Feeling that summer heat in the real estate market? If you are trying to buy a house right now and you've been getting burned by bidding wars you're not alone.
OK, I'll stop with the all the cheesy Realtor summer cliches.
Summer is always the busiest time in the residential real estate market. It is has been since I got into this industry in 2003 and I'm pretty sure it has always been that way. There are more buyers out putting offers on properties in Summer than any other season. Pricing becomes more competitive, over bidding happens most frequently in the Summer and people start acting a little house crazy. Traditional explanation of this phenomena is that parents want to move while their kids are out of school and this makes sense because after September the market usually calms down. Below is a graph of total units sold in Highland Park 90042 and Eagle Rock 90041 over the last two years. Note the big month of June in all three years, consistently among the highest on the chart.
But there are other forces at work this particular year. This Summer prices are way up in my East side neighborhoods of Eagle Rock, Glassell Park and Highland Park. Gentrification, relatively low prices for Los Angeles and the abundant "hipster flips" are all factors causing NELA to explode in popularity and price. Here is a chart showing the medial sold price by month in zip codes 90041,90042 and 90065. The median price is up 20% year over year. That's quite a bump. This can't all be because of hipsters moving in droves to the area and snatching up rehabbed craftsman houses, can it? I don't know.
Another colorful LA neighborhood map is a variation on the same theme. This shows the number of sold single family homes in Eagle Rock is up 43% year over year from 4th quarter 2010 to 4th quarter 2011. A healthy increase in sales volume and on par with some other areas of the city. Look at all the neighborhoods in red (increasing in sales) around LA. 100% increase in Hollywood in a year? That is startling. Market volume is increasing in our neighborhood. More volume does not automatically equate to higher prices but in this case it seems to.
Here is a typical case study of the current summer buyer frenzy in NELA. Below is a picture of an LA times front page from June 2012. The blue house featured in the picture was one in Highland Park just off York Blvd. It was a nice 3 bedroom 2 bath house at 1428 Mt. Pleasant. It was not a flip and was not in excellent condition. It was listed for $379k. I showed it to one of my buyers who loved it and bid $450k on it. It got over 60 offers in two weeks and sold for $542k all cash. So that means there are 59 other ready willing and able buyers who did not get this house and are still out there looking. After losing out in a few bidding wars, many buyers will get frustrated and write ridiculously high offers on the next property they like. This perpetuates the overbidding cycle and pushes prices up quickly.
So what's a buyer to do? Be patient. Unless you have to buy right now, it's OK to wait until after the school sensitive buyers exit the market and things calm down in October. Don't get frustrated and overpay for a house-there will always be more out there. Although the market appears to have turned the corner and is now climbing prices are still low and interest rates are very low. There are still many more foreclosures in the pipeline that will need to work their way through the system and will hold prices down (unless all the flippers swoop in and push them up). I personally don't think the foreclosure backlog will be cleared out before 2015 so most buyers still have time to snag a good property in this real estate market down turn.http://www.facebook.com/photo.php?fbid=490539398592&set=a.211591738592.161164.211591103592&type=3&theater