Happy Fall! It’s time to take inventory of where the real estate market is after summer and try and get a read on where we are heading as we approach the end of the year. Here’s a synopsis of how the market compares to a year earlier throughout the South Bay:
- The number of properties sold increased slightly by 2.5%
- The median price increased 7.9%
- The majority of houses sold around 99% of the original asking price, suggesting there is some harmony between sellers and buyers expectations.
- Inventory currently stands at the highest levels in 4 years and 22% higher than a year ago – a combination of more new listings and a slight pullback in demand.
- The time it took to sell a property stayed flat at 31 days in most neighborhoods
- Month’s supply has risen steadily since March to just over 3 months worth of inventory (economists consider 6 months a balanced market)
Taking a deeper look at the market, it is clear that well qualified buyers have more tailwinds than in the past 2 to 3 years. The three key indicators that support this include the following: The highest Inventory levels in over 4 years; lower mortgage interest rates; and more sellers willing to consider price reductions (about 40% of current inventory has had at least one price reduction). It is conceivable that further reductions in interest rates could stimulate greater buyer activity, but for despite these market improvements, buyers remain patient. Add in concerns of recession (although this seems to always be an undercurrent no matter how well the economy is really doing), and the upcoming presidential election, and determined buyers have a great opportunity to score a deal from willing sellers in this market.
Sellers, don’t despair! There is good news ahead! Goldman Sachs recently released their 2025 Real Estate forecast and with lower mortgage rates on the horizon, they are predicting robust growth in real estate values, especially in California. They cite a resilient real estate market and limited to no impact due to recessionary forces. While that forecast sounds wonderful, there are still challenges ahead. As a good friend put it best, many homeowners have the golden handcuffs – low mortgage rates and a low tax basis. These two factors will likely continue to cause a strain on supply in our area. In addition, supply at the entry levels largely consists of properties in mostly original condition requiring buyers to upgrade systems and finishes. That requires additional capital after scraping together a downpayment (most are north of $400k) to keep monthly mortgage payments manageable.
This will be a benefit to homeowners looking to sell in the next 12-18 months as mortgage rates drop and inventory remains tight. But the market benefits the most from momentum, similar to what we saw in 2021. With momentum in the market, both buyers and sellers benefit from more options. Multiple options allow move-up buyers to trade out of smaller homes and into larger properties as families grow, and those with grown children can right-size to smaller one-level homes while remaining in the community. Lack of supply limits this mobility, but the demand doesn’t just go away. Capable buyers drive prices higher and price less capable buyers to other areas if not out of the state all-together.
I want to close by saying my heart goes out to the families impacted by the land movement on the South side of the Peninsula. While the land movement is mostly limited to a relatively small area of Palos Verdes, the effects are felt throughout our entire community and we hope there is a timely solution for those directly affected.
Please feel free to contact me if you have any questions, and in the meantime, enjoy this wonderful time of year in our beautiful corner of the world.
Go Dodgers!
Kyle Daniels
