LOW SUPPLY AND MULTIPLE BIDS
Market Times have dropped like a rock since the start of the year, squeezed by not enough sellers.
After hearing about falling home prices due to sky-high mortgage rates, buyers expect housing to be slow so they can take their time and not compete in purchasing a home. Instead, they are experiencing long lines of buyers at open houses and multiple offers on homes priced right and in reasonably good condition. Home buyers are frustrated once again.
Ever since mortgage rates climbed above 6% in June, there has been a tug-of-war taking place between buyers and sellers: low demand, which favors buyers, pit against a low supply, which favors sellers. Last year, inventory kept growing until it peaked in August, while demand continued to drop after peaking in March with rising rates. As market times grew, buyers had the upper hand. The pool of buyers evaporated due to affordability constraints. The remaining buyers were not tripping over each other to purchase, they were unwilling to overpay for a home, and the few houses on the market took longer to sell. The sense of urgency that characterized the market from June 2020 through May 2022 had vanished. According to the Freddie Mac House Price Index, as of January, the Los Angeles/Orange County region has dropped 8% since May and was down 2% year-over-year.
The housing market has evolved yet again in 2023. The supply of available homes has been dropping while buyer demand has risen. The inventory declined from 2,530 homes in January to 2,168 today, a drop of 14%. On the other hand, demand has grown from 900 pending sales in January to 1,567 today. The difference between supply and demand has diminished from 1,630 in January to 601 today, its smallest difference since May last year. The market time dropped from 84 days in January to 42 days today, its lowest level since May 2022. Anything below 50 days indicates that not enough homes are available to purchase and sell.
At 42 days, Orange County buyers are once again experiencing long lines of buyers at open houses, multiple offer situations, and sales prices above the asking price. This is not due to heightened demand. High mortgage rates are inhibiting demand. Instead, it is a result of not enough new sellers and a muted inventory. So far this year, in January through February, there have been 2,793 missing FOR-SALE signs compared to the 3-year average before COVID, down 45%. Today’s buyers cannot buy what is not for sale, so buyers in today’s marketplace are waiting for homes to be placed on the market. As soon as a home becomes available, if it is in decent shape and priced right, it will be greeted with plenty of buyer traffic and interest.
A WARNING FOR SELLERS: This is NOT the insane market from June 2020 to May 2022, where values were screaming higher.Sellers may have the advantage, but overpricing a home is futile. Homes with deferred maintenance or a poor location will be extremely challenging to sell without adjusting the price. Price a home according to its Fair Market Value based on condition, location, upgrades, amenities, and age. Multiple offers may be back, but sellers should not get overzealous.
A C T I V E L I S T I N G S
The active inventory continued to fall, declining by 2% in the past couple of weeks.
D E M A N D
Demand increased by 4% in the past couple of weeks.
L U X U R Y E N D
The luxury market did not change much in the past couple of weeks.