Age Old Advice - FTHB Market Update

Well, hello everybody, and welcome to another episode of our First Time Buyer Southern California Market Housing Update. I'm your host, Stephen Meade, with Domicile Real Estate. And kind of an interesting one for you today because it reminds me of joke, an old adage that I once heard about first time home buyers, and it goes something like this the best time to buy a house was yesterday. And I think that's really illustrated by the stats that we have this week for you. I think if you have been sitting on the sidelines kind of waiting for your moment, it hasn't really happened. And I want to take this week to maybe look back to about a year ago and kind of compare where.

Are we today versus where were we a year ago if you were a first time home buyer then versus now. So let's go ahead and get started. I think there are definitely some interesting insights this week. So number one is let's take a look at prices. Where are we on prices versus a year ago? And there actually is some good news here, right? Like, I think where we about a year ago, we were close to $800,000 thereabouts in that neighborhood. And where are we today on our entry level single family home? 760. Right. So we're off maybe a little bit versus where we are. So things are still lower. But if you look at the shape of this chart here, you see things kind of bottomed out right, in January and then they've kind of been moving back up. I think that's a pretty easy to spot trend. It's a little bit harder to see that trend here. With condos, they've actually been a little bit more stable. But I think you can still kind of see this sort of dipped momentum. So you are a little bit better.

Off today than you were a year ago in terms of the price that you're looking at for these houses. So, I mean, let's see $40,000 out of 800. That's roughly 5%. But you can see obviously by the middle of July we were in the same zone as we are in today. Here is where you are not necessarily that much better off. And it's no surprise this is in our entry level single family home payment. So we're calculating at 5% down using. Prevailing rates just above $6,000 a month.

For that entry level single family home, again, based on 5% down, including mortgage, insurance, taxes, et cetera. And that really is a little bit higher than we were at a year ago, but not higher than our peak. You'll notice actually last year in October, we actually peaked at $6,200 for that entry level home. And for most of the point, kind of around this time period last spring and June, we were in the high 5000. So we're not completely out of line, but it definitely would have been better had you bought last year in terms of the payment that you are paying on a home, we look at what.

Does it take to qualify for these homes? Last year we were in that 137,000 $140,000 range. This year we are $148,000. And if we're taking a look at our condo here, that was around 105 and right now it's at $112,000 or close to it. So honestly, we're kind of treading water. What I think is interesting though is if you calculate our year over year inflation in terms of where were we last year, this number, this $6,051, is actually somewhat in line with overall inflation versus last year. So it's not a hyperinflationary increase in housing payment. And I think that actually explains a lot of the reason why we're seeing the market is somewhat resistant to price dropages. I think people were expecting the market must adjust prices downward and that's one of the reasons why they've managed to hold on.

If we look here at our condo. Right, as recently as if you look at middle of June of last year, we're at 45 53. Where are we right now? 45 62. That's actually less right than where we would be if you factored in inflation over the last year. Now, if you look at our absorption rate, right, this is the one that. Also tells you why this market activity. Especially for entry level buyers, right? Especially for these prices that we are talking about, this kind of mid to high 700s for our single families and our 500 and mid five s for our entry level condos. This is of course across La and Orange counties. So that kind of entry level price varies by area. But if you look at that, this. Is the reason why this end of that market is still feeling so competitive is the rate at which listings is coming on the market is just not really enough.

Is not enough to make up for that. And a big part of that is a lot of these entry level homes would normally be put on the market by those looking to move up. Those people who are looking to sell their entry level home and get into the next home up and they are not doing it. Why are they not doing it? Because they have an interest rate of around 3 % and they do not want to give that up to go to the next house. So it's that real shortage of listings that is more than counteracting really any shortage of demand.

And as always, that's really what determines prices. It is the balance between supply and demand. And the balance here says that supply and demand, we just don't have an abundance of supply. And that's a theme. We're going to get back to that. Now, if we look at our total inventory, this again illustrates the problem. Inventory levels are significantly lower than they were a year ago. But even worse, they are not climbing as they were at this point last year. They are flat. They climbed a little bit, and that is all that we got.

And in fact, they really didn't climb at all here for our entry level condos. And again, it is lower than we were at last year. That's really what is causing this is a complete lack of inventory, especially at the entry level end of the market. If we look at the % still active after 14 days, that is another proxy measurement for how competitive is the market. And you can see we are actually in a more competitive market.

Lower means more competitive versus where we were last year. And then finally, this is the one that I think just really brings it home. So this is our relative supply graph. So what this is measuring is relative to the speed with which homes are being sold, how many weeks of inventory do we have? And guess what? For our entry level single family home, we have dropped down to four and a quarter weeks. Really, other than about a month ago, this is the lowest number we have seen in the last year. And for our condos, we are at 5.31 weeks. We have only once had a number very close to that. And again, every other time we've had in the last year, we've had more relative inventory.

So when you factor these things in, that's why we're in the market that we're in. And you might be looking at interest rates thinking, I'm a first time home buyer, I should be able to get in there and write whatever I want, and I'm not getting my offers accepted. And this is the reason why you're facing a lot of competition out on the street. So I think this notion that if I just wait, it's going to get significantly easier slash better for me. I think we might see some weeks that are relatively better than others.

But I think if you're expecting some Earth shattering change in market dynamics in the immediate future, it's not happening. Instead, I would focus your efforts on buying the right thing. Go to the math for the houses and the properties that really make sense for you and fight hard for those because if you are in that property for the next 10 years, you are going to think a lot more about whether you like that property that meets your needs than you are on whether you paid $5,000 too much for it to beat out somebody else. So that is our advice.

Questions, comments, we love them. Do not forget to like, subscribe, and hit that notification bell. Obviously, if you'd love to work with us, if you'd like to become a homeowner, that is what we are here for. It is our mission to help California's renters become homeowners. Definitely reach out to us. We would love to work with you in the Los Angeles and Orange County areas. I think that's all I've got for you. Thanks so much, everybody. We'll see you again real soon.