I Didn't See That Coming

Well, hello everyone and welcome to August. My name is Stephen Meade with Domicile Real Estate, where we are on a mission to help California's renters become homeowners. Go ahead apologize, I'm losing my voice a little bit. I yelled a little too much over this weekend. But this is our Southern California Bar housing market update for August 1 2023. Our data is a little surprising to me, but it shouldn't be. Let's go ahead and get started. So, you know, if we take a look at this, this part's not terribly surprising, surprising. We are seeing a little bit of a rise in inventory. We are still way, way down versus where we were last year. Right. I mean, just, I mean, we're looking at, really, I think close to 50% declines, I think in most of these categories, right? Okay, whether it's under a million or one to $2 million. Remember, this is our kind of whole market updates. And this is not our entry level market update. So if we take a look here, if we look at our new listing volume, right, I mean, really, that's just never materialized in the way that it exists last year. You know, from the beginning, you know, look at this.

From our low point right at the beginning of the year, what over every two week period where we're getting approximately, we're gonna go out and say maybe 1800 new homes, under a million dollars. Look at our spring ramped up, it did 2000 new homes every two weeks under a billion dollars in LA and Orange Counties. Look at our one to $2 million category, right? Where are we here? Maybe like 850 900? Where do we adopt just over 1000, like we never really had a big kind of hump. This is this graph normally has an interesting shaped curve, right? It's like a hump. As we go through the summer, that's just never happened. It's like we just never got past that early spring listings hitting the market. And if we look at our new escrows, in the last two weeks, those kind of bottomed out and they've rebounded a little bit why interest rates, of course, we saw a little bit of relief on those. We look at our absorption rate, what does that do? Predictably, that shoots it up, we are over 80% under a million dollars, we are over 70%, one to 2 million. Those are still seller's market type numbers, maybe not a hyper seller's market, as we've seen in the past, but still very strong seller's market numbers, if you are priced right and have the right thing for sale. This is where the news is a little surprising.

Now. Normally, I would look at this. And I would think well, you know, one of our price tranches dropped a little bit, that wouldn't be a big deal. But all three of them did from our 25th percentile entry level to our median 4/75 percentile, which really took the biggest tumble. Now understand that these are based on data that is four to six weeks old, on average. Why? Because these are closed prices. So they tell you exactly what the market was doing four to six weeks ago, not necessarily to doing market is doing right now. So four to six weeks ago was a pretty good time to be a buyer. And I mean, look at this, this is a pretty big decline here on 75th. You know, hearing the median, it's a little less clear, right? This almost looks like we just took out that as gains. Same thing here on the 25th percentile real if you were to just draw a line here, you kind of see where we gonna just kind of smooth that hump out a little bit. If you look at our percent still active, that's actually been crawling under a million dollars. That actually means the market has been steadily getting since April, a little less competitive.

What is that? I do think that that is kind of that interest rate burnout, but our one to 2 million that's been steady. Interestingly enough. This is another one that I'm a little bit fascinated by as you look at this close to list ratio. Now remember, again, this is four to six weeks old. So this data is not what the market is doing the second it's what the market was doing four to six weeks ago. If you look at this, we are trending on average. I mean really a number that is well over 100% but it's it's kind of evened out right. January's this bottom right around 97 and a half 98%. This steadily went up up up, bottom sucked out a little bit here as interest rates scare on July and then it's kind of resumed but it does look like As leveling out, we're not going to we're not seeing numbers shoot towards us 105 107%, like we had remember, this is average. So some of these homes will be below this. And some actually will be doing bidding higher than this versus their list price.

If you look at our days on market, though, that data is actually showing a little bit more of a competitive market. So I'm always fascinated when we got a couple of sets of data that are not always showing the same thing. And I've got a little bit of a theory about what's going on. You know, in fact, I'm going to talk about that a second before we go to our three ways. So one of the things about the state of the we look at is that you also have to look at things in sort of the fourth dimension. And what I mean by that is time, these statistics do not all move at the same pace. These are not market indicators that move at the same time. So sometimes they're delayed reactions to things, why they're delayed reactions, market data, human behavior, logistics, right? Like I mean, just getting into escrow. Right. Even if I told you homes had dropped by $100,000, right, that'd be a stimulus to demand. Not everybody would be under contract in the next week. Right? It wouldn't happen instantaneously. So, you know, sometimes you see a little bit of a timing adjustment, I think that's what we've got going on here is some of this data is showing where the market was four to six weeks ago. Some of it is showing where the market is. And you know, hopefully, what we're really always trying to predict right is where is the market going? What are things going to look like in the next couple of weeks, at least in that short run? You know, this days on market for new contracts.

This says really, where was the market two weeks ago? If we go to our three way chart here, this one makes me feel a little bit more comfortable. Why? When we chatted two weeks ago, I was very concerned about this kind of growing disparity, right. And that was caused by both pricing and interest rates. Well, both of those items for the East, what's happened is that payment index has dropped down, rents have stayed the same. And it's close this gap a little bit. And you can see that this level of gap is not entirely out of the ordinary, not like it was here where we were at that sort of 20% gap between the growth of rents and the growth of payments on median, single family homes. You know, this really is kind of that backstop that shows us the market being just insane and showing no rationality. Are there limits to this right? Is there a limit to how far these can move apart? I think there is a finite element, we don't always know exactly what that is. And finally, if we look at our prevailing mortgage rates, you know, we just kissed 7% here, and then we eased off of those a little bit in the high sixes.

As you saw the news last week, the Fed decided on another quarter point rate increase, or the prime rate with the Fed funds rate. You know, and when you see that, that doesn't always have a direct and instantaneous correlation on mortgage prices. Remember, mortgages are based about long term thoughts on inflation. So it's how does those fed decisions affect long term thoughts and inflation, not the number itself? Anyway, I know it's a little bit of a shorter update. I'm really struggling to kind of get the words out for you guys here. But as always, thank you for watching questions and comments. We love them. If you are looking to buy or sell a home here in Southern California, namely Los Angeles and Orange County's would absolutely love to help you with that. Definitely reach out to us and let us lend you our expertise. Don't forget to like subscribe and hit that notification bell and we will see you again real soon.