Was I Wrong? - FTHB Market Update

Welcome everybody to another episode of our SoCal First Time Buyer Market Update. My name is Stephen Meade the managing Broker here at Domicile Real Estate real estate for people who love houses where we are on a mission to help California's renters become homeowners. Last week was a rough week learning that the California Housing Finance Agency had already run out of money for its dream for our program. But not all is lost. If you are a first time homebuyer, it turns out, I might have been wrong, we're going to check out why that is maybe here, we're seeing some of our indicators move in a little bit of a surprising direction. And we're going to talk about that, let's jump right into it. I want to get into giving you the market stats that you deserve and that you need. So let's go ahead and get started here. First off, let's talk about price. Again, as a reminder, I don't think I've said this in a little while, we base our numbers off what's called the first quartile. And the first quartile is basically if the median is halfway between the cheapest and the most expensive property, the first quartile is halfway between the cheapest and the median. And we do that to sort of approximate an entry level into the market.

Our statistics are based on Los Angeles and Orange Counties, we combine those two, especially since a lot of our clients are in that North Orange County, South LA County area. So there is a lot of crossover. And if you look here, our blue line here is our entry level single family home, what do we see actually kind of some decent little increases, you see, we kind of really hit a bottom and then kind of bounced back a little bit. You see kind of something similar for our condos here the red line. By the way, our entry level single family home is a three bedroom, two bathroom house and our entry level condo is a two bedroom, two bath condo, we pick those to be sort of representative of what a lot of our buyers are interested in. So you can see the prices are a little flat. But again, bouncing off kind of this, this bottom trough really that you see or was kind of towards the beginning of the year. And again, as always remember that these are delayed by four to six weeks actually think things might be a little higher than that right now. So if we take a look at our monthly payment, I think this one's particularly interesting. Again, we base this on 5% down including mortgage insurance taxes, HOA fee. In the case of our entry level condo, we really want to give people a complete an accurate look at approximate payments for entry level buyers. You can see we're here at 5711 for our entry level, single family home and 4251 for our entry level, condo. Now, one thing I'm going to say really quick, I'm gonna go off share because this is important, we had a recent meeting with a client of ours who's considering buying a house. And one of the things that really she wasn't aware of was just how much especially if you have a higher income household, really how much of that payment may be tax deducted when you might actually be able to bring home more out of your take home paycheck.

Obviously everybody's situation is unique, you will want to talk to your tax professional on that today is tax day. So kind of on everybody's mind anyway. But you may find that these payments are not equivalent to rent. So for example, buying a two bedroom two bath condo at 4251 might be equivalent to paying 3500 a month in rent. Just as an example. Now what are the minimum incomes needed in a household to afford these items? We are below 140,000 here for our entry level single family home and right about 104,000 for our entry level condo, this assumes no other debts in your household. But I think this is a pretty good approximation to let you know and again, this is household income, not single person income. So that means in a two person or a two income earner household. This could be for example, $52,000 for each person, or 70 $71,000 for each person. Now we get to our 14 Day absorption, right? This is where things honestly have turned just a little bit right. We had the beginning of the year and we really just bounced up into this 100% zone. And honestly we've actually seen a little bit of drifting and I'm going to call this a little bit of a trended this week. We're at 88% signified by the red line which is our entry level condo and 84 which is our entry level single family home. So what that means is that ratio that that balance of supply and demand in the last two weeks has changed a little bit. For both entry level condos and entry level single family homes, I think that is pretty interesting to see if that's going to be a bigger trend. But you know, this is still a very competitive for buyers market. It's just not a hyper competitive market, maybe when it's up here in the 90s are exceeding 100%. And the corollary here is looking at our total inventory, right.

So if we look at this, we actually see that for the first time, this year, really, inventory has bounced up a little bit, not a lot, if you look at the shape of this curve over here at this time last year, look at what inventory was doing. I mean, it was jumping up. So this is still a much weaker year for inventory growth than we were seeing in 2022. But it is a little bit of an increase. And it's making me think that, you know, this year is not going to be great for buyers, I still think that that was the right call, I don't think it's going to be it's going to be worse than last year in some ways. However, I don't think it's going to be so bad that we just see inventory dwindle all summer and spring long. I think we are seeing some signs of life that, you know, there might be a little bit more in the way of selection. We haven't seen that in our entry level condos yet. And again, we're still trending at very low inventory levels. I mean, look at where we are versus last year, we are roughly the same, maybe slightly higher than last year. But I mean, for all intents and purposes, this is a very, very low inventory environment that is not changing very quickly.

Now, if we look at our 14 day, still active percent, that also has risen slightly right both for our entry level single family home and our entry level condo, this means those markets are slightly less competitive. They're still at a level that again, is looking more like kind of that spring timeframe and not like the fall where things were way less competitive. So you know, we're seeing some signs that things are a little bit better, maybe marginally. And I think if you're a home buyer, obviously for first time buyer, you want that to continue, right? You want to see that trend continue, I'm not sure it's going to get a lot better for you. But at least it is not getting worse. And if we look here at a week supply of homes, that tells a similar story, right, we've got a little over five and a half weeks on entry level condos and a little under five weeks on entry level single family homes, that is better than we were at last year, right where our relative inventory levels were around three weeks, boy, yikes.

But there's a sign of a little bit better. You know, it's not like it was back in the fall, when we told everybody to buy houses, we were 11 weeks of inventory, nine weeks of inventory. Obviously we are less than half of that right now. But it is showing signs, it's not getting worse, this is still a very low inventory environment. But again, it is not getting any worse, which I think is great. If you're a first time homebuyer, it means you have not missed your opportunity. But again, you know, I don't know if this is something that I would sit on the sidelines and wait too long about. I think one of the scary parts, if you're a real estate professional, like I am, is that you look at these market conditions. And you know that they can change week to week. So I can tell you what's going on right now I can tell you what happened in the last couple of months. But understand that a big issue with this is that I can't tell you what it's going to be like in a month, I know even less about what it's going to be like in two months. And I think that's important to take heart. And I always tell clients who seem to be focused on this idea of magic timing, right. They're either trying to time the market or they're trying to time with when their lease is up on their home. And I will tell you this 10 years from now, you will be much happier buying the house that met your needs and the property that worked for you that you wanted, then you are either a finding a property you don't like perfectly with a lease ending on an apartment, or spending getting a great deal on something that you fundamentally do not like, I think you're much better off really not trying to type it in instead focusing on what's going to meet your needs. I promise 10 years from now, you will care a lot less about those other things and a lot more about did you buy the right property for you or not? Anyhow, thank you so much for watching.

We are looking to launch kind of a new video series we're working on. I'm excited about we're going to have a co host, so you will not have to listen to me talking the whole time. And this is a co host she and I actually have known each other a while now. We'd like to argue and fight about things. So I'd imagine it will be entertaining and fun and you will learn a lot. So definitely look for that coming up to be on here. We might do a couple of those live but I think we're probably going to do those produced a little bit more.

And don't forget to LIKE subscribe, hit that notification bell If you are a first time homebuyer, we are working on another webinar. It is our home buyer hacks, webinar, all our fun little tips and tricks. We're going to make an announcement about that soon and have a place for you to sign up for that. Let's see I said don't forget to like subscribe and hit that notification bell. If you are looking to buy your first home or you know someone who should definitely send them our way here in Southern California. We would love to help them. Thanks so much for watching. We'll see you again real soon.