Just like the balmy weather that enshrouds it, Los Angles is a real estate market that is hot year-round. Recently, the industry’s thermometer has been spiking – think record high asking prices and ballooning interest rates on home loans. With this, a swell of opinions has rushed to dissect the current state of the upscale residential segment.
To make sense of all the latest trends in Los Angeles’ real estate, Haute Residence talked to Lisa Optican, Luxury Estates Director at Compass.
Prices in the Los Angeles market are soaring up, reaching record levels. Some experts say this cues to a healthy recovery from the Great Recession, others express worry of possibly another bubble. What’s your take on the rising prices?
I think the soaring prices in Los Angeles are a reflection of the shortage of inventory. Los Angeles is in a unique position because it draws all types of business and commerce, the weather is stunning, and there is a limited amount of quality homes in prime neighborhoods. I do think, however, that some of the current prices are exceedingly high and until sellers get a bit more realistic about how much the property is truly worth, those properties will sit on the market.
Some recent reports have shown a slight decline in the number of listings in 2017 and the first half of 2017 despite the increased profits from selling, showing that some sellers are not rushing to sell, and keeping prices high. What is your take on this? What could stimulate more potential sellers to list their homes?
Week after week I hear people contemplating putting their houses on the market to sell and then they ask the question, "Where am I going to go?" Sure, they can make a lot of money by selling right now, but they will also have to spend a lot of money to buy something if they want to stay in Los Angeles. Sellers have to be exposed to what else is out there for them...perhaps there is a neighborhood that they never considered; perhaps they no longer need the size of the house they are in; or the size of the lot.
What is your advice for those looking to sell their properties?
Be smart and realistic about your property. A good agent will be able to not only talk to you about the comps, but will also be able to tell you what the present-day competition is, should a seller put their house on the market. A seller has to imagine that any buyer looking at their property is also looking to see what else is available. How does this property compare to the other properties available for sale? Size of house, size of lot, location, style, amenities...all of these factors have to be weighed so a seller can accurately price their house.
What about advice to buyers, who are also saddled by spiked interest rates on mortgages?
Buyers have to be savvy about their financial picture. The best plan is to meet with financial advisors and mortgage brokers before searching for homes so that they are aware of what they can afford and what the payments will look like in the future. I always tell people that buying a house should not cause absolute financial stress. If the numbers are not working and it becomes a stretch, I recommend pausing and reconsidering a different price point.
In a slew of cities, including LA, homes, today, often sell for above the asking price. How can a buyer navigate such a dynamic to ensure his or her proposal leads to a deal?
Working with an agent who has good relationships is critical. It's also about telling a story and making your clients stand out in a personal and emotional way. Of course, a good agent will also point out the strength of the buyers finances.
What about sellers?
A seller should be very clear in what they are looking for and an experienced agent will be able to sort through the offers to evaluate the likelihood of a deal closing. Sometimes it’s not all about the highest price, sometimes the strength of the buyer is in the details of the offer.
What are your expectations about the market dynamic the second half of 2018?
I think the remainder of 2018 will continue to be strong but I do think we will start to a see a shift in the high-end luxury market as more properties $20 million and higher continue to come on the market. As it presently stands, for example, there are 48 homes on the market (not including off-market) priced at $20,000,000 and higher in Bel Air, Beverly Hills, and the Sunset Strip and more are expected to come on.