Lack of Inventory

where inventoryA lot of newbies to real estate know one truism about the current market: there’s a “lack of inventory.”  When I talk to new clients, they often tell me they understand there’s a lack of inventory as if that’s the first real estate buzz phrase they learned.  I like it.  It sets up the correct expectations because, while I count about 350 properties in the range I most often search (good real estate areas of Los Angeles between 2-14 units under $2M), the truth isn’t so much that 350 is a small number, but rather that 99% of those properties aren’t good enough deals for me to show to my clients.

My clients are smart investors, not usually prize collectors or solely homeowners. The real lack of inventory in Los Angeles comes from too many bad investors, prize collectors, and homeowners driving prices to unreasonable heights because there aren’t many safe places to put your money right now. I wish I could say that sellers had unrealistic expectations and their prices will come down when they realize their mistakes.  But the truth is, in 2013, people were paying ridiculous prices for mediocre investments, and now sellers expect that to continue in 2014.  The jury is still out on whether it will or not. But, in the meantime, I’m keeping a close watch on those price drops.

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