Thursday, January 29, 2009

Los Angeles: A Buyer’s Paradise

Los Angeles Santa Monica Beach at SunsetThe media’s dire portrait of the real estate market fails to emphasize that for buyers (at least in Los Angeles) the terms are more favorable than in any time during the past 20 years.

There is no denying we are in a downturn (the ‘worst recession since the depression’ seems to be its moniker). However, all the elements that have contributed to So Cal’s boom – the diversified economy (small businesses, big businesses, ports, universities, youthful population, media companies, sunshine!) – will lead to the next boom when we exit this down-cycle.

At the beginning of the decade, while property values rose and lending underwriting guidelines were relaxed, buyers lost their “buying power” as the market shifted dramatically in the favor of sellers.

By the height of the effervescent market in 2005, buyers were forced to make no-contingency offers at prices well in excess of the asking price – and then would compete with rafts of other equally-ebullient buyers – in the hopes of getting a home (fingers crossed that the foundation isn’t cracked.)

Those days are long gone. Buyers who have good credit and documentable income with a 20% downpayment can benefit from the best interest rates in 40 years (hovering around 5% depending on the loan amount). They have a wide selection of excellent properties to choose from. There are abundant deeply discounted bank-owned properties that are floated on the market. Buyers can now have the luxury of ‘shopping around.’

Some might argue that it’s unwise to buy when no one knows where values are going. True, no one can read the tea leaves. However, loan underwriting guidelines change, interest rates fluctuate, governmental regulations can be revised.

Two of the Obama Administration’s proposals – a six-month moratorium on foreclosures, and a ‘locked’ 4.5% interest rate for buyers – will shore up the market and diminish the buyer’s advantage overnight. Homes and investment properties bought today could indeed be the ‘buys’ that are discussed over dinner parties ten years from now.

Jamie Adner
www.adnergroup.com

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