It is becoming increasingly difficult to keep up with home prices in Los Angeles these days. You see some of the pricing on homes and think it will never sell at that price and then it ends up selling for significantly more. What is responsible for this? Demand and lack of supply.
How is the listing price of a home determined? The listing agent will look at comparable properties (comps) that sold recently in the same or a similar neighborhood. They will take into account the location and condition of the home compared with the subject property and make the appropriate adjustments. This will determine the appropriate price at which to list the property. Buyers and their agents will have access to the same information and will know whether the home is fairly priced.
However, in this current market of high demand and low inventory sometimes all bets are off. Buyers become desperate and may be willing to overpay for a home they love, especially if they are cash buyers where an appraisal does not factor in. To them, at this time, the home is worth the amount they are paying. Or maybe a buyer getting a loan is willing to put more down to get the home.
This is where prices start to get out of control because the last sale will become the comp for the next similar property selling in the neighborhood.
Here are some examples from a selection taken in one neighborhood over the past six months. The average sold price vs list price for those homes sold in under 30 days was 107.89%. Surprisingly for those sold between 61 to 90 days it was 110.37%. Go figure.
Here are some individual stats:
A 1,535 sq. ft. home listed at $1,399,000 sold for $1,500,000 in nine days.
A 1,850 sq. ft. home listed at $1,579,000 sold for $1,678,000 in 10 days.
A 1, 580 sq. ft. home listed at $1,249,000 sold for $1,450,000 in 11 days.
A 2,354 sq. ft home listed at $1,699,000 sold for $1,869,000 in 13 days.
A 1,536 sq. ft. home listed at $1,495,000 sold for $1,650,000 in 62 days.
Until we start getting some more inventory in these areas prices are going to continue to rise although there has to be a tipping point.
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