Our market is shifting from a seller’s market to more of a balanced market.
Looking to sell a home in Southern California?
Looking to buy a home in Southern California?
What’s going on in our Southern California market lately?
The statistics indicate that we’re starting to shift from a seller’s market into a more balanced market. The NAR just released a study that found that pending home sales have declined for the last five months. Everyone’s gotten used to our market being super hot, but things are starting to change.
Part of the reason behind this shift is workers’ wages haven’t kept pace with rising home prices. Year to date, home prices have increased 5%. Last year, they increased 10%. Potential homebuyers, however, haven’t seen the same increase in their paychecks. With prices high, affordability low, and interest rates rising, some buyers are simply being squeezed out of the market and electing to rent instead.
To further illustrate this change, year-over-year pending sales have dropped 20% from 22,000 homes to 17,737 homes. The number of closings has dropped year over year as well, to the tune of 17%. Since the beginning of this year, inventory has steadily increased. In January it stood at two months, but now it’s at three months. Because of this, I’m seeing more and more price reductions on listed homes. Sellers keep pricing their homes high but not getting the response they want, so they have to reduce their price to get buyers’ attention.
Finally, active inventory has increased almost 30% since December 2017, and with this increase, prices have flattened.
Part of the reason behind this shift is workers’ wages haven’t kept pace with rising home prices.
How should buyers and sellers respond to this shifting environment?
Because we’re only seeing the start of a shift, if you’ve been holding on to an investment property or a property you’ve thought about selling in the near future, now may be the time to put it on the market before conditions shift further.
Sellers should also be more accommodating toward buyers. In the past, they could get cash offers with no contingencies attached and make many demands from buyers. Now that we’re transitioning into more of a balance market, buyers can make more requests from sellers and even back out of a deal if they think a home needs too many repairs.
If you’re a buyer, you shouldn’t necessarily hold off on buying. With interest rates rising, even if prices drop further, you may end up paying more by waiting to purchase than you would if you locked in a lower interest rate now.
If you have any more questions about our Southern California market or you’re thinking of buying or selling a home, don’t hesitate to reach out to me. I’d be happy to help you.
