New World Order

It has been a challenging summer for the real estate industry. Agents are scurrying around to list properties left and right. However, due to interest rates still being very high and insurance companies being barely willing to insure in California, there has been significantly less activity in the area than normal. Days on the market have increased considerably, and the days of listing a house and expecting it to be under contract within 10 days are over.

Please consider this carefully when setting your expectations about the sale of your property. This is the New World Order of real estate.

The same things that have always precipitated sales are still occurring: people are getting married, having another child, sending their kids to college, and downsizing; people get a new job, lose one, get divorced, or have to move their parents in with them. This is all standard human behavior that occurs frequently and forms the basis for the majority of real estate sales.

What has slowed considerably are people moving just because they want a nicer, larger place for no concrete reason.

What has also slowed (and has been slowed for a long time) is people choosing to sell because they want to downsize in the same area. Those people likely refinanced their houses when rates were at 2.65%, and so they have a golden set of handcuffs holding them in their home because they cannot remotely replace their property with something smaller that won’t cost more.

Another ongoing issue is that buyers want their property to be perfect. Aesthetically upgraded with no flaws. So, if you want to sell a home with a roof that is way past its natural life, you won’t be able to unless you either deeply discount it or do the work. If you want to sell a house that still has knob-and-tube wiring anywhere, many insurance companies will not insure it with that sort of wiring. Additionally, ensuring your electrical panel is up to current code is another necessity, as it can be a significant obstacle to obtaining insurance.

I recently had hard-wired smoke detectors rejected because they weren't the most current technology, even though they were fully functional. Replacing them cost nearly $1,000.

All to dance to the insurance company’s tune.

Moreover, people are genuinely frightened of fire at this point. They are aware that climate change is increasing the likelihood, and funding for disaster relief has been reduced. They have heard that the Fair Plan is almost bankrupt after the LA fires, so it is a reasonable fear. This doesn’t bode well for hill home sales. Be mindful when pricing your property to understand that what your neighbor received in 2021, or even 2023, is no longer likely.

It is a much more normal market, and it is still functioning, albeit not at the outrageous levels it had previously. Of course, the ultra-luxury market is largely untouched. Go figure…