Malaga Cove Library in Palos Verdes

I suppose I really can’t call the subtle changes in the local market a cooling trend when Norma Toering & Team currently has one of eight offers on a Hermosa Beach multifamily property. However, last May we had one of 35 offers on a Redondo Beach income property.

Where have all the buyers gone? It’s no secret the real estate market swells and shrinks on cycles tied to economic indicators. We came out of the long, lingering down cycle last fall and bounced off the bottom of the market with a tremendous force precipitating the astounding rise in local real estate prices during 2013. With local prices up as much as 25% in 12 months, it should not be a surprise some buyers are retreating from the market due to a decline in affordability. Prices are sidelining some buyers.

Interest rates remain attractive, but those 30-year mortgages in the three percent zone are but a historical memory. Coupled with a slight rise in interest, and a 20% or so increase in prices in most South Bay neighborhoods, the purchasing power of many buyers is substantially less. It’s not fun to be forced into a downsizing position, and accept a higher monthly mortgage payment. Many buyers are questioning whether they missed the opportunity to purchase their move-up home due to limited inventory.

Local inventory is beginning to creep upward. This is a positive sign for buyers still searching for the right house in their neighborhood of choice. However, the higher prices are forcing the fix and flip investors to evaluate whether the profit still justifies the opportunity. Income property buyers searching for positive cash flow properties are being more selective and keeping a watchful eye on the rising prices. Since investors were primary players in the recovery, it is logical if they step away the market will feel their absence.

There is no question the trio of higher prices, higher interest rates and some investors leaving the market will continue to blow a cool breeze toward a still smoldering South Bay of Los Angeles real estate market. However, I find a balanced market is a win-win situation for both sellers and buyers with neither feeling they are being held hostage by the other party. The mood swings of the market can be difficult for everyone, including agents, to maneuver. I, for one, am encouraged by the emerging trends of both rebounding prices for sellers and increased inventory for buyers. That should put a smile on everyone’s face.

– Norma (310) 493-8333