Housing prices and asking rents continue to rise amid strained inventory • Long Beach Business Journal | Ezine Daddy

From single-family homes to apartments, high demand and low inventory are continuing to drive up sales prices and rents, local property experts say, but rising interest rates should calm the market.

“Interest rates have gone up significantly,” said Phil Mazzocco, operations manager of First Team Realty in Long Beach, noting that properties for sale across the city are still getting multiple offers, although not as many as in previous months .

Instead of getting 30 offers for a property at a reasonable price, Mazzocco said he saw about 10.

“They’re still flying off the shelf, but there’s a small stand with days in the market,” Mazzocco added. Instead of being on the market for seven to 10 days, correctly priced properties sell in about 15 on average, he said.

However, overpriced homes tend to dry up in the market, Mazzocco said.

“It could be the kiss of death,” Mazzocco said. “Overpriced is a big mistake.”

The average interest rate on a 30-year fixed-rate mortgage last year was less than 3%, data from Freddie Mac shows. However, rates have risen to around 5.5% this year as of April 26, according to Forbes.

Despite the sharp rise, interest rates remain historically low, Mazzocco said. From 1973 through the early 2000s, average interest rates ranged from 6.5% to 16.63%, according to Freddie Mac.

The fact that interest rates were cooling off the market at this point is healthy, Mazzocco said, adding that the recent move is unsustainable.

“Buyers have to do really irresponsible things to get into homes — clear up emergencies and sometimes do inspections,” Mazzocco said. “Historically, you would never advise your client to do this.”

As the market normalizes, buyers’ agents will have more influence and be able to negotiate more responsible deals, Mazzocco said.

Median home prices have skyrocketed nationwide since the pandemic began, according to data from the US Census Bureau and the US Department of Housing and Urban Development. In early 2020, the median home selling price in the United States was $329,000. By the end of 2021, that number had grown to over $408,000.

According to a report by the Inspection Support Network, more than 27.5% of home sales in the Los Angeles area totaled more than $1 million — the third-highest among major cities nationwide.

As of March this year, the average home price in Los Angeles County was $875,000, according to Redfin, up almost 13% from the same period last year.

“Personal experience, I check the value of my home on Zillow and it hasn’t stopped rising,” said Edward Coulson, director of the Center for Real Estate at UC Irvine. “House price growth is still with us, but it’s leveling off a bit.”

The sustained pace of sales and other indicators show no signs the market is a bubble about to burst, Coulson said.

When prices are reasonable, Mazzocco says all home types sell well — from fixer-uppers to luxury homes. However, homes under the $1 million mark are the most desirable, he said.

The buyers are a mix of first-time buyers and people upgrading to larger homes, Mazzocco said. Despite reports from around the country, he said that Long Beach doesn’t see real estate that companies are buying as investments.

“We’re so isolated from everything,” Mazzocco said, noting that Long Beach remains a haven for more affordable housing compared to many other cities in LA and Orange County.

“Companies are certainly a bigger force in the marketplace than they used to be,” Coulson said. “But there is still no overwhelming presence.”

apartment building

The multifamily market is faring much the same — high demand and limited supply — said Robert Stepp, Stepp’s commercial principal. Similar to the single-family market, the speed of sales for multi-family houses has slowed somewhat in 2022 due to higher interest rates.

However, prices remain strong — for both sale and rental prices, Stepp said. Over the past 12 months, asking rents have risen by 6.5%, he said, “a strong recovery from just 1.5% rental growth in the previous 12 months”.

The passage of Assembly Bill 1482 in January 2020, Stepp said, would allow for a 5% increase in rents plus CPI. Recent inflation contributed to the higher increase, he said.

Long Beach rental unit supply continues to lag far behind demand and will continue to drive prices higher, Stepp said. Many prospective buyers are being forced to remain in the rental market due to rising property prices, he added. As a result, Stepp said the vacancy rate in Long Beach has hit a low of 3%, down from 1.5% over the past 12 months.

And the city’s rental landscape is unlikely to change anytime soon.

“While Long Beach has maintained a strong construction pipeline since 2016, most of the new rental stock is higher-end four- and five-star products where there is less demand,” Stepp said.

According to Stepp Commercial Senior Investment Associate Travis Traweek, the vacancy rate for upscale luxury properties is about 8.3%. The vacancy rate in low- to middle-income housing, meanwhile, is about 2.4%, showing a shortage of affordable housing, Traweek said.

Despite reported population declines across the region, multifamily development remains relative to demand due to “high construction costs, NIMBY sentiment and onerous permitting regulations, none of which will go away anytime soon,” Traweek added.

“Unless legislators commit to addressing the housing shortage in meaningful ways, California will continue to experience a housing shortage.”

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