Perspectives From A Seasoned Broker

Weekly Trust & Estate Newsletter  |  October 1, 2024

Stay updated in two of California’s key markets.

1. San Francisco:

The Q2 2024 real estate market for single-family homes and condos in San Francisco reveals a stable yet competitive landscape. The median sales price remains unchanged from Q2 2023, holding steady at $1.41 million, which indicates a balanced market. However, one of the more significant trends is the faster pace of sales—properties are staying on the market for just 38 days, 14% fewer than the same time last year. This shorter time frame suggests that well-priced homes are moving quickly, even in a market where prices have plateaued.

Inventory levels, meanwhile, are tightening, with a 5% decrease from Q2 2023, leaving only 798 homes on the market. This lower supply, coupled with steady demand, could create upward pressure on prices in the coming months.

From a strategic standpoint, sellers should view this as an optimal time to list their properties. With inventory low and days on market shrinking, there’s a strong chance that sellers can secure favorable offers in a shorter time frame. The market, particularly for homes priced between $1 million and $3 million, remains active, making it an opportune moment for sellers to capitalize before any potential shifts in buyer sentiment or interest rates occur. For luxury homeowners, the continued demand for properties over $3 million also bodes well for those targeting high-end buyers, especially in sought-after neighborhoods like Pacific Heights and Sea Cliff.

For sellers considering going to market, the current conditions present a compelling case to act now before additional inventory potentially saturates the market in future quarters.

2. Los Angeles:

The Q2 2024 real estate market in Los Angeles presents a mixed picture, with the median sales price rising to $1.11 million, a notable 13% increase compared to Q2 2023. This price surge reflects strong demand, particularly for homes in the $1 million to $3 million range, which make up nearly half of all sales. However, sales activity has slowed, with a 15% drop in closed transactions, suggesting that some buyers are being priced out or holding back due to higher interest rates. Despite fewer sales, homes are still selling quickly, with the average days on market decreasing by 6%, now down to just 33 days.

Inventory levels have surged by 43%, with over 6,400 homes now on the market. This influx of new listings provides buyers with more options, but it also intensifies competition for sellers. With more properties to choose from, buyers may become more selective, which could result in longer selling times for homes that are not priced or marketed strategically. For sellers, this means that while higher prices might be appealing, it’s crucial to position your property effectively to stand out in a crowded market.

From a strategic standpoint, sellers should consider acting now while the market conditions remain favorable. Rising prices and faster sales times create a window of opportunity, but the growing inventory suggests that waiting too long could lead to stiffer competition. As more properties hit the market, buyers will have more negotiating power, making it essential for sellers to list at the right price and with a strong marketing strategy to attract motivated buyers.

Case Study

When a fiduciary is tasked with managing real estate assets for trust beneficiaries, the responsibility extends well beyond routine maintenance. Decisions about repairs, renovations, and property stabilization require careful analysis to strike a balance between fiduciary duties and the potential for value-added improvements. It’s essential for fiduciaries to understand their role, respect the scope of authority granted by the trust, and avoid taking unnecessary risks. At Premiere Estates, we emphasize this cautious approach to help fiduciaries protect themselves and their beneficiaries from undue liability.

Our goal is to minimize risk. While each situation is unique, we generally recommend fiduciaries limit renovations to essential repairs, such as correcting maintenance neglect, or making minor value-adding improvements, like fresh paint, updated flooring, and landscaping. These types of enhancements are low-risk and help preserve the property’s value. On the other hand, we advise against undertaking significant renovations—like adding a second story, installing a pool, or remodeling a kitchen—unless the outcome is almost guaranteed to increase value. Major projects introduce significant risks, such as contractor delays, permitting issues, and supply chain disruptions, all of which can lead to conflict with beneficiaries and even litigation.

Another key consideration is cost management. Fiduciaries should secure multiple bids (ideally five) for any project, discarding the highest and lowest, and comparing mid-range quotes. It’s also essential to verify the contractor’s credentials, including licenses and bonds, and to check references from previous clients. Contracts should be reviewed by an attorney to ensure they protect the fiduciary and trust from risks related to payments, disputes, and performance milestones. Additionally, using progress-based payments and ensuring lien releases match each payment phase can safeguard fiduciaries from financial surprises down the road.

By focusing on necessary repairs, verifying contractors, and managing costs diligently, fiduciaries can protect themselves from liability while ensuring that real estate projects benefit the trust. Avoiding large, risky projects and sticking to manageable improvements can help fiduciaries meet their responsibilities without exposing themselves to unnecessary legal or financial complications.