The Circling Black Swan

Well, hello, everyone. Interesting update for you this week. We've often talked about the term black swans in real estate, those unexpected events, the things people weren't counting on, that could drastically alter the market. And if you're a first time homebuyer, we have one of those things circling overhead. Right now, let's get started. I'm Stephen Meade with Domicile, Real Estate, real estate for people who love houses and we are on a mission to help California's renters become homeowners. So if that is you, if you are not currently a homeowner you'd like to be, you've come to the right place.

We're going to run through our normal stats. But I want to talk about something really important. Almost every discussion of the market out there has been predicated upon this idea. When interest rates drop. Well, what happens if they don't, they don't drop by the mouth. The last week or so maybe two weeks have really seen rates reverse course and head up or economic news has come out casting a lot of doubt over the Feds plans. For the next year. Some people are saying we may never hit a recession or a situation that results in wholesale rate changes.

What does that mean for you if you're a buyer? Well, guess what? It's actually not all bad news. In fact, I would argue that your situation has actually improved in the last two weeks, even though it doesn't seem like it. Let's go ahead and start taking a look at the stats. Alright, so the very first thing is the effect that I'm going to talk about is something that we see happening right here already, if you look at these close prices, you see that they basically shot upward and are leveling off.

Remember, this is still taking a little bit of a look backwards. But I think that you're going to see these interest rates are going to have a temporary effect on prices. I'm going to talk about that in a second. monthly payments. Yes, they are high but they are not nearly at our maximums, right, we are still a few $100 off our peak. So definitely not bad news, their minimum household income, we are kind of heading towards that peak number they're at $159,000. Well, or a little bit under still.

And same thing with condos, right. Like we're not near these peak numbers for condos. In fact, I think right now, we need household qualifying with no other debts of about $115,000 to hit that price point. And $120,000 was kind of our peak last year in October. So really, the news is not as bad as it seems. And if we look here, at our absorption rate, right, that has been kind of a temporary factor, like we only went up from 83% to 85%.

Whereas at this point last year, we were definitely running higher absorption, right like that disparity between supply and demand. And that is really an important thing. I'm gonna go ahead, go off share, because really, this is too important. This is the reason why rates are kind of an interesting thing for first time homebuyers. On one hand, you want rates to go down. The reality is what you want rates to do is go down by a lot. And why is that it's not just because of the cheaper payment. It's because if rates go down by a lot that will spur more homes to come onto the market.

The problem is that rates go down a little bit, which is what we saw maybe about a month, month and a half go. if rates go down a little bit. That is enough to bring a whole bunch of buyers back into the market. But it is not enough to bring any more sellers. So it results in a net worsening of position, especially for entry level and first time homebuyers. But if rates stay approximately where they are, that at least remains kind of that status quo more of a situation that we had last fall, which was not a terrible position to be in for buyers, it could have been worse.

In fact, we told buyers, now you should be getting off the fence because if you buy now rates go down later, you'll get the cheaper price as of now and be able to get the cheaper rates of labor are kind of a best of both worlds. if rates go down by a little bit, you're gonna see kind of a tightening of supply, because that's not enough to make a difference for move up buyers rates go down one percentage point they end up at low sixes that is not going to do anything for bringing more supply in to the marketplace. So let's go ahead and jump back to our statistics here.

We look at our total inventory. Okay, admittedly not a great scenario. In fact, we are seeing something that is pretty crazy right to see and that is a point where the inventory of condos entry level condos and entry level single family homes is very close together. We almost never see that as that condo inventory is going up. It's a little better than last year, whereas that single family All inventory is still quite a bit worse than it was at this point last year. If we look at our active percentage, remember 14 days still active, higher is a less competitive market, we have actually seen some improvement.

So like I said, these, these are interest rates kind of reverting to sort of end of last year levels. That is really a boon for the first time homebuyers who are smart, and kind of opportunistic in their behavior. And then if we look at our weak supply of homes, that condo inventory has actually lived a little bit relatively speaking, and it has gone up a little bit. These are still really kind of at least in the in the sense of our entry level condos. These are these are better numbers than we were at last year. And we're slightly worse than last year for looking at until single family homes, but generally about the same in terms of that relative inventory amount. So, you know, if you're the kind of person who's sitting on the sidelines, like I said, you might think that the rates were voting is really bad news for you. It's really not a tool. Remember, a lot of our predictions of the past that we're talking about, were kind of predicated on the statement, when interest rates drop in 2024.

I think we're going to see these drops, we're going to push these back. But, you know, this really highlights the folly of trying to predict what the Feds gonna do, what the bond markets are going to do and where interest rates are actually going to be. I think a lot of things are a lot easier to predict economically than interest rates at all.

Thanks so much for watching. If you're a first time homebuyer out there and you'd like to become a homeowner, if you're a renter, if you've been sitting on the sidelines, I really we'd love to let you our expertise and work with you if you're in the Southern California area. If you're not in the Southern California area that you like how we do things. We do know other agents in other markets that work just like we do. Definitely, don't forget to LIKE subscribe, hit that notification bell questions and comments as always, we love those too. Thank you so much for watching. We will see you again real soon.

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