Seller’s Market Tightens as Homeowners Won’t Let Go
With record home prices and abundant prospective home buyers, it’s a great time for many Southern Californians to sell their homes and either move up or take a profit.
It’s not happening.
Worried about their jobs and the economy, or afraid they won’t find anything to buy, or waiting for prices to go even higher, homeowners in surprising numbers are refusing to sell or are taking their homes off the market.
This phenomenon, happening across the country but more pronounced in the Southland, is contributing to the record low inventories that have gotten progressively lower for four years.
Homeowners who won’t let go are jamming the gears of one of the all-time great real estate booms, discouraging buyers and frustrating agents who easily could be collecting more commissions if they had more homes to sell.
“The people who want to sell know they can find a buyer,” said John L. Williams, a real estate agent at Remax Real Estate Services in Monarch Beach. “The only question for the seller is: Now what?”
For Roberta Willis, the answer came while sifting through the market for two months. After poring over scraps of listings, she canceled an escrow sale of her home in Covina.
A buyer had agreed to purchase her home for $231,500, or $1,500 above the asking price. But she figured that another residence of similar size, in good condition, would cost at least $300,000. That was more money than she was willing to spend, and she found nothing for less that appealed to her.
“I saw dumps,” said Willis, 62, who wanted to move closer to her daughter in Whittier. “The prices on houses were ridiculous. You move in and you need $30,000 to fix up the place. I said to my agent, ‘I’m not going to do it.’ My days of fixing up houses are gone.”
Willis, who retired from a bookbinding job this year, said she ignores real estate agents who keep asking whether she will put her home back on the market. She plans to stick around, enjoying a deck she added a few years ago that overlooks peach and apricot trees.
“I won’t sell this house again,” Willis said.
Many would-be sellers share her frustrations or have other reasons for holding back, analysts say.
Some homeowners may be reluctant to sell because they feel insecure about their incomes as uncertainty clouds the nation’s economy.
Though much of Southern California posted unemployment rates of about 5% or less, Los Angeles County was worse than the state average with 6.8% unemployed in the latest report. With California’s economy still mending, some people have been leery of taking on new mortgages.
Still, employment has been more abundant in Southern California than in many other parts of the country. This cuts the number of people who must sell their homes to accept a new position in another state, a more common occurrence during the recession of the early 1990s.
Others may intend to sell but hope to time their deals with the very top of the market. Prices have set new records three months in a row, jumping nearly 17% in May from a year ago. It was the sixth consecutive month of double-digit increases. Some sellers have grown convinced that the longer they wait, the more they’ll make.
Rising prices have given owners another reason to stay put: equity. With the value of their homes climbing, they can borrow against that capital at low interest rates, or refinance their mortgage and lower their monthly payments. They can use the money to fix up their homes, adding space or amenities.
And as has been true for years, people who owned their homes before the passage of Proposition 13 in 1978 have a disincentive to sell because they probably would face substantially higher property taxes if they moved to another home in California.
The result of these factors has been fewer homes on the market.
In Los Angeles County, the number of listings in May dropped 39% from a year earlier, while Orange County’s fell by nearly a third, according to the California Assn. of Realtors.
Real estate agents have devised bold gambits--both high and low tech--to attract sellers.
Robert Bents, whose real estate team targets households along Newport Bay, sends a sand-textured brochure promoting his services to 1,500 households every month. He also mails postcards that show how much nearby homes have sold for and follows up with an automated phone program that calls those residents and leaves messages describing recent sales.
A Valencia real estate agent, Neal Weichel, has used new-home construction as a lure for listings. In April he hosted 130 former clients to meet with the developer of Westridge, an upscale community scheduled to open this year in Valencia. Over a spread of carved ham and turkey, fruits and cheeses, the homeowners were shown floor plans, exterior sketches and other details of the project.
Afterward, Weichel heard from 25 people who had expressed interest in hiring him to market their current residence so they could buy one of the new homes. “I’ve never done anything like that before,” said Weichel, who spent $7,000 to hold the event in a hotel conference room, “but you have to think outside of the box.”
Homeowners have learned the same lesson. Some properties have sold so quickly that sellers have spent weeks with relatives or in hotel rooms while hunting for another place to live. And a growing number of them have sought protection through contingency clauses.
Brad and Jeanette Stephen have received a handsome offer for their home in Mission Viejo but are buffered from closing the deal by a 60-day agreement allowing them to back out if they fail to find a replacement. They were outbid twice this year for houses they wanted and fear being stuck indefinitely in an apartment.
“We don’t want to miss out on buying something because prices have moved out of our range,” said Brad Stephen, who juggles ownership of a small trucking company with managing his father’s spray-painting business.
The Stephens still believe they can find a house before the deadline. But other would-be sellers have ended their search for a home that would be a move up, convinced that nothing exists in their price range worth buying.
Sharon and Harlan Klipp scoured the Pasadena area for a year and came up empty. “If we found something that was similar to what we have, we would have moved,” said Sharon Klipp, 47, a registered dental assistant.
The Klipps probably will stay put and secure a loan that lets them borrow against the equity in a Pasadena home they’ve owned for 16 years. Expanding the den, updating the kitchen and adding a half-bathroom will cost thousands less than buying a larger house, Sharon Klipp said.
“I wouldn’t move for any of the homes I’ve seen, and they’re all $75,000 to $150,000 more than what ours is valued at,” Sharon Klipp said. Their 2,300-square-foot home has an estimated value of $550,000, she said.
“Whenever we go out, I tell my agent, ‘Don’t bother me if that’s all you can show me.’ It’s all very frustrating,” she said, “but what else can you do about it?”
