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Hello South Bay, it’s 2023 and I wish you a very Happy New Year.
The real estate market has changed, let’s first look at the numbers and then stick around until the end to find out how can take advantage of the current market.
Let’s look at median estimated home values around the south bay, They range from about $652,000 in Wilmington to just under $4 million in Rolling Hills. Values have fallen from their peak a few months ago but if we look at the map everywhere except El Segundo and Lomita have higher values than this same time last year. If you want some values for your home or neighborhood, contact me, or better yet leave a comment below and I will send you a custom report.
Just to give an idea of the range of homes that sold in December they range from this 1 bedroom 1 bath 760 square foot condo that sold for $281,500 to this 5 bedroom 7 ½ bath 6,885 square foot home on an almost 17000 square foot lot that sold for $7,200,000.
We all know what affects changing prices most is supply and demand so let’s take a quick look and see what is going on.
On the supply side, we had 571 active listings in December with only 157 new listings coming on the market in December. These are really low inventory levels and the 157 new listings is the lowest in at least the last 14 years.
So you may ask why are values going down with supply so low?
The reason we see a little softening in prices is from the demand side. Looking at closings or sold homes, we only had 238 sold. But remember homes that sold in December were probably already in escrow in previous months. To look at how buyers felt about the market in December we can look at pending sales. These are people just going under contract to purchase a home. And as we can see at only 139 pending it is much lower than it has been back all the way to 2008 which is how far back my data pulls.
So yes supply is low but demand is even lower.
The average days on market is 38 which seems like a lot because we have been used to such fast sales during the pandemic but as you can it’s just getting back into pre pandemic normal range.
One way to visualize the balance between supply and demand is best shown in our inventory months of supply, which is at about 1.7 months of supply. So if no new homes came on the market we would sell out of homes in about 7 weeks. It is this continuing low inventory supply that makes us believe values should stabilize and even go back up over the next year. Experts believe that the current downward pressure on values is caused by uncertainty in the market due to inflation, interest rates, and Government response to the economy. We don’t really worry about a downward market until inventory numbers rise to around the four months supply mark, we are then in a very different economic market.
If we take a look at what is going on with prices, the average sale price across the whole south bay is $1,176,223 a little off of the high but still up 8% from before the pandemic price surge.
I mentioned at the beginning about taking advantage of the current market. If you have been trying to buy for the last few years then you know how competitive it has been to get an offer accepted. Now you have a lot more strength in negotiating an offer that is right for you. Sellers who have been indifferent to your wants and needs because they had so many offers to choose from now have to be a little more accommodating to get their homes sold for the maximum price.
Yes, interest rates have gone way up making homes less affordable but that is also an opportunity for many. For one, higher interest rates are softening prices and demand. Maybe giving you some opportunities you didn’t have a year ago. This may allow you to negotiate some assistance with the purchase, such as repairs, closing costs, or even interest-rate buy-downs.
Remember you are not buying an interest rate, you are buying a home. If interest continues to climb you will have saved money by acting now, and if interest rates fall you can refinance to that lower rate. If your plan is to live in the home for a long time, you should not be caught up on current interest rates but more so on what fits your family’s budget and goals.
But even more good for buyers – buying a home, is a quality of life purchase, benefiting you and your family in many ways besides what it cost every month. Yes, it cost you more right now to buy but once that cost is locked in it will stay the same forever unlike rent which historically keeps going up here in Southern California.
My final thoughts are, that rising inflation is actually a reason to buy. A home purchase shields and stabilizes your largest monthly cost, your housing cost, again inflation. Rents will continue to rise with inflation whereas a home mortgage will remain the same and build equity over time. History also shows us that once inflation is under control, we will probably see lower interest. Giving you a chance to lower your payment in the future but don’t wait until then, when interest goes back down prices will go back up also.
So don’t be afraid of all of the media hype. No matter the state of the economy you still need a place to live and build memories with your loved ones. Would you rather be doing that, while paying off your own home or paying off your landlord’s home?
For questions on buying selling or investing contact me so I can help.
Bye for now.
