The housing market in Southern California is definitely feeling a chill. I believe the chill is being felt nationwide, especially when looking at the east coast housing market which has already adjusted. This cool down started trickling in about 2 months ago as the housing market really tried to continue it's uphill climb, capping out at approximately an 80% increase since 2012 in some areas. The economic stimulus of lowering the rates to 3.31% in 2012 did exactly what the government planned in order to get the economy back on track. With the cost of borrowing money 45% less than what it previously had been, it catapulted a surge not only in the economy and job markets, it also sent housing prices over the next 5 1/2 years to levels that in some areas are higher than ever. But as with all good things, they do change in time and this market has definitely started doing that. The price reductions started showing up in late May/early June and have been growing since as the properties stopped moving quickly.
The change in itself is not a bad one. It is just a market that some may not be used to. If you've been in this industry as long as I have, you know these changes are normal and the balancing of the housing market is a good thing. It sort of levels the playing field. Many buyers that have held off due to the rising home prices and affordability may get the opportunity to purchase as the prices begin to normalize more of a "Fair Market Value". That coupled with the increase in inventory will bode well for home buyers, especially with the interest rates still being under 5.00%. When it comes to home sellers, realistically pricing your home along with stellar presentation and aggressive and strategic marketing and working with a good real estate agent, will get your home sold. Price it too high and cut corners on presentation and marketing or try and sell it on your own (FSBO's)....it will sit for quite a while.
Bottom line, as the savvy masses get wind of market changes, they become even more strategic when it comes to home purchasing. Marketing times are now reaching way over 90 days, something most sellers, real estate agents that got in this industry in the last few years and others in this business have not been used to. For high end luxury properties, marketing times can go over a year or two. As the interest rate continues to rise, the market will continue to shift as when the cost of money goes up, the bonds go down and economic shift happens across the board. There are still some predictions of a 3-5% appreciation in home values, but I am willing to bet that is ONLY on houses that priced fairly according to their corresponding market.
Economists have varying predictions of a recession within the next 18 months to curb rising inflation and the enormous national deficit, now approaching $1 trillion. In addition to that impending news, many of the big real estate investors along with their economic advisors are waiting until the market corrects as they know that prices in many facets of real estate, both commercial and residential, have just gone too high. In some areas, leveraging is once again at an all time high and one market change can quickly dissipate any monetary gains. They also know that the market ALWAYS corrects.
This is just a normal market change....slowly shifting to a more balanced market, which is and has always been the way this market works. So be cautious with leveraging too much and invest wisely your future. It is still a great time to sell your home as the economy and housing market are still healthy. Buyers should also take advantage of their purchasing power before the rates do increase.
People will continue to buy and sell....with a new mindset of a more balanced market.
Holly Young - Coldwell Banker Residential Brokerage - Newport Beach, CA
Picture Courtesy of Surfcityusa.com