It's Not Great But - FTHB Market Update
Well, hello, everyone, and welcome to another episode of our Southern California First Time Buyer Market Update. So if you are someone who is out there in the market right now, especially if you're an entry level or a first time homebuyer, namely, in Los Angeles and Orange Counties, this is sort of the market update for you. This is for the end of May, May 30 2023. And, you know, I think we're gonna have a little bit of a dose of honesty and a little bit of a discussion about where we are in the market and what you can expect or maybe, how is your positioning and your timing? I think the number one thing that we talk to when we talk to buyers about are the questions that they tend to have is, do you think it's a good time?
And I've always thought that's kind of a funky, weird question, but hopefully will give you a little bit of an answer that might help you out right now and thinking about positionally where you are. So let's go ahead and get started. If you looked at our, let's see here are obviously going to say, if you went ahead and you looked at our cover, let's go ahead and Screecher. If you looked at our title and description, here's the reality of it. Things were not great last year. But you know what's funny, I actually think as a buyer, you are a little bit better off today than you were last year. And I'm going to I'm going to explain that with our numbers and with our market update. So let's go ahead and get started. These are closed prices.
And just as a reminder, everyone, we wanted to come up with a figure that was based around entry level homes, I think the entry level end of the market is different than the middle of the market. And the higher end of the market. That is especially true right now, because the groups of people that are in these markets are very different. The entry level market has a lot of people who have savings, they have jobs, they're ready to go, the middle and the higher end of the market as people who might have a home to sell, right. And that alters that market dynamic significantly, for that group of people.
So when we tried to come up with this idea of an entry level market, what we wanted to do was pick two popular configurations that we thought were good approximations of some of the first time buyer groups that are out there, namely the three bedroom, two bath, single family home group and a two bedroom, two bath entry level condo group. And then what we did is we went to the middle of the price range, and we went to the middle between the lowest and that middle. So it's the middle of the middle, which is the first quarter or we call it quartile or whatever funky names statisticians like to use. So let's go ahead and take a look at where these prices are, and kind of walk a little bit through our history on this. You know, our high point really was around this time last year, and it was in this kind of, we'll call it $800,000 range. And you can see that over here in the end of May and into June. And then the market proceeded to slip down in price, reach a low point and then bounce back up.
And that's kind of where we are right now. So on this blue line or entry level single family home with the 750 mark, and I'm going to explain why I think you might actually be better off now than you were last year and you're not universally better off. But from a financial perspective you might be and I'm going to talk about why. So if you bought last year, you paid around $800,000 for this kind of first quartile level entry level property today, you're going to pay $50,000 less for that property. Right. That's definitely some good news. And if you're in a condo, I think you know, there we were kind of more towards the high fives and today you're kind of towards the mid fives, right. So by the way, you'll notice this trend we bottomed out and then we started going back up, we bottomed out, we started going back up.
Now if we look at the payment, right, this is a really interesting one because this incorporates what our interest rates doing. You'll notice that around this point last year, we were you know we peaked right around $5,900 on that entry level single family home today, where are we at right around $5,900. But there's some good news, right? The person who bought over here, they paid in under $1,000. And they got a very low interest rate, which is great. They've been enjoying that low interest rate throughout the past year. If you're a buyer and you buy it today, you will not be enjoying that low interest rate. Right? You're gonna have this 5900 payment, but you paid 750 But something magical could happen and something magical I think will happen next year, either end of this year. Probably towards the middle of next year is if there is a point where those rates drop, you will be in the very wonderful position of being used to a $5,900 payment and being able to refinance to a lower payment and enjoying a smaller payment on the same house, right, this is the opposite of rent, right? Like rent, you get increases just about every year, this would be your buying, and you might get an opportunity to have your payment drop.
So you may actually be in a position again, where you're going to drop down more to some of these other time periods. So you actually do have a little bit of a favourability. Because of that, I would rather pay a lower price and have a higher interest rate and take advantage of an of a lower interest rate that might come along than the other way around. And if we look here, what's the minimum household income required to make these happen furniture level single family home, and it has crept up to 145,000? That is, again, back near here, and for our condos at $111,000. This week? If we look at our absorption rate, those took a dive but then they bounce back. What do these numbers mean, these 80 and 85%?
Well, it does show that our market is more competitive than it was at this point last year. And I would say anything in the 80s is a is a very competitive market, especially for the more desirable homes. But it is not a sort of circus crazy environment, except for maybe the most desirable being a particular area where there's limited inventory, I think you're gonna find you're going to have competition frequently on homes, but it may not be 20 offers, it might only be four or five offers. For example, you'll notice we had some periods here, where we went above right above 100%. That what this means is that homes are coming off the market are going into escrow faster than they're coming on the market. But anytime you see this above 80%, that is a pretty competitive market. Here is the situation where I think if your plan is to wait, that you will not be in a great spot. And so this is the total inventory that we have versus last year at this point, right. So if you look at our red line, which is entry level single family homes, there were probably about 1800 houses available between Los Angeles and Orange Counties 1800 of these you know, three bedroom, two bath homes a day where are we at we are below 1500, I'd say we're around 1300 50. So that is a significant drop in inventory.
And probably even more alarming is especially it's just not really seeming to grow. Like we would have expected not for these three bedroom, two bath sort of entry level type homes, the inventory is growing for larger homes, right. But that is a different buyer group and a different price range. If you look at our condo market that also has not really recovered to last year's levels, it was right about 1000 units, and we are below 1000. And again, if we're not building inventory through the spring and into the summer, like that's normally what we would be seeing happen this ramp up, I still think I mean, we got a little bit of a bounce and kind of petered out the last two weeks. You know, and I'm hoping we're gonna see a little bit better than what we have. But I think if you're expecting it to be like last summer, when inventory was actually pretty, pretty decent, I don't think we're going to see a repeat of last summer. So if your ideas to wait for that to happen, I wouldn't be holding my breath on that. If we look at our percent still active, this is lower means more competitive, you saw it kind of went up a bit last through the spring, as rates went up, it kind of peaked here, you know, at the beginning of the year, and then it dropped down and it's kind of settled into this range.
Again, that is a fairly competitive market, but not a hyper competitive market, which would actually drop below that 70% level. You can also see if you notice here by our blue line, that our entry level single family homes are actually more competitive than condos. I believe that is accurate and true. And it's pretty much been that way since around February of this year. And finally, if we take a look at our relative supply of homes, so if you go down here, this total inventory is absolute supply. That's just the number of houses and relative inventory or week supply is reference to how many homes are flying off the market. And we actually see that situation is a little bit better than it was last year. For condos. We have about six and a half weeks. And for single family homes we have just under five weeks of inventory meaning if no two homes came to the market, and they kept going under contract at the same rate in less than five weeks we will be done and out of single family, three bedroom, two bath homes, but you'll notice we are still quite a bit lower than we were through last summer. There's a little bit of growth here. And what does this tell us right So what can we glean from this if this number here is staying flat or dropping a little bit, but this number, let me go back here, but this number is going up a little bit. What it means is the number of buyers in the market might be dropping, and that's honestly pretty normal. Based on interest rates, you know, as we have these little bumps in interest rates, if they come back down a little bit, you'll watch this inventory will get more aggressive again, right.
So in a lot of ways actually think right now is a good time for buyers, you want to catch these things on this upswing, right of interest rates actually think that's a better time to be in there. If you kind of wait for the wave and you're, you're following kind of the downward trend on interest rates, you're going to see you have a lot more buyer competition. And I'd actually rather be in the situation now, because you can always fix the interest rate later, if interest rates should drop, you're gonna have a lot more opportunity to do that. So if we look here, what does this mean? It means that we are seeing fewer buyers a little bit into our marketplace at this exact moment in time. I still think it's a fairly competitive market. I mean, anytime you see these numbers under, you know, eight weeks of inventory, that's just not a lot of relative inventory. And we don't have a lot of absolute inventory, either. Anyhow, what do you think? Do you agree with us? Do you disagree? If you're a person who's kind of checking listings, what is your perception of the market out there, I can tell you as someone who is both representing sellers and buyers at the moment, you know, it's pretty tough out there for buyers, especially in particular price ranges and areas, as well as for buyers who are after that, you know, even if you're in a higher price range, like say a million and a half dollars, if you are looking at the homes that look like they came out of a magazine, that's where all the competition is, amongst other buyers.
That is what everybody wants that turnkey, beautiful house for 1.5. And that range, what they don't want is to be doing a lot of work. So you know, no matter what price range you're in, there's always going to be some competition if you're looking at the same things that everybody else is. But if you are a first time homebuyer, there are opportunities out there, especially if you're willing to kind of have an open mind and develop a strategy. If you are looking for agents who want to work with you strategically, instead of just sending you listings and saying what do you like, definitely reach out to us. If you're in Los Angeles, Orange County's we would love to work with you. Don't forget to like subscribe and hit that notification bell and we'll see you again real soon.