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‘The market is not the same’

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Price cuts for homes sold in Southern California indicate a chilling home market nationwide. (Lead Saxon / Associated Press)

Home sellers are increasingly lowering asking prices as buyers constrained by rising mortgage rates and overall inflation are becoming less motivated to enter the home market at any cost.

The trending increase in price cuts in Southern California and national data is one of the strongest signs that the previously red-hot market is chilling, boosted by low mortgage rates and a full-bid war. ..

Price cut does not mean Overall home value It is falling. In Southern California and the wider United States, they make up a small list, and most homes are still sold at prices higher than the list price.

Industry experts haven’t seen a plunge in the housing market so far, which plunged to record highs in the first two years of the pandemic as many people sought more space and spent new savings. Hmm.

Some experts said that if the Federal Reserve’s actions to curb inflation significantly raise mortgage rates or put the economy in recession, their value could fall moderately.

For buyers, the market already feels very different from the fierce competition a few months ago.

“The market isn’t the same as it was a month ago,” said Lindsay Katz, a Los Angeles agent for securities firm Redfin.

On Van Nuys’ Covelo Street, four-bedroom homeowners recently reduced prices by $ 50,000 to $ 949,900 after a three-week market for tract homes in the 1950s.

Other homes in the area are showing even more significant price cuts. Two-bedroom homes are priced at $ 78,000, homes with attached dwelling units initially priced at $ 1 million, and are currently priced at $ 860,000.

Katz does not represent Van Nuys’ list, but also recently needed to reduce the price of a four-bedroom house in Woodland Hills by $ 40,000.

According to real estate experts, it’s easy to explain the dramatic changes. Mortgage rates soared In the last few months, housing has quickly become much more expensive.

Monthly mortgage payments for homes of the same price are now hundreds of dollars (sometimes over $ 1,000) higher than at the beginning of the year when interest rates were in the 3% range.

With this change, some buyers are in a whole new price range and others are completely discounted.

Yolanda Cortez, LA Area Agent for Century 21 Realty Masters, said:

Some have already seen homes in the LA area on a budget limit.

But after rising interest rates, they can now only buy homes in the desert-rich community of Antelope or Victor Valley, more than 60 miles from downtown Los Angeles, Cortez said.

As a result, fewer homes are in escrow, inventories are increasing, and sellers are starting to react.

The share of recently reduced homes for sale has more than doubled since last year. In the four weeks leading up to June 5, Redfin data showed that 16.2% of the Los Angeles County list had at least one price cut, up from 7.5% in the same period last year.

In the Orange, Riverside and San Bernardino counties, the rate of price cuts has risen to more than 20% of listings, up from about 7% in the previous year.

Nationally, there haven’t been so many price cuts since 2019. Homes for sale in Los Angeles and Orange County haven’t seen this number cut since late 2018. Inland Empire has the highest price cuts ever in its dataset launched in 2015.

Despite the slowdown, agents still have many enthusiastic buyers, the number of homes for sale is well below pre-pandemic levels, and the bidding war continues for the best properties. Is called.

Rodeo Realty’s agent, Tregg Rustad, said two weeks ago his client submitted an offer to Silverlake’s home that was hundreds of thousands of dollars above the asking price.

“The buyer didn’t understand it,” he said, saying he saw a similar bidding war at Santa Monica and Hancock Park.

Still, the environment for homebuyers has changed significantly, and other changes are underway as price cuts become more common.

Over the past two years, many sellers have ignored the offer unless the buyer gives up the contingency of a rating that the buyer can leave in certain contingencies, especially if the rating is low.

Realtor Derek Oyer, founder of the Inland Empire Movement Real Estate, said buyers can now take these contingencies and take their offers seriously.

The buyer is “not in the driver’s seat,” Oe said. “But they are no longer dictated.”

Karl Isbiki, a real estate agent at RE / MAX Estate Properties in Los Angeles, said homes that previously received about 15 to 25 offers are now receiving 3 to 5 offers.

When the market was on fire, a couple, one of Izbicki’s clients, lost about eight homes, even though they bid well above the asking price. Last week, Izbicki sent them a list of properties on the market for over 30 days.

“If they like one of these homes, we’ll offer less,” he said.

In an interview a few days later, Izbicki said the couple did just that, about $ 40,000 cheaper than the $ 789,000 asking price for a Vannize three-bedroom home. They are waiting for a reply.

Michael Simonsen, founder of real estate data firm Altos Research, said some buyers are currently being discounted, while others are probably suspending searches for other reasons.

As inventory grows, even those who can still buy are choosing not to buy, creating a self-fulfilling slowdown prophecy.

“Buyers know they can probably wait until the summer and have more options,” Simonsen said.

Despite the increasing popularity of price cuts, many analysts do not expect the actual value of Southern California homes to decline immediately without a recession.

Even after considering price cuts, most sellers have listed their homes at a higher price than they were a year ago, and on average, homes still sell above list prices, according to Redfin economist Taylor Marr. ing.

In Los Angeles County, the median initial listing price for the four weeks to June 5 (the price at the time of the first listing) was 9% higher than the same period last year, but the average price decline is growing. Occurs with. But still a small number of lists — 5% according to Redfin.

According to experts, some of the recent price cuts are likely due to enthusiastic sellers who have set real estate prices far beyond market value in order to take advantage of markets that were very hot until recently.

To further prevent value declines, homeowners who do not need to sell may choose not to sell to a softening market.

For example, Izbicki has reduced the price of Palms two-bedroom condos by $ 24,000. If no one offers a price close to the new list price of $ 824,000, he said the client will rent it instead.

Many analysts predict that house prices will continue to rise this year, but at a lower rate than they are currently.

One of the more conservative forecasts comes from John Burns RealEstate Consulting, which predicted last month that by December 2022, home prices in Southern California would rise in the mid-single digits year-on-year, slowing significantly from about 20%. Profit in May.

Consulting firms predicted that house prices would fall in the mid-single digits in both 2023 and 2024 as the Fed’s efforts to combat inflation put the economy into recession.

However, the market is subject to change. After Friday’s report showing that inflation is accelerating, more economists say this week’s Federal Reserve could raise interest rates higher than widely expected and raise mortgage rates even higher. I’m expecting it.

On Monday, the average 30-year mortgage rate reached 6.18%, up from 5.5% last Monday, in anticipation of some more aggressive federal governments, according to Mortgage News Daily.

Rick Palacios Jr., research director at John Burns RealEstate Consulting, said research firms are discussing whether to revise their forecasts as mortgage rates exceed 6%.

“There aren’t that many buyers,” said Heather Precha, an agent at Keller Williams, who specializes in South LA. “It’s not surprising that we’re in the middle of the buyer market by the end of the year.”

The Times has created a guide to help first-time homebuyers navigate the market. Check out Great SoCalHouseHunt here..You can buy the summary version here..

This story was originally Los Angeles Times..

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