Riding the Rate Roller Coaster

Hello everyone and welcome to a another Southern California First Time Buyer Housing Market Update. My name is Stephen Meade with Domicile Real Estate, real estate for people who love houses. And where we are on a mission to help California's renters become homeowners. This is our housing market update that is really geared towards the entry level and of the market, where we noticed some different trends, which is why we break down the data a little bit differently. So one of the things we've talked about before, is how this entry level into the market is a lot more sensitive to interest rate fluctuations. We've been seeing that pretty much for the past year or so. But that's especially acutely pointed out by our data this week.

So let's go ahead and take a look and answer the question. Knowing that is there something that you can do with that information to be a smarter home buyer. So let's go ahead and we'll start off by taking a look at our closed price data. Now remember, this pricing data is six to eight weeks old. Why is that because this is based on closed prices. Also, another reminder, our data is for Los Angeles and Orange counties here in California, we combine that data to kind of give us a good kind of composite score. And it is based on the first quartile or the 25/25 percentile level of pricing.

For three bedroom, two bath homes indicated in the blue and a two bedroom, two bath condo indicated in the red. So what do we notice here, right in our single family home is that it kind of reaches this point of price and it fluctuates a little bit, we are showing you a downturn number but again, this data is six weeks, so six to eight weeks old, do not believe it. Prices on entry level homes by and large are actually up. Part of that is because the last few weeks or two weeks or so have really been a great thing in terms of interest rates coming back down to earth.

So we've been riding that, that interest rate roller coaster. I don't think it's been a particularly fun ride. From my perspective here on the agent side, I can only imagine from the buyer side, it's very hard to budget, it's pretty hard to plant. So it looks like you're at a relatively lower price point here on that entry level single family home at 745. The other thing I'm seeing is look at this growth in the condos. Now, you might think that this is a little counterintuitive, right?

If interest rates were on an upswing when these homes went under contract, why is it that condo sales actually condo prices went up? Well, the reason condo prices went up is because these are buyers that have been displaced from single family homes, they are priced out and they are going towards that condo market making it stronger. So if we come through here and we take a look at what are our payments, now we pick a 5% down including mortgage insurance taxes estimation, this is really designed to approximate that sort of archetypal first time homebuyer that does not a big down payment, you'll see our single family home payment is $5,967 a month that is actually a bit lower than our $6,200 a month peak, but still higher than it has been.

The good news is rates have come down a little bit I think since this and you'll see that that numbers a little bit lower. The bad news is that is exerting some upward price pressure that is coming. fueling our condos we are at $4,922. Now if we put that in perspective of what is the minimum household income required to qualify, this is assuming you have no other debts, or entry level single family home that household incomes $146,000 and $120,000. For our entry level condo, by the way, just as a reminder, if you would like to become a homeowner, and you are not a homeowner, and you're in that Southern California area, we would absolutely love to help you. Don't forget to reach out to us, we can chat a little bit further.

Looking at our absorption rate, this is a little bit of a mixed signal. So we do see that this absorption rate is down a little bit 77%. That is hardly a low absorption rate. But it's a little bit lower than it has been we've been kind of bouncing in the 80s here. And then we are down to 69% on the condo. I actually think these are temporary. I think we're going to see these swing up a little bit. If we look at our total inventory. I think that tells kind of another story. You know what you hear when people are talking about this market stagnation, or they're talking about the real estate market being dysfunctional.

They're not really talking about prices quite as much as they are talking about volume. And I think this graph really owes traits that this was our inventory about a year ago 20 750 units, here we are a little bit more than half that this year. So we've had almost a 50% inventory reduction versus this time last year. And a similar story over here, a little bit less, maybe we're at just under 1500 units. And now we're just over 1000 units, on our entry level condos. If you look at our 14 day, still active percentage, though, that tells us a little bit different of a story than the inventory, then the absorption rate.

And that is that this market is really holding steady at this more competitive level, all through kind of late summer through through the fall. And maybe through the end of the year, we saw this lower level of competition, and then things heated up. And that's kind of the range, we've been running it. Finally, if you take a look at our week supply of homes, I think this is this is what we call a relative inventory. So what this means is this is trying to gauge not just the absolute number of homes, but based on the rate at which people are buying, how many weeks do we have? And you know, we've got less than five weeks of inventory on our entry level single family homes. Where were we a year ago, eight weeks of inventory.

So we're seeing that not just the raw number. But that amount of how many homes relatively speaking, we have in the market is also way down, given the number of buyers that we have. So what can you do with this information? Like is this information actionable? And you know, it's a funny thing. I've noticed there's some interesting trends, especially among entry level buyers and interest rates. And like I said, entry level buyers tend to be very reactive to interest rates.

And, you know, one of the things that I tell a lot of clients is, hey, you know, you the interest rate you have this is probably not the last mortgage you will have, you will most likely have your home longer than you have your mortgage. This is somewhat of a statistical fact, I would rather buy on a week that interest rates have been elevated and competition is reduced. Because I feel like that interest rate is a temporary problem. if rates go down by a lot in the short term, you can refinance out of that if rates go down while you were in escrow. And many lenders you can utilize a bloke down option.

So you have a lot of options as a buyer. And I think when you're an entry level buyer, you're facing a lot of competition out there in the marketplace. We had a listing out in Fontana, you know, that was priced in the six hundreds, and we received 34 offers on this home. And I mean, I think that tells you really that that that end of the market is just where people are fighting the hardest to get a house sometimes any house, right?

So whether you're just fighting to get an offer accepted, picking these sort of relative times where maybe the competition's a little bit less, that can give you the leg up to either get a house at all or frankly get a home that you wouldn't otherwise be able to get. So definitely something to think about. Again, if you would like to utilize our expertise to have a home of your own in Southern California. Let's go ahead and chat. Don't forget to like subscribe and hit that notification bell questions and comments. We love them. We will see you again real soon.