Is A Housing Bubble Really Driving Down Home Prices In Los Angeles?
POST WRITTEN BY Gina Michelle
Ask a home seller in the Los Angeles real estate market, and they might tell you housing prices have stalled or that their home hasn’t sold in “forever” (after a six-week list life). They might tell you they have heard that demand for properties is low. Or, as they lower their price to try to spur some interest, they might even tell you prices are going way down. And you ask, are they right?
The answer is: Not for the reason you think.
As a real estate broker who’s been plugged into the Southern California housing market for over 15 years, I have experienced firsthand that the normal culprits — the market bubble, skittish homebuyers and a lack of demand — are not the current cause of the pricing quandary.
Then, the question becomes, “What’s really happening to home prices and why is the general consumer impression one that tells them the sky is falling?”
Let’s get back to basics. The golden rule of real estate remains true: Solid properties priced correctly are selling and comparatively quickly. Simply put, many people aren’t being realistic when they price their homes.
If you’re selling your home in any high-volume market and you’re worried about stalling prices, don’t set yourself up to lose with fear — set yourself up to win and be smart. Strategic thinking will make the difference between your home selling for its best value or staying on the market longer than you had hoped as an overpriced property.
The Market: Good, Bad Or Somewhere In The Middle?
Nationally, 2018 has been dominated by talk of a U.S. housing market bubble. Certainly, with all of the speculation out there, no one can really be blamed for jumping to conclusions about housing prices. And in popular markets like Los Angeles where demand has typically been strong and prices have risen consistently over time, it’s easy to look at your home’s pricing decrease and point to a market bubble.
But as I’ve argued before, one of the biggest myths around is that high prices are a reliable sign of a market bubble. After all, we still have an inventory shortage.
So why did your listing end up dropping 15% before you sold?
A Solid Selling Strategy Vs. Wishful Thinking
Buyers are getting smart. And sellers need to get realistic.
Obviously, there are a number of factors at play in the slowdown, and that includes cautious buyers who have read about the housing bubble and have decided to sit tight in their current homes. But that’s not that whole story.
In the market upswing over the past several years, every property was selling, regardless of price. As people continued to flock to Los Angeles, median prices rose, and with no end in sight to the boom, you could sell your home above its real value — or within a few points — with little to no resistance at all
Over time, this booming-market mindset has conditioned many sellers to think their overpriced home will always sell for 10%-15% more than the listing price. Forget the fact that no renovations or improvements have been made in four years to substantiate that price.
But here’s the thing …
When prices are high, and sellers are worried about a bubble, you must price strategically, understanding that buyers are tired of paying more than a home is worth.
Smart + Strategy + Sale = Win
Home sellers have two very straightforward solutions to beat the slowdown: renovate to substantiate the price, or price the property appropriately.
If you’re listing your home at 15% higher than its real value, don’t be surprised if you don’t get any interest. If you’re going to list above market value, you need to substantiate the price with some finely tuned renovations.
Analyze the neighborhood, the sold and currently listed home values, what they are offering as far as the renovations, extras, etc. Then, using this knowledge, bring real value to your home. You will find that people actually respond positively to the price when they can justify the value.
If renovating for a sale isn’t your speed, then you need to be more realistic about your pricing. Sometimes, pricing appropriately — and lower — will actually help the final selling price, because it earns your home more attention and can spark a bidding war.
Price too high, and everyone will want to lower the price; Price just low enough, and people will be willing to move up.
Successfully Selling Your Home In 2018
Think of the slowdown as more of a reality check. It’s clear that buyers in major markets like Los Angeles still flock to attractive, well-priced homes. With this knowledge, you may need to rethink your listing price or you may need to perform some smart renovations to earn it. To succeed in the market slowdown, you simply must be smarter about pricing — because the buyers in your market already are.