Redondo Beach CA Real Estate: Sell Now or Wait?

With home prices clearly on the rise at the beach and inventory in many neighborhoods very low, one of the most common questions I get from homeowners is "Should I sell now or wait until prices go up even higher?" Well, it depends.

My personal opinion is that home prices are very likely to return to or even surpass what we saw at the height of the market. Here's why.

Interest rates are much lower than we've ever seen and apparently buyer demand is far stronger as well. So, if buyers could afford to buy in 2005-2007 with rates a few points higher and with less money down (bigger mortgage), why would we think that prices will level off before we get to those levels again? I don't.

On the other hand, one of my favorite sayings is that in real estate, all we know for sure is what we know today (sounds kind of Phil Jackson Zen like). It is human nature, whether you are buying or selling to believe that the most favorable conditions to your side of the transaction will continue indefinitely and only get more favorable. This rarely happens in real estate or in life.

When home pries were going down, buyers believed they would continue to do so indefinitely - or at least until five minutes after their purchase closed escrow. Remember the "wave of foreclosures" that was supposed to be coming that would depress prices another 30% below the low? Never really happened, did it?

On the other hand, when prices are going up, it is human nature to believe that they will do so indefinitely. Also not likely.

So, where might we wind up? A potential scenario in the next 18 months or so may be 5-8% above the previous highs. Or roughly 15-20% higher than the current prices in Redondo Beach.

For example, new construction 2 on a lots were selling for about $1M at the height. Now they're priced in the high $800's. So, let's do the math: $875,000 * 1.2 = $1.05M which is 5% above the previous high. (Same for SFR Tall & Skinny in the Golden Hills.)

Let's look at 3 on a lots. Recent sales in the 1900 block of Grant were low $700's. Here's the math: $725,000 * 1.2 = $870,000. Don't think we can get there? Recently a new construction "A" unit on Perkins was listed for $819,000 and almost immediately went into escrow.

So, should you sell now or wait? As I said before, it depends. Specifically on what your next move is.

If you are "moving up" to a higher price range, than it doesn't make sense to wait because (again the math) an increase of 20% beyond today's prices is probably a lot more than your potential appreciation on your current property during the same time period. And, as prices go up, your cost of sales also goes up, so maybe nothing to be gained.

If you intend to buy a less expensive home, than waiting may make a lot of sense. This could be your situation if you are downsizing or moving out of the area.

If you have tenant occupied property and are collecting rents, waiting might not be a bad thing. Your risk factor is the same as any seller: as prices increase more sellers may flood the market changing the current dynamic which is very favorable to sellers. Or, if interest rates go up a point or so, that starts to stop the runaway price train.

For those who may have recently inherited real estate, (check with an accountant), your "stepped up basis" is the value of the home when you inherited it. If you wait longer, you may have a tax liability. So, on a risk-reward basis, it may be best to take the money off the table sooner rather than later. Or not.

Just as each piece of real estate is unique and different, everyone's home is as well. If you are curious as to what your home may sell for today and would like an analysis of whether you should sell or hold, call me at 310 975 5139 or email socalistings@yahoo.com.