There is something very interesting happening behind the scenes of Los Angeles real estate. Buyers and sellers don't know about it, most real estate agents don't understand it, and it's affecting how accurately we can evaluate the market for our clients.
It's called the “Listing Re-launch". First let me explain what that means. Then, I'll talk about how it's moving across L.A. Then, why you need to know about it.
This is when an agent deletes a current listing online and puts up a brand new one. They do this to get a fresh start on a home. Maybe it's fallen out of escrow, or they put it on hold over the holidays, or they want to reduce the price in a different way. Traditionally, agents will simply do a "price reduction" and drop the price from $899,000 to $849,000.
The best part... the number of "days on market" gets rolled back to Zero.
With the advent of Zillow and Redfin, buyers are very sensitive to how many days a listing has been on the market. They think it helps explain whether a property is a good deal or not. In my opinion, this couldn't be further from the truth, but as a listing agent, that's the Buyer's reality, so I won’t argue with them. And most of the time, the other agents don't even know it's been on the market before!
This is not a new phenomenon, but it is gaining popularity. Take Los Feliz for example. In the 90027 zip code, 9% of the listings in the last two years were re-launches. The two years before that, only 6%. It's not only gaining popularity from year to year, but from West to East. In Highland Park the last two years, 5% of the listings were re-launches. Pasadena, it was 7%. If we head back west, the Hollywood Hills East was 10% during the same time frame, and Hollywood Hills West in the 90069 zip code was at 15%.
That means almost 1 out of every 6 homes is a re-launched listing.
I am also not counting when a listing agent was fired and the seller brought in a brand new agent. This is only when the same agent(s) relists the property. Interestingly, the further West you go, the more agent firings you see.
The more re-launches, the more misleading the data can get.
Quick Example: Let's assume there was a house that was on the market for a total of 180 days. But, it was re-launched after 90 days, so instead of having ONE listing with 180 days, we have two 90-day listings. When you start to calculate average days on market, the data will tell you that homes are selling faster than they really are.
Because of these re-launches, you might be looking at unreliable information about the market.
Usually when homes are re-launched, they do it at a lower price. This means the “List-Price-To-Sales-Price Ratios” are also flawed. This list-price-to-sales-price ratio lets you know how close to the original asking price it sold for. 100% means it sold for asking price. 102% means it went over asking price. When you look at the average ratio in a certain neighborhood, it can tell you a few things about the market, and it usually correlates to the average days on market, which will tell you how “hot” the market is. But, the more re-launches we see, the less reliable the data can be to your average agent who doesn't understand all the moving parts.
By looking at the same data, I could either tell you a certain market is on FIRE with homes selling faster every year by looking at one piece of data. Or, I can tell you that the market is cooling because homes are being re-launched and they're actually taking longer to sell.
Even though the re-launches can "muddy" the metrics, the one and only piece of data you actually need is the Sales Price. In every single one of these neighborhoods I mentioned, sales prices are increasing. For example, in Los Feliz, the average price increased by 9% last year (median prices increased over 13%). That's no small potatoes! Consider that the average sales price in all of Los Feliz for 2016 was $1.767 million, and the average home appreciated by 9%.
The average home in Los Feliz accrued over $150,000 in value in the last 12 months.
Despite what you might hear, Los Angeles is a scorching hot real estate market in 2017.
Whether or not the "re-launch" can misrepresent some of the other real estate metrics, this is still a very effective way to get a home sold if used correctly.
But if you are a Seller, it’s good to know we have this trick up our sleeve, but it should be used strategically and only after we exhaust the other million ways of marketing a home. Not as the first measure like many agents are doing.
If you are a Buyer, it would be wise to know the history of a listing before you write an offer. This fact doesn't affect the inherent value of the home, but without getting all the pertinent information, are you truly making an informed decision?