Southern California Coldwell Banker Realty President, Jamie Duran, notes the following regarding the Southern California Real Estate Market as of October 31, 2021.
- Housing has pretty much lined up in favor of sellers since 2012.
- Even as the pandemic persists and economic uncertainty rises, the housing market, although showing small signs of some normalization, remains remarkably resilient.
- Beginning in July of 2020 through today, the market began rebounding from the pandemic with a flourish and show no signs of letting up.
- Buyers are still faced with crowds of interest on just about every home that hits the market.
- Multiple offers are still the norm and homes are selling in record short periods of time.
- It is more important than ever to have a trained, full-time, experienced Realtor to represent your interests in what is usually the largest financial transaction of your life.
Current inventory levels remain an issue:
- Southern California began October of 2021 with 37,433 active listings 52% below pre-Covid levels of September of 2019.
- New listings continued their three-month downward trend. This month, 19,106 new listings hit the market. This was a 26% decrease from the prior month of September 2021 when 25,673 homes went up for sale.
- Closed sales of 35,969 were 53% more than last month but were 31% less than October of 2020 when the Southern California real estate market roared back from the pandemic induced slump.
- Active listing inventory remained flat with the prior month, but remained well below typical inventory levels at this time of year. October active listings were 52% and 34% lower than inventory levels in October of 2019 and 2020 respectively.
- The average selling price for a home remained above one million dollars at $1,022,140 for the seventh straight month since reaching that milestone in April. This average sales price reflects a 16% improvement in the last year.
Duran thought back over her career and wondered if it be 2013 and 2018 all over again?
- Like today, in 2013 there was a very limited supply of available homes to purchase, creating a supply crisis.
- Market time was very low, below 40 days to start the year. Compare that to the insanely low market time of today at 21 days.
- In 2013, the inventory remained at a low level until it started to climb in April. It peaked in October of 2013 almost doubling from its peak in March. What changed? Mortgage rates. They started 2013 at just over 3.25%, went to 4% in the Summer and surpassed 4.5% in the fall.
- In 2021, rates have been at 3% or below most of the year but are beginning to inch up.
- When rates rise, affordability diminishes. As a result, the inventory rises.
- Interest rate increases caused a decrease in demand of 27% from its peak in 2013.
- 2018 also began the year with a supply crisis.
- Interest rates rose rapidly from 4% to 4.5% in the first quarter, making its rate to almost 5% by November.
- Demand dropped 28% from its peak and the inventory doubled, resulting in a balanced market (represented by an Expected Market Time between 90 and 120 days).
- In the first week of 2021 rates were at a low of 2.65%
- Rates have only risen to 3.14%, which historically still feels like an all-time low.
- Even with an increase to 3.5%, little relief would be felt at the inventory level.
- If rates do climb to 4% and above, it would make the market shift to more of a buyer’s market.
- Freddie Mac forecasted a couple of weeks ago that mortgage rates will rise to 3.5% a year from now, so there it would appear that there is no end in sight to this seller’s market.
The High-end Luxury Market is Strong
- In the last twelve months ended 10/31/21, sold volume of homes greater than $10,000,000 once again doubled to $17,677,295,014 from $8,822,085,050 in the prior twelve-month period.
- Volume of homes sold greater than $5,000,000 also almost doubled in the last twelve months ended 10/31/21 to $46,448,741,924 from $23,976,014,650 in the prior twelve-month period.
In conclusion, Duran stresses the importance of four key elements that will impact the Southern California real estate market into 2022:
- As pandemic travel restrictions dissipate, the re-emergence of foreign buyers further increase demand, particularly at the high end.
- There will continue to be a shortage of homes as new construction has lagged demand, and population increases for around 15 years. Some builders have even flipped “for sale” projects into “for lease” projects anticipating further price increases.
- A good part of the inflationary pressures we are now beginning to feel are supply side driven which would make them potentially more curable.
- There is a larger build up of savings in the world than ever before.