In a nutshell, when a real estate market slows, it typically takes longer to sell a property. And, as all agents will tell you, the longer a property is on the market, the harder it is to sell and will usually sell for less. While a slowing market is not all doom and gloom for sellers, it does pay to know when your market is slowing. Being armed with a little knowledge can help you get a decent price in that slow market. With that in mind, here’s what a slowing real estate market means for your Los Angeles property.
Characteristics of a Slowing Real Estate Market in Los Angeles
The tell-tale signs of a slowing real estate market are:
INCREASING INVENTORY
Most of the time in a slowing market, the number of homes on the market is increasing. These inventory levels are determined by comparing the average number of homes listed each month against the number of properties that actually sell. Generally, when a market has a six-month supply of inventory, it is considered a balanced market. But when the supply of inventory is more than a six-month supply, it is a buyers market. So when you see a market creep up to and past that six-month supply, you’re looking at a slowing market. And at this point selling will present a greater challenge.
DOUBLE-DIGIT DAYS ON MARKET
In a slowing real estate market in Los Angeles, properties stay on the market longer before selling. And just as in retail sales where long-held products have to have the price reduced, properties that stay on the market usually have a price reduction. For real estate, the first 30 days are critical. If a property doesn’t sell within that period, that’s bad news for the seller.
PRICE GAINS BEGIN TO DROP
It sounds like good news for sellers and owners when home prices continue to increase. The problem, though, is that rapid price gain usually presages a fall in home prices. And when they begin to fall, that’s a good sign of a slowing real estate market in Los Angeles. Rapid appreciation is good for a while, but eventually, it will plateau and then reverse trajectory.
PRICE REDUCTIONS INCREASE
Similarly, when home prices rise too high, buyers will wait till they come down. So when a real estate market begins to slow, you will see more and more home price reductions. It’s a simple function of supply and demand, really. What this means for sellers is that the pricing expertise of a good agent is absolutely critical for knowing exactly how to price a property for sale in a slowing market. (Discover more about slow market pricing by calling 1 (800) 344-4164.)
MORTGAGE INTEREST RATES ARE RISING
Another typical characteristic of a slowing real estate market in Los Angeles is rising mortgage interest rates. Rising interest rates result in buyers being able to afford less house because their monthly mortgage payments will be higher owing to the higher interest rates. The result is that buyers have less purchasing power, and sellers have less negotiating leverage.
Further Implications of a Slowing Real Estate Market in Los Angeles
Obviously, then a slowing real estate market is not the best state of affairs for sellers. An additional challenge is that buyers are even more hesitant to buy because they fear depreciation. No one wants to buy a property that will soon be worth less than they paid for it. The real difficulty here is determining when the market will hit bottom and reverse. It’s fairly easy to tell when a market is slowing, but nearly impossible to predict when it will bottom out. And this makes buyers cautious and often fearful.
What You Must Do in a Slowing Real Estate Market
What all this means for you as a seller is that you absolutely must get some things right in order to stand above the competition. You have to understand the local market conditions, you get must get your property in tip-top shape, and the pricing has to be spot on. Basically, in a slowing real estate market in Los Angeles, you need all the pricing, marketing, and negotiating skill your agent can bring to bear. We can help.