Last week I was fortunate enough to chat with TheStreet.com and LA.Curbed.com, two influential financial and real estate websites, on the trends shaping the real estate market. In case you missed the published articles where I earned a quote or two, I thought I would recap the information and share my thoughts on each article.
Rates rising, but not a big problem for buyers…yet
This was the topic my interview covered. For my readers, you have been well educated on my thoughts of where interest rates will go this year (South Bay Real Estate: 2018 Fearless Predictions) and why (South Bay Real Estate – What’s Happening with Mortgage Rates?). I believe this year will have moderate rate growth but we have to watch what happens in 2019.
Banks will get aggressive about mortgage loans
Yes and no. Maybe other areas of the country are experiencing more loan opportunities, especially “forgotten” commercial real estate property as mentioned in the article. Many commercial lenders, however, have pulled back on multi-family apartment lending since there has been a huge run. For high end real estate, banks had already opened up more creative and aggressive home loans for the wealthy a.k.a. non-conforming mortgages so that has happened already. As far as standard loans, underwriting guidelines are easing but they are still very strict compared to early 2000’s standards.
More homes selling in high-tax states
Now this one I must respectfully disagree with Mr. Steve Hundley out of Del Mar, CA. Very few people can afford a second home in Manhattan Beach or Santa Monica (or Del Mar for that matter), and if they can, an increase in taxes is unlikely to impact their financial situation. Especially for a vacation beach home with an emotional attachment.
All a wealthy second homeowner needs to do is convert their property to a “vacation rental” and they can earn back those property tax deductions without too much effort. There will be less demand for second homes as buyers will be convinced to rent a VRBO or stay in a hotel each year instead. Less demand means less sales which results in softening among key markets as Mr. Hundley states, but not due to MORE inventory, instead, due to LESS demand.
More vacation home buyers
In the South Bay, this will definitely not be true due to capped mortgage and property tax deductions in California and our very high median sale price.
An agent-free market?
Now I am a biased agent that operates a real estate brokerage, so take my opinion at face-value. I will not argue whether our readers think a real estate agent is extra valuable, worthless, or just a necessary evil in the home sales process. That is just opinion. What I will argue is there are a lot more industries that could go “agent-free” more easily than real estate.
Wasn’t E-Trade and Charles Schwab supposed to wipe our stock brokers and wealth managers? If you could trade stocks online from your own account, surely they would be gone. Nope. The financial services industry is stronger than ever. Furthermore, the stock market is much more data-based and run online where A.I. and computers could take over. With real estate needing to be visited in person, contracts to be drafted, people conflict resolutions, negotiations, local property laws, lending guidelines, etc. the real estate agent business is not going anywhere for a very long time.
Mr. Chiland’s article is focused locally on the greater Los Angeles residential market and what everyday buyers can expect to face in the coming year.
I think some of the differing local marketing opinions here are great to take in. What seems to be the theme is that if you are looking for a median priced home then you are in for a tough time. With virtually all of the Beach Cities and Palos Verdes selling well above the median L.A. home prices, you can expect anything that is “lower-priced” to be in great demand.
My quarterly report recapping the South Bay 2017 real estate performance covers this affordable “lower quartile” phenomenon in P.V., North Redondo, Hermosa condos, and East Manhattan Beach. If you are interested, download my free report here to see the strength of these property-types.
Now that the market will begin to slowly build after the sleepy holiday, I will work on some regular local pieces with deeper analysis into South Bay submarkets. Please feel free to send in your requests and I will be happy to work on your real estate questions.