our colleagues. 

And the big exodus out of California? Despite a few high profile tech companies decamping to Austin, this rumor is also overblown.

Bottomline

These are the current realities of real estate in Silicon Beach. Some of them are counter-intuitive for our current pandemic life, but real estate has been a very bright spot for our economy and will continue to do so for the foreseeable future.

Do these current realities surprise you? Join me over on my Facebook page where I post regularly about what's in the real estate news and how it applies to Silicon Beach.

This post also supports our “Buyer’s Edge” series, content designed to give real estate buyers in Silicon Beach an edge in a competitive residential real estate market. Read more about our full Buyer’s Edge program on our website. Want help buying real estate in Silicon Beach? Contact us, grab time on our calendar or read more Buyer Edge articles. Need help beyond Silicon Beach? Reach out and let us help you find a high caliber agent with hyperlocal expertise in that area.