Lately people have been frequently asking my take on the where housing prices are now. Are we in the “housing bubble”? The question can be phrased in different ways, but the message is the same. Buyers, sellers, economists, media personalities – you name it - are all concerned.
I can’t help but find it ironic that Realtors’ brains are being picked on this topic because there has been an on-going attempt over the past 20 years by the large tech platforms to eliminate Realtors. We are the “unnecessary cost” in a Real Estate transaction from many of the pundits. Yet, they seek and value our perspective.
I have always closely watched how the Commercial Real Estate market fares particularly in comparison to residential estate. In the past, residential real estate had a short-term herd mentality, often fueled by hype. When everyone was buying, it was a feast; when no one was buying, it was a famine.
On the other hand, Commercial Real Estate had and continues to have a long-term viewpoint. Despite the pandemic shutdowns, I notice an uptick in Commercial rentals. How is that possible with the hybrid workplace concept? The answer is easy, the days of elbow-to-elbow cubicle life is behind us. The amount of square foot per employee is growing because people are simply not comfortable being in close working proximity any longer.
Getting back to the question, provided interest rates remain low it is my opinion that the simple economic principal of supply and demand will continue to fuel the Residential Real Estate Market. Add to this, the Pandemic has fueled an exodus from the downtown city lifestyle to wanting more living space both indoor and outdoor (think about how often we have heard that it’s much safer to gather outdoors since the Pandemic began). The lack of new construction of single-family homes only adds to the already hot real estate market and puts stress on the supply chain. More demand plus less supply equals buyers willing to pay more for a single-family home.
While some pundits point fingers for the lack of inventory on dwindling builder confidence, that is not the case by any means in the greater Los Angeles area; instead, it is thanks to restrictions created by the Building Department and the politics of getting approvals to build new homes. Depending on which part of the greater Los Angeles area in which you are, the approval process could take one to three years. How can that be, when you can go to other states and pull permits within 100 days?
I predict that as sellers start to list their homes the increased supply will gradually soften the hot real estate market and potentially create a stabilizing factor in home sale prices. I do not believe this would cause prices to decline. On the other hand, I have noticed that many buyers in the entry level market are forced to stay on the side lines because homes are out of their reach; they make a solid offer yet get outbid by anywhere from $50,000 to $100,000. It is extremely discouraging for them. Add to that the now hefty monthly loan payment and it most certainly eliminates a good portion of potential buyers.
Getting back to the bubble, the good news is that the current rule of thumb is for lenders to verify if a buyer has real income, and then a few days before they release the funds, they again confirm a buyer’s employment. If these standards remain in place, we will not have a real estate bubble. Alternatively, if lenders start loosening the lending rules again, all bets are off. I would see us recreating the real estate nightmare of 2004-2007.
I have also noticed that international buyers are starting to return to the buying market. Typically they are all cash buyers, hence this will maintain prices and help to prevent a bubble.
Wishing you a safe Wishing you a safe and healthy life and I look forward to your comments. If you are looking for a knowledgeable, focused and goal-oriented Realtor in the Beverly Hills area who will help you achieve your Real Estate goals, please reach out to me directly! If you are looking for a pet friendly Beverly Hills Realtor who can handle and sell the most difficult properties that no one else could, please reach out to me directly!! If you are considering buying or selling a home, a luxury home, luxury investment real estate, luxury vacation homes, or luxury beach properties in Southern California, Los Angeles, Century City, Westwood, West Hollywood, Beverly Hills, Marina Del Rey, Venice or Malibu, feel free to contact me at 310.486.1002 ( m) firstname.lastname@example.org or visit one of my websites at https://www.endrebarath.com I contribute a portion of my commission to local animal rescue organizations. Endre Barath,Jr. Realtor at Berkshire Hathaway HomeServices California Properties DRE#01238708