3 Tips for Homebuyers in this Competitive Market

April 2024 is no joke for homebuyers in Los Angeles. Inventory is only slightly up. Tons of fixers on the market that buyers are afraid to touch. Interest rates are back up over 7%.

BUT… none of this is new. There will never be a perfect time to buy, especially in high-demand areas. So buy when it is right for you aka monthly payment makes sense and the house fits your needs. Here are 3 tips to help:

1) stay the course - it is very common in today's market for a buyer to lose out on a few homes because of bidding wars. but remember every loss is a step toward your dream home.

2) be prepared to take on seller's problems - all homes have their quirks and issues. but most can be fixed. don't freak out when you see things called out on an inspection report. instead let me help you negotiate a credit to cover the cost of any major fixes.

3) hire a great agent - a lot of things can come up in a home purchase and having an experienced real estate professional to guide you through the hundreds of pages of reports and realities of construction and home ownership can lead you to make huge, life-changing, wealth-building decisions.

How long do LA homeowners stay in their homes?

Well according to NY Times, the average Los Angeles resident will stay in their home an astounding 18 years. That is the longest in the country.

Why is this important? Well... I tell all my clients that you need to live where you love. That could mean a variety of things to different people: live near the people you love, the coffee shop you love, hell even the trader joe's you love.

if you see a home in your ideal area come to market, let's game plan on how we can get you into that home -- it could make for a lovely 18 year journey!

Can I time the market? (spoiler alert: no)

Long(er) answer: We still have a inventory crunch here in Los Angeles. There are more buyers than homes for sale.

This is why it is best not to try and "time the market". It is basically impossible to predict. So buy when you are ready and able.

My current advice for buyers is to keep an eye on the homes hitting the market right now. Yes your interest rate might be higher than you would like, but if you can swing the down payment, this could be an excellent time to buy.

Why? Because most buyers will be waiting for those rates to creep down. Then when the rates do dip, there will be a flood of buyers hitting the market at once, driving up prices. Wouldn't you rather buy now with less competition? Then you can refinance when the rates dip while those other buyers who waited are still searching and bidding.

Sellers... you do have a unique advantage in this market. If you need to sell, then make sure you are prepping your home for the market. New landscaping, fresh paint and staging is what it takes for multiple offers in this market. Long gone are the days of completely rehabbing your kitchen or bathrooms -- buyers are fine with character (and in the $1-1.5m range, they are expecting it).

If you are considering selling in this market, let's talk. I would love to chat with you about the pros and cons of letting go vs holding.

Things to AVOID when applying for a loan.

1. Don’t Buy or Lease an car before you apply for a Loan

When reviewing your loan application, lenders will look carefully at your debt-to-income ratio. A large payment such as a car lease or other significant purchase can negatively impact those ratios and prevent you from qualifying for a home loan. 

2. Don’t Change Jobs 

A new job may require a probation period, which must be satisfied before income from the new job can be considered for qualifying purposes. 

3. Don’t move assets from one bank account to another

These transfers appear as new deposits and complicate the application process, as you must disclose and document the source of funds for each new account. The lender can verify each account as it currently exists. You can consolidate your accounts later if necessary. If you are receiving a gift from a family member to help pay for your downpayment, DO NOT move those funds into your account. When you are in escrow, the person giving you that money will wire those funds directly to escrow.

4. Dont attempt to consolidate bills before speaking with your lender

The lender can advise you if this is necessary.

Single Family Home or Condo…What to do?

Lots to consider here. Condos are not right for everyone: you share walls, garages, common spaces. And it’s a fact that condos do not appreciate as quickly as single family homes.

With that said, condos can still be a great way for a buyer to get into the market. Maybe you can't afford a house right now, but starting with a condo that you can live in for the next 5 years is a great way to go. Start building equity and stop paying your landlord's mortgage. Then when you have the cash to buy a house, you can sell your condo or even lease it out and start making a passive income.

Also, condos are great for buyers who don't have the time (or patience) for maintenance.

Interest Rates…Where are they going?

In the immediate sense, we are seeing very small shifts in interest rates. there was a lot of focus on The Fed hiking interest rates last year, which meant borrowing rates on credit cards, auto loans and personal loans went up. However, mortgage rates don't take direct cues from The Fed, rather they respond to economic outlook and inflation. It seems there is a handle on inflation so that points to a gradual decline in interest rates.

Rates hit their peak in November with some buyers in the Los Angeles area locking in at 8%. Since then, things have gone down. As of February 2024, you can expect to see something closer to 6.5%.

All lenders can and should give you an estimated monthly payment based on the pre-approval purchase price. Make sure you’re comfortable with it, if not we adjust our search to a lower purchase price based on what you’re comfortable with paying. 

Try to focus more on that monthly payment vs getting the best rate possible.

But keep in mind...the lower the rates, the more buyers in the market. So don't only look at interest rates when you are considering buying. talk to a lender and get a sense of what your monthly budget is. Buy when the time is right for you, not when the time is right for everyone else.