Southern California Real Estate Market in the Summer of 2013

The Real Estate Market in Summer of 2013 seemed to know no bounds, it just kept going, up, up and up. There are many reasons for this. For instance, banking rules on foreclosures making it hard for banks to foreclose and then offload their inventory onto the markets which artificially helped reduce the number of homes for sale allowing housing prices to recover. Unfortunately, this created too much pent up energy, with not enough homes on the market, it also caused home builders to meet that demand, since used homes were not coming onto the market fast enough.

In the Los Angeles Times on Sunday August 25, 2013 there was an interesting article by Kenneth R Harney titled; “Red-hot Market for Homes Cooling Slightly,” and it noted that with slight increases in interest rates, the market was showing signs of resistance. The article also noted; “Prices aren’t rising as fast as earlier in the year and competition isn’t as intense.”

Meanwhile, on that same day there was a notation that in the San Fernando Valley nearby median prices were up 40% in the second quarter and into July and sales rose 28% for condos. Are these two articles in conflict? Perhaps not, because single family dwellings are taking a hit due to interest rates but the supply and demand for condos at more affordable prices is holding even with slight interest rate rises.

We also saw where investors with 100s of millions of dollars came in and bought up previously foreclosed homes for cash, even when many Americans who could afford them couldn’t get mortgages for used homes now on the market. Many of these institutional buyers would later would put these homes into the rental market to get a steady return until the real estate prices came back strong, and then sell them.

Still, with all these rental homes on the market, rental rates continued to rise, which gave these new investors a nice return, meaning they’d be less willing at that point to sell those homes. This in turn caused inventories to remain lower than demand and so then the home prices continued to rise, but for how long no one could say at that point. Banks were lending again, but raising rates, still the pent up demand was increasing and as the economy appeared to be recovering, there were lots of buyers and not enough available on the market.

How long would those conditions remain? No one at the time knew, this was what was going on back in Summer of 2013. Please consider all this and think on it.

Southern California Real Estate Market in the Summer of 2013