Entry-Level Inventory Coming Soon
Has it been 15 years already? Beginning this April, homeowners who purchased Controlled Price Units (CPU’s) will no longer be bound by maximum resale price restrictions and will be able to start selling these properties for market value. For over 100 units with an original sale date in 2003, the lifting of this maximum price restriction is likely to immediately increase these properties’ resale value (on paper) by approximately 50-75%. For instance, a ~650 SF 1 bedroom CPU should have a current maximum resale price in the high $300,000’s, however the current, low-inventory market value of such a property would actually be valued closer to $600,000. Will that still be the case if the market is flooded with dozens of similar properties from sellers who have the same idea?
For a little background, 10 percent of homes in Playa Vista were set aside as Controlled Price Units, which were required to be provided by the developer as affordable housing. The original buyers of these units were owner occupants with qualifying employment (police, nurse, teacher, etc..) who did not exceed a certain income. Due to their popularity, they were sold in a lottery and there have been several phases of CPU’s. Most of the units in the original 2003 phase are in Crescent Walk and most are smaller one bedrooms. Some of these units have been sold by the original owners for the maximum resale price over the years, but fewer and fewer have been sold in the past several years as we approach the 15 year mark and as property values have widened the gap between the current maximum and the potential non-restricted resale values.
Many people have been holding onto the properties for 15 years with this in mind. In fact, those buyers who were lucky enough to purchase these as resales from the original owners did so for this express purpose. While this may still be a windfall for those who purchased CPU’s for very low prices and held on, there are many questions of what might happen, including the ripple effects, if a large number of these sellers decide to put their properties on the market all at once. There’s no doubt they will compete with one another, bringing down values for all units of a similar size. Will values of other property sizes be affected? How long will it take the market to absorb these additional units and normalize and how will the market respond to future phases of CPU’s when their resale price restrictions are removed in the coming years?
For the first wave of 15 year owners in April, a decision will need to be made soon on what strategy to take. Contact Playa Vista Experts if you would like to discuss a strategy for selling your property.