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LA Digs - Northeast LA Real Estate Blog

Welcome to LA Digs, the real estate and Northeast Los Angeles community blog written by Realtors Tracy King and Keely Myres.

Here, we share tips, market updates, and local news bits to keep you informed on what's happening in Northeast Los Angeles and the surrounding neighborhoods. Read on to learn about the latest in your neighborhood!

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What's Happening with the Real Estate Market During a Pandemic?

First, the numbers. This spreadsheet compares the number of active and sold properties in each zip code, compared to the same time last year, and the average list or sales price. For a PDF version, click here.

market activity chart June

This is very confusing, right? Stay with me here — we are looking at real estate trends and in the light of all that’s gone wrong this year—Coronavirus, civil unrest, job losses, restaurants and bars closing (so you can see where my head’s at), life as we knew it—real estate should be devastated, right?

Well, it’’s not. Sure, there are fewer sales this year than last—after all, we have experienced an incredible loss of jobs and money. Lenders are nervous, people in general are nervous, but true buyers in a certain price range (and it’s generally not the highest range with exceptions) see their chance and are going for it!

We are representing buyers who are up against 10, 39, 40 offers! Some of our buyers have all cash! And they can lose to someone who has more. Once in awhile, we pull off unlikely deals —like we were actually quite a bit lower than the highest offer on one house but we got it because the buyers wrote a great letter and we represented them instead of the out of area unknown agent. The sellers cared about such things. Some do, some don’t. You never know.

If you compare the average sale price of 2020 and 2019, you see that they are higher this year over last year, in every zip code except South Pasadena. This is not the sign of a recession.

What conclusions can we make from all this? You might be thinking that to get the most for your money, you should save on the commission. Not true. You get what you pay for, just like a lawyer or a doctor. 

1. Choose the best agent you can who is experienced and trustworthy (not the same thing as the cheapest or your cousin who just got into real estate) and do what they say! 

2. If you’re a seller, price your house right, and prepare it correctly in line with your price. 

3. If you’re a buyer, the choice of your buyer’s agent can make a difference as well—your cousin from Santa Clarita doesn’t really know this area or how things are done here, and the seller’s agent is more comfortable with someone she knows will get the job done. The possible savings on your cousin’s kicking back some of his commission is not worth what they don’t know and the fact they could be the reason you don’t get the deal. All this is nothing new, but because there are fewer sales than before, you really need to bring your best to the table.

Another conclusion we can come to is that this isn’t bargain-hunting time. And this is the time when sellers who are pricing their homes to sell are succeeding. Sellers who are wishing for a high price are sitting on the market getting stale. And buyers who actually want to buy a house, not “play the market,” can do so.

 

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How to Show a House in a Pandemic

We are living in a strange new world, and it is still not business as usual anywhere regardless of what people try to tell you. In the real estate part of it, there are a lot of rules and prohibitions regarding seeing houses listed on the market, and people are finding many of the rules very confusing. Plus, just when you think you have it all figured out, the rules change! Here are the high points first, then at the end of this article are some of the actual forms that detail everything. Every state is different, and within states, some counties are different and even some cities are different.  So this is about California, Los Angeles County. Keep in mind, the most restrictive rule is the one that dominates.  Did you know that in New York City they don’t allow any showings at all?!?  The old saying that real estate is a very local business is more true than ever. Remember, we are trying to protect ourselves and everyone else from being exposed to a silent, invisible killer. 

The days of dropping by a new listing’s open house are gone. You have to make an appointment, you have to sign a form that states you don’t have symptoms of COVID-19, and that re-states all the rules regarding a showing. And you’re supposed to do it electronically before you access the property. The property must be sterilized before and after you view it, you generally have to provide proof that you can afford the property (not a law but most listing agents require it), you have to give your contact information, you have to wear a mask and wash or sterilize your hands as you enter the property. 

Then there are more rules about how many people can be in the property at one time, who they can be, and that the occupants of the house must be out during the showings. And there can be no paper changing hands—no flyers, no signed forms, no information regarding anything—everything is to be electronic. And tomorrow, this could all change, depending on the pandemic. 

You’ll notice there are lots of  “musts.” Each one is a limitation that the listing agent is primarily responsible for. You might think there is less that the listing agent does, but the responsibility, paperwork, and liability have increased exponentially. The listing agent generally has to do more negotiating to protect their sellers’ bottom line than they have done in the past. There are many more escrows cancelling than before—both from buyers losing their jobs or having to take a cut in pay, or fear of the future.

And yet properties do sell right now. Buyers go shopping online first, then they generally commit to their own buyer’s agent, lender, get pre-approved, and have their agent arrange for showings. And (here in Northeast Los Angeles and surrounding areas) there are multiple offers on well-priced properties. This is actually a good time to buy or sell, because the marketplace isn’t cluttered with unserious people.

Here are the official rules for showings:

Posted Rules for Entry
Best Practices and Guidelines

(These are the rules and regulations as of June 28, 2020; they can change at any time).

 

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Social Distanced Walking

Thanks to the Corona virus shelter-in-place rules changing, people are thronging to all the hiking trails and approved walking paths like the Rose Bowl Loop. This has resulted in the very crowded conditions we are trying to avoid and so they might be closed again soon. Since you can get ticketed and fined for defying the rules, you need to read the news just about three times a day to stay on the right path for your walk. How about avoiding all those popular places and checking out some of the roads less travelled? 

Pasadena and Altadena are treasure troves of historic neighborhoods with gorgeous houses that have documented styles, architects, famous owners, and stories that supply conversational material along with eye-candy to add interest to your walk. As the philosopher Kierkegaard said, “If one just keeps walking, everything will be alright.”

You can access maps, addresses, interesting lore and historical facts, walking and driving tours  and more on the www.CityofPasadena.net site. They even have an app for your phone called Historic Pasadena and you can follow the Bungalow Courts, (walking or driving tours), Victorian tours, Mid-Century tours, even a Neon Signs tour (who knew Pasadena still had so many?) and more! 

My walking buddy Kendyl and I were big users of the Rose Bowl loop until it closed and then we walked the length of South Grand from South Pasadena north to the famous Colorado Street Bridge and back until it became crowded. Now we have walked a few of these historic tours plus some neighborhoods in Altadena and have discovered a wealth of interesting sites and secret places (to us, that is) which I’m going to share with you, dear Reader. Hopefully, you will want to add a bit of your own special twists. Please share!

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Northeast LA Market Update

How are you doing? What’s happening with your job? What do you think is going to happen with it post-Corona? 

These questions and more are in the air along with all those droplets we are avoiding. We can only ask, actually, on the phone or on those endless Zoom calls (for those of us who are trying to live with the new normal physical distancing, yet stay in touch).  We all wish we were Mr. Zoom. He is definitely going to profit from this pandemic.

But you are reading this post because it’s about real estate, right? So what’s going on with the housing market? In our little corner of the real estate market, Northeast Los Angeles and surrounding areas, it’s always interesting and seldom like the national or even the California picture.

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Forbearance Does NOT Equal Forgiveness

As news and information about relief assistance swirls around in the midst of this crisis, there are lots of questions about what to do with your mortgage payments. To some, it can be interpreted that if you just don't pay your mortgage payment right now all will be forgiven. This is not true, and can have some serious affects on your financial health, and truly the health of the economy as a whole. 

Here is information from a lender friend of ours, Scott Groves with Movement Mortgage, that explains forbearance and how it works:

"If you, or your clients, are in dire-straights and having to make the toughest of financial decisions - like, what bills do I pay or how do I buy food - then I understand that you must do EVERYTHING you can to improve your cash-flow situation.

That being said, applying for a FORBEARANCE on your mortgage payment should be an ABSOLUTE LAST RESORT when it comes to your finances.

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Real Estate Now Considered an "Essential" Business

Things are changing every day in these wild times we live in!

Per the California Associaton of Realtors - "On March 28, the U.S. Department of Homeland Security Cybersecurity and Infrastructure Security Agency (CISA) updated its list of essential services during the coronavirus (COVID-19) crisis and expressly included residential real estate. Since Governor Newsom’s March 4, 2020 order incorporates this list, the order now includes residential and commercial real estate, including settlement services, as essential services in California. However, if a city or county has an order with a more restrictive standard regarding what qualifies as an essential service, or more restrictions on activities, those guidelines will still govern the activities of a licensee.

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Real Estate Must Be Virtual, For Now

Chaos! Every day brings a new interpretation of the current edicts given by all the heads of state—the president, the governor, the mayor, CAR (which is the California Association of Realtors), the police, I’m sure there’s more. As of Thursday, March 26, 2020, basically, we are supposed to stay home except to procure food, health care, to walk, or perform an essential job. Therefore, we Realtors are in a curious Catch-22 situation: we can’t meet buyers or sellers at a property, we can’t order inspections because inspectors aren’t considered essential (but sellers can hire them to find out if they need repairs if they want or need to do),  buyers can get loans and appraisers can do desktop appraisals, escrow companies can work, counties can record sales, movers are considered essential, but if sellers sell and they need to buy another home can they? If you see some inconsistencies in all that, you are correct! 

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Coronavirus and Local Real Estate

So as of today, March 12, 2020, Coronavirus cases are spreading - first there’s one case reported, then 2, then 100, then a thousand. Universities and other schools aren't having live classes. Germy kids get to stay home and only infect family members and caregivers. The NBA has suspended the season. Wow! And mortgage interest rates are so volatile that lenders aren’t publishing them. In fact, some lenders aren’t taking any new or refinance business because they have more than they can handle. 

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Should You Buy a House in 2020?

Should you buy a house in 2020? Of course, this is a question that has a very complicated answer.
Two reasons that the answer is no: prices are high and inventory is low. Yes, interest rates are historically low which makes paying these historically high prices a little more bearable. Low inventory means a couple of things: it's hard to find the home of your dreams at the price you feel you can afford; it's extremely competitive in our market (we had 47 offers on one home in January, and we heard of another house nearby that had over 50 offers and is going $400,000 over the asking price!); also, it means the thought of buying your dream home (or any home) contingent on the sale of your current home is a losing proposition. Would you entertain a contingent sale on your own home? Probably not, because you want to minimize the things that can go wrong with the sale so you can move to the next step in your life without depending on variables you have little or no control over (like the price of the contingent home or the skill of the agent involved).

Despite those issues, I'm in the camp of yes, this is a good year to buy a home. I know what you're thinking - of course the Realtor thinks everyone should by a house right now! But the reason why?
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It Pays to be an Older Homeowner

At last, a reason to be glad you’re older: California Proposition 60/90! If you or your spouse are 55+ and you’ve owned your home awhile, you might find this interesting.

Basically, you can take your property tax with you one time if you purchase a primary home that costs the same or less as your current home! This can be a huge savings, since in California, property tax is calculated on the original purchase price of your home. So, if you paid $325,000 for your home in 2000, sell it in 2019 for $1,250,000, then buy a replacement home within 2 years of its closing date for 1,250,000, you will pay about $5,333.00 per year instead of $15,625.50 per year!

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What a Difference 15 Years Make!

eaglerockhomeforsale

It’s interesting to look back fifteen years and compare 2019 and 2004 because 2004 was a year of big fear and doubt. Many people questioning “will the economy go up? Down? If I buy a house now am I buying at the top of the market?”  Sound familiar? These are the same questions we're hearing from our clients now!

Let's take a look at the numbers, and then I'll dive into my interpretation:
data

Look at things like the $500,000 difference in the South Pasadena List Price/Sales Price this year—that issue would seem to be that the higher end of sales isn’t selling as much as the lower in South Pasadena. Makes sense, right?

Obviously, home sales prices have gone up a lot in 15 years in all these communities. The average number of sales has gone down and the days on market is all over the place. We aren’t seeing the general interpretation by experts on the market that we hear on the news—which is that days on market is increasing everywhere while the sales price is going down.   In these areas, the sales price keeps going higher and higher.  But why are we seeing the number of sales drop? Affordability? Choice? Probably a little of both. Less inventory, that is, far fewer available listings are on the market now than in 2004 and this has been the case since 2012. The higher end of the sales today in most of these zip codes are primarily high-style flips or new construction. That wasn’t the case in 2004 at all. 

Flipping with style really started as a result of the glut of foreclosures and short sales in 2008-2011 and it started in places like Highland Park, where a few flippers bought foreclosures really cheap, fixed them up nicely and stylishly, then resold them at fairly reasonable prices to first-time buyers with some money of their own or with help from their families. Now the flips are the high end of the market.

Altadena is really interesting because the average sales price was almost $100,000 higher there than Eagle Rock in 2004, and the average sales price this year is almost the same as Eagle Rock.  What does this fact mean? More choices in Altadena? We have sold several houses in Altadena this year because our buyers felt they had better choices in their price range—more house, more lot size, and sometimes the basic ability to purchase a home now for what they could afford instead of waiting to save more money or win the lotto or find some windfall somewhere. Eagle Rock has appeal because of its location—close to downtown, close to the studios, easy to get around in town and to get out of town. Also it’s neighborhoody (great community feel), has decent public schools, and is kind of a Mayberry-type suburb of Metro LA. And it’s cheaper than Los Feliz and Silverlake.

There is no clear conclusion to draw from all this, except that prices are still going up with no end in sight in these areas, so waiting for the crash is likely futile for the time being. When will the bubble burst? Maybe not for several years, maybe never. Only time will tell. It's usually luck that allows people to "time" the market. We often tell our clients that the best time to make their move is when they are truly ready!

Want to get regular updates on the local real estate market? Sign up for our semi-weekly newsletter here

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Today's Version of Irrational Exuberance

Remember when Alan Greenspan, former chair of the Federal Reserve, talked about the irrational exuberance in the stock market? You might not, because the quote is from a speech he gave all the way back in 1996! I see some of the same enthusiasm in the pricing of some houses on the market in our dear corner of Northeast Los Angeles. But the exuberance Greenspan referred to had to do with actual business being transacted. In today’s real estate market, I’m seeing irrational exuberance in some list prices, not in actual closed sales.

I’m dedicated to attaining a fair market price for our real estate. But that doesn’t mean that sellers should be listing their homes at overly ambitious prices, because that does nothing to firm up actual sale prices.

Let’s imagine that you are in the market for a home. You are pre-approved for $800,000 and you want a 2 bedroom 1 bath home in Eagle Rock. You look on the computer every day to see if something new has come on. Although you think $800,000 is a lot of money to pay for a small home, it is not easy to find a really good property in the right neighborhood for that price.

One day a property comes on that fits your criteria but it’s listed for $829,000. You wouldn’t even see it on the Internet because your search is limited to properties in the $450,000 to $825,000 range. But let’s say you are out one day and see an open house sign and stop in. Hmm. $829,000? Out of your league, you figure, and you leave.

Another day comes with a new listing for $825,000 that is pretty nice, but not quite big enough. Eh, you let that go because it’s at the top of your range and probably not worth it to you.

Another day you are looking and you see a small but perfect property for $675,000. Wow. You rush to call your agent and hurry over. There are already 5 other prospective buyers there with their agents and the buzz is loud. What’s the plan for multiple offers? How much do we need to offer to be in the running? Can we expect a counter if we offer enough over or are they going to take best and final? Do you think I can get the lender to pre-approve me for $830k? $850k?

Which property do you think might get the highest final sales price?

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What is it like to buy a home in Los Angeles?

What is it like to buy a home in Los Angeles?

We all have to live somewhere—even if it’s under a bridge. Most of us don’t live under bridges, though, and herein lies the story—it’s very hard to be a buyer in today’s market. I know this because I just sold my home (of 18 years), and now I need to buy a new one. Buyers today (me too) hope that the market is changing—in their favor of course. But, as a Realtor, I do understand all sides of this issue--Buyer, Seller, Realtor. 

It's painful to try to buy a house in the Los Angeles area today, unless you have unlimited funds and are willing to spend a lot of them. A surprising number  of folks do have a lot of money, and they all seem to like the same houses I do!

People are paying crazy amounts of money to live here. We have been in an increasing price sales cycle for ten years. People say “It can’t go on,” and yet it does. Even so, the market is very discriminating and the standard of quality or style has really been raised. Homes that you wouldn’t put on your Pinterest Dream Home board just sit there—they even have price reductions! 

Back when I first began my real estate career, people in the business jeered at sellers who felt that their house was worth more because they “used heavy-duty nails,” which was code meaning they had used quality materials in their maintenance and remodeling efforts. The only way to increase value then was to increase square footage. That has never been entirely true, but “style, design, and functionality” has now come into play like never before. High-end finishes do add value these days, and the more stylish, the better.  

Why is that? Because what house buying is about these days is “How does this house make me feel?” or “Does this house have the potential to make me feel the way I want to?” Yes, folks, buying a home today is all about the emotion, not price per square foot or recent comps. If you don’t believe me, fine, but you won’t buy a house in this market, or you are not interested in buying a home you love, or you can love a house because it fits into the average price per square foot.

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How to Prepare Your Home to Sell

You’re getting ready to put your home up for sale soon which has you making endless to-do lists of things that need to get done so that your house makes the biggest impact when it goes on the market. You've read article after article about creating curb appeal, decluttering and removing personal belongings, staging each room so it looks like a model home. There’s the deep cleaning, minor repairs to take care of, and giving your walls a fresh coat of paint. It can all start to seem extremely overwhelming and expensive!

We've seen this happen with our clients over and over and so we decided to find a way to make the process much easier (and less stressful!). 

Enter Compass Concierge. With this only-at-Compass offering, we'll front the cost of services to improve your home for a quicker, more profitable return. Exclusive to our clients, our Concierge program will prepare your home for the market. From deep-cleaning to cosmetic improvements, we'll work with you to assess every opportunity to elevate your home's value. 

And with our in-house construction company, Eagle Rock Restoration, all you have to do is decide which improvements you want to include in your preparation plan. We'll manage the project (big or small) from start to finish!

Compass will cover all upfront costs, collecting payment for the services rendered when your home closes escrow. By investing in your home's potential, we aim to provide a swifter, more profitable sale.

Services include: 
Staging

Deep-cleaning

Cosmetic renovations

Decluttering

Landscaping

Painting

Pest control

and more!

Curious to learn more? Contact us to discuss how Compass Concierge could help you.

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Introducing Compass Cares

Through this unique philanthropy program, we're giving back to the community, one home at a time. 

Our new hyper-local approach to giving and volunteering, Compass Cares empowers us to support causes that are meaningful to us — and to you! — right where it counts most: at home. 

With every transaction our team closes, we'll make a contribution to help local institutions continue to make our incredible community an even better place for us all to live.

Our team loves our hometown, but it's all of you—our clients—who inspire us to give back. Recently we've been honored to donate to Union Station Homeless Services, Center for the Arts Eagle Rock, and the Northcentral Animal Shelter on behalf of our clients. We look forward to sharing our progress with you as together we work toward an even brighter tomorrow.

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Introducing Compass Coming Soon

Introducing Compass Coming Soon

As your agent, our primary goal is to find new ways to sell your home as fast as possible for the highest price, so we couldn't be more excited to share a new initiative with you today: Compass Coming Soon. A unique pre-marketing opportunity, Coming Soon will allow us to reach potential buyers before officially listing your home. Why is this so important? For a few key reasons:

Greater demand.

From movie trailers to Fashion Week, other industries have mastered the art of pre-marketing. That’s what Compass Coming Soon is all about — building excitement and anticipation for your property.

Increased exposure.

With a Compass Coming Soon listing, you have not one, but two opportunities to launch your property: first on Compass.com, then later on the MLS and aggregator sites.

Invaluable insights.

We’ll gain key feedback regarding the initial pricing, photography, and positioning of your property ahead of listing it, without having to amass any days on market.

More flexibility.

Don’t have professional photos shot or staging completed just yet? No problem! You can get a head start with Coming Soon while you wrap up the details you’ll need to list with the MLS. 

What about buyers?

Coming Soon allows buyers to learn about these properties — as well as potentially view them and submit an offer — well in advance of the competition. In some cases, Compass Coming Soon listings are sold so quickly, they’re never even entered into the MLS! If you’re looking to buy, don’t miss this significant and unique opportunity to be first in line for the home of your dreams. 

Interested in learning more about the benefits of listing or buying with Compass Coming Soon? Call or email us today and let's get the conversation started!

View all Compass Coming Soon listings!

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The Emotions of Selling Your Home

My home of 18 years is sold! 
 
Putting my own theories to the test, I sold my house recently. I believe that Realtors ought to buy or sell property every few years just to stay in touch with how difficult it is. Difficult? Really? Yes—the home selling process is complex, but the really hard part is the emotion involved. Especially if you’ve enjoyed living in your old place. Good memories flood back (and at the most sensitive times, like when the buyers present you with a laundry list of what they want repaired or credited back.) 
 
“Ingrates! They don’t deserve my home, I’ll cancel the sale!” Nice revenge, but you can’t justcancel. You have to follow the rules that the written contract provides. So they can ask for you tofix things within their inspection period, and you can say no, or you can say yes, or go back tothem with a counter proposal. But you can’t just cancel unless you’ve given them a notice to perform and the deadline has passed. That one sentence is the meat of another whole blogpost, folks, so tune in again soon. 
 
You have to follow the contract and so do they, so you’d better be sure you understand what itsays before you sign it. How long are the contingency periods? What and when do you have todisclose? When do you have to have everything out? Did you agree to leave appliances? Howclean do you have to leave the place? 
 
Another emotion that often occurs is what looks like greed to the outside world, but is actuallykind of like comfort food—something hurts or someone feels sad or overwhelmed and moneyhelps to dull the pain. At least if you have to part with your beloved home, you can afford to dosomething fun with the proceeds. Not always, folks. The market might not agree with your “I justwant some fun” price. But, speaking from experience, you can dream, can’t you? Maybe youcan spend a week in Bora Bora with the money you save by being debt free…
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Home Upsizing, Downsizing Or "Rightsizing"? That Is the Question

Home Upsizing, Downsizing Or "Rightsizing"? That Is the Question

When we consider the important elements of our lives - like buying and selling our homes - the words we use and how we think about it matters.

Helping homebuyers and home sellers buy and sell real estate in NELA for as long as I have, I’ve seen it all. Homes for sale in Mt. Washington, for instance, offer large modern homes as well as tiny bungalows. Homes for sale in Pasadena offer ginormous California Craftsman homes as well as very small ones. Many are buying and selling homes to upsize. They need more space. But we also see many trying to downsize. They require less space.

Rather than thinking “upsize” or “downsize”, for many good reasons, we might ought to consider the modern term “rightsizing”.


Right-sizing is often about our quality of life. Often a much larger home requires a lot more work and effort to maintain. That time could be better used for other endeavors. Time is the last luxury. We are ALL running out of it.

This is one of the 6 points that Leonard Steinberg, Compass' President, itemized in his daily email regarding downsizing, or  rightsizing as he calls it. I'm dealing with a couple of downsizing/rightsizing projects myself, and I know how stressful it can be. My husband and I often ask each other--how did we end up with so much stuff? Then there's my mother, who is 91 and facing the same issue with only my sister and me to help. And I'm 300 miles away! 

But enough about me. I loved Leonard's conclusion:

Scaling down your home often feels like a regressive, negative moment in life, but I see it as the exact opposite. I have bumped into clients months after they made this stressful shift only to find them happier, less stressed and with a new sense of freedom. Remove ego from homeownership and the decisions made are often much wiser.

The wisdom of removing ego from homeownership, and from all kinds of real estate transactions, is so true in so many ways. For instance, your house will not sell for more than a flipped completely done house that's bigger no matter what you think of their taste. It's not about you and how cool you think your house is. It's about buyers and what they think. And they speak with their feet these days.

"Why don't they make an offer?" Sellers ask this all the time. It's because they don't want to offend you, or they don't want to bother, or they've been trained to believe that you really mean your price.

Here's another example: real estate agents who try to dominate a transaction, like "I would never let my buyer get less than half the credit I told him to expect from the seller." What? This agent thought she had some eerie power over the seller and the buyer in this escrow. My seller said "Let's kick this buyer to the curb and go to the next one." We had a great backup buyer and we did exactly that.

We all have some interest in real estate. After all, we all live somewhere, even if it's under a bridge or on our buddy's couch. Let's figure out what we need and let go of at least some of what we want and maybe we will all be a little more content with our lives.

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NELA Real Estate Market: An Affordable Issue with a Special Twist

NELA Real Estate Market: An Affordable Issue with a Special Twist

What we're seeing in the Eagle Rock, Highland Park and Mt. Washington housing market is happening all  around the state.

Interesting things are afoot in the Northeast LA real estate market. Anyone keeping their eye on prices of homes in Glassell Park and Mt. Washington have noticed that prices up from where they were just a year ago. Those watching homes in Highland Park and Eagle Rock are noticing homes staying on the market longer. What does it all mean?

Good question! Here’s the latest news from the top. Leslie Appleton-Young is California Realtors’ Chief Economist and we are lucky to have her help us make sense of a very big subject: the real estate market.


The bottom line is we have been facing a big affordability issue here in our little corner of the Los Angeles real estate market. And it has gone viral state-wide. The average change in California’s year-over-year number of sales has decreased 5.5%. And the average sales price has increased 5.5%. Statewide!

Many of you readers might be muttering “I don’t really care about state-wide, I want to know about here, in good old NELA!" (That’s zip codes 90041, 90042, 90065.)

So here you go, Dear Reader: These are year-over-year, September to September 2017 to 2018 percentages for NELA and they are startling. Number of active listings is a whopping 56.7% more in 2018, while the number of sold is down 13.6% and the number pending is down 5%. Here is the interesting news—the average asking price is 10.2% higher in 2018 and the average sales price is 18.5% higher. So fewer homes are selling, but they sell for more.

What does this mean to you? It seems like this is an affordability issue, but with a special twist. Especially with the uptick in mortgage interest rates on top of still rising prices, who can afford to pay an average sales price of $972,000? And in Eagle Rock alone (90041 zip code) the average sales price was $1,133,000 in September 2018! Average! So what’s the twist? The prices are continuing to rise, that’s what. Ordinarily, too-high prices start coming down when the inventory increases and number of sales drop.

It seems like many Buyers (or think they wanna be buyers) want to just have a crash take us back to 2009 bottom of the Great Recession prices and stay there long enough for them to close escrow on their dream home at a bargain price 40-to-60% below today’s prices. And then spring back to today’s crazy high prices so they can feel like they got the deal they missed back in 2009-2012. But their dream homes wouldn't come on the market in such a case because their owners aren't going to lose all the equity they’ve gained in the last few years. Why not? Because they are not in distress! Homeowners will just sit tight and wait it out because they don’t have crazy loans that are going to adjust to an impossible payment like they did in 2008. And those homes that sold in 2009 were not your dream homes either. People who own dream homes don’t generally have to put them on the market at the bottom of a sales cycle. No one does that unless they have no other alternative.

So what about the increasing inventory? A lot of homeowners are still trying to cash in on the high prices and they are comparing their homes with cream of the crop “done” homes or super well-located homes with a lot of potential. But times have changed, folks—you can’t put a cluttered, dirty home on the market with a few bad cell phone photographs and expect to sell for a top price. You should expect to put in a lot of effort and possibly money to present your home in its best light, hire the best experienced Realtor you can find and do what they say. This thought that all Realtors are alike and do the same thing so you just need to hire the cheapest one and he will sell your house for a lot of money is as mistaken as thinking the diamond earrings you buy at the big box discount store are just like the ones you could buy at Tiffany’s for five times as much. Anyway, those sellers are the ones driving up the inventory numbers and when they expire, the numbers will go back down and only a few buyers will have the money to buy the good homes that are left. We just put two properties into escrow for over $200,000 above their list prices because they are special, well-prepared and well-marketed homes.

It’s not a logical situation, potential buyers aren’t squeezed out of this market because interest rates have ticked up, they are squeezed out by not being able buy the home of their choice at the price they can or want to pay and they can’t or won’t find an acceptable alternative. The only houses that sell quickly in a changing market like this one are super great prepared homes or super well-priced ones, just like always.

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Magical Thinking and this Crazy Real Estate Market

Magical Thinking and this Crazy Real Estate Market

Homebuyers and home sellers's expectations often clash with harsh realities of the market when it comes to the nitty gritty ... selling price and offers.

Magical thinking and this crazy real estate market. What am I talking about? I have some examples.


The Home Sellers’ Magical Thinking

PREMISE: The house next door to mine sold last year for $1.1 million. It was smaller and there was only one house on the property. We have two houses and more square footage, therefore we should list ours for $1.2 million and get at least as much as that one.

FACTS: The house next door was small, but every detail was well designed and evoked a very emotional response. The landscaping was lush and serene, like a Zen retreat, a special relaxing haven in the midst of a harsh city.

The subject property lacked curb appeal and the landscaping was non-existent. Being a 2-unit income property, it is valued very differently and income properties are supposed to be valued on a formula based on its income. Historically low rents in a rent-controlled area do adversely affect the property’s value. That’s why vacant properties usually sell more quickly and at a higher price than ones that have been occupied by long-term tenants in a rent controlled area.

PREMISE: Why are these offers so low? I saw that a house sold just down this very street for over a hundred thousand more!

FACTS: There hasn’t been a sale this high on this street in over two years, and that one was a 5-bedroom, 3-bath redone Craftsman. This is a 2-bedroom, 1-bath home with a lot of view but no yard.

What am I saying? We don’t value our own property anything like a buyer or an appraiser will.

But sellers aren’t the only ones subject to magical thinking. In fact, homebuyers can really try to bend reality to suit their own agendas.

Homebuyers' Magical Thinking

PREMISE: Today, we have a Sellers' market that has actually been going strong for a good 6 years. Buyers are convinced that now is the time for what has gone up to come down, and down hard. We all remember the Great Recession, don’t we? In Northeast Los Angeles, we lost 40 to 50% of our average sales price in just 15 months. But buyers today have an even better fantasy: prices will fall to 2009 levels just long enough that they will be able to buy their dream home for a bargain price, then right after they close escrow, prices will rally back up to 2018 levels.

FACTS: Many facts belie this fantasy. Do those of you who were actually in the market in 2009 remember what the houses for sale were like? Many were distress sales, so forget about beautifully prepared homes, forget about pre-inspections, and forget about decent loans with low interest rates and 21-day closes. The loan process was so draconian only those who could prove they didn’t really need a loan could get one. Plus, even more properties were selling for cash than are today and most sellers rightly preferred cash sales over the obstacle course that was the loan process then. Owners who didn’t have to sell (such as owners who were not in trouble, owners who had pride of ownership and didn't have to deal with penny-pinching buyers who acted like their lovely home was just a piece of trash) just waited it out. What happens then? Low inventory and higher prices. This is known as unintended consequences.

There is a whiff of desperation in the air today ... 

Sellers want to time the market for the highest possible sales price, and buyers worry that if they buy now, they will close escrow the day before the market crashes and they will be left owning an overpriced turkey. What happened to owning a home as a place to enjoy your life, raise your family, and do whatever you want without a landlord telling you that you can’t? Even if you buy your home at the height of the market, if you hold onto it long enough, it will increase in value. And if you look at the prices over time, a correction almost never takes prices down to previous lows. Even the overblown prices of 2006-2007 are not seen today:

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So if you want to buy a nice house in a great neighborhood for a bargain price, you will most likely be leaving LA.

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