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Tuesday, Jun 28, 2022

2020: Year of Lowered Expectations?

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You don’t know what you have until it’s gone.

That seems to be the message for luxury sellers in Orange County heading into 2020.

“Sellers are holding out for unrealistically high prices rather than settle for a fair price for their home,” said Daftarian Group Real Estate’s Paul Daftarian.

The divide between buyers and sellers is exacerbated by a growing chasm among product types, according to Compass’ Rob Giem, who expects newer, turnkey homes to garner high prices, while outdated properties will struggle to sell.

“High quality product will continue to do well,” while older or outdated homes, or those without a view, will experience the most price softening this year, said Giem.

Current price levels represent a healthy market, brokers note, despite dropping since the cycle highs reached in 2017.

This softening is “especially true in the ultra-high end,” according to John Stanaland of Villa Real Estate. “There’s a lot that didn’t sell in the past year that definitely would have in 2017.”

How to Sell

Last year was slower than many anticipated, due to a lack of inventory and a cautious attitude from buyers.

The market picked up substantially last month, though, following new signs of consumer confidence.

“The past few months had been slower than expected, before the Federal Reserve’s decision to lower rates injected new confidence in the market,” said Daftarian. “Buyers are leveraging low mortgage rates to compensate for not being able to write off as much on their loans.”

“We haven’t seen this much activity in December in some time,” added The Agency’s Michael Caruso.

Heading into an election year may stymie some of this confidence, as well as ongoing disconnects between buyers and sellers as of late. Both have been forced to make concessions within an unexpectedly quiet market.

“There’s been a big misconception among sellers, who think their home is worth more than it is,” said Stanaland.

Meanwhile, there’s a lack of inventory available for potential buyers, with “new home construction not able to keep up with demand,” said Caruso.

Daftarian added that buyers “have had to lower expectations to buy what’s available.”

“Everyone is asking for renovations or new builds, but there’s been a pullback in that sector due to high land prices and rising construction costs,” said Daftarian. “Developers have been more bearish on the market.”

Prolonged Positives

Continued pullback in foreign investment is expected to continue through 2020, though this gap has been filled by new local and out-of-area buyers, according to Caruso.

“The bulk of buyers are coming from California, but we are seeing a lot of interest coming from Canada, the East Coast, Chicago, etc.”

“The desire to live in California will never go away, and this prolonged growth environment is a positive sign for our local economy.”

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