Southern California Real Estate in 2013

Dear Clients,

We’d like to share with you an update on what we see happening in real estate in 2013 and we’d like to thank Bruce Norris and the Norris Group for all of the invaluable research that they provide regarding the California real estate market:

“My best guess is that California we will have significant price inflation. Prices could escalate so strongly that we will think we are in 2004 instead of 2013.” – Bruce Norris

Some may ask how this is possible. But Norris has experience predicting the unpredictable. A real estate consultant, investor and educator for the past 30 years, Norris publicly predicted the current sub-prime lending and foreclosure crisis in January of 2006, more than a year before the nation’s leading economists and real estate industry analysts would even acknowledge the possibility of a downturn. Norris also correctly forecast both the real estate boom that began in 1997 and the subsequent doubling of home prices.

In 2013 there is shaping up to be an engineered boom in the overall real estate market with prices moving upward much like what we saw in 2004 and 2005. This market was not allowed to correct itself naturally because of policy and government intervention so that huge pile of shadow inventory that you’ve been waiting to see hit the MLS will not be showing up.The banks have stopped foreclosing so there is a large piece of the market that will be missing from inventory moving forward. There are still as many buyers (if not more) out there but without any bank owned properties (REO/Foreclosures), there are many less sellers.

We are already seeing the effects of too much demand and not enough supply in the form of multiple offers, prices going over asking, off market deals and buyers desperately trying to find homes to buy. We are also seeing many cash buyers saturating the market, from investors looking to flip, to overseas buyers grabbing up anything they can in California.

The banks have solved their debt problem in the following ways:

  • Make payments really low (with historically low interest rates)
  • Other investments are volatile (stock market)
  • Reduce inventory (by not foreclosing and reselling as bank owned)
  • Hedge Fund buyers introduced in 2012
  • Sell loans in bulk instead of foreclosing

Right now in LA County there is only 1.5 months of inventory in the MLS. The last time we saw that number was 2004/2005. FHA (Federal Housing Administration) is selling 45,000 loans to Carrington so that is another 45,000 properties that will not be foreclosed upon. Fannie Mae sold 500 homes in Q3 2012 and they are all rented so that inventory has also been removed.

We expect to see building starts come up and finished building lots start to make sense over the next few years. There will be price increases to the point where construction becomes profitable again. This will create jobs in construction and lead to further price increases. At this point price increases are VERY absorbable because the values have come down so much and rates are so low.

We’re at a turning point in the market where you can seize your opportunity to build massive wealth by acting now. We are recommending to our clients to go into acquisition mode immediately to capitalize on the price increases already underway. We can help you to invest properly and ride the next wave of California real estate. We can assist with single family homes, condos, short sales, income properties, apartment buildings and triple net investment properties. Call us anytime for a consultation to see how you can be properly positioned for the next market.

All our best, Missy and Jason

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