There’s been lots of chatter about low inventory for months on end. While the inventory still remains low, in my opinion the number one reason for homeowners and landlords to place their South Bay of Los Angeles property on the market is interest rates are still hovering around 4%, give or take a bit depending on the buyer’s credit score and loan required. Yes, there may not be as many homes to choose from, but a 30 year mortgage at 4% is so appealing many buyers are willing to make compromises on their list of “Must Have” for their new home.
From a real estate professional’s viewpoint, low inventory is what is keeping the market rather slow this spring in Palos Verdes and the surrounding South Bay Beach Cities. Buyers are checking new listing alerts throughout the day waiting and hoping for a house that will come close to meeting their needs. I’ve seen the shift from must have a pool to simply requiring there is sufficient room to add a pool later. The buyer’s long list of wants is being snipped shorter to a list of real needs, and still they are sidelined by the inventory ogre.
Sellers, I realize you are not concerned with inventory, but you should be very concerned with making your property easier for prospective buyers to purchase. While the traditional preparation steps of preparing your property for sale, such as painting and staging, still play an important role in the process, your number one concern must be not will they like it, but can they buy it. The availability of financing at attractive and affordable rates is the real force at play in today’s real estate market. When interest rates edge higher, as they undoubtedly will, the affordability factor is tightened. Couple this with the meteoric rise in prices that occurred in 2013 and suddenly the pool of qualified buyers for your property is much smaller.
For example, if you had your eye on a new flat screen TV but decided to wait as prices were falling, and falling some more due to cheaper prices, wider availability and choices, naturally, you were content to wait on the fence thankful you did not purchase earlier. Then, one morning you woke to a news story that flat screen prices were on the rise. You missed the short-lived bottom of the market. You rushed to the nearest store, but alas the model you wanted was no longer in stock. To your chagrin, when your finally found the model the price was 20% higher. You inquired about financing the purchase, and yikes, the higher interest rates made the flat screen too costly for your current budget. On a larger scale that’s what is happening in the housing market. Buyers are finding house prices roughly 20% higher than they were a year ago. Thankfully, long-term low interest rates continue to take a little sting out of the across the board price increases buyers are facing.
My advice to sellers is if you’re thinking of selling in the near future, it might be a good idea to keep a close watch on interest rates, as when those rates rise the pool of buyers for your home will shrink. Houses were on sale during the recession years, that sale is over, but rates are still low. Once these historically low interest rates are gone many buyers will be priced out of the market, and home prices will face some downward pressure due to reduced demand.