Housing traditionally slows down in the fall when families tend to stop looking for homes once the school season has started. Others lose interest as they begin to look toward the holiday season and set aside house hunting until spring of the new year.
Prices took a huge leap up in 2012 and 2013. With price gains of between 20 percent and almost 30 percent in sought after luxury Southern California communities last year, the issue of affordability is causing prospective buyers to slow down and reassess options this year.
Corelogic analyst Andrew LePage reports, “…now a lot of would-be buyers just can’t stretch their finances enough to buy in today’s more conservative lending environment.” He says about the area, “the more spectacular annual price gains of a year ago – over 20 percent seem far back in the rear view mirror now.”
“Looking ahead, such double-digit price jumps seem unlikely unless there’s a burst of pent-up demand, perhaps triggered by more robust income growth, a loosening of mortgage credit or a significant move in interest rates,” says Lepage. None of these triggers appear to be on the horizon.
The most recent unemployment report was disappointing. Mortgage credit remains tight and interest rates are not expected to rise any time soon.
It is not just Southern California homebuyers who are frustrated. Since 2011 buyers all across the country have been experiencing the frustration of too few homes available for sale.
More buyers are looking to move up or purchase their first home but the number of newly constructed homes still sits near all time record lows. The lack of inventory has created increased demand and continues to drive prices up.
Many homeowners are finding themselves trapped. Some bought or refinanced with loans at low rates or low down payments and cannot qualify for a new purchase loan under current strict lending standards.
According to Redfin, the outlook is bright for an increase in new home building. Such projection is based on increasing employment numbers in the residential construction job sector and increase in building permits of 6 percent this year compared with 2013. This data is based on reports from the National Association of Home Builders.
Presently, buyers are finding few options – either pay more as prices continue their gradual rise due to still scare inventory, make some adjustments in expectations, or place buying plans on hold.
Home flippers are being more cautious as well. With 20-30 percent annual price gains in the past, flippers buying for a short term fix and flip are facing more risk so many are focusing on high-end areas for the biggest profit margin.
Southern California year-over-year price gains are reported at about a 7 percent increase in the median home sales price from a year ago. The Southland July median stands 18.2 percent below the peak $505,000 median price in the spring/summer of 2007.
For a free consultation, contact Bess Hochman, a top Westside Real Estate Broker for more than 20 years. Bess is also distinguished by holding a law degree. This article expresses the opinion of the author. You are advised to consult attorneys and others experts specializing in the issues referenced in this article. Contact Bess: 310.291.4111. E-mail: Bess.CenturyCityNews@yahoo.com.
“Bess is a master negotiator!” says Michael Donaldson, attorney and author of “Negotiating For Dummies.”
