Home Sellers: Here’s Why It’s Time to Take off Those Golden Handcuffs

The big story in Los Angeles real estate right now is inventory. Where is it and why didn’t the spring selling season bring some fresh, new listings our way? There’s been a marginal increase in inventory over the past few weeks but it’s still not nearly enough to make a difference. We’re in an inventory drought. According to the Los Angeles County Housing Report by Steven Thomas, the active inventory in Los Angeles County this May is at its lowest level since tracking inventory began in 2012.

Why?

Sellers remain confined by what’s being called “golden handcuffs.” They’re stuck in place, unwilling to give up the golden interest rates they’ve been enjoying for years.

And it makes perfect sense. Why would someone move when they have such a shimmeringly sweet rate?

To that I say: Because it’s time, my friends. The time to move is now. Let’s take off those golden handcuffs and talk about one gigantic, diamond-encrusted reason to sell: ridiculously high prices.

I was touring a home in Sherman Oaks last week (if you know, you know) and saw this pricing phenomenon come to life in a very big way. Built in the late 1950s, the mid century modern house was about 2,300 square feet with one of the nicest views I’ve ever seen.

To give you an idea about the interest for this home – and the inventory-starved market of today – when I checked the online property search portal before touring the property, it had 19,000 views. Typically, we expect a couple hundred or even a couple thousand views but 19,000 views is one of the highest I’ve ever seen.

Expectedly, the open house was packed and in the end, the house received about 35 offers and went for more than $1 million over asking. (I guess that’s the definition of a million-dollar view!)

To me, it’s the ultimate showcase of where the market is right now for good properties. And it’s not the first home in the area that’s sold in multiples for more than $1 million over asking. I've been hearing these stories from agents all over the city. Another property in Altadena – original condition, a bit of a charming fixer – sold for $1.2 million over asking price. And a condo in Encino just sold for waaay over asking.

There aren’t any comps for properties like these. Buyers are coming in with all cash, no-loan, no-contingency, no-appraisal offers because they simply want the property. It creates a scenario where your house can be the new comp of the neighborhood.

It’s also why I say if you have a property that’s potentially in demand, you have a very good reason to unlock those golden handcuffs and use this particular window of opportunity to get an unprecedented price for your home. With higher interest rates, the market has a shrunken buyer pool but those still swimming are incredibly serious about finding their way to dry land. They’re over the sticker shock of interest rates and they’re tired of leasing or waiting for a house, so they’re willing to go above and beyond for a home that fits their needs, even if it’s far from perfect.

We’re seeing this happen in every price range but in particular, in the under $3 million range, there’s a huge backlog of buyers who are ready and willing to move and will pay an absolute premium to do it. They know they’re overpaying and frankly, they don’t care.

But the window of opportunity can glaze over sooner than you think. All it takes is a small shift in inventory and these inflated prices will normalize. It’s why I say if you’re thinking about relocating or rightsizing, this is the time to do it.

The economics say it shouldn’t be happening but in reality, it is. Prices are higher than ever.

However, this doesn’t mean any home should expect to garner an incredibly high price. It takes something special for this particular golden-handcuff scenario to unlock. Your home must have any (or all) of these certain X factors to sell at a premium:

●     Good neighborhood

●     Decent condition

●     Beautiful location

●     Square footage

●     Ideal floor plan

●     Stunning view

I’ve found that another magic combination is a mid century modern home with a pool and a view. Put a house on the market with those two features and it’ll be gone before you can even stick a sign in the front yard.

But not every sale is that easy. I’ve also seen some instances where average homes lacking these “x factors” are priced too high, hoping to hop on the bandwagon of this particular trend without any wheels to ride. What winds up happening is that the overpriced home stalls and sits on the market far too long, which is never a good scenario for anyone.

The big takeaway? The market is partially at a standstill. Escrow activity is down. Title orders are down. There are less transactions happening because the golden handcuffs are keeping would-be sellers in place. But if sellers have on their golden handcuffs, buyers have on their golden blinders because they’re willing to overlook a lot for a home with something going for it – land, a view, square footage, a great floor plan, location – and that’s why it’s time for those handcuffs to come off.

If you’d like to chat about potentially selling your home during this high-price window of opportunity, get in touch for a free real estate consultation!

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Andrew Manning • REALTOR® • Berkshire Hathaway HomeServices California Properties • DRE: 00941825 • 818-380-2147 • andrew@andrewmanning.com