The Southern California housing market is finally slowing down after a two-year pandemic boom fueled in large part by record low borrowing costs.
Now that mortgage rates are rising, home sales are down, inventories are rising, and the prospect of home depreciation is just around the corner.
In June, the median house price in Southern California fell 1.3% from May, despite the fact that it usually increases between those two months.
Compared to last year, the median is still up 10.5%, according to real estate agency DQNews. This is a big increase, but much smaller than the 16.7% seen as recently as April.
So what does all this mean to me?
First, let’s start with the customers. The main reason for the housing slowdown is that mortgage rates have risen sharply this year from a low 3% to an average 5% where they are today.
This has made the monthly cost of a home much more expensive and reduced the amount of loans that borrowers can get, while some buyers have been completely excluded from the market.
If you are a buyer, you will most likely not get approval for something you would have had just a few months ago, and you may not be able to buy a house at all.
If you can still afford a house, there are some upsides.
With fewer people shopping at home, properties stay on the market longer and provide more options for the remaining buyers.
Nearly 19% more homes were listed for sale in the Inland Empire in the four weeks ending July 10, according to real estate agency Redfin, compared to the same period a year earlier.
Redfin data shows that in Los Angeles and Orange counties, the number of offers is still below the level of last year, but has risen steadily in recent months as mortgage rates have risen.
This means that if you go shopping, not only will you have more homes to choose from than you did a few months ago, but you will likely have to struggle less to buy them.
The combination of fewer buyers and more inventory has made the bidding war less common, so you may find it easier to bargain at the list price.
In fact, you may not have to bid on the list price at all.
Redfin data shows that 29.6% of all homes on the market in the LA metro area had price cuts in June. This is more than double the 12.6% level compared to June 2021.
What else should buyers know about the bidding process?
Over the past two years, many buyers have turned down contingencies to make their offerings stand out from dozens of others submitted for the same home.
Some sellers didn’t bother with offers that retained certain contingencies, which are, in fact, legitimate reasons why you might want to back out of a deal.
For example, inspection contingencies allow you to opt out if the inspector finds a cracked foundation or other defect that you don’t like. Contingency in valuation, which is usually forfeited in the pandemic market, allows you to walk away if the valuation is low.
Now, some agents say more sellers will consider offers on a contingency basis, a shift that will give you more confidence that you’re not buying a lemon.
And the sellers?
Don’t expect your home to garner dozens of offers and sell for tens or even hundreds of thousands of dollars in excess of the asking price. Your property may stay on the market longer, especially if you charge too high.
As mentioned above, buyers can afford less than they could a few months ago, and many of your fellow sellers have had to reckon with this fact and lower their asking price.
While always important, you must be careful to choose a good real estate agent. When houses usually disappear from the market within a few days, the agent needs less effort to sell the house.
A good agent can help you sell a house in a slow market by offering a fair price for the house, by providing quality furniture, or by using other methods such as video tours or 3D viewings.
For buyers, a good agent can also help you with strategies for buying a home at a relatively good price. For example, you can target homes that are languishing on the market and come up with offers below.
What will happen to home values?
Some analysts say that the overall cost of housing is not likely to fall, but rather the rate of growth in home prices will slow down. That is, prices will rise, but less than in the last two years.
To prove it, these analysts say that despite the recent increase in supply and falling demand, there is still a general housing shortage and a large number of people who are still able and willing to buy a home.
Other analysts predict that home values will fall in 2023, but few experts predict a fall similar to that experienced during the Great Recession.
This is largely due to the fact that a significant decrease last time was due to foreclosure. Now lending standards have become much tighter, and experts say many homeowners are reluctant to sell for less than their neighbors a few months ago unless they are forced to do so.
Times Staff Writer Jack Flemming contributed to this report.
#Cooling #Southern #California #Housing #Market #Means #Buyers #Sellers