The Los Angeles real estate market is changing: the missing balance
We know very well that, in the market in general, it is necessary to meet demand and supply perfectly, in order to guarantee a fair exchange between the parties and to benefit from certain advantages. Tendentially, for this to happen, it is fundamental that there is a proportion between the interests exposed. But there is not always this perfect balance. Indeed, this anomalous situation, related to excessive displacement towards buyers, is revealing itself in California, precisely in one of the most exemplary cities of the United States, both for fame and uniqueness: Los Angeles.
Typical house prices have been about eight times higher than average income over the past year, and this would have been limiting for the entire real estate market in the long run.
Due to this increase, however, the side effect was twofold: the presence in the brick market of a 'wide variety of properties and, at the same time, the sudden lowering of prices, so as to avoid accumulating unsold properties.
The number of homes offered for sale in Los Angeles was 21,500, about 30% more than in the last half of 2018. Exorbitant numbers, which, however, greatly encourage new investors who, wishing to appropriate a property in one of the most famous cities in the world, exploit this stalemate to conclude a great deal. On the other hand, however, these advantages turn into considerable damage for the sellers, who are forced to reduce the purchase value of the properties, in order to obtain the signing of a sales contract.
The ‘’ escort ”effect therefore appears to be particularly feared on the supply side and, at the same time, the Volta key to the demand curve.
The only positive note for both parties? Interest rates on mortgages decreased and stabilized at a decidedly lower level than in 2018. A particularly dramatic year in fact, it ended with only 5,000 homes sold in December and a 20% drop compared to 2017. That this was so scary to demoralize the owners?
According to economists, a problem that caused uncertainty in the real estate market in general, was the fear by the investors themselves of contracting problems once they bought a property.
The fear, therefore, of experiencing a phase of stalemate and, even worse, of recession, has promoted the initiative by the owners of real estate, to lower the prices (even devaluing clearly the value of the property itself) in order to be able to streamline the market and, at the same time, to get rid of a property that over time would only lose value and, obviously, interest in the demand side.
We hope that this situation is still stationary, as the market balance, although difficult to obtain, is still desirable by virtue of a fair and manageable market in the medium to long term.
Typical house prices have been about eight times higher than average income over the past year, and this would have been limiting for the entire real estate market in the long run.
Due to this increase, however, the side effect was twofold: the presence in the brick market of a 'wide variety of properties and, at the same time, the sudden lowering of prices, so as to avoid accumulating unsold properties.
The number of homes offered for sale in Los Angeles was 21,500, about 30% more than in the last half of 2018. Exorbitant numbers, which, however, greatly encourage new investors who, wishing to appropriate a property in one of the most famous cities in the world, exploit this stalemate to conclude a great deal. On the other hand, however, these advantages turn into considerable damage for the sellers, who are forced to reduce the purchase value of the properties, in order to obtain the signing of a sales contract.
The ‘’ escort ”effect therefore appears to be particularly feared on the supply side and, at the same time, the Volta key to the demand curve.
The only positive note for both parties? Interest rates on mortgages decreased and stabilized at a decidedly lower level than in 2018. A particularly dramatic year in fact, it ended with only 5,000 homes sold in December and a 20% drop compared to 2017. That this was so scary to demoralize the owners?
According to economists, a problem that caused uncertainty in the real estate market in general, was the fear by the investors themselves of contracting problems once they bought a property.
The fear, therefore, of experiencing a phase of stalemate and, even worse, of recession, has promoted the initiative by the owners of real estate, to lower the prices (even devaluing clearly the value of the property itself) in order to be able to streamline the market and, at the same time, to get rid of a property that over time would only lose value and, obviously, interest in the demand side.
We hope that this situation is still stationary, as the market balance, although difficult to obtain, is still desirable by virtue of a fair and manageable market in the medium to long term.
