Belated Merry Christmas and Happy New Year. My last article closed with a note that I would be absent from writing my weekly article until after the holiday season. I did, however, keep up with my reading and kept my finger on the pulse of real estate so when I returned I would have current information to share.
To catch everyone up, the Market Activity Report remained steady since my last article in mid-December, hovering between 43-44. As previously discussed, that puts our market in the high neutral/ low seller’s market range. This means there is buyer activity, but it is incumbent on sellers to be mindful of correct pricing right out of the chute because interest in a property is highest within the first weeks of coming onto the market.
After that, it can appear stale which makes buyers wonder what’s wrong with the property, so they get very picky and demanding. That’s when the low-ball offers come in too, which are very stressful and inflammatory for sellers. The advice is to moderately price the home to sell and let the market bid it up.
Yes, we are still witnessing bidding wars above list price if the listing price is reasonable when it comes onto the market. The surest indicator of correct pricing is market activity. If buyers are staying away in droves (aka, they are not showing up to open houses (which do still work) and/or not making appointments to see the property, then the market is signaling that the property is overpriced.
Properly priced properties do sell while overpriced properties sit. Remember, we have experienced incredible price appreciation over the last three years; 18-20%/year in some areas. Given the value of Southern California real estate that is a lot of money in real dollars.
If you want to sell your property, be priced reasonably, mindful of how much the property has appreciated. Many people with whom I talk want to sell their Southern California real estate and migrate to a lesser priced areas where their real estate dollar will go further.
If that’s the motivation for selling, then keep pricing in mind so that buyers will show up and will want to buy the property. That’s the way to maximize the return on your real estate investment. Overpricing results in fewer offers and lower selling prices than properly price properties.
Okay, let’s talk interest rates for a minute. During my hiatus, the Federal Reserve met again and for the third time voted to not raise the federal funds rate. The markets liked that and subsequently mortgage interest rates responded and fell from above 8% to mid-low 6% range (rates depend on many factors; credit scores, asset strength, amount of debt, income stability, loan program (government loan rates are often lower than conventional since they are guaranteed by the government)).
There is even theory among some economists that the federal funds rate will start coming down in multiple reductions in 2024; one optimist predicted there would be four rate reductions during 2024 beginning in April. There are also those in the opposite camp who do not believe the rate will drop at all in 2024, some even believe the Fed will actually make additional increases during the upcoming year.
Most seem to be of the belief though that there could be a soft landing and avoid even a mild recession, all positive indicators. That being said, I read an article published on Christmas Day, “Economist Predicts 2024 Financial Apocalypse: Brace For The BIGGEST Crash Of Our Lifetime” published By BlabberBuzz Monday, Dec. 25, 2023 (an online news service, no author credit given).
Harry Dent, the founder of HS Dent Investment Management, said: "Since 2009, this has been 100 percent artificial, unprecedented money printing and deficits; $27 trillion over 15 years, to be exact. Dent believes that overvalued markets and excessive stimulus spending will be the catalyst for the crisis.
This intrigued me, so I went to his website and learned about Harry Dent and his team. They are well educated and published, so I listened to Dent’s Dec. 15 YouTube video in which he explained in highly techno speak why he believes this very significant crash across financial and real estate sectors has to happen.
He is a highly credentialed CPA and his 4-person team use historical modeling to predict the next events (boom and bust cycles). What they do is sell their consulting services predictions based on modeling. He is well-spoken, out-spoken and convincing, and he counsels to get out of the stock and real estate markets.
Wow, talk about a buzz killer! He makes valid points and I will continue to read his articles, but there are enough other well-educated points of view that are also worthy of consideration before I hit the panic button.