Is This...What Normal Looks Like?
Hello, everyone, and welcome to another Southern California Housing Market Update. This is for October 24. Gosh, can't believe we're almost to November here, October 24 2023. I'm your host, Stephen Meade. I'm the managing broker here at domicile real estate. And we're going to talk a little bit about what is normalcy? And are we entering a period of normalcy? You know, to most people, if you ask them what is a normal real estate market, they will start describing some kind of market of the past, usually pre pandemic, something kind of in the mid teens.
And let's say that's a normal real estate market. But the reality is a normal real estate market is whatever an equilibrium in a stable non volatile market is, in fact, that really is the state of the new normal, because that's what we call what normal is, is when the market is in a place of stability. And I think there might be some signs that as strange as these market conditions are, that they are, in fact, defining a bit of a new normal, I've got the data to kind of prove this. So let's go ahead and get started here and kind of go through, because I think you guys might want to see this. Bring this up here. All right. So let's get back to the beginning.
Right. And by the way, just a quick little commercial bit here. If you are looking to buy or sell a home in Southern California, we would love to lend you our expertise, we are the experts in this area, we take data and we bring it down to actual actionable strategies so that you can make better real estate decisions. So let's go ahead to talk about, first of all, something interesting, that's happening, we've seen this trend for a little bit here. And that is an increase in the number of active listings.
This is not really what we normally see around this time of year. Normally around this time of year, we tend to see our you'll see this number actually goes down. If you look over here, at our There we go. There's our spotlight. If you look back here a year ago, today, we were kind of flat and falling, we're actually heading up not flat. I mean, this is a firm increase in the number of listings. Normally this would be cause for celebration by the masses, right, especially those buyers looking to get a home under a million dollars.
But the problem is, look at where we are in terms of this number. You know, last year at this time, we were 70 508,000. You know, homes available under million dollars. Right now that number is 5000. So even though it's rising, it is still a very, very small number. Compared to where it's normally been a little bit less of a story between one and $2 million. You know, that number is going up as well. But it's not, it's not as far below as it was last year. If we look at the new listings coming on the market, we see that this this increase in listings is maybe a little bit caused by people putting our homes on the market.
As you can see here, we've got a little bit of a mini kind of Spike maybe slightly more than our average. But I mean, look, this is really a pretty tight zone of the number of new homes that come up every two weeks on the market. This is looking back 14 days, by the way, in the Los Angeles and Orange Counties. You see we're just below 2000, we've kind of been in this, this kind of range here, this 1800 to 2000 range, pretty much all year long. And look, we are still well below where we were last year at this time. Now for one to 2 million, it's a little bit of a different story. But again, it's it's kind of trending right in this in the range it's been in the whole time.
So that number is much more in line with where we were last year and that one to $2 million range. Now if we look at our new escrows this is this is the reason why the the number of active listings is going up. As you see there's kind of been a steady decline here. And we are having seen fewer homes go into escrow. However, last two weeks did bring up a little bit of a spike here and increase. But you can see we're kind of following a trendline if you draw through here, the question is, where's this going to bottom out? It is a little bit less than it was last year. I think given where interest rates are they are significantly higher than they were at that point last year.
That's not entirely unexpected. But what you're not seeing in this graph, right? It's you're not just see some kind of Cliff, that new escrows have fallen down. In fact, you're seeing a little bit of a bump, I think we are going to see that floor number hit down here pretty quickly. And it's not going to go much lower than that in terms of number of new escrows. And then in our one to 2 million range. You see that the escrows actually also came up a little bit again, but they've really been playing in a tighter range. And I think this speaks volumes about the kind of buyers that you have in these two price ranges right.
The under $1 million buyer is very frequently going to be a first time homebuyer, they are going to be more interest rate sensitive, the one to $2 million buyer, however, that might be somebody who is coming from out of area, maybe they switch jobs, you've definitely got to kind of look at that a little bit. And if you go back into it versus a year ago, the number of new escrows is actually up. So if you look at our absorption rate, right, this is one of our measures of competitiveness, right? A higher absorption rate is a more competitive market, a lower absorption rate is a lower competitive market. We're right around 70% here for both of these. And honestly, this is a great number, if you are a buyer, right, if you're a seller, not as much of a great number. But if you're a buyer, this is really a great number to be looking at, because it means yet you are still going to run into multiple bids on properties.
However, those multiple bids that you were seeing on properties, those are going to be you know, really those kind of special those top two, your property is the average property, which is really what we're trying to gauge or the average property is going to see less activity. And if you look at our closed prices, we see a little bit of growth. Remember, this data is four to six weeks old, because it is based on transactions negotiated four to six weeks ago. If you look here, you'll notice that our prices are in fact elevated a little bit in that upper 75th percentile.
And we're seeing numbers that are very close a little bit higher than they were at last year. If you look here, in our median, we're seeing again, prices took a little teeny bit dropped. But those are still a little bit higher than they were at this point last year. And if you look here at our entry level, this 25th percentile prices are in fact, maybe a tiny bit higher than they were last year, but pretty much in a flat position. And that's because those prices dropped towards the end of the year, and then they bounced back through the spring. And then it kind of eased a little bit as we've gotten into this kind of new elevated rate, elevated rate environment. However, you know, this easing is a very gradual thing right? Now, if we look at are still active after 14 days and mortgage, this one I find a little bit fascinating. And this is why I'm telling you that if we were looking at this reduction in new escrows here why I think that this thing's going to flatten out. And that's because we look at this percent still active after 14 days. Remember, this one is the opposite of absorption. And this one a a higher number means less competitive, a lower number means more competitive, we see competition sort of peaked right in the beginning of April, that makes sense. And then the market has been steadily getting less competitive. But look, it's kind of almost hit a wall here around this 80% number for under a million dollars, it's definitely stopped rising. And same thing here on one to $2 million. Now it's kind of in that 84% level, it also has leveled out and stopped increasing. And we are still more competitive than we were at this point last year, which I think is interesting to note. So I do feel like we're kind of reaching this point of stability and equilibrium. Now this one I find really interesting, right? This is our close to list ratio. And this has been kind of a bit of a tough number, right? Because ever since the spring, we have been consistently homes have been selling for over list price both under and over a million dollars. And finally, that is really starting to get back to that 100% level, I think what you're going to find is, you know, we're going to see it hover around 100% Not because that not as a sign of the strength of the market, but frankly, is a changing pricing strategy. A lot of sellers and agents are encouraging sellers to really list low to get multiple bids to get buyers off the fence. That seems to be the strategy that is pretty prevalent right now and the one that is working, they let it get bid and they let the market figure out where the price should be. If you look your days on the market, this is another one showing some stability, right? We had days on market sort of peaked in January of last year. And then it's been steadily going down ever since it kind of hit a bottom in June and bounced back a little bit. But now this number is just looking steady. And frankly, it's around 30 days for both of our price categories. We're not seeing that huge increase in days on market for new contracts and another sign that the market is actually in a point of stability. And now we have our three way chart. And this is one that I don't actually like. Well, I like the chart, I just don't like the data that's on it. You know, we are in a market where the reason that we show these things together is because I think there is a bit of a symbiotic relationship between payments on single family homes and rents on single family homes. Right. We've got our CPI index down here in the red. And these by the way, these all tied together We're in June of 2018. So this shows you how have these numbers grown separate of one another since June of 2018. That is five and a half years ago. Now, I can't believe I'm saying that. And, you know, this payment index, right is a spread between the payment on a median single family home and the median rent on a single family home. And, you know, these are these are fairly close commodities to see, right. And what you look at here is, you know, where this period of higher rates, right when we see that this number for this payment index is, is kind of hitting some all time highs. But what I find fascinating is look at how the rental market has reacted to this, right? And that's because if, if the payments on homes are going up and fewer people are buying homes, what are those people doing, they're not living in cardboard boxes under the freeway, at least not, not when it comes to single family homes, those people will tend to rent a single family home and look at what that has done. It has caused that number to also rise up look where we were at this point. Last year, you know, we've seen that these market rents and single family homes have gone have steadily kind of moved upward. Now it does tend to trail a little bit. And I've said this multiple times, I do not like when these graphs are really far apart. I think that is not a long term sustainable thing. I think that the cost of housing can go up faster than inflation factor house of causing cost of housing has gone up faster than inflation, through history. But what I find kind of interesting is that when these rent, and buy numbers start diverging, that can't be a huge permanent divergence. That's this large, and you'll see the rents are starting to jump up to try to bring these close together. I think if we get a little bit of rate relief, we're gonna see these come closer together. And it seems like the place where the market is comfortable is when we got one bar or a 20% difference between these two numbers. Now we're finally our final chart is ugly here. Where are mortgage rates as of today? Well, the ease back below 8%. This is where I get to tell fun little story. My mom was in banking, right? You know, this charts really kind of ugly, I just don't want to look at it. So we're gonna pick up here. My mother was in banking, you know, both before I was born when I was very young, this was her career. And, you know, she tells me stories in the early 1980s of double digit mortgage or mortgage rates, right? This wasn't one month where these things were this high. And this was a period of, of gosh, I think it was about a 12 month period when rates were over 10%, prevailing rates for mortgages. So you know, sometimes I see these numbers, and I see people complaining about them, and they say they can't get any worse. Well, they absolutely can get worse, and they have been worse in the past. See, I've not seen that screenshare come up again here. I don't know if I've lost that. That was our last slide. But you know, people are asking me what do I think's going to happen on these mortgage rates? And do I think that this means it's a terrible time for first time buyers to buy a house. And you know, I had lunch with a client today uswe as if he is watching this. And he said something that I think was really, really a piece of wisdom that seems to only come to people after they've owned a home for a while. And that is no matter what the time period is, there is always something and I think people are looking to some, you know, golden era when all of the stars will align and it will be cheap and easy to buy a home and they'll have tons of selection. And the fact is, you know, there's always at least one something right there, whether that means that the rates are higher, whether that means that the prices are high, whether that means there's not a lot of selection, whether that means people are worried about the future. So they'd like to buy but they're free to. You know, there's always something and I tell people, if you're waiting for that perfect moment, you're going to be waiting forever, there is no such thing as a perfect moment. What you want to do instead is analyze, is this a good moment for my objectives and what I need? What are the pros or the cons? What are the risks and what are the opportunities. That's all I got for you this week, everybody. Thank you for watching our Southern California market housing market update here for October 24. Don't forget to like subscribe and hit that notification bell. And of course if you are looking to buy or sell real estate in Southern California, we would love to lend you our expertise and strategy. Also, definitely share these videos if you get some value from them. Share the wealth of knowledge on that. And we'll see you again real soon.