Is The Housing Market Stuck?
Well, hello, everybody, and welcome to another Southern California Housing Market Update. I'm your host, Stephen Meade with Domicile Real Estate, real estate for people who love houses. Welcome back, it is the end of September September 26th.
And this is our regular full market housing update. We also do one that's specifically geared towards the entry level into the market. And, you know, I had a client asked me an interesting question, and they asked, Is the market stuck? Right? And it got me to thinking, what does this stuff actually mean? And I started thinking about kind of the market that we've been in, at least, for the last year or so right? People expected housing prices to fall, they haven't really not not in the magnitude, or I think or in any direction people thought they were now they've kind of just held steady.
And we've really seen a lot of waffling of the market, particularly in the last four months or so. And so I wanted to kind of take a look at the stats as we kind of through that lens of stuck. And then at the end we're going to talk about, do we think it's stuck? And what might actually change that. Right? What might change kind of the market, if it is in fact stock. So let's go ahead and get started. We've kind of got some kind of some interesting things to talk about that I noticed this week.
So we're gonna go through those. And yeah, let's bring this up. So first thing is active listings under a million dollars, we're holding steady on that. But we're actually rising just a little bit and ever so slightly, kind of on the one to $2 million homes. And that's interesting, because that is not kind of where we're at last year.
Last year, we were steady and starting to drop. I'm not sure we're seeing that drop kind of perspective. You know, one of the things that's happened in the last couple of months is we've really seen how this under $1 million market has reacted very differently than that one to $2 million market. And I think it's because they are really pulling from very different buyer pools, and different seller pools, and that is creating different dynamics. So if we look here at our listings in the last 14 days, you know, on our under 1 million, we've seen them rebound a little bit. But frankly, you know, these numbers were pretty low two weeks ago, basically as low as they were back in February.
So people kind of held off on listing and then they kind of bumped back. This is not super unusual. I've talked about this kind of end of summer vacation slash back to school slump that we see very commonly. And it's in Southern California. I think that's true. So we're seeing a little bit of a bounce back. The question is, is this a trend going up? Are we going to just kind of be in the zone here, kind of 1800 houses under a million dollars every two weeks or not? If you look back a year ago, we were kind of on that downswing last year and it doesn't really look like we're on that downswing. And the one to 2 million, we actually see a pretty healthy number, at least healthy by the standards of this year.
Right kind of homes are coming on the market at the same rate. And, you know, one of the theories on this is that most of the home sellers that are out there today, most of these home sellers are not. I don't want to say optional home sellers, right? They're not voluntary home sellers. They're people where someone is going to assisted living, someone has passed away, they are moving for a job divorces, these kind of compulsory moves are what we're seeing a lot of especially in that one to $2 million category. I think that's the reason why that number seems to be a lot steadier, in terms of the listings coming up and it just hasn't really changed as much as you might expect.
Let's see I'm not sure the resume or share here. Let me see if I can get those stats back for some reason it doesn't want to go here. But let me try it again. And see if we can't get these. Let's see here it says it is paused, resumed share. Alrighty, we're going to try this once again, I normally don't have technical difficulties on the staff. But we are going to see what we can do here and if not, I can manually reload it here. Let me try this one more time on this and see what we can do.
Okay. Now I think I got it. Let's give it one more time to bring those slides back. Most of you know actually do record these live. So you know when we have these kind of technical difficulties like this it really is live. So if we look at our new escrows right if this is the supply side of the equation of the supply and demand this This is the demand, right? And what we see is rising demand here for homes under $1 million. We saw them take a dip, and really kind of bounce back here.
I'm curious if we're gonna see some of this is such a rapid rise, you know, is this going to continue onward and upward? Anecdotally, it sure seems like it one to two minute again, we're just kind of even, we're just kind of playing in the same range. We look at our absorption rate, that again, kind of tells two stories, we're seeing that absorption rate rising back up, you know, over 80%, here for under 1 million, and it has dropped below 70%, from one to 2 million. What does this mean, right? If you're a buyer or seller, well, if you're a seller between one and $2 million, it means you need to have a compelling house to sell, you need something that it's going to make buyers take notice.
If you're a buyer in that range, congratulations, you actually have a pretty decent selection depending on area, and you've got a little bit more market power than you previously did. If you're under a million dollars, that market is tightening. Now if we look at our closed prices, this might explain a little bit about why we're seeing demand softened, right, as things get absorbed. Look at all these prices have kind of jumped here in the 75th percentile, right? These are those homes kind of heading towards $1.5 million, our median home price is pretty much flat trading in this range. And then we've seen some rises at the bottom.
And though this past two weeks, maybe a slight decline. Again, the state is a little old. So you have to remember, you have to remember that this data is basically based on the deals that happen to four to six weeks ago because it's based on closed prices. Now, if we look at percent still active, this again tells kind of a diverging story under a million dollars, that's still active percent is dropping, that indicates a tightening of market, right under a million dollars.
If we look at our one to $2 million, that market is continuing to get a little bit softer, a little bit easier, as soft as it was last year. No, but definitely moving in a positive direction if you are a buyer in that market. If we look at our close to list ratio, again, we see a diverging market, look at this are under 1 million are almost at 102.5% of list price. That means on average, homes are selling for a bit above list price, whereas our one to 2 million, look at this number kind of creeping back towards one 100% meaning on average selling right at this price, which I think is pretty interesting. If we look at our days on market for two contracts, again, we are seeing that diverging story between under 1,000,001 to $2 million.
You know, if you're a seller and you have a home, it's worth just into the one millions, my advice, price it at 999. That will get you a lot more eyeballs on it. But look at this days on market dropped for under $1 million. And by the way, these are homes that went under contract and last week. So this is more recent data days on market for one to 2 million that went up Now admittedly, are these that far apart from each other?
No, but it's interesting to look at the different direction that they are going. Now if you look at our three way chart, right, this is one of my favorites here, we see that we've got a little bit of an easing here. On the that payment level, it's kind of sticking around there are rents bounced back down. So the question is, was that a blip, kind of an end of summer rental index blip, we've seen a couple of those in the past?
Or is that going to kind of be treading in this zone here, we're gonna have to wait two weeks to find that out. Inflation, of course here on the bottom line creeping up very steadily and slowly. And then finally, we have kind of our prevailing interest rates, we are of course firmly across that 7% threshold. Let's talk a second about interest rates as part of this stuck versus unstuck, conversation. You know, there are a lot of things that kind of contribute to this market being sticky and stuck together.
Here's some things that it would take to really kind of upset that balance. I think you'd have to see a big difference in interest rates right? And by stuck or mean stuck doesn't necessarily mean that the prices are stuck. What it really means is that the volume of transactions is not very high right now. So there's not a lot of speed in the marketplace. And let me give you an example of some raw numbers right? In 2021. For example, in California we were over 400,000 homes sold for the year of 2021.
For 2023. We are on pace to hit about 280,000 homes sold and that is a huge huge drop. So you know I am definitely in the camp. I would call this a stock market. Right stuck means people are afraid to make decisions. They're afraid to do anything buyers are worried about am I paying too high of an interest rate? is the market going to fall? I think that's so concerned, or there's nothing available for me or I can't afford anything.
These are the buyer concerns, sellers are saying, well, if I sell where am I going to go, and I can't even afford to buy the house I have, because I can't get the same interest rate on it, as I have now. So, you know, what we're gonna have to see is a couple of things are gonna have to happen to make a market unstuck.
Number one, you know, right now that the average mortgage rate, you know, in the marketplace is below 4%. Right, mortgage rates are gonna have to come down to be closer that encourages those move up buyers, that means the price differential is smaller for them to move up and buy another or a different house that they need a different configuration to, to changing needs. I actually do think we're gonna have some pent up demand, right people that were planning on making a move and have been holding off, I think there's going to be a threshold where a bunch of those would be movers, buyers and sellers come back to the market.
Unfortunately, that doesn't really solve a that that might unstick our market. But that doesn't really solve a lot of the affordability problem, because we are adding buyers and sellers at roughly the same pace. There is a net zero, it cancels that out when we're talking about demand. The other thing that I think might need to happen is if there's some sort of an inventory, other kinds of inventory event that could happen in the marketplace. That would be something like institutional investors selling in mass. Unfortunately, I don't think any of those is terribly likely.
So if you are a buyer waiting on the marketplace, I don't think Blackstone is going to suddenly unload their investment portfolio of single family homes. I just don't see them doing it that quickly. Even if they did, they would do it over like a 10 year period of time. I think the net effect would be known negligible. Anyhow, that's all I've got for you. Happy Tuesday, everybody. I hope you're enjoying kind of a little bit of our Indian summer we've got going on right now. It is kind of a nice warm September that we're experiencing and we had some chilly weather but now it's you know, these are the these are my favorite days right tourists are gone.
Weather's nice. Enjoy the Southern California lifestyle. That's what we're paying for. Don't forget to like, subscribe and hit that notification bell. If you or someone you know is looking to buy or sell real estate in Southern California. We would absolutely love to chat so we can lend them our expertise and strategy. Let's see. Don't forget to like subscribe and hit that notification bell and we will see you again real soon.