Housing market spurs frenzy
The desire to own a home in the region has some throwing cash and contingencies to the wind
After a three-year search for a house, apartment dwellers Arthur Grijalva and Michelle Moraveg considered moving back to El Paso, Texas, or living out their days renting a studio apartment.
Perhaps, Moraveg mused, they could put their first child in a dresser drawer when they start their family.
Then, after getting outbid again and again, they crafted their winning strategy for buying a Southern California home: Bid higher. Act fast. Streamline the offer.
It worked, and on May 27 they moved into a
cozy corner house in a leafy Burbank neighborhood.
To get it, they paid $150,000 over the asking price, waived their right to cancel based on a low appraisal or high home repair costs and closed the deal in two weeks.
“We kept waiting for (the market) to crash, and it never crashed. So we decided to bite the bullet,” Moraveg said. “You just have to accept this is what it takes to live in L.A. and be a homeowner.”
Grijalva and Moraveg are two of 87,000 “winners” in Southern California’s housing market this year, one of the most intense buying frenzies in three decades.
Market watchers say frustrated losers far outnumber the winners, with low mortgage rates, bulging numbers of millennials on the hunt and a pandemic-driven desire for bigger homes boosting demand.
Bidding wars are common. Desirable, reasonably priced homes are rare.
The number of homes on the market dropped 20%50% this spring from last year’s levels, figures from several data firms show.
Zillow reports homes in Los Angeles and Orange counties are selling within 10 days. In the Inland Empire, the average time for a sale is eight days.
“It’s a huge challenge for buyers,” said Amy Cimetta, an agent for Vista Sotheby’s International Realty in Manhattan Beach. “Unfortunately, buyers have to remove as many hurdles as possible. Sellers are getting 10 to 20 offers. The buyers who stand out are paying all cash or removing financial contingencies.”
Interviews with agents, home shoppers and a Zillow home trends expert show it takes more than cash to win a bidding war, although that’s still the biggest factor.
Home shoppers also need to get pre-approved for financing, become adept at using real estate apps and prepare to act as soon as a home in their price range hits the market.
A lot of buyers are giving up after getting outbid over and over, agents say. Some are refinancing their current homes and remodeling.
Others are waiting to see if prices will drop, said Amanda Pendleton, Zillow’s home trends expert. But unless there’s a new crash, they risk paying even higher prices or higher mortgage rates down the road.
“Your buying power is going to be lower the longer you wait,” she said.
Pendleton noted that not all homes have bidding wars. Zillow reports 58% of homes in the L.A. metro area are selling at or below their asking price.
“There are stories of homes being bid up. But the majority are not,” Pendleton said. “So, stick with it.”
“It takes a lot of perseverance,” Cimetta added. “… When you go the extra mile, that’s what it takes to get the property.”
Here are stories from several homebuyers who did.
Arthur Grijalva and his wife, Michelle Moraveg, hold their dogs, Otis and Calical, at their new home in Burbank.
they wouldn’t pay for any repairs. And they waived the appraisal contingency because Grijalva was confident the home was worth that much. To be even more competitive, they agreed to complete the transaction in just two weeks. Escrows typically take 30-45 days in a normal market.
The seller had just one other offer for around the same price, but it was “all cash” — meaning the buyer wouldn’t need a mortgage.
Then, Grijalva and Moraveg composed a “love letter,” describing who they were, telling about the family they planned to raise in the home and the careers they hoped to build there.
“We instantly fell in love with the cozy living room overlooking the magnificent tree in the front yard,” the letter said. “We can already envision decorating the grand tree with Christmas and Halloween decorations to get into the holiday spirit.”
They looked forward to setting down roots in Burbank and making the house “our forever home,” they wrote. They included a photo of their two dogs, Otis and Calical.
Writing love letters, popular in sellers’ markets, has fallen into disfavor in the past year because Realtor groups fear it could encourage housing discrimination.
But the couple says their letter clinched the deal.
Now they had to get through escrow — and in just two weeks. They battled over the cost of termite repairs and raced to get their financing and inspections done. They estimated the home needed about $20,000 worth of upgrades.
But a low mortgage rate — just 2.25% — helped bridge the costs.
“Just the fact the interest rate was so low made it work so much better,” Grijalva said.
The couple made their decision on the street outside the home right after their tour.
With three children and two dogs, the family long had outgrown their rented two-bedroom condo in Chino.
At first, they wanted to buy a new townhome, but homesites were quickly selling out and prices jumped $15,000 by the time they picked out a lot. So, they decided to shop for an older house instead, looking in the Ontario, Chino and Upland areas.
They had been approved to pay up to $550,000, and there were 25-30 homes in their price range. But they were selling fast.
“If I didn’t go that day or the next day, they were ‘sale pending,’ ” Rio Baeza said.
The first house they looked at listed for $540,000 but needed about $20,000 worth of work. And someone had died there, “which really turned us off,” Rio Baeza said.
“We were really discouraged. If this was our price range, and this is what we got, we were going to have to look at really lowering our expectations or saving more,” Rio Baeza said. “Or taking another loan out just for upgrades.”
Then, they visited the second house, a one-story home listed for $535,000. They told their agent right away they would buy it, but another buyer already had bid $558,000.
“The seller said if we could give them $560,000, they would sell it to us because we were a young couple that reminded them of when they were just starting out,” Rio Baeza said.
They won their bidding war by going $10,000 over their price cap. But they still almost lost the house.
First, the loan appraisal came in $13,000 too low, launching a new round of negotiations. The problem was solved when the Baezas’ agent, Peter Perez of Coastline Properties, waived $10,000 of his commission and the sellers came down an additional $3,000.
Then, the sellers tried to back out of the deal after their bid to buy a replacement home fell through.
“It was really scary,” Rio Baeza said. “They were trying to cancel our escrow. But the lender said that’s impossible. The house had been paid for.”
The Baezas gave the sellers an extra two weeks to find a home to rent.
On April 10, Daniel Baeza’s birthday, the family moved in.
“When we got the keys and started to have the popcorn removed (from the ceiling), that’s when it started to feel like our house,” Rio Baeza said. “When they delivered our fridge, (it hit me), this is real. We just bought a house.”