Hello South Bay, it’s February already?
I am still writing out my new year’s resolutions. Not sure where the time goes.
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 $674,000 in Wilmington to a little 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 has higher values than this same time last year.
If you want to know what your home is worth contact me and I will send you a free report. If you just want a free report for your neighborhood leave a comment and I will send you one.
Just to give an idea of the range of homes that sold in December they range from this 1 bedroom 1 bath 658 square foot condo that sold for $325,000 to this 5 bedroom 7 bath 5,685 square foot home on an almost 6,000 square foot lot that sold for $9,800,000.
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 652 active listings in January, which is up 37.8% from a year ago. Of those 652 homes in inventory, 294 are new listings on the market in January, which puts new listings down 28.8% from a year ago.
So even though we have almost 30% fewer new homes coming on the market we have almost 38% more inventory. We get those kinds of numbers because homes are sitting longer on the market and staying in inventory.
Lets look at the demand side. We only had 205 homes sell in January. Remember that is for the whole south bay. Many of those homes that sold in January were probably already in escrow in previous months. To look at how buyers felt about the market in January we can look at pending sales. These are people just going under contract to purchase a home. And as we can see at only 129 pending it is much lower than it has been back all the way to 2008, this shows that buyers were very hesitant in making an offer on a home.
The average days on market is 42 with half selling in less than 28 days. That seems like a lot because we have been used to such fast sales during the pandemic but as you can see it’s just getting back into pre pandemic normal range.
One very important number and a way to visualize the balance between supply and demand is best shown in our inventory months of supply, which is at about 2 months of supply. So if no new homes came on the market we would sell out of homes in about 8 weeks. This is the number that gives us an indication of where the market is going. So even when the numbers are a little crazy we can look at this and see how things balance out. With only two months of supply, we are still in an upward market long term. But that doesn’t mean that there will not be a decrease in prices in the short term. The huge gains in home prices during the pandemic was not normal or sustainable and has to correct at some point to a more normal market. If months of supply reach 4 months locally or about 6 months on a national level then we will be looking at a downward market. Inflation and interest rates seem to be coming down hopefully sparking buyers and sellers to get back into the market. We believe that by the end of the year values will be up higher than they are today.
If we take a look at what is going on with prices, the average sale price across the whole south bay is $1,146,875 this is about 21% off the high in May 2022 but still up 9.4% 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, against 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.
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.