How did the real estate market change in the Palisades during 2020-22?
Due to an increase in the number of people wanting to move here, coupled with plunging interest rates through most of this period as well as an insufficient number of homes being put on the market to meet the increasing demand, prices increased significantly. The affordability of living in the Palisades diminished greatly. Even today we are seeing multiple offers with many listings, and prices have yet to go down much, despite interest rates having doubled during 2022.
What particular differences have you observed in how real estate is managed?
Many meetings have been and are being done online with Zoom, and far fewer agents are currently back to working out of their offices. Far more new agents have entered the field and none of them have ever experienced a market where it was challenging to succeed in putting transactions together.
The pace of real estate has become much faster, with far fewer days on the market, and great pressures on buyers and their agents to make quick decisions that often resulted in fewer protections. New knowledge and new skills are required, and an increase in market share is being done by teams.
Having had a great many Palisades transactions and been through at least two market downturn periods, how would you characterize the current market?
Yes, I’ve actually experienced three down markets, but none of the previous periods of correction were at all like the present one. There is concern that the market is beginning another 20 to 30% adjustment, which would be in line with the last 40 years typical pattern.
However, there are many reasons I do not think that is at all likely at this point. The inventory of available properties for sale is still far below a level where the local market would strongly favor buyers.
Many owners now enjoy loans in the 3 to 4% range, which is half that of the current rates, and they have enough equity that even a market downturn of 20% would not lead to selling pressure. Also, the loan industry is far more conservative and regulated by far more stringent standards than in 2006 when the previous market highs were approaching.
So do you think that this is still an advantageous time to buy in our area?
The best time to buy was two to three years ago. Even though loan interest rates are now double what they were last year, the current range is about average for the last 40 to 50 years. Odds are they might fluctuate a bit over the next several months, though it seems rather unlikely that they will increase much more in the near future.
In the meanwhile, while the rate of price increases has decelerated, it may be many months before they actually are noticeably lower than now, due to the continuing strong demand for local housing. Someone buying now will begin enjoying their home sooner and have tax benefits now. Those who remain tenants may find that the monthly rent will increase.
What about selling now? Does the new city transfer tax have any impact on that?
Yes, the new law just passed will hurt many sellers in Los Angeles, with a transfer tax that goes into effect April 1, 2023. The sale of a home at $5 million or more will cost the seller 4% more in transfer taxes. Above $10 million it increases to 5.5%. Since the average Palisades home is selling for $4.5 to $5 million now, many owners will face an added cost of selling by $200,000 or more after April 1, 2023.
What about you personally? Have you made any changes during the COVID era?
Yes, I decided to make good use of the opportunities to upgrade both my personal and business life. I now regularly meditate, exercise nearly every day, take a walk in the hills most days and read an average of one book per month. I also joined the Pacific Palisades Community Council last year so I could begin contributing in more ways in the community.
Our team needed to pivot by June 2020 to accommodate the challenges of the new market, and we have implemented new systems and procedures to provide an even higher level of service to our clients. We have built up a substantial library of blog posts and YouTube videos, and accelerated our marketing with both regular online and social media campaigns.
Do you have written guidelines for people thinking about selling? Anything that could be useful in planning ahead a year or more?
Yes, we actually have two sets of guidelines that have been helpful to dozens of people since we began distributing them a year ago.
One is a compilation of suggestions, tips and guidelines for owners definitely thinking about moving. The other was put together specifically for seniors who may or may not plan on moving, but have asked for input on how to stay in their home longer and safer. It also addresses the issues involved in downsizing and rightsizing as well as moving.
Either or both of these can be requested at michael@edlenteam.com or 310-600-7422.
Recently a potential home seller asked me the following questions in his process of narrowing the field before deciding who to hire for representing his family:
- Have you been in real estate since before 2010?
- How many listings have you personally had in the last three years?
- Have you personally actually sold more than five of your listings in the last three years?
- What is your escrow fall-out ratio? What percentage of them has closed?
Last question: Just what is a real estate team and how do they differ?
Many teams are loose-knit collections of individual licensed agents, usually with some administrative support. Our particular team is different than many, with three people in specific support positions using detailed systems and procedures to assure the highest level of service to our clients. The other four focus energies on providing services to both sellers and buyers.
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