2023 Buyer’s Real Estate Guide: San Pedro | Los Angeles

Although interest rates have settled in the 6% range for much of the new year, housing inventory remains low, but prices have started to decline. Real estate agent Karen Anderson based in Rancho Palos Verdes and San Pedro has noticed the market shift, along with many others in the industry.

“Last year we saw signs of the market changing, given rising rates and overall uncertainty with regard to our overall economic outlook, it was only a matter of time before we would see the effects start to take place. Buyers have gained immense leverage, unlike anything we have seen in the last 7 or 8 years.”

Karen Anderson, Realtor – Broker Associate

Market data from February shows much of what Karen is saying. There has been a 32.6% reduction in the number of homes being sold compared to last year, while prices have only come down by 2.2%. Inventory is up 53.4% from last year, but we had low inventory then as well. Although there are more homes for sale than last year, inventory remains low. Despite the real estate market trend, there are always sellers who need to sell, and buyers looking to buy. So if you are considering buying a home in 2023, here’s what we think you need to know.

Know the Market, Know Your Leverage

The Los Angeles real estate market, which includes the coastal community of San Pedro, has seen immense changes from a year ago with respect to interest rates. With interest rates nearly doubling from a year ago, affordability took a massive hit, which forced a lot of hopeful buyers out of the market. With this many buyers out of the market, sellers have lost much of the leverage they had in previous years because they are no longer receiving multiple offers on every home on the market. The buyers that remain are much more sensitive to changes in rates, and if they land in an escrow with a seller that is not willing to make concessions, more often than not the buyer will cancel and find another property.

Manage Your Expectations

With inventory up 53% over last year and the time it takes to sell a house (Time on Market) doubling, buyers in this market should have at least a few homes to choose from. Some sellers are still acclimating to the new, more balanced, market. As a buyer, you should expect some flexibily from sellers. Things like closing costs, 2-1 buye downs, repairs and/or credits are all on the table for a seller to cover. Most houses, unless presented well and priced competitively, will sit on the market for about 30 days before going into escrow.

However, condos and townhomes remain very competitive, especially 2-bedroom units which are very popular with first-time home buyers. Desirable condo complexes, such as The Gardens in San Pedro, also remain very competitive. If this is the kind of home you are looking to buy, be prepared to compete, as units are still selling for over asking, averaging just 2 weeks on the market. Each case is different, so refer to your agent and your own observations to determine how much competition you might be dealing with from another buyer or two.

Whether or not this trend changes is yet to be seen. Inconsistency in the market is usually what makes buyers weary of pulling the trigger on a purchase. We predict that the market will drop only if rates continue to be erratic, as they were in the last quarter of 2022. If rates remain consistent, even in the 6% range, buyers will gain confidence, and competition will grow.

Double-check Your Purchasing Power

Interest rates can have a drastic impact on your monthly payment, so it is especially important to keep in touch with your lender so you can stay up to date on your payment estimate.

Here is an example of how rates can change your payment on a $500,000 purchase with 10% down:
Mortgage Calculator

Interest Rate	5.75%	6.75%
Principal & Interest	$2,626.08	$2,918.69
Insurance	$145.83	$145.83
Taxes	$508.75	$508.75
Mortgage Insurance	$168.75	$168.75
Total Payment	$3,449	$3,742

So a 1% change in the rate resulted in approximately $300 additional per month. The higher your loan amount, the more your payment will be affected by rates. Although high rates can be difficult to look past when purchasing a home, one advantage is that some sellers are willing to work with buyers on their financing.

Make an Offer

With homes sitting on the market, most sellers will often welcome any reasonable offer, and by reasonable we don’t mean $100k below the asking price. However, if the property has been on the market for two or more weeks without a price adjustment, the seller may be in the midst of considering a price reduction already, so submitting an offer 10k – 20k below the asking price may be something they consider. Aside from negotiating the purchase price, we will also have an opportunity to negotiate further with the condition of the property, but not before conducting our inspection. Another area where you can expect help from sellers is in the form of financing.

Sellers Will Help With Buyer Financing

With limited buyers and inventory steadily increasing, sellers are willing to work with the buyers with regard to their financing. This can happen in several different ways, such as seller financing, paying for closing costs, buying down the interest rate, and even lender-required repairs on the property. A more recent product that has been very popular is a 2-1 buy-down program, where a seller pays to lower your interest rate by 2% in the first year, 1% in the second year, and the standard interest rate from the 3rd to 30th year.

Have an FHA or VA offer? Not a problem! In previous years, sellers would shy away from buyers with FHA and VA offers because of the potential for lender-required repairs to the property, such as chipping paint, damaged floors, functioning heat, or termite issues. They would usually go with a clean offer. However in this market, most sellers will not have the luxury of multiple offers, so if they are in a position where they need to sell, they will make the right concessions, but you also need to know how to ask for them.

Asking for the Right Concessions

Asking for the right concessions can make all the difference when submitting offers in this market. As mentioned before, sellers are much more open to performing repairs or taking FHA or VA offers. Closing cost credits, buying down interest rates or points, and repair requests are all concessions that are appropriate in this market. What and how much to ask for will vary depending on the buyer and the property.

Typically, we coach our clients to focus on the major systems in the home first, then work our way out toward cosmetic issues or problems. This is something that typically happens while reviewing our home inspection report. Most items in the report that are safety-related are brought to the seller’s attention with a repair request in which the buyer states what they want – either a credit or fixing the issue. While it may seem like a good idea to send an entire punch list of items to do, most of the time asking for a credit to take care of some of the items is a better strategy.

Want to learn more? Work with a great real estate agent, like the ones at The Prestige Team!

Work with The Prestige Team

As a top-rated Real Estate Team, Karen Anderson and The Prestige Team close 60+ homes per year, so we get a first-hand feel for what the market is doing. Acclimating our buyers to the current market is one of the most important things we do to improve your buying experience and chances of getting your offer accepted.