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When Is The Los Angeles Housing Market Going To Crash?

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Presidential Candidate Dennis Kucinich Fund Raiser in Malibu

Wow! What a difference a year makes. Just over a year ago, as we entered the Coronavirus lockdown, it seemed you might not be able to give away some houses, and in-person showings were completely shut down in Los Angeles. Now, we appear to be in the midst of one of the hottest national housing markets since before the financial crisis. This parallel may lead many people to wonder when will the Los Angeles housing market crash? With so few homes on the market, I’m sure there are a few home shoppers praying for the Los Angeles housing market to crash.

As a Los Angeles financial planner, who has grown up in Southern California, I have seen the real estate market boom and bust over the years. I am also fortunate enough to see the long-term trend of real estate prices going up, up, and up over time. Most of the homebuying discussed here could apply to any housing market that may or may not be coming up on a crash.

  • Last year, overall, the increase in home prices nationally was 17.2%. In Austin, Texas, the median listing price for a house rose 40% in one year. -Axios Markets, April 11, 2021, In Los Angeles County, the median sales price rose (just) 14.3% to $708,500 in February, while sales climbed 19.1%.

What Would Cause the Los Angeles Housing Market to Crash?

There is always a risk of losing money on a home in Southern California, including high-cost areas like most of Los Angeles, West Hollywood, and Beverly Hills. There is obviously more risk when prices are as high as they appear to be now, paired with a housing shortage, record-low interest rates, and what appears to be a buying frenzy. But unless someone discovers some hidden land that tens of thousands of homes can, magically, be built (quickly), there is little reason to expect a crash in the Los Angeles housing market. As a financial planner, I must point out that the Los Angeles housing market crashing and you getting misguided into an unwise home purchase are not necessarily the same thing. Prices may soften, or you may get sucked into (way) overpaying for a home. Or perhaps, you buy your dream home only to find your dream job is in another town, and you are forced to move.

The only other thing that could really cause a crash in the Los Angeles housing market would be a wave of Coronavirus-related foreclosures. If for some reason, everyone had to sell at the same time, prices could drop. Even this would likely only put a dent in the frenzy around home buying, and I don’t see this as a likely possibility with all the government support to keep us out of another great recession. Unlike the financial crisis, most homeowners had to qualify for their mortgages based on their incomes at some point, and most have a larger equity cushion than average homeowners had before the real estate market crash during the great recession.

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Timing the Los Angeles Housing Market

The best home-purchasing advice I can give you is to buy the right house for you at the right time. If you own a home that you like and live in for the long-term, then most short-term market pressure on real estate shouldn’t matter because you likely won’t be forced to sell during what would likely be a temporary downturn.

I will use my grandmother as an example. When she sold her home in the Greater Los Angeles Area and moved into a new retirement home, it was during the 90s housing recession in SoCal. She received less than half of what she expected from selling her home. While that seemed like a bad decision, she ended up coming out ahead, thanks to her decision to purchase her retirement home on Balboa Island in Newport Beach. Her new home’s value quadrupled over the decade that she lived there. Beyond money, her house on Balboa Island was a better fit for her lifestyle and much more fun for our large extended family to visit regularly. 

I should also point out that she lived in her Los Angeles home for more than 40 years, raised her six children there, and it still sold for nearly 600% more than what she paid. Time in the housing market is key to making a healthy profit and not having to worry much about short-term volatility in Los Angeles housing prices. If nothing else, if you get a 30-year fixed mortgage – and make 360 payments – you will own your home outright. 

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Should You Bid Up A House in Los Angeles?

You may be wondering How much over the asking price should I offer on a home in Los Angeles in 2021? It has been reported that more than 42% of homes in Los Angeles have been selling for over the asking price. Certain areas, and price points, are going to see an even higher percentage of homes selling for more than asking. There are a lot more people who are desperately trying to buy one-million-dollar homes than 100-million-dollar homes.

Under normal circumstances, I would try and talk you out of bidding up a house price in Los Angeles. However, in the current Los Angeles real estate market, those buying houses on the lower end of price points in their zip codes (a vacant lot in West Hollywood would likely set you back 3-4x the median house cost of a home in Los Angeles) may want to consider being a bit more aggressive with their offers. I love a good bargain, and saving a few thousand dollars off the purchase price is excellent if it works but terrible if you lose out on the perfect home. Ok, so you are shopping in Los Angeles; I’m not sure the dream home exists unless you have several million dollars to spend. The more money you have to spend on a Los Angeles home, the more options you may have to purchase, with less competition.

Set a maximum housing budget that you can afford, which should be less than the maximum mortgage you qualify for. (The only exception here is the self-employed who may have to be a bit more creative to get a large mortgage). Try to avoid getting sucked into a bidding war where you end up spending way more than the house is worth, or worse, spending more than you can really afford. Being house poor is the worst.

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How to Lose Money on Los Angeles Real Estate

As a Los Angeles financial planner, many of my clients have owned homes, some since before my parents were even born. Value has gone up and down, but if you own your home long enough, historically, it has been hard to lose money on California real estate. In the short term, it is quite easy to lose money. 

I will admit that I had bad timing on my first Los Angeles home purchase. My home was purchased a bit after the real estate peak before the financial crisis, but before all hell broke loose. The single-family home in the Beverly Grove area likely lost about a third of its value during the financial crisis and likely about 50% off its peak value. I was lucky enough to purchase it for around $300,000 less than the original listing price. Some neighbors purchased homes on my block for $400,000 less than what I paid. Sounds terrible, right? Well, I had no plans of selling or need to move, and I still own the home. Luckily, it is now worth more than double what I paid for it.

When purchasing a home, make sure you will be comfortable living there for at least five years. Purchasing a home often entails financial sacrifice, so make sure you can afford the home (and associated expenses) without having to reduce your standard of living too much. Try to avoid taking on a house remodel project that you can’t handle or afford. 

Mortgage Rates and Buying an LA Home

With interest rates still near record lows, we have to expect that they will increase at some point in the future. This will put pressure on housing prices by making mortgage payments more expensive. Higher interest rates will likely cool the frenzy of home buyers, but this is not expected to be a strong enough effect to crash a housing market.  

Should You Sell During This Hot Los Angeles Real Estate Market?

It may be tempting to sell now during the sizzling housing market. If you are looking to leave LA or downsize from a single-family home to a condo, now may be a great time to sell. If you are looking to sell and just buy another place in the LA area, you will be selling in a hot market while also buying in a hot market, which after paying real estate fees and any capital gains taxes, your money may not go that far when shopping for your new home.

While I don’t see a crash coming, I would tread lightly when shopping for a new home in Los Angeles. Don’t let irrational exuberance force you into an unwise home purchase. Owning a home is still part of the American Dream, but losing money on a home can put a big dent in your overall financial security.

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13 Tips For Real Estate Investors Crafting An Exit Strategy

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Photos of featured members.

Real estate investors know that not every purchase they make is going to be a win. In a few cases, you’ll end up with a dud, where a property that looked good at first ends up being more trouble than it’s worth once you’ve bought it.

This is why no investor should go into a property purchase agreement without having at least one clear exit strategy defined. To help avoid a bad purchase before it’s too late, 13 experts from Forbes Real Estate Council share critical steps all real estate investors should consider to craft their exit strategy from the moment they start scoping a property out.

1. Understand The Current Financials

It’s important to understand the current financials of the property. From this you can model a multiyear pro forma focusing on the value enhancements you plan for the property. Based upon that model, you can project a valuation for the property at some point in the future. This process should help clarify the investment potential for the property. – Mark Tiefel, Capital Equity Group, Inc.

2. Set Clear Objectives Before Investing

Know your objective before investing in a property and establish your goals for any property you’re considering. This helps identify what success looks like for a property you want to invest in, which will help map out your exit strategy. Committing to a property without a clear objective and “winging it” after you commit to it typically ends up costing a lot of money and time. – Jim Brooks, The Brooks Team – EXP Realty


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3. Consider The Future Buyer Persona 

Know your buyer. Always have the future buyer persona in mind when you are buying an asset. If you know your asset will attract syndicators, for example, then make sure to renovate no more than 50% of the property so you can leave meat on the bone. If you buy a larger asset, you can renovate 100% of it and then sell it to an institutional buyer who normally doesn’t like to execute a value-add plan. – Ellie Perlman, Blue Lake Capital LLC

4. Check Tenant Laws And Sale History

I believe that when purchasing any property, investment or not, you should buy with an exit strategy. Real estate is an investment that is used to create wealth. Look at local tenant laws, development in the area and rental rate history. If new inventory is coming, then rents will decrease. Check sale history for the last five years for trends. – Steven Minchen, Minchen Team/Elevated Living Network, Inc

5. Stress-Test The Deal At Purchase

Any good exit plan starts with stress-testing the deal at purchase. There are many factors in stress-testing a deal but here are a few to consider: 1. Never run out of money, so plan accordingly; 2. Increase the vacancy to at least 25% for the duration of hold and verify that the expenses can still be paid; 3. Increase the exit cap rate by at least 10 basis points per year of hold. – Chris Roberts, Sterling Rhino Capital

6. Plan For The Worst-Case Scenario

Always plan for the worst-case scenario when trying to exit. It’s really that simple. After proper planning and extensive research, determine what the worst-case exit strategy is. If you can stomach the worst-case scenario, then move forward and commit to the property. – Ben Grise, InvestWithBen.com

7. Buy A Property That’s Easy To Sell

Buy a property that will be easy to sell. I prefer single family homes over condos because there is more buyer demand. Homeowners Association dues can also go up as condos get older and/or there can be special assessments for repairs which can make a property harder to sell. Assess the location—does it back to a commercial property or a railroad that may make it hard to sell? Does it have a good floor plan? Be picky! – Kristee Leonard, The Leaders Realty, LLC

8. Have A Multipronged Exit Strategy

Commercial real estate is evolving quickly before our eyes. Having a multipronged exit strategy approach to real estate investment is necessary. Don’t follow the headlines but look for the trend lines. Underwrite an asset traditionally but also underwrite the property in a nontraditional way. Look for one to two scenario analyses considering what happens if a market, sector or demand trend changes quickly. – Jacob Bates, CommonGrounds Workplace

9. Have At Least One ‘Weasel’ Clause

A “weasel” clause is a clause that allows you to exit, even when you’ve made the mistake! Resist the temptation to overdue. You need one. My personal favorite is “subject to the approval of the hard money lender.” Only once in 20+ years have I had to exercise this weasel clause to get out of a deal, but when I did, it was literally 10 minutes before closing. – Sherman Ragland, The Realinvestors®️ Academy, LLC

10. Have Multiple Exit Strategies

Having multiple exit strategies helps protect you from losing money on a deal. If you buy a house to flip but cannot get the price you anticipated to make a profit, if you’re able to rent it out instead, you’ll protect your investment. Unfortunately, if you get in a deal with only one exit strategy and that strategy does not work out, you will find yourself in a risky situation. – Chris Bounds, Invested Agents

11. Check Out Average Days On Market

Find out what the average days on market are for comparable properties throughout the year prior to your purchase. You will then have a good indication of when would be the best month of the year to resell the property for its highest and best price and for the shortest amount of time for an effective emergency exit strategy. – Mor Zucker, Team Denver Homes – RE/MAX Professionals

12. Hire A Home Inspector

Hire an excellent home inspector. These professionals are priceless! Sure, they can alert you to big red flags but they can also point out a lot of “minor issues” to consider. An itemized list will let you know exactly when to exit if a particular task takes more resources than you expected. Feedback from a professional inspector can help you “exit well,” minimizing losses and maximizing gains. – Michael McMullen, Prominence Homes and Communities

13. Remove Emotion From The Equation

Always remove emotion from the equation and perform unbiased, clear-headed due diligence without a lot of rosy scenarios. Be conservative with your valuation and repair estimating—often, investors value too high and underestimate renovation costs. Sometimes the best strategy is to walk away from a deal rather than spending the next several months wasting time and resources on a low-margin deal. – Nick Ron, House Buyers of America

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Digital Mortgage Lender Announces Softbank-Backed SPAC And $7 Billion Valuation

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SoftBank founder and Chief Executive Masayoshi Son invested in Better during his search for 'fast-growing pre-IPO companies'.

The Softbank-backed digital mortgage lender Better announced yesterday its intention to join a SPAC with The Aurora Acquisition Corp., in order to take Better public. The transaction is expected to close in the latter part of 2021. This merger gives Better an implied equity value of approximately $6.9 billion and a post-money equity value of approximately $7.7 billion, as stated in the announcement. 

A subsidiary of SoftBank Group Corp., SB Management Limited, will bring $1.5 billion private investment in public equity (PIPE) and Novator Capital, the sponsor of Aurora Corp, will invest $200 million through the same method. Activant Capital, an existing investor in Better, will also participate in the PIPE for an undisclosed sum. 

Only a month ago Softbank invested $500 million in Better, leading to a valuation of $6 billion.

Better’s strong financial footing is no doubt a direct consequence of its success due to the covid pandemic’s double influence of sustained low interest rates over the past year and the need for consumers to be able to close on transactions without having to meet in-person. Last March, when the pandemic’s impact began, Better had a 200% increase in applications compared to February and a total of over $1 billion in closed loans during the month, which is more than the four-year-old company closed for both 2017 and 2018 combined. In all of 2020 they funded $24.2 billion in volume, according to the press release announcing the SPAC. 

Better, which has not been without some controversy, was founded in 2016 by Vishal Garg who was frustrated with the mortgage application process after losing out to a cash buyer when he made an offer on a home. He built the all-digital, multi-product platform to lower costs and speed up the process for buyers. Company marketing materials say their online process allows qualified customers to close in as little as two weeks.

The biggest takeaway from this news is how large the demand will be going forward for real estate transactions to take place in a fully digital manner. The pandemic has shown us that the market can continue with limited need for in-person contact and mortgage lenders of every size will have to improve their digital platforms if they want to stay competitive. The news about Better is only the beginning of a much larger trend.

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How Consolidated, Bundled Real Estate Offers Can Serve Homebuyers

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Close up hand of man signing signature loan document to home ownership. Mortgage and real estate property investment

Amit Haller is the Co-Founder & CEO of Reali, a high-tech, high-touch real estate company founded in 2016. 

When homebuyers make the largest financial decision of their lives, they want the best options that take the pain out of the real estate process. They’re ready to focus on the details that matter most to them — such as settling into their new home — and desire a simplified and streamlined process to get them there. In recent years, that’s come in the form of bundled real estate products, where consumers are eager to combine several steps into one.

At Reali, we’ve also seen this trend emerge across several industries, not just real estate. Bundles have become highly appealing to customers regardless of the complexity of the buying process, including purchase decisions around insurance, home appliances and video game systems. Bundling often means financial savings for consumers, but it also means less stress and time-consuming interactions with nuanced details. Essentially, bundles save time, money, and stress, and that’s exactly what real estate companies should do for customers.

Here are the top trends we’re seeing in 2021:

1. Consumers want to keep it simple.

Complex decisions take more time, and right now, most of us are stretched too thin to think through all of the details. The pandemic, as well as other personal and social concerns, have stretched our capacity to do everything we want to do, including daily activities such as working or running our household. At the same time, people are eager to move into the next phase of their lives, and we’re seeing them begin to move forward by holding their delayed weddings, buying new appliances or investing in a new home. Anything that makes the process simpler will help that transition.

In real estate, homebuying can be one of the most stressful transactions that people complete. They have to worry about real estate brokers, a mortgage, insurance, escrow, inspection and warranties, and all of that can require different companies and experiences to complete the final tasks. Consumers may get lost along the way or miss a critical detail right now as they begin to move toward a “new normal.” 

In an experiment by our partner agency, Next Step, consumers who saw real estate as complex were nearly three times as likely to say that they wanted a bundled experience. They wanted more ease in the process and a smoother experience to get to their end goal. Essentially, bundling can help people to make a decision sooner rather than later, experience less risk and stress — and actually enjoy the decision-making process of buying a home. Any bundled options that real estate companies can provide to free up customers’ time and stress could reduce the barriers for making a decision.

2. Bundling can increase the perceived value.

Homebuyers want the best purchase for their hard-earned dollars, which has become even more prominent in the past year. People have faced tough financial decisions, and many families are rethinking the priorities that they need in a home-work-school space. They’re looking for more value and an all-in-one solution that makes the financial decisions easier and more transparent.

In the Next Step study, people said that, compared to individual product offers, consolidated bundles seemed more valuable, more popular and more preferred than other options, which plays to our psychological needs for belonging and smart decision-making.

Bundles also decreased costs. On average, people can save nearly 16% by bundling homeowners and automotive insurance policies, according to a 2015 Insurance Quotes study. Those who combined condo and car insurance saved about 11%, and those who bundled car and renters insurance had an 8% discount.

Overall, bundling complementary products can lead to a cost-savings of about 8% for consumers, according to a marketing study from Fordham University. In addition, the researchers found, offers that make sense together can create greater consumer happiness, which is the ultimate goal. For real estate companies, this could mean pairing mortgage options with insurance options or legal services.

3. Consolidated offers can facilitate the decision-making process.

Customers have told us that the decision-making process seems more complex than ever. People have easy access to products and services across the country — even across the world — and that can lead to analysis paralysis when deciding on the best option. We’ve found that bundles can help people make those decisions, particularly in complex service industries.

For instance, in a 2019 Accenture survey of 47,000 consumers, half said they were interested in bundled services in healthcare, home security, car care, personal finance management and homebuying. In real estate in particular, they voiced a need for end-to-end homebuying services, including advice on finding a new home, securing a mortgage, using legal services, buying insurance, and getting help with the moving process.

Ongoing survey data show that this trend has been increasing in recent years and became more popular throughout last year in particular. In the insurance industry, for example, consumers said they were seeking bundles so they could make better decisions and experience greater value from their options.

In fact, a 2020 survey by Deloitte found that consumers said offering non-insurance products was the most important factor when choosing an insurance provider. They said it added value and created an extension of the core products, so consumers wanted to buy them. In real estate, this requires rethinking the conventions around what products to include and creating innovative options.

Ultimately, we need to keep consumers in mind when considering the best ways to serve them in the homebuying experience. Their concerns come out loud and clear, with a need for simpler decisions, a smoother decision-making process and bundled packages that increase the value of their purchasing power. Real estate leaders should step up to provide these consolidated offers to clients and guide them along the successful path to homeownership.


Forbes Real Estate Council is an invitation-only community for executives in the real estate industry. Do I qualify?


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