It's very challenging to be a buyer in today's market. Interest rates are at an historic low. Prices have gone up enough that some owners of really good houses are willing to put their homes on the market, and the market is well suited to try moving up from that sweet cottage you've outgrown. So what's the problem? Well, no one knows what anything is worth, especially here in Northeast LA where real estate in Highland Park
, Eagle Rock, Glassell Park, Mt. Washington and other neaby communities have become hot items.
Why is that such a problem? Buyers and their helpful friends and families can't figure out if they are getting a good deal, or if they are overpaying.
If you listen to national housing market news, inventory has gone up dramatically in the last year, prices have flattened out, no one can get a loan, it's all over! Here in Northeast Los Angeles, if you look at just the last year, although inventory is higher than Spring 2013. But compared to 2000 or 2007, it's a fraction of what it has been! Did I mention that interest rates are at an historic low? And average sales prices are up 20% over last year? In Eagle Rock, there have been 7 over-$1- million-plus sales closed so far in 2014. That's more than has ever happened in one year before - seriously, EVER. We just represented the buyer on the highest priced home to sell in Eagle Rock in 10 years, $1,800,500. Does that sound to you like the market has flattened?
What we are hearing now in our Los Angeles marketplace is that affordability is becoming an issue. Currently, the California Association of Realtors says that 55% of households in Los Angeles County can afford to purchase an entry-level home here. Only 30% can afford to buy a median-priced home. County-wide in September 2014, "median-priced home" was $414,000. In Northeast LA, the median price was $586,000. But in the last quarter of 2005, only 9% could afford to buy the median-priced home, and the median sales price was $571,000! So we are in a much better situation today.
The question at the end of the day is, "Is this a good time to buy a home?" The answer lies within you and your own personal financial picture. All the charts and percentages are attempts to quantify large groups of data, they don't know you or your situation. And just to put things in perspective, if all you wanted was a really good deal, you would have bought in April of 2009, when the real bottom of the market was. Oh, you didn't have the money then? Neither did a lot of us.
If you have a 20% downpayment, FICO scores above 750, a great job that pays a salary, you are a great buyer and you can compete for the desirable homes. Now is your time to buy. If you have 10% down, ok credit (above 710), 1099 income, you will have to jump through some hoops to get financing, but you can probably do it--but you won't look as good to a seller as that first buyer. Now is the time you'd better buy, because a small rise in interest rate can knock you out of your own personal affordability index. Do you think you should wait till prices come down again? From the chart below showing average sales price for Northeast Los Angeles, it looks like the cycle is at least 7 years. And look, in 14 years, prices never went back down to what they were in 2000. Do you think they will? And If they did drop that much, do you think you’d have a job then? Or the cash to buy something?
Average sales price (red) and average list price (green) in Northeast LA
Buying a house is always a delicate balance between making a sound financial investment, and making a huge life decision. It's important to have a real estate agent who can help you look at the current real estate market and how your needs fit into that picture.