May 8, 2021

DCTRS

Damascus Center for Theoretical and Civil Rights Studies

L.A. home buyers pay above the listing price, some way above

In Southern California, where home buyers are seasoned bidding-war combatants, demand lately has been pummeling supply so badly that some neighborhoods are seeing most homes fetch far more than owners were asking.

The six-county region’s median home price hit an all-time high in February of $619,750, according to the most recent data from real estate firm DQNews, as buyers strengthened by low interest rates fought over the depleted roster of homes for sale. L.A. County’s median sales price rose 14.3% year over year to $708,500; San Bernardino County’s median jumped 17.7% and Riverside County was up 16.5%.

But the median price — the point at which half the homes sold for more and half for less — gives a broad overview.

Exactly how bad is it out there?

Within L.A. city limits, more than half the homes sold in March fetched more than the listing price.

Of the 565 properties that traded hands, 287, or 50.8%, hauled in more than the price tag, according to the Multiple Listing Service real estate broker database. A year earlier, 44.2% of homes sold for over the asking price. In March 2019, that figure was 36.1%.

Upward price pressure is strongest at the lower end of the market, in which more buyers compete over a smaller number of homes.

Of the L.A. homes listed for less than $1 million, 66.4% sold for more than the asking price in March. Most of those fetched between $1 and $10,000 above the original price tag.

In Lancaster, where homes typically sell in the $200,000 to $400,000 range, nearly 71% of homes sold for more than the asking price. In Palmdale, another relatively affordable city, nearly 61% of sellers received more than the original price.

Luxury enclaves also got a healthy share of bidding wars that drove deals millions above the asking price. Of the 392 L.A. homes sold that were listed for more than $1 million, 172, or 43.9%, sold for more than the original price.

Although the bidding-war pace at the upper end is slower than in lower-cost markets, the size of the transactions leads to some eye-popping numbers.

“I’ve never seen a market like this,” said Joshua Myler of the Agency, who sold Walton Goggins’ Hollywood Hills home in March for $3.665 million, more than $300,000 above the asking price. That surplus would buy an entire house in Lancaster.

“We have lower borrowing rates than we’ve seen in half a century and no inventory. It’s a perfect storm,” Myler said.

Among L.A.’s tony communities, Hollywood Hills had the most homes fetch more than the asking price in March. Out of 75 home sales, 26 sold for more than the asking price — nearly 35%, according to the Multiple Listing Service.

For reference, the same month last year saw 11 of 40 Hollywood Hills homes sell for more than the asking price (27.5%). In March 2019, nine of 42 homes sold for more than the price sought (21.4%).

“The pandemic caused this revolution where people are rethinking what they want to do and where they want to be. I had three clients move to New Zealand last year,” Myler said.

Although some people are leaving L.A., others are trying to enter. Myler had seven offers on the Goggins listing, including four from out-of-town buyers — some way out of town — in San Francisco, New York, Britain and China.

The over-asking effect was most pronounced in Santa Monica, where last month 16 of the 27 homes that were sold fetched more than their original asking price. That’s 59% compared with 40% last March and 33% in March 2019.

The trend holds true in the even pricier communities of Brentwood and Bel-Air, where the median home price hovers between $3 million and $4 million. Brentwood had 10 of 21 homes sell for more than what was asked in March (47.6%) compared with three of 14 last March (21.4%). Bel-Air had seven of 23 (30.4%) compared with two of 11 last March (18.1%).

In Beverly Hills, a 5,600-square-foot home that’s still under construction traded hands for $10 million — more than $2 million above its February listing price.

“There’s just not much out there to pick from,” said Eric Lavey of Sotheby’s International Realty. “I’ve sold everything I have.”

Suburbs have made a comeback in a world with less need for commuting and more need for square footage and outdoor space, he said.

In the affluent San Fernando Valley neighborhood of Encino, 14 of 25 homes sold for more than the asking price in March (56%) compared with 12 of 34 in March 2020 (35.3%) and two of 28 in March 2019 (7.1%).

There’s significant demand for homes below $3 million, Lavey said, but also demand for properties between $8 million and $10 million and even for high-end estates above $20 million.

“A buyer wants a good deal in every market, but right now a good deal is just getting a house at all,” he said. “Many have lost out on other properties, so they make offers quickly to avoid a bidding war. There’s a sense of urgency.”

Last month, Lavey sold the four-story Hollywood Hills home of Thomas Pentz, whose DJ name is Diplo, for $2.805 million — or $110,000 more than the price he set. He had an offer in hand five days after the house hit the market.