Playa Vista Condo Buyers Should Prepare for the Next Buying Opportunity

One of the most common questions a real estate agent gets is “is now a good time to buy?”. This is a tough question to respond to, as the answer is most often based on the potential buyer’s personal circumstances. In terms of pricing, historically speaking, now is a better time than it will be five years from now and it is a worse time than it was five years ago. Admittedly, it is a challenging time to be a buyer right now, especially if they are getting a loan. Inventory is scarce, interest rates are as high as they’ve been in over 15 years, and prices are very close to their peak. With economic uncertainty and sticky inflation, it is difficult to picture values going up immediately, even with limited supply.

Low inventory exists today more than ever, but it is something that we have faced for most of the past 11 years. I just viewed an old blog post of mine from December 2012 saying the same thing – there are not enough homes for sale to meet demand. The difference between then and now is that sellers were waiting for values to go back up, following the financial crisis, before selling, and they soon would go up due to tremendous demand. The reason for sellers holding onto their properties today is different and demand is much lower for the majority of condos in the Playa Vista market. As of the third week of September, there are currently 13 active condo listings in Playa Vista and only 5 under contract, which is well below the recent average of around 15 under contract at any given time. 11 of the 13 actives have been reduced in price or re-listed at a lower price, some more than once. Most of these listings are attractive enough to sell in a more active market and have a comparable sale in the past six months that sold for more than the asking price for the active listing. This shows demand is waning, or at least affordability has reached a point where a buyer cannot or will not pay peak pricing.

While listings have still not accumulated to the point where inventory has increased above the 1-2 months of supply level, the recent slowing of absorption (under contract condos) is likely to lead to increased inventory in the near future and this will reduce buyer urgency even more. A summer slowdown in the local market is typical and the next few months are crucial to market stability. If most of these current sellers prove to be either too unmotivated or stubborn to sell at lower prices, values could hold into next year when seasonal demand increases and/or interest rates are expected to decrease, improving affordability and boosting transaction volume. If not, and I suspect some of these sellers seeing inventory increasing, financial headwinds, or just wanting to move on, are going to capitulate and unload their properties for 5-10% below what they might have sold for in the spring, this is an opportunity for buyers to get the best deal they might get in the next few years.

A short-term buying opportunity caused primarily by interest rates temporarily depressing demand and compounded by seasonality could be on the horizon. After interest rates come down to the 5.5% level (they are currently around 7% for an owner-occupied property), absorption will increase and prices will likely go back up, particularly in desirable neighborhoods of the Westside. If you’re a buyer, being prepared to make offers in the fall during the typically slower holiday season could be your next best chance to get a “deal”. Buyers who purchase during the current high rate environment can refinance when rates eventually come down. Just remember, if you plan to refinance, an appraisal is necessary. If the appraised value is lower than what you paid, you might need to bring in extra cash.