Is the Market Fluttering?

What the eff is fluttering? We're going to talk about that and a lot more. Today on our southern California Housing Market Update. Let's get started. My name is Stephen Meade, the broker of record here at Domicile Real Estate, real estate for people who love houses. And today, we're really talking about the whole Southern California market. And we're talking about a topic that I find particularly interesting. And that's the notion of flooding.

So what is flooding basically, in a real estate market? Well, watering is when you start getting shaky market indications, right, some will point up, some will point down one week, they'll go up one week, they'll go down, it's basically a sign of a lot of uncertainty in the market. Think of it kind of like an airplane wing that's fluttering? And you kind of get the idea. And why do we talk about this? Most people think that our market operates in a linear clear fashion. What I mean by that they think that if home prices are going to go up 12%

Next year, that means they go up 1% every month for 12 months. Well guess what, it doesn't work like that. And similarly, when the market begins to hit a price ceiling, it doesn't suddenly turn on a dime like that. What it does is it starts bouncing and fluttering against a little bit of a limit. Let's look at the data and see is that's what's starting to happen in our market. By the way, don't forget to like, subscribe and hit that notification bell.

If you appreciate these updates, questions and comments. We do love them. Okay, so the first thing we're going to talk about is active listings. And there's another chart I kind of wished I had prepared for you guys today. I don't have it. I wish I did. that I saw in the last couple of days, I was at a strategic planning session for the largest MLS in the country. And, you know, one of the one of the slides that came up from one of the presenters was talking about an interesting stat.

So if you look here, our total active listings is starting to wane, right? Like it's starting to kind of curve and flatten out. That's not terribly unusual. We do have a lot more listings than we had a year ago today. Right? Like, I mean, we were at 4000. Today, you know, here we are at cost probably 5500. Right? Like that's a, that's a pretty good chunk, maybe a 33% rise, even in our one to $2 million category a lot, but it is flattening out. One of the interesting things that was discussed was the rate at which listings are being pulled off the market without a buyer after a short period of time, these aren't listings that have expired.

These are listings that have been withdrawn from the market, and that is at a six year high. But what does that mean if that's what's going on, if we're starting to see sellers pull those listings from the market without giving them enough time to market? Well, what that basically means is that many of the listings you are seeing may not necessarily be hyper motivated or realistic sellers, they may be sellers who are more looking to test the market with higher prices kind of a kind of a make me move.

Now in a normal market, listing agents, people like myself, realtors normally will generally reject those listings if they feel that a seller is not serious about selling at a market price. However, I think some of the agents on the market are desperate and they are taking listings at prices that are unrealistic because they want to have a listing. And so we're seeing kind of these houses go up for 30 to 45 days, the seller doesn't get what they want, they pull and withdraw the house on the market that is not really a seller that is trying particularly hard to actually sell their house.

We look at our new listings, that number is starting to take a nosedive, which I think is pretty interesting. We're seeing that number sort of eased down. We did have a holiday weekend in here that always affects things. But we're starting to get back to a level really of new listings hitting the market at least under a million dollars. That's very similar to where we were at last year. We are still at an elevated level of new listings coming on the market in that one to $2 million category. But even that's starting to drop. So I'm very curious to see what's going to happen in two weeks. If these trends continue or not to kind of revert more tobacco bound the point we're at all last summer. Now if we look at new escrows right, those are pretty flat or up tipped slightly and generally let's hit our million dollars.

We're a little bit less than we were at last year but for that one to 2 million those His newest scores are actually a little bit higher than last year. And then if we look at our absorption rate that has it's really rebounded for more time period than that, right? Like it's actually rebounded quite a bit, versus even where we're at over the last month or so. What I find interesting about this is look versus last year, though, this is not as competitive in terms of that ratio of new listings coming to market versus old listings, or versus listings being taken up and going under contract. So again, kind of a bit of a mixed signal here. If we look at our close prices, generally these are trending upward, we'll say, for the most part, maybe some slight softness here, yet again, kind of a sign that we might be hitting against a little bit of that price and affordability ceiling.

This is the one though that I think is really kind of the interesting piece of data, right, and this is the percent that are still active after 14 days on the market. This number is elevated, elevated means less competitive. And again, I've been talking about that idea of concentration. In our market, right, I've been I've been talking about that idea that many of the buyers are going after a small percentage of listings. However, like I said, I think we're seeing another effect, which is some of these listings just really aren't that great in terms of their value proposition. They're overpriced for what they are, or they are downright not attractive at all. We look at our clothes versus length ratio, right? This is the house of the actually selling. Well guess what? That's been pretty steady.

We're here over 101%, close to 102%. Frankly, not very far off between where we were last year. And what I find about this one that's interesting is of the houses that are actually selling right like not listings on the market, but the ones that are actually finding buyers and closing, we're finding that those sellers and still pricing pretty close to where they need to be, we're not seeing this number drop below meaning we're of the home selling, we're not seeing sellers take big discounts off of their list prices. And then if we look at days on market for new contracts, that also is a number that is pretty steady here. Right. But again, this isn't measuring days on market across the whole market. This is measuring days across days on market for the homes actually finding buyers.

So what does this tell us the homes that are attracted the ones that people want, they are just as competitive as ever. And then if we look at our affordability chart here, again, we've got about two paces between that payment index and our rent index. As you can see, CPI is slowly beginning to close and even even the rents are starting to run away a little bit from there. You know, when I look at this chart, what does this really tell me? Right? Like we looked at our prevailing mortgage rates, I'm gonna go off the go off the screenshare here.

What does this really tell us, it tells us that, you know, the market is definitely facing some pressures, I think we are hitting a little bit of an affordability ceiling. And what's going to need to change that is something's gonna have to come into the mix either a shortage of new listings hitting the market, where buyers are forced to compete, even if they want anything at all, or we're gonna have to see those interest rates start to drop a little bit to kind of fuel some further price growth. So I will still say that those most competitive houses, they are still competitive, you're not going to be finding deals, but the ones that have been the market, maybe they've been on the market, 30 days, right, if that seller really is interested in selling, that's really the place kind of where some of the higher value is. But again, those are not the properties that everybody's going and looking at.

I think, you know, this is a little bit of an opportunity for people to kind of get in now before some of those expected rate drops towards the end of the year or the beginning of next year occur to kind of get into something that you want, you get in at today's prices that have not been fueled by those lower rates, because I think lower rates will fuel kind of a resumption of some of that upward curve, they'll leave a little bit more room above headroom and that ceiling. Anyhow, thanks so much for watching. We'd love to have you here. Don't forget to like subscribe and hit that notification bell. And of course if you are looking to buy or sell a home here in Southern California, definitely look down in the description below. We would love to lend you our expertise and help you out with that. And don't forget to LIKE subscribe, hit that notification bell and questions and comments. We love those too. We'll see you again real soon.

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