While the media argues about where the California real estate market is headed and rumors of massive foreclosures are whispered about on blogs; there are actually a few folks who are buying homes. Over the last few weeks in all the South Bay-Beach Cities escrows have been opened and sales have closed.
Two factors are fueling the slight rise in sales... price and interest rates. In 2006 a lot of folks dropped out of the Beach Cities housing market and have been quietly sitting on the sidelines waiting for the market to turn. Others sold homes a year or two years ago and have been renting. Some are tired of renting and want a home of their own. Others got married, divorced or had a new addition to the family. Contrary to popular opinion they have excellent credit and they didn't lose a lot of money in the stock market crash.
So just who are these intrepid souls who are venturing forth in Manhattan, Hermosa, Redondo and El Segundo? They are not flashy speculators or risky flippers. They are conservative buyers. They are looking in all price ranges. They have cash for a large down payment. They are looking for a home not a retirement account. They are planning to live in the home for at least 10 years or more. They are buying below what they can afford. A few are willing to buy cosmetic fixers at the right price. They understand that the market values may decline more but believe the safety of a long term fixed rate loan will work in their favor.
Two factors are fueling the slight rise in sales... price and interest rates. In 2006 a lot of folks dropped out of the Beach Cities housing market and have been quietly sitting on the sidelines waiting for the market to turn. Others sold homes a year or two years ago and have been renting. Some are tired of renting and want a home of their own. Others got married, divorced or had a new addition to the family. Contrary to popular opinion they have excellent credit and they didn't lose a lot of money in the stock market crash.
So just who are these intrepid souls who are venturing forth in Manhattan, Hermosa, Redondo and El Segundo? They are not flashy speculators or risky flippers. They are conservative buyers. They are looking in all price ranges. They have cash for a large down payment. They are looking for a home not a retirement account. They are planning to live in the home for at least 10 years or more. They are buying below what they can afford. A few are willing to buy cosmetic fixers at the right price. They understand that the market values may decline more but believe the safety of a long term fixed rate loan will work in their favor.
They are careful and patient. They will wait for the right house. They have determined upfront how much they will pay for a property. They will pay more for a home that meets their exact needs... but they won't overpay. They will bargain and are not afraid to negotiate. They will walk away and find another house if the price isn't right. They aren't interested in "old inventory" at "old prices". They don't necessarily believe that an REO or short sale is a bargain... unless it is. They are pre-approved and have shopped lenders for the best rate and terms.
Since April 1, 2009 they have opened escrow on 9 homes and townhomes in El Segundo, 30 in Manhattan Beach, 15 in Hermosa, 26 in North Redondo and 22 in South Redondo. Most of these escrows will close on time.
4 comments:
Now these buyers just have to hope that (a) the US is not Japan; and (b) interest rates stay at 4% for the next 15 years.
I think the probability of both happening is very low. If rates stay low, it's because the US is Japan. And if the US is NOT Japan, then rates are headed much higher.
As long as market rents continue to be dramatically lower than the cost of buying, home prices in the South Bay will fall.
Folks buying today are making a consumption decision, not an investment one.
If they're not thinking like that, they should. Home prices aren't likely to reach 2009 levels until 2025 or so.
bondinvestor,
I don't think we will wind up like Japan and I doubt rates will remain low beyond the end of the year.. if they remain low that long.
I think a lot of people have decided to treat buying a home in the same way as their parents... as shelter rather then an "investment".
It has only been in the last 10 years or so that people started buying homes more as investments rather then as shelter.
I have no idea when the market will stabilize but I hope we are not going to see home prices down as long or as far as you are predicting.
Wow. Do you really believe this nonsense, Kaye? You haven't a clue as to what will happen to rates. And I love that "these buyers have just been sitting on the sidelines with huge down payments..." Really? South Bay prices rose for the same reason they rose in the rest of the country. Funny money. Those days are long gone. Also, great of you to tacitly state that buyers the last three-fours years were dumb, but the next crop of buyers are all genius. Yep. Okay...
Anon 1:28,
Hmmmm.. hard to believe we are talking about the same post. You certainly read a whole lot of innuendo into the post that never crossed my mind.
You are right I don't know exactly where rates will wind up... and frankly neither does anyone else. But if the past is any clue to the future then rates will rise. The administration is flooding the economy with money. We could well wind up looking at some big inflation numbers. If that happens you can bet the FED will increase bank rates which may ultimately lead to significantly higher interest rates.
Actually while "funny money" had a lot to do with the rise in home prices it's not the whole story. Historically CA real estate has seen prices rise and fall dramatically more then a few times. Home prices rose significantly in the 70's and 80's and there was no funny money at that point.
I think that people who bought in the last few years who plan to stay in their homes for at least 7 years and have a low rate loan are going to be in great shape over the long run. On the other hand I believe that people who think they are going to make a quick buck in the real estate market usually get burned. I think flipping is just gambling with another name... sometimes you win and sometimes you lose.
Finally... This post is about the type of buyer in today's market. People who are buying today are aware that prices move down as well as up. They are being cautious. I fail to understand why you find that so upsetting.
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