Over the past 6 months, the evidence for a shift in the market has mounted. Sales have been on the decline. Homes are staying on the market longer as the median number of days on market continue to increase. Sellers are beginning to have to discount their properties again, with 42% of active listings having some form of a price reduction. Inventory continues to increase.
There has been some stability over the past month. But new listings have fought the traditional seasonal trend, and the quantity went up. The quantity of escrows newly opened, and closed, bounced off the September lows.
There are many reasons to believe that the current slowdown will not lead to the dramatic climax California experienced back in 2008 and 2009. The risky financing of that era has largely been absent from the current cycle, with buyers putting some money down, securing fixed-rate mortgages, and needing high FICO scores. In addition, home equity borrowing is still subdued. More importantly, the broader economy remains strong, with California’s unemployment rate hovering at 40+ year lows. A wild card is how is the new tax code limiting the mortgage interest and property tax deduction going to affect the market, and which price ranges?
Buyers have the benefit of more options to choose from given the significant number of new properties on the market. Longer days on market and increasing discounts mean that buyers can begin to negotiate again, or at least enjoy less competition from other buyers. For buyers, acting now could lead to significant savings on their monthly mortgage payments by getting into a mortgage before interest rates rise further in 2019.
Ultimately, there IS clear evidence that the market continues to shift and that our supply problems have lingered for so long that they have begun to create problems on the demand side of the equation. As interest rates go up, the affordability index drops.
At the time of this blog, we are still regionally fighting a major wild fire that is distroying many homes. We’ll see how that changes the buyer equasion, as the reconstruction of those properties will potentially take years.
If you are in the Los Angeles area, have any questions or real estate sales or financing needs, feel free in contacting me.
Ron Henderson GRI, RECS, CIAS
President/Broker
Multi Real Estate Services, Inc.
Gov’t Affairs Chair – California Association of Mortgage Professionals (2017-2018)
BRE #00905793 NMLS #310358
www.mres.com
ronh@mres.com
Specialist in the Art of Real Estate Sales and Finance
Real Estate market, mortgage rates, Los Angeles, San Fernando Valley, Conejo Valley, Simi Valley, Woodland Hills, West Hills, Calabasas, Chatsworth
Leave a Reply