Recently, the Los Angeles Times reported that “rising mortgage interest rates have put the brakes on a once-hot housing market in Southern California and across the country.”
But what does that mean in our greater Hancock Park, Windsor Square and Larchmont Village market? We asked some local realtors for their reactions and to share what’s happening in their own practices.
“We are down 6% year over year from July 21 to July 22 in listings in Hancock Park, Los Feliz, Silver Lake, Hollywood Hills East and Studio City,” said Ali Jack of Compass, who grew up in Windsor Square and live in St. Andrews Square.
“The market is down 10% year over year on accepted offers, but the most telling stat is we are down 48% in houses sold year over year (166 sales to 87 sales), while listing inventory has not changed that dramatically. This is why you are seeing headlines of price reductions,” added Jack. “Still, the median price has generally held around $1.937 to $1.98 (up 2%) and price per square foot [a less important stat, in Jack’s opinion] is up 15%.”
So it all comes down to inventory. Fewer houses drive prices higher, explained said John Duerler of Hancock Homes.
According to Duerler, comparing July 2021 to this current July, 16 properties sold in 2021, the average number of days on the market was 48 days, and the median price was $2.5 million. In contrast, this past July, only 7 homes sold, the average days on the market was 26, and the median price was $3.2 million.
Part of that is also pricing, explained Andrew Woodward of the Woodward Team at Keller Williams. Woodward grew up in Fremont Place and lives in Windsor Square.
“If it’s priced it’s right, it sells quickly,” Woodward told the Buzz. “If sellers are ready and they are realistic about pricing, which is challenging because pricing is an art, not a science. We have several properties that were recently on the market just six days with multiple offers over the asking price.”
“Hancock Park is very fashionable,” said Anne Loveland of Loveland Carr, who grew up in the neighborhood. “The overall more demand is more than supply.”
“There is demand, but no seller wants to be a fool, so when listing a property today it’s important to not just look at your neighbor‘s sale from a few months ago,” said Loveland. “Pricing is highly nuanced and an art…always and more so in a shifting market.”
Current market conditions are also making selling less attractive to some homeowners, further reducing supply.
“Some are not selling because they have mortgages under 3 or 4%,” said Loveland. “If they sell, their next mortgage will be over 5%. Plus they have fees to pay. If they’re much older, then they[also] have capital gains to pay.”
Those historically low rates also mean that current owners can hold on and rent out those homes, further reducing supply of smaller starter homes.
“I think it will be interesting to see how the historically low interest rates of the last few years will impact the market as well. I think we will see some smaller houses will also be harder to come by, as the low-priced product is easier to hold onto and rent out, as sellers have historically low interest rates and can retain the property, pay their mortgage, and use the extra income to offset the tax bills on their next home, retaining a larger portfolio of assets versus selling,” said Jack.
For others, selling doesn’t make sense because they don’t have a place to move to, added Duerler, also noting that “during COVID our home became our sanctuary. People are asking where I am going to go. Some are just not ready to move,”
But there’s a strong market for renovated homes, given the complications of supply chain issues and city permitting challenges, according to Jack and Loveland.
“We are seeing a flight to renovated inventory and buyers being more cautious and particular, said Jack.
“Our homes are 100 years old, so the ones that are fixed up will sell faster and for more money, of course,” said Loveland. “Unlike the past, today’s buyer who can afford our houses are busy helping with dual income earners and have less desire to fix up, deal with supply chain issues and city red tape at the department of building and safety (which is grossly understaffed, still, post-lockdown.”
But if you are already in the market, fear not. Properties are still appreciating, just not as fast as they had been. And, for those in our neighborhood who have had their homes for 25+ years, the appreciation is probably six times what they paid, so selling is wise now if they think they’re going to move in the next few years, suggested Loveland.
“Price appreciation is slowing from it frenzy,” said Loveland. “This is why economists still think home prices will keep rising, just at a lower rate. In short, the market is normalizing after a wild two-year run.”
And everyone agrees that slowing maybe a good thing.
“Buyers are really kicking the tires,” said Woodward. “We are not seeing as much frenzied multiple offers. It’s a bit slower. Lenders are doing their due diligence. It feels like more of a normal market.”
Jack said she is waiting to see results from the end of September, as compared to last year.
“I think we saw a return to the seasonal nature of our market, with people returning to summer vacations in July and August, placing the focus on travel versus purchasing a home after COVID lockdowns,” said Jack.
Jack told the Buzz that her lenders are seeing more buyers getting pre-approved, signaling a potential uptick in sales before the holidays, and she’s seeing some buyers coming back into the market in the last few days of August.
So yes, the market is slower for now…but stay tuned!