Rearranging Deck Chairs on the Titanic
Hello, everybody, welcome to another Southern California Housing Market Update. My name is Stephen Meade with Domicile Real Estate. And it is Thanksgiving week here, Tuesday, the 21st. And I want to talk a little bit more broadly, broadly, about the housing market. And, you know, we're gonna go over a normal set of results that we usually go through here.
But I wanted to take a second and kind of pose a little bit more of a philosophical question. And that is, are we simply rearranging deck chairs on the Titanic. And of course, if you're not familiar with that turn of phrase, I've been told that not everybody gets that now I feel old. You know, it's basically the idea that a lot of activity is happening. But it's really futile in terms of solving your actual problem, right? Like, you can argue about how the deck chairs arranged on the Titanic, but it is still sinking, and you're not solving the actual problem, which is a hole in the side of the ship from an iceberg.
And, you know, there's a lot of talk about the housing market and, and things that governments nonprofits, a lot of entities are doing. And the question is, are we just rearranging deck chairs on the Titanic. And we're gonna go into this in a little bit more detail. But, you know, our housing market here in Southern California, right? Our housing market in Southern California has two big problems. The first problem is we just plain don't have enough housing, like they're just there just isn't enough. And it doesn't matter how you attempt to slice and dice up that housing, there aren't enough units available. In Southern California, we have an actually one could argue all of California, we have a second problem.
That is, that is really probably just as important, but one that maybe we have a little bit more shorter term control over to some degree. And that is, we don't have a very efficient housing market. And what I mean by that is, we have a lot of impediments in place, that keep impediments that keep people from selling homes, and people and things that keep people from buying homes. So what we have happening is, you've got a situation where you have the wrong people in the wrong houses.
So what's a good example of this, right? Maybe somebody who has been, you know, bought a large home, raised a family, now those kids have gone and left, right. And so now it's a large home that has one person living in it. I mean, while we might have a, you know, a family or a need for space, and they are in a, you know, two bedroom condo, right, it's, it's the wrong, there's not an efficient method for people to move from the house that they don't need to the to the home that they do need.
And so we've really got two problems here in Southern California. And I'm gonna circle back around at the end. But I want to kind of talk about how we know that these problems are pretty big, and that some of the solutions that we are working on, or at least that had been worked on last couple of years are really just drops in the bucket. And, you know, I think there's a lot of talk about activity and things people are doing, but they're not really addressing those two fundamental issues of the housing market. And I think until we address those issues, we're not really going to see a lot of relief.
And, and you might be thinking that this is primarily relief for buyers, right, or people getting into the home into the housing market. And while that's true for a lot of them, that second problem is especially acute for people who already live in homes, right? Because they're in the wrong home, maybe they want to be in a single storey property. And they're not able to do that right now. So let's go ahead and get started. And we're going to talk about how do we know that we have that what we're doing is not working.
So up, I see we've got my, my screen shares deciding to not behave at the moment. So I've got to actually exit out a couple of windows, this latest version of Mac OS is just not very happy in terms of screen sharing, when you attempt to screen share on PDF viewer, so let me see here, I think I think I've got it all handled. Let's go ahead and see if we can try this. We are working on the playlist. There we go. So now we actually got nowhere actually have something that's, that's gonna work for us. So let's take a look at our active listings. Right. And our active listings. If you look here, one of the things that you will see is you've got this number is not really declining that fast. And that's kind of interesting to me, because that's different than last year last year. I think we had a worse inventory problem, or we had a war First outlook. But again, like we've seen in months past, here is the issue.
On one hand, the shape of this curve is a lot better than it was last year. You know, inventory is not just diving towards zero as we head into the end of the year. But the problem that we have is where were we last year, we had almost 8000 homes under a million dollars active on the market. Where are we right now, around 5000. I mean, that is a rather significant that is almost a 40% drop in inventory versus last year. We come over here, it's a little bit close in our one to $2 million category, but it's really still the same issue that we're dealing with. There were a lot more homes for sale last year than there are this year. And, you know, that is a sort of perennial problem, there just aren't enough houses for sale. And if we look here, we see the beginnings of a problem, right, it's not as dire last year, except the last one to 2 million. But you see that the number of new homes coming onto the market is taken a nosedive.
This is stellar saying we're going to wait until next year, before putting our home on the market. Obviously, this has also it tends to be a slower week in general holiday weeks for sellers. But if we look at our new escrows, this is this is the other one I find interesting, this is going down but not going down that fast and either under a million or one to $2 million dollar category. I think a lot of that is driven by a rather remarkable drop in interest rates that we have seen in the last 30 days, I think that is really kind of propping up sort of this late season demand for housing. And if we look at our absorption rate that really shows that doesn't it, look at these numbers shooting upward, both under 1,000,001 to 2 million, they are both up over the last two weeks. This is very much a sign of interest rates.
This is those interest rates drop and it causes an immediate bump in demand. I'm even surprised by just the extent to which that one to 2 million category has jumped. If we look here on our closed prices. Now again, remember that these are two weeks old, or four to six weeks old. This is trailing data, we see honestly pretty strong price performance in our upper end, really strong price performance. And our median is kind of just under a million dollar zone. And you know, here's the thing for anybody that said last November, and there are a bunch of us so it so it emits yourself if you were one of these people, anybody who last November said, we're going to wait until next year to buy a home. Look at what has happened.
It does not matter what price range you are in home prices are noticeably higher today than they were a year ago. You know, for looking here, this is almost $125,000 Higher. If this upper end, if we are down here, it's a little bit smaller of a number in terms of absolute figures. But these are still pretty solid jumps in pricing versus last year. And interest rates are still higher than they were last year meaning waiting was not a good move. If that was your plan, if you thought your situation would improve and 2023 it did not. Now if we look at our other kind of measurement of market demand, look at this reversal. Of course here. Normally a rising percent still active on market indicates a less competitive market that has now reversed course and is heading downward. I think again, a big part of this is that we're kind of striking reversal in interest rates, that has really brought people back in to the game and looking, at least for buyers, when it has not done is brought back a bunch of sellers.
And if we look at our close to list ratio, again, that is holding steady over 100% meaning on average, people are paying over list price for homes, both under 1,000,001 to 2 million that's here in Los Angeles and Orange counties. And if we look at our days on market for new contracts, that is holding right around in this 30 days zone, again take a look versus last year when we were over 40 days. Now we're gonna get to this point, right. If the market is objectively worse this year and and I honestly would maintain that it is I think you probably were better off having bought last year than right now. Your situation you have less buying power. If it is objectively worse, why are prices continuing to rise?
And I think that's exactly What we're seeing, and why it indicates that the measures that we have are not helping. And that is because our fundamental problem is not enough housing units and not enough housing units for sale and available. The ease of transferring property right now is not there. So if we look at our affordability chart, right, this is kind of an interesting one. And I left this in here, because I wanted to do this, I don't know if you can see this, you know, we had this payment index actually go off the charts. And it has turned around and come back down, you can just see a hint right here of it coming back. And I think that faith, right, that these numbers are going to get back closer together at some point, that faith, I think, is something that really is kind of keeping that market moving forward. Remember, markets operate on the basis of faith faith that the future will be better in that really can allow a lot of price disparities. And what's what's keeping this big gap here, it is a fun, the mental lack of housing.
And again, we see another story here, if we're looking at our prevailing interest rates. If you look at our prevailing interest rates, you saw, they jumped way up, and now they've come back down, we're actually very close to 7% right now, and we were kissing 8%. Think a little over a month ago. So really a big change. Now, I promised we were going to circle back to this idea of things not working. And it's like, what are we doing? Here in California? Well, we did enact a law that allows anybody who is 55 or older, to more than one time, transfer their property tax basis and put a little bit of grease in the wheels.
I think the problem with that is fundamentally I think interest rates are holding back some of those buyers, right, they still need a loan, and they don't like the idea of taking out a new mortgage at a significantly higher interest rate than the mortgage that they have. In some cases, this may even be more of a psychological problem right? On $100,000 loan, the payment difference between 3% and 6% is actually not that big in terms of real dollars. But I think to someone just seeing that number go up as a percentage, that really is a deterrent to making a change. The other issue that we have is that we just frankly, are not building enough houses and we're not building houses in the places that people want to live. So not only are we not building them up, but we're building in the wrong places for that. You know, we have these areas, especially anywhere coastal, right.
So we talk la in Orange County, these are, you know, even if inland Orange County, I would still consider that coastal California, you're still in that high desirability zone. And there's just not really enough new construction going on, there's not enough higher density going on. That's really kind of fulfilling those needs. And I think until we solve those problems, this is the kind of market that we're going to be in. And those problems are not going to be solved overnight. They're not going to change in the next six months. We're just not seeing anything fundamentally, that changes those economics.
So you know, what's the message here? Right? If you're a buyer, the best time to buy was last year, no matter what history, you know, and if if you're a seller, right, I think you might be thinking that your situation is gonna get markedly better. But really, it's a it's a trade, you know, you may get next year, you might get more for your home, and it'll be harder for you to buy the replacement, right. And so it's kind of a kind of an even trade across. So, you know, my advice for people is to really sit down and make a decision about what's going to work for your life. Time is the one resource that you really cannot buy more of. So always remember that when you're thinking of delaying a decision. My experience has been that you know, the most expensive time to waste is the time between knowing what you need to do and actually doing it. Anyhow, thank you so much for watching. Happy Thanksgiving, everybody. Hope you're all safe and with family and have a great holiday period. If you're looking to buy or sell a home in LA Orange Counties. Obviously we would love to help you and you can reach out to us. We've got contact information down below. Do not forget to like subscribe and hit that notification bell and we will see you again real soon.