What the Housing Market and Lemonade Concentrate Have in Common

Hello, hello, hello. So what do I talk? What am I talking about? When I'm saying this is a market made from concentrated my talking about those cute little frozen tubes of lemonade used to get at the grocery store as a kid and make a pitcher of lemonade? No, but no, I'm talking about market concentration and a market of the haves and the have nots. Let's go ahead and get started.

My name is Stephen Meade. I'm the owner here at Domicile Real Estate real estate for people who love houses. And this is our Southern California Housing market update for April ninth 2024. And here's how today is gonna go. So we are in a market of strange contradictions, right things, one side points up one side points down. And what I'm going to do is I'm going to go through those stats, and then at the end, so please follow through to the end, I'm going to explain what I think is really going on that really suggests how does this data actually make sense, right? Because this is one of those markets where the data is very conflicted, anecdotal experience in the marketplace is something else entirely.

How do we reconcile those to kind of come up with a model with what we think is actually going on that fits that dataset. So we're gonna jump right into screen sharing here. And so here's our first thing, right? This is mixed news, we've got more active listings like this is great news. If you are a buyer in the marketplace, right, both under a million and over in that one to $2 million category, there is a noticeably higher amount of inventory, I think it's about 10%. More under a million. And gosh, probably about the same over last year. In terms of number of active listings, right? This is more selection. Good news indicates that the market should be a little softer. By the way, spoiler alert, it doesn't feel softer for a lot of buyers. So why is that?

This is our new listings hitting the market. And again, really, this is this is pretty good news from last year, I do think we had a faster ramp up than usual on our listings under a million dollars. But generally looking at this is good news here on for our last 14 days of new listings for that one to $2 million category. By the way, just as a reminder, this is Los Angeles and Orange counties that we do take this data from. So again, right in terms of not not just the amount of inventory we have, but also in terms of the listings as they are hitting the market, we are seeing more listings coming onto the market than last year. Right?

Great news should indicate a softening market. And then we have new escrows, right in the last two weeks, those have actually dropped. And in under 1 million, we're way down over where we were at at this point last year. And then in our one to $2 million category, we're actually above where we were last year. But again, some of that, I think, is buyers who simply moved up in their price range, right? Like if wage growth is 6%, you're gonna see a bunch of people kind of cross categories here. And then look at our absorption rate, right, or absorption is actually at the low end of the spectrum kind of in that 70 to 80%. Right, like this is all news that suggests a market that should be starting to soften, right?

That should start to feel a little bit easier. But anecdotally, for a lot of buyers, it does not feel any easier. In fact, that feels a lot more like 2021. So what is going on? And then we see here, right? If we take a look at our prices across these kind of three price tranches, right, our 25th percentile, our median, and then our 75th percentile. Look at that one. You look at where we are versus a year ago. So by the way, for everyone that we told last year, don't wait to buy a house, it turns out that was pretty good advice. You would have been significantly better off had you bought last year, right? Like I mean, that would have been a smart move price rise versus where we are today.

So what gives right like why do we see these indications that we should be having a softer market. Here's another piece of information. percent still active after 14 days in the market. Remember, when this number goes up, that actually means our market is less competitive. So higher means less competitive on this chart here are listed close ratio though that's interesting. Now one is also off right? And normally, in a less competitive market, you see that listed close ratio start to go down. It's steady is going up. In fact, I mean, look at this, we are over 102% in our for one to $2 million category. Now again, as with the closed data, this data is four to six weeks old, totally transparent on that. So there is a delay factor in some of this, that might not indicate exact market conditions. But look at this, this is a piece of information that is not delayed.

This is days on market for new contracts. So this means in the last two weeks, everything that went into escrow, how long did it sit before that happened. So this is only counting the houses that are actually getting offers accepted on them. And look at the difference between last year, we are under 30 days for both and we were on the 35 day mark last year, that may not seem like a huge shift. But it's important to see just how fast that has fallen. In fact, we are, we are approaching kind of the numbers really that we're sort of at the kind of peak summer numbers for in fact for how fast homes are going under contract, but ones that actually are selling. And then if we look at our affordability chart here, right, this is another one that gives us a little bit of context, we keep riding around that zone of being about you'll see we've got about two segments on our graph here, between that rent index and that payment index. And that's really where we've been for most of the last 12 months.

Now what else is interesting is we're seeing that this inflation number is actually starting to catch up with some of this rent number, this number keeps going up and rents have been mostly pretty stable here, through that period of time for the single family index. So we're seeing that, you know, despite all the headlines, it turns out that rental housing, at least in terms of single family homes, is not as insanely expensive compared to inflation as a whole. And then we've got our prevailing mortgage rates, right.

This is the graph that we've all seen, we're just kind of hovering in these high sixes, the Fed has indicated that these, the rate drops will be slower and farther spaced out than than we had expected or wanting to believe. I think maybe that's a better way to put it. So, you know, what, what does that mean? Right? What is going on in this market? So now we're going to talk a little bit about what's going on and why. So we have a lot of data, right? That points to a market that should look and feel softer. And yet, it doesn't when it comes down to prices, it doesn't come when it's down to days on market. And it doesn't. It doesn't show that when we look at where are the properties closing. And here is the difference. And this is what I mean by market concentration.

Normally, when we look at the stats, we assume that the stats cover the entire market equally right by entire market, I don't just mean prices in areas, I also mean things like in any given market segment or neighborhood the most desirable home, right and the least desirable home. And we assume that the stats kind of apply evenly to all of them, but they don't. And this is one of those time periods where I think that they are diverging greatly. So what I mean by that is let me give you a concrete example.

If you have 20 homes that come on the market right now, the top five homes, those ones may get 75% of the offers on them. So if you are buying things that are desirable, right, if you're in that top 25% of desirability, those homes are getting 75% of the offers. Do I have an actual number on that? I don't. But that sort of explains why buyers are seeing a hyper competitive market for the homes that they want. And yet the stats aren't exactly bearing that out, and why the prices and remember the prices are based on the homes that have actually sold and closed. Right. And I think what we're seeing is a market that is skewing towards these more desirable homes. So yes, we're getting more listings. But not all of these listings are desirable, and buyers are hyper focusing on those listings that they are most interested in.

They're fighting competitively for them. It is a very interesting market. But that also means there's an opportunity, right? If you're a buyer, start looking at the homes that are not getting the same attention as everyone else. If you're a seller, you want to do whatever you can to be in that top 25% of homes that have hit the market you want to be the one that is on buyers lists as a must see and I think that is becoming more and more important.

That idea of just throw a sign in the ground and getting a bunch of offers. That may not be true for every listing going forward as it has been in the past. Anyhow, thanks so much for watching. That is our market update for April 9 2024. Once again, my name is Stephen Meade Domicile Real Estate don't forget to like subscribe and hit that notification bell questions and comments. We love them. And also if you'd like to work with us we would like to work with you definitely hit us up down below. We've got some contact information. We'd love to hear from you. Have a great week everybody I will see you again real soon

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