Market Mixed Signals
Hello, everybody, Stephen Meade here with Domicile Real Estate. This is our Southern California Housing market update for September 12, 2023. I'm actually on location at a hotel, so the internet's a little shaky. So for those of you on the live stream on Facebook, you might notice that the quality isn't great, but we're going to have this on YouTube. We're recording locally, too. And we're going to talk a little bit about why the market is sending some very, very mixed signals right now.
And in fact, if you've been reading the economic news, you probably have an idea of why this might be happening as well, right? Like you've been seeing, the Fed does one thing, one day, the markets react, it's kind of a very bit of an unstable situation out there economically. And I think we've definitely got some changes that are happening. And we've got some pretty strong evidence to suggest that. So let's go ahead and get started. And by the way, just as a little bit of commercial, my name is Steven meat, I'm the broker here at domicile real estate in Southern California.
This is our Southern California Housing Market Update. So unfortunately, this only applies mainly to LA and Orange Counties is where we run our stats. If you are looking to buy or sell a home, here in Southern California, we would absolutely love to lend you our expertise. Definitely reach out there is instructions in the description down below. If you're watching this on YouTube. Let's go ahead and take a look at the stats and kind of jump into this. And I can explain sort of what's happening. So
the first thing we've got going is that listing the number of active listings is pretty stable. It's not really dropping, but look at where it is compared to last year. I mean, we were, you know, 76 7700. This year, we are below 5000. And that's a pretty big drop. In our under 1 million category, one to 2 million things are a little bit better, but it is still down versus last year.
If we take a look at our new listings, this one is really interesting, right? Our listing volume is pretty stable here of new listings coming on the market for that one to 2 million category, but look at under a million dollars, it's almost like the bottom has really just fallen out in terms of sellers putting these kinds of homes up on the market, people are staying put. And obviously when we don't see new listings coming up, what does that do a few weeks from now, that is going to result in lower active listings.
That's my prediction. If you look at newer escrows that are also down in the last two weeks, right? I mean, in fact, this is a low point, all the way since back in the beginning of January, in terms of the number of transactions or the number of homes going into escrow, we even see that one to $2 million number is down two part of this is that there's very little for people to buy. The other part of this is that rates have gone up.
But I've got some bad news for those people who are waiting on the sideline, we're gonna get to that. Now if we look at our absorption rate, right, this is our quick and dirty, how fast are homes coming off the market versus the rate at which they're coming onto the market. You'll notice in both of these, the number has gone down. I mean, we're still at about 80% here for under a million that it's still a competitive market. So even though this number is lower, it's not low by any means. And are one to 2 million is that 70%. Again, that is still a fairly healthy market. It's definitely not a buyers market, but it is less a little less competitive. So if we look at our prices, we've got a very, very interesting story to tell.
Our 75th percentile market is gosh, I mean, these prices have just been steady, right? Look at this straight line going across our median. This is in that area, kind of between 750 and a million dollars, we see that that price that price has gone down, but look at our entry level into the market. Right? This is that under 750. That number continues to go up right? Normally, we see prices across these groups move somewhat in unison. And yet right now they are not they are moving kind of in opposite to each other.
And I think you know, a real function of that is because the buyers in these different price ranges are in very different situations, the buyers and the sellers. I think that middle market is somewhat weak right now, right? Because we don't have a lot of move up buyers, these people who currently own a home, they feel like they're stuck like they can't get out of it right. And I think those people are not moving. They're not buying and they're not selling and that's really kind of creating a little bit of softness over there. But if we go back here,
and we take a look, let me find this again. Go
You know, this, this upper range, I think is just a little less sensitive to interest rates, we are finding that that entry level market, there was just a shortage of inventory, there are people who want to buy houses and they just can't do it. And that's why we're seeing those prices continue to accelerate. Now, if we look at are still active, right, higher numbers mean a less competitive market, you know, we've been seeing this creeping up, right for one to 2 million, but looking at this, this shot up under a million dollars. So these are some conflicting pieces of information, right.
Our closed prices says the prices are going up. This seems to predict that we will see some softness on prices going forward. How can that possibly be? How do we reconcile that? Well, number one, this closed price data is a little bit older, right? So this is based on four to six weeks ago, which may not be where the market is today or in the last two weeks. But the other thing that I find kind of fascinating about this is to watch how this has accelerated. Kind of pretty much since about April, we kind of reached a peak competitiveness back here. And I think what we're seeing is a little bit of a buyer pickiness, and we start to notice this as, as kind of that affordability level starts to drop. The buyers who are in the market start getting pickier, they start saying I'm not in a hurry, I'm willing to wait for the right house, I don't need to buy a house today, there's not really a sense of urgency.
However, I think that might change. The other thing that I think is interesting to look at is this chart, which is our close to list ratio, it is still over 100%. And in fact, it is settled right in here, around 101% of loose parts. And that's both for under 1,000,001 to 2 million. What gives Why are homes consistently solid for over list price? Well, I think what we're seeing is a bit of a strategy shift on the part of sellers and frankly, on the part of the agents that are advising. So one of the things that we're seeing is in this market where there's not a huge amount of motivation and sense of urgency and buyers. One way to create urgency, right is to throw up a property at a price that tells everyone it's not going to last that it will go into escrow in the next week that kind of kind of gets the players off the benches, right. And it kind of gets people to jump in the market.
Which you know, it's funny, we had a client this week, he might be watching this. You know, he's he's suggested, right? Why don't I go on the market and a make me move kind of a price? Well, you know, that's always a strategy. But I don't think it's a very good strategy right now. Right now, what you need is that buyer, you know, let's use this as an example, you have a home that you hope will sell for $1.5 million. That's probably several of you on this call.
You hope it'll sell for $1.5 million. Now, one strategy is you can listed at 1.6 million and hope somebody pays 1.5. The problem is, again, zero sense of urgency on those buyers, that house will sit on the market more, you could put that home up at $1.4 million. And there are a whole bunch of people who we're going to call them hopefuls, right, they would love to get that house for $1.4 million.
And they might even say I'm only willing to spend $1.4 million on that house. However, once they get in there, once they see it, once they write up a bid, they find out somebody else went to $1.45 million, you can see where this is going. You know, as soon as people feel like somebody else is willing to pay it, then they too are willing to up their bids in order to get it. And I think that's kind of the effect that we're seeing and why we're seeing despite a market that isn't completely on fire. We're seeing these comps are consistently closing over list price. And that's really what's happening is it is more of a strategy than it is an indication of the market.
If we look at our days on market renew contracts, that has again been steadily increasing for under 1 million, but it's kind of stabilized here, right around 30 days, again, softer does not mean soft. This is all relatively speaking, it's a softer market, but not really not soft like it was towards the end of last year. And if you look here, the three way and this really
this is really something interesting to take a look at, you know, where were we last week where we were here. And I expressed some very big concerns about this spread, right? This once again, for everybody looking this is our freeway chart.
The blue line is the payment on a median priced home since June of 2018. Right, and it shows how that has changed relative to inflation, which is this red line here. And then relative to rents on a single family home. Look what has happened after a long period of stability on rents. Market Rents for single family homes have jumped right and what that's done in combination with a little bit of an easing of interes straights that is brought these two closer together. And here's the here's the news. Here's the good news on that, right? I no longer feel like this market is weird and out of control and unstable in the sense that these are getting too far apart because they've been brought back together. The bad news is, right, if you were,
if you're a buyer, right, your way of hoping this reconciles is that homes get cheaper, by a lot right to bring these two close together.
But that's not really what happened. What really happened, or at least not by that much. What happened is these rents have started to come up to meet where the current home prices are meaning the price of housing itself is sticky. That is what's reconciling that equilibrium, is we're seeing the price of rental housing coming up. Now. Question is, is this a momentary blip? Or is this really a trend where we just kind of seen a step up here? You know, normally, rents are kind of slow and steady, but there are these moments where they just seem to jump a little bit like this. I think we might be in one of those moments right now.
And then finally, we have our prevailing mortgage rates. You know, obviously not that good, not the great news people are hoping for the people are saying when rates going to come down? I wish I had the answer that question. I think probably sometime over the next 12 months, we'll see a little bit of easing but nobody knows exactly how much easing that is going to be. Can we saw a little bit of easing here but we are still at these really high peak numbers with a rate that is still above 7%. Anyhow, once again, I apologize for your for our connections a little unstable. If you're watching this on Facebook Live, we will have this on our YouTube channel as well, which you should be subscribing to as well. Speaking of which, if you're watching this on YouTube, don't forget to like subscribe and hit that notification bell questions and comments. We love them. And if you're looking to buy or sell a home in Southern California, and you would like our expertise on strategy to help you get the most money and the highest proceeds for your house or to help you purchase a home. We are here for you don't hesitate to reach out that contact information is down below in the description. We will see you again real soon.