Is the !@#$ finally hitting the fan?
Well, everybody, I know we're talking a little bit earlier this Tuesday for watching us live on Facebook. My name is Steven Mead with Tom saw real estate. This is our Southern California Housing market update for October 10 2023. I cannot believe we are in the last third of the year already. And we have seen an almost unimaginable jump in interest rates. I think this time last year, most people were predicting that this is when we would begin to see the lowering of rates, not the raising of rates. And yet that is the position we find ourselves in.
So the question is the one that I'm asking, everyone's asking is, is this enough to really hit a breaking point on the housing market? And the answer is yes. And no, it depends very much on market segment, because buyers have vastly different sensitivities, to interest rates. So we're going to talk about that and give you some information if you're a buyer or seller in this market, that you can use to help make better real estate decisions, which is really what we're about. That's what we do with our clients on an individual basis.
If you'd like to be one of those clients, it gets our individual expertise, definitely reach out to us, we'd love to work with you if you are in the Southern California area, especially Los Angeles and Orange County. So we're going to go ahead, we're going to bring up our stats, and we're going to start talking about some of the things that we're noticing that are happening. So first off, you know, I want to talk about something that is a little unusual for this time of year. And that is watching inventory actually rides a decent amount of that under $1 million category. Now, we've talked about this before, right.
And whenever there's a bump in rates, we kind of see this bizarre thing happen where there's kind of a moment of a little bit of freakout by buyers, especially at the lower end, right, because they see what they were pre approved for. If they're right on that bubble. Now they are not pre approved for that, right. And so there's kind of this panic mode, right, and some buyers will panic into finding anything they can get right, because they're afraid things are gonna go up further. But a good number of those buyers, were really just take a step back for a couple of weeks to sort of reevaluate what they can qualify for what does the market look like and then jump back in. And so we're seeing these active listings go up by a decent amount, which is not what normally happens.
This time of year, once we enter into October, we're usually kind of in this flat phase before fall off towards the end of the year. So that is interesting, right? And look at the slope of that. I mean, that's a decent little bump there. And we're going to talk about where that bump is coming from in a second. It's not coming from listings hitting the market. And then we've got our one to 2 million, just a little bit of a steady rise, but we're going to call that fairly flat. So we're already starting to see here. And the point I'm trying to make is that different price ranges are affected differently by this right one to 2 million, these buyers are likely to have a lot more cash going into the transaction than the buyers under $1 million.
Okay, if we look at our new listings in the last 14 days, we're pretty much at a lower point to pretty flat. I mean, it's dropped like a little bit, but not a huge amount. Okay. So we're gonna call this flat, whether you're under a million, or one to 2 million in the last two weeks. But look at the new escrows. And this really should tell you everything you need to know to understand how these price segments are very different from one another. Under a million dollars, look at that new escrow number in the last two weeks drop that is that buyer panic that we are talking about? And the question is, is that a long lasting buyer panic, or is this kind of what we've seen many times before, which is interest rates take a jump, and buyers freak out for gosh, two to four weeks.
And then we see this number kind of return to normal, right as they sort of adjust to quote unquote, the new normal. If you look at one to 2 million, right, like it's down a little bit, but this is a far steadier number. I mean, even just looking at these graphs, there's a lot more volatility in that under $1 million segment from week to week in terms of the number of new escrows that are happening, that should tell you that that is just a highly sensitive market that under 1 million. So if we look at our absorption rate, again, like you know, things are kind of at the low end here, one to 2 million, but they're like fairly steady. But look at this, and that under 1 million. Right. I mean, that is that was basically a full on stop in the last two weeks. I don't want to say a stop. But you know, it's definitely a reduction in demand. And the question is, does that a permanent reduction in demand, or is that this buyer freakout that we've been talking about?
So a little bit of advice here, you know, if you're a seller, right, and you're hearing me talk about this, you probably are having your own little bit of panic. And if you're a seller, there's not a reason to panic, but this is a reason to maybe shift your strategy and what I mean by that is if you were thinking if you're in a crowded mall, Get segment, right? If you've got four houses for sale on your street, don't be the fifth right now, this is not the right timing for you. So number one, you don't want to be in a crowded market. The second thing is you want to be attractive. There are absolutely still buyers out there, but they're picky.
And you need to be that house that they say I want this, right, this is a market of the haves and the have nots, under a million dollars, what are buyers looking for, they're either looking for something that is irresistible, meaning it's so nice, they think it's not going to come along again, or something that offers a lot of value. Right, maybe you are one of the best prices, three bedroom townhouses in your area, that is something that will attract the buyers. Obviously, if you're in that one to 2 million segment, you know, that's been a tougher segment anyway, just because you don't have that move up buyer population.
But we're seeing that that's a much steadier segment. Your strategy, again, is having an attractive product, do not try to play games with pricing in the market, you know, now's not the time to test for a new high in your neighborhood. But if your price, right, you're gonna see activity and you've got a compelling home on the market. If we look at our closed prices, right, you know, this should tell you something also interesting this entry level segment, we've actually been seeing a little bit of softness, this middle level, it's been pretty steady across the line here. And the high end has been much more volatile, right.
And part of that's because our sample sizes lower, you know a little bit on that item, it's just that these fringes, it's you're going to get some of that fringe effect, especially that 75th percentile, as you get into these upper price ranges. You know, we saw prices climbing, they go back down. But if you look, we're well within the range. So here's another measurement, right of our competitiveness in the market. And remember higher on this chart means a less competitive market. So let's reference compared to last year, we've more or less competitive, it is a more competitive market than October of last year. Right.
But look, what we've seen, you know, if April was the point of the most competitiveness, all through the years, those rates have gone up the markets beginning a little less competitive, a little less competitive. And then you look in the last two weeks, we'll see a little bit of a jump here in the under 1 million, of course, that coincides with our other data and corroborates it, we are seeing kind of the that momentary kind of jump back. I do think that that most of that effect on buyers is not permanent. I do think that most that fact is the oh my gosh, rates went up really fast. And I can't qualify for the thought. And I'm gonna freak out a little bit until I readjust my expectations. If you look at our close to list ratio, you know, that's still riding in this 101%.
And part of this is, you know, again, some advice here for both buyers and the sellers. I think the winning strategy in this market is to price competitively to get activity. I don't think the winning strategy in this market is to do hopes and dreams make me move pricing unless you just have a property that is so attractive. And so one of one never will be on the sale again. But the reality is, you know, for every for every 10 sellers who think that's their property, it's probably only true for one of them. So unless you're that kind of a property, you know, you really can't be commanding that market making power right now.
However, we are seeing a lot of people, let's say they think their house is worth, you know, a condo is worth 600,000, they will price that at 550. And let the bidding commands, right, especially if it's a nice looking unit, and they're gonna see activity, they're gonna be able to get basically that maximum value. Likewise, if you're a buyer, don't be fooled by list prices, list prices are a strategy, they are not always indicative of what something is worth.
So really, you want to lean on your agent to be like, is this gonna go for more? Is this a realistic price? What do we think about that. And if you don't have an agent to lean on, again, you probably call us days on market for new contracts. So this one did surprise me, I thought this number would have jumped up in you know, we calculate this a little bit differently than other people do. And there's a reason for that. This is days on market for new contracts. So this isn't days on market for all the properties that are out there.
This is the days on market for the ones that are actually getting offers and going into escrow. And what this tells me is this tells me that buyers are picky and that they are totally jumping on houses that are desirable. What are sitting are the ones that are undesirable. Now if we lead our three way chart, you know again, I have a little bit of concerns here because this rate jump what this has done is this has popped us into that we've got two segments on this graph here. And I like to see these numbers close together.
Again, this is our payment index versus our single family home rent index. Going back to June of 2018, which gosh, is now Oh, you know, over five years ago, right? These numbers do need to be close together, I do think that what we're going to see is at some point, these rates are going to drop, I cannot give you a month that I think that's going to happen. I think it'd be imprudent. I think a lot of you know, pundits and experts were proven caught off guard, maybe by some of the events in the last month, those employment numbers are looking way too good. But when that starts happening, I don't think you're gonna see rents go down and single family homes, you're just gonna see this payment index number start to come back to get close to this.
That's that's sort of my general prediction of what's going to happen. You know, sort of in in the long run. Finally, we have probably the ugliest chart in our slide deck here, and that is prevailing mortgage rates. I have been resisting the urge to add an 8% bar here because I just don't want to do it. But I think we are getting to the point where we are going to have to go ahead and add that 8% going forward. Anyhow, that is our update for you for our October 10 SoCal housing market update. Once again, I'm Steven meat I'm your host on The managing broker and owner here at domicile real estate real estate for people who love houses which is hopefully you if you're watching this. We love real estate too. So if there's any way we can help you, either with buying or selling or providing advice, we are here to do that for you in the Southern California area. Don't hesitate to reach out don't forget to like subscribe and hit that notification bell and we will see you again real soon.