Southern California home prices, sales rise in January amid post-election rush

Southern California home prices and sales jumped in January from a year earlier, a sign buyers rushed to purchase a home as mortgage rates rose following the presidential election.

Sales in the six-county region rose 5.4% to reach the highest level for a January in four years, real estate data firm CoreLogic said. The Southland’s median price for new and resale homes increased 5.3% from January 2016 to hit $455,000.

The price gains add to a four-year-plus stretch of a rising market, a result of a strong job market, low mortgage rates and a shortage of homes for sale.

The strong January sales numbers mirror the national housing market, where Americans last month purchased previously owned homes at the highest rate in a decade. Analysts said a jump in mortgage rates following the election might have spurred some buyers to close a deal faster, fearful rates would rise further.

Last week, the interest rate on a 30-year fixed mortgage averaged 4.16%, according to mortgage giant Freddie Mac. That was up from 3.54% in the week prior to the election, though down from a high of 4.32% at the end of 2016.

Rates have risen as investors believe President Trump’s promised cuts in taxes and new infrastructure spending could lead to stronger growth and higher inflation.

Despite the recent strong sales, there are questions over how long price increases can last, particularly if mortgage rates continue their upward climb.

Southern California’s median price, for example, fell 3.2% from December, despite being higher than a year earlier.

The median — the point where half of homes sold for more and half for less —  also is below the $465,000 level reached in June, which was a nine-year high at the time.

The dip could signal the market is nearing a peak.

Prices have climbed far faster than incomes in recent years and as of the end of last year, only 31% of Californians could reasonably afford the median price house in the state, according to the California Assn. of Realtors.

Or the recent dip may be normal seasonal fluctuations given there is usually less demand during the fall and winter months. CoreLogic analyst Andrew LePage said the 3% decline from December was in line with historical norms. Sales also declined from December, as is normal.

A clearer picture will emerge in coming months, during the typically busy spring home buying season.

“Historically, [January and February] are not good indicators of how the market will shape up during the rest of the year,” LePage said in a statement.

On a 12-month basis, prices rose in all six counties tracked by CoreLogic.

In Los Angeles, the median climbed 7.1% to $525,000; in Orange County, 2.6% to $635,000; in Ventura County, 2.2% to $510,000; in San Bernardino County, 6.8% to $283,000; in Riverside County, 6.5% to $330,000; and in San Diego County, 7.0% to $495,000.

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The Home's Appraisal Value Is Less Than My Offer, Now What?

It’s a nightmare situation: You’ve spent months searching for your dream house, finally get an offer accepted, and then … the house doesn’t appraise for the agreed-upon price.

Now what?

Take a deep breath

“It can be heart-wrenching for the buyer and seller if the deal falls apart because of the appraisal,” says Suffolk, VA real estate agent Lori Strickland.

But you’re not alone. Low appraisals happen more often than you might think, especially in rising markets.

Sometimes there are insufficient comparable sales applicable to the home you want, or maybe distressed sales in the area have skewed the appraisal.

“Traditional lenders will generally only lend funds up to a certain percentage of the appraised value [80% of appraised value as opposed to 80% of the contract price],” says Michael R. Santana, a Florida attorney.

If the appraisal is lower than your offer, you may need to come up with more cash — but you do have other options.

Look over the appraisal contingency clause

An appraisal contingency clause built into your contract allows you to reevaluate the situation or renegotiate if needed. But even with a contingency clause, you could end up spending more or walking away to look for another house.

Sometimes all parties need to join together to make the deal work: sellers, buyers, and agents. Sellers might come down on price, you might pay closing costs, and agents might even take less of a commission — but the deal still goes through.

Get a second opinion

Maybe the appraiser’s estimate of the home’s value was inaccurate. If so, Sam Heskel, CEO of Nadlan Valuation Inc., recommends a value appeal.

“The appraiser will review the appeal and respond by reevaluating the property or explaining why he or she did not use the comparable sales the lender sent,” says Heskel.

Another option is to try working with your lender to get a second appraisal. They might be willing to accept the subsequent, higher appraisal.

“In some instances, especially if you are well qualified, sellers are willing to pay for the second appraisal to keep the deal on the table,” says Santana.

To help guard against a lower appraisal, make sure you let the appraiser know the reason you made the offer you did.

“The selling agent should meet the appraiser at the property to provide comparable sales and listings,” says Casey Fleming, a former appraiser.

Try not to pay more than appraised value

You might think you have found the only house you’ll ever love, but with that mindset, you’re liable to get hurt. Try to remove your emotions from the equation. “The euphoria of offering and counter offering on a home can quickly become buyer’s remorse,” says Nevada real estate professional Bruce Specter

If you do pay more than the appraisal, you’ll spend more than the house is worth. If you wouldn’t pay more than the list price for a car or even for shoes, you generally shouldn’t do so for a house.

Forget about whether you’re in a hot market

Unless cash buyers are ready to swoop in, you can use the low appraisal as an opportunity to renegotiate.

As long as you’re not in a hot market, Tamela Ekstrom, owner of Haven Real Estate in Detroit, says, “the seller will typically drop down and sell for the appraisal amount.” Once people are entrenched in a deal, they usually try to work things out.

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How To Buy A Home In Los Angeles Before You Turn 35

Whether movie stars, traffic snarls, or juice bars come to mind when you think of Los Angeles, CA, the reality is, there’s a lot to love about living in the City of Angels. And L.A. lovers say it lives up to the hype.

“It’s such an amazing, collaborative city for independent artists and small business owners,” says lifestyle photographer Jeff Mindell, who has lived in Los Angeles with his wife for five years and hopes to buy his first home in the next several months. “You really can’t beat it. I wake up every day so happy to live here.” L.A.-based creative director Whitney Leigh Morris, who posts about living in a tiny Venice Beach cottage on Instagram, agrees. “I’ve lived in many other cities, big and small, United States and abroad,” she says, “And I came back to L.A.”

But there is a downside to living in a city where everyone wants to be: Whether you rent or own, Los Angeles is a particularly challenging (and competitive!) real estate market. We chatted with Morris and Mindell to get a sense of what it’s really like to find a place to live in La-La Land—these are their 10 best tips to keep in mind when you’re hunting for houses for sale in Los Angeles.

1. Know what you want before you start looking

A natural setting and walkability were at the top of the list for Morris when she was house hunting in Los Angeles. “We looked at about 30 houses before we decided to go with this one,” she says. “We knew we wanted to stay in Venice. We walk everywhere, we bike everywhere. It’s just a beautiful place to live.”

Real estate, like marriage, is all about the compromise. But you have to start somewhere, and that somewhere means daydreaming about all the things you want in a home and then whittling that list down to the bare essentials. This is your list of must-haves, and it’s an important tool to help you sift through listings to find only the houses you’re truly interested in — from price range to location to the number of bathrooms. This narrow focus can give you a competitive edge, freeing you up to take fast action, especially in a hot market, where homes (especially starter homes) can go under contract in hours instead of days or weeks.

2. Be realistic

“I think it’s a huge accomplishment when you are finally able to buy a home, in LA or otherwise,” says Mindell. But he admits it might be a slightly bigger accomplishment here, considering the competitive nature of real estate in Los Angeles. “We’re being super-realistic. We know we’re not buying our dream home.”

But even with some compromises, he’s excited to get started. “My wife and I are both not really afraid of projects,” he says. “So we’re definitely leaning in the direction of our first home being a fixer, then working on those projects.” This way, the couple can be flexible on price, spend a little less than if they were buying move-in ready, and make the home their own.

3. Consider your future

In real estate, as in life, it’s important to play the long game. Even if you’re not planning to start a family right away (or ever), it’s never a bad idea to look for a home in a good school district. If you can afford it, being zoned for a popular school will make your home even more desirable when it’s time to sell. In addition, a home that’s just right for two people can feel a little claustrophobic as a family grows.

“I was looking for very different things in my 20s and 30s,” says Morris, who says that her priorities are shifting now that she’s expecting her first child. Morris and her husband have chosen to stay in their tiny home, downsizing their belongings to make room for their new addition. “We have converted our bedroom closet into a mini-nursery with mobile pieces. We got rid of about half of our clothes.”

4. Expect a bidding war

Mindell says he’s expecting to compete with multiple offers and enter a bidding war when he’s ready to make an offer. “A lot of times in the LA area, houses are being picked up by flippers and sold for price and a half of what they were bought for.” He admits it can be frustrating when you’re looking for a place to make your home and you’re competing with investors. “You’re going up against businesspeople. They have no personal connection to the house.”

5. Give yourself a competitive edge

Although Mindell admits it can be intimidating to go up against an investor when you’re house-hunting, he remains optimistic by remembering that the sellers are ultimately in control. “At the end of the day, the homeowners are picking the person who’s buying the house. Do something to help you stand out,” he says, adding that his real estate agent has had clients who have written persuasive offer letters or even made videos introducing themselves to help their offer rise to the top.

6. Don’t discount the potential of your outdoor square footage

All that SoCal sunshine makes Los Angeles a very special place when it comes to outdoor living spaces — and smart buyers will see potential to transform outdoor space into livable square footage, whether that’s adding cozy seating area or dining room on an outside patio or even putting in a “she shed.” That’s one huge reason Morris and her husband decided to stay put instead of moving to a larger home to raise their child. “The LA climate has definitely played a part in how we expanded,” she says, and adds that since she and her husband are from Florida, where it rains all the time, they definitely don’t take the sunny weather in Los Angeles for granted. “We put a 2-foot-by-4-foot shed outside to hold some things for the baby that we don’t need to use on a daily basis. The idea of storing things in a cedar shed is not laughable here.”

7. Get your finances in order before you hit up that open house

Mindell and his wife are working to organize their finances now and plan to meet with a lender before they go on any showings with their real estate agent. But Mindell says he’s put in some work over the years to set himself up for success as a young homeowner. “My parents did a good thing for me when I was younger. Before I knew what a credit card was, my dad opened up a credit card in my name,” he says. “And then started using it and paying it off, so that now I have a really great credit score.” Establishing a good credit history — and a high credit score — is an important early step toward homeownership.

8. Take your new ’hood for a test-drive

As a way to learn about the local real estate market — and have a little fun while you’re at it — Mindell suggests taking a “staycation” in neighborhoods you think you might like. “We took a weekend and parked our car and just pretended we were locals,” he says. “We went to the farmers market, people-watched, and got a feel for the neighborhood. We’re trying to find a place that feels like home but that is maybe a little bit cheaper than where we are now.”

9. Don’t forget to consider the convenience aspect

If you don’t want to do daily battle with LA’s famous traffic jams, it’s important to look for a home that offers convenient access to where you need to be — whether that’s work, schools, or leisure activities. For instance, Morris and her husband carefully considered their home’s proximity to Los Angeles International Airport (LAX) before making their final decision. “We love that it’s close to LAX without being so close that we’re influenced by the air noise,” she says, adding that she didn’t want family and friends to have difficulty getting from the airport to their home. “That’s something we definitely considered when moving here.”

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Getting your buyer's offer (or counter offer) accepted

Key Takeaways

• If sellers require fresh pre-approval, buyers have the right to ask that their offer remain valid during the time it takes for the new approval process.
• The buyer and his or her Realtor should discuss the specifics of any counter-offers and see if there are parts (or all) of it that are acceptable

When inventory is tight, every advantage you can give your buyer client to get their offer accepted is key.

Here’s what you need to know about pre-approval and counter-offers in the home buying process.

Pre-approval

These days, when lenders compete on the speed of their pre-approvals, not all pre-approvals are created equal — especially when it comes to documenting income.

Pay stubs and W2s once were considered sufficient proof of income, but now tax returns have been added to the mix, even for salaried employees.

Most borrowers with pre-approval letters from lenders fail for to qualify for a mortgage because they failed to update their financial status between the time that they are pre-approved and they make an offer on a home.

Pre-approvals are usually good for 60-90 days because a borrower’s financial status can change due to a change in the buyers’ debt burden, in income or a change in their credit score.

Most, but not all, lenders require that tax returns be signed. Most, but not all, will also require borrowers to sign an IRS Form 4506-T to give them the authority to obtain a copy of the return, and they will manually review the returns.

Yet rarely does that happen, according to mortgage guru Mark Greene, a loan originator with HomeBridge Financial Services. “Borrowers are wary of sending tax returns and paystubs and bank statements to a mortgage rep to secure preliminary mortgage approval, because they are not in the lender choosing phase of the process — all they want is a pre-approval letter,” Greene says.

A buyer's offer with a pre-approval based on income data derived from complex tax returns may set off an alarm.

And getting a fresh pre-approval from a lender recommended by the seller may delay the process.

Buyers have the right to ask that their offer remain valid during the time it takes for the new approval process. They also should ask the seller not to penalize them for the lower credit score that will result when the new lender pulls their credit.

In today’s environment, when “pre-qualified” and “pre-approved” are terms that may mean different things to different people, any letter from a lender is only as reliable as the information upon which the opinion is based and upon the competency and veracity of the lender providing the information.

The likelihood of receiving a counteroffer depends on several factors — including whether the local market is skewed in favor of buyers or sellers, how long the home has been on the market, how eager the sellers are to move and whether the offer comes close to the sellers’ expectations.

Typically, a counteroffer will include a higher price or a larger earnest money deposit, a different closing date, a change in the contingencies or the timing of the contingencies, or an exclusion of specific fees. Buyers can accept it, reject it or make a counteroffer in return.

A counteroffer will always include an expiration date. If buyers don’t respond by the seller’s expiration date, the offer is void and the seller can accept an offer from someone else.

What to do with a counter-offer

A buyer’s decision about how to handle a counteroffer will depend, in part, on how much he or she wants this particular house.

If the buyer is fine with the sellers’ conditions in the counteroffer, the buyer can simply accept the offer by signing it.

If the buyer doesn’t like the counteroffer, the buyer and his or her Realtor should discuss the specifics of the offer and see if there are parts of it that are acceptable.

Buyers can make a counteroffer to the sellers with a new price or a different set of contingency dates or a larger earnest money deposit — anything that’s acceptable to the buyer and that could sway the homeowners to sell the property.

Keep in mind that buyers need to stay within the confines of the pre-approved mortgage and that the house must appraise so that its value is equal to or larger than the sale price.

Once a buyer makes a counter-offer to the sellers’ counter-offer, the buyer will be obligated to go through with the deal if the sellers accept it. So, make sure buyers are comfortable with the offer.

The sellers may not respond to the offer. If they don’t and the buyer still wants the house, buyers can make another counter-offer within a week or so to see if it’s possible to nudge them into negotiating.

A buyer’s best resource during this stage of buying a home is your Realtor.

Ask the Realtor to talk to the listing agent and find out what is most important to the sellers — such as the move-out date, the price or perhaps avoiding having to make repairs.

The more you know about the sellers’ motivations, the easier it is to tailor your offer so that it’s acceptable to them.

Article credited to Steve Cook, inman