Here’s what Southern California’s housing market cool-down means for buyers, sellers

During the four weeks that ended July 10, nearly 19% more homes were for sale in the Inland Empire than in the same period a year earlier, according to real estate brokerage Redfin.

In Los Angeles and Orange counties, Redfin data show the number of listings is still less than year-ago levels but has climbed steadily in recent months as mortgage rates have risen.

This means if you are out shopping, you not only will have more homes to choose from than a few months ago but also will probably have to fight less to buy one.

The combination of fewer buyers and more inventory has made bidding wars less common, so you may have an easier time bidding around the list price.

In fact, you may not have to bid at list price at all.

Redfin data indicate that 29.6% of all homes on the market in the Los Angeles metro area had price cuts in June. That’s more than double the 12.6% rate of June 2021.

What else should buyers know about the bidding process?

During the last two years, many buyers waived contingencies to make their offers stand out from the dozens of others submitted for the same house.

Some sellers didn’t bother with offers that retained certain contingencies, which essentially are the legitimate reasons you can back out of a deal.

For example, the inspection contingency lets you back out if an inspector finds a cracked foundation or other defect you don’t like. The appraisal contingency — commonly waived in the pandemic market — lets you walk away if the appraisal comes in low.

Now some agents say more sellers will entertain offers with contingencies in place, a shift that will give you more peace of mind that you aren’t buying a lemon.

What about sellers?

Don’t expect your home to get dozens of offers and sell for tens — even hundreds — of thousands of dollars over asking price. Your property may sit on the market for longer, especially if you price it too high.

As mentioned above, buyers can afford less than they could a few months ago and many of your fellow sellers have been forced to reckon with that fact and bring down their asking price.

In this market, you should be even more careful to pick a good real estate agent. When homes typically fly off the market in days, there’s less an agent has to do to get a home sold.

A good agent can help you sell in a slow market by suggesting a fair price for the home, staging it with quality furniture or employing other techniques such as video tours or 3-D walk-throughs.

For buyers, a good agent can also help you with strategies to get a home at a relative bargain. For example, you can target homes that are languishing on the market and come in with offers below the asking price.

What will happen with home values?

Some analysts say overall home values aren’t likely to decline but the rate of home price appreciation will slow. That is, prices will keep rising, but they’ll climb less than they have in the last two years.

To make this case, these analysts say that despite the recent increase in supply and drop-off in demand, there’s still an overall shortage of housing and large numbers of people who still can and want to buy a home.

Other analysts predict that home values will fall in 2023, but few if any experts predict declines like those seen during the Great Recession.

In large part, that’s because the sizable declines last time around were driven by foreclosures. Now, lending standards are far tighter and experts say many homeowners don’t want to sell for less than their neighbor did a few months ago unless they are forced to do so.

Via Los Angeles Times