Its not a buyers market…….. Although I can help you get a deal so let me know. Many buyers are looking for a deal or waiting for the housing market to crash before they purchase, but that is not going to happen anytime on the horizon. The insane, instantaneous housing market may be gone, yet with an Expected Market Time of 78 days, Riverside County is still a Slight Seller’s Market. Hi, I’m Tom Olsewski with Coldwell banker and Team Olsewski…………….
The looming recession has buyers on the edge of their seats fully aware that the housing market has slowed considerably. From the flood of online news articles describing the real estate slowdown to the countless YouTube and TikTok videos detailing in only a few minutes how housing is about to crash, many buyers are convinced that the Riverside County housing market is on the brink of collapse. Homes are taking a lot longer to sell. The number of price reductions has surged higher in the past couple of months. As a result, many buyers sit on the sidelines waiting for prices to plunge. They are waiting for a deal, a total bargain. I have separate videos detailing that homes have not lost value check them out I will have links below.
Just because so many people are jumping to the conclusion that home values must plummet does not make it so. Merely mention a recession and everyone’s collective minds recall the devastating blow to housing during the Great Recession. Instead, homeowners across the country purchased their homes with huge down payments, extremely strong credit scores, money in the bank, and qualified for their mortgages. Buyers over the past many years have not been purchasing homes utilizing subprime loans, pick-a-payment plans, teaser rate adjustable mortgages, or zero down programs. This is not 2005 to 2008 all over again.
Instead, with an Expected Market Time (the time between hammering in the FOR-SALE sign to opening escrow) of 78 days, it is a Slight Seller’s Market (between 60 and 90 days). It is not a Balanced Market (between 90 and 120 days). It is not a Buyer’s Market (over 120 days). The market still lines up in favor of sellers. In fact, in the past four weeks, the Expected Market Time increased by one four days, rising from 76 to 78 days. It appears as if this year’s rise in market time has slowed and stabilized and will remain a Slight Seller’s Market for the remainder of the year. For the rest of Southern California, the market time dropped in the past couple of weeks. This is due to the active inventory nearing its 2022 peak, rising by only 91 homes in the past couple of weeks, and demand dropping by only 1% with rates falling to levels last seen in April.
The issue is that everyone had grown accustomed to two years of an auction like atmosphere where there were only a limited number of homes available and an ocean of buyers willing to purchase, prompted by historically low mortgage rates. Open houses were flooded with potential buyers. It was not uncommon for homes to procure 20 or 30 offers in just days after coming on the market. Sales prices soared above their purchase prices. The trajectory was up, up, up, and up. That market was extremely unique and home values rose nationally at a record pace. Flash forward to today and the housing market is distinctly different.
Most homes are not selling instantly. Busy intersections are now adorned with weekend Open House signs. It is not uncommon to see the same home open for several weeks in a row. Price reductions are quite common in today’s market. There are fewer multiple offer situations, and most homes are selling below their asking prices. This is a “normal” market. The issue is that nobody has experienced a normal market in several years. It is hard to recall when housing was just ordinary.
An astounding 42% of the active inventory has reduced their asking price at least once. Many believe that price reductions are indicative of a buyer’s market where prices are falling. That is just not the case. Given today’s 78-day Expected Market Time, the price adjustments reveal the considerable number of homeowners who simply overpriced and did not cautiously approach pricing. When the Expected Market Time drops below 40-days like it did between June 2020 and June of this year, sellers got away with stretching their asking prices. Many real estate professionals scratched their heads in disbelief as their sellers picked arbitrary prices much higher than what was suggested by the professional, yet they still were able to obtain multiple offers and sell above their inflated asking prices. That market is now in the past. Arbitrarily pricing a home and stretching the asking price above the last comparable sale will result in limited activity and the need to readjust pricing.
Many sellers are pricing their homes in line with a sale from earlier this year when there was nothing available and buyers paid way over the asking price. This occurred even while mortgage rates climbed from 3.25% at the start of this year to over 5% in May (according to Mortgage News Daily). The problem was that there was nearly nothing available to purchase and plenty of buyers ready to pounce on anything new that hit the market. On January 1st there were only 2,202 homes available, a record low compared to the 3-year average reading prior to COVID (2017 to 2019) of 8,618. Eager buyers who had written offer after offer with no success were willing to do whatever it took to finally purchase, including paying way over the asking price, often $20,000, $30,000, or even $60,000 plus over the list price. The underlying, changing mortgage rate environment did not justify these extremely high sales prices, yet it occurred, nonetheless. This was a frothy stage of this year’s market.
Sellers who price their homes according to these frothy comps are finding that they are not able to sell. While a home may have closed for a top dollar record price in one neighborhood, there are often adjacent neighborhoods with comparable properties that did not experience a frothy sale this year and have homes available to purchase for far less. Buyers shopping around will notice the disparity in pricing and will opt to purchase the cheaper homes.
It is a Slight Seller’s Market. That means that sellers still get to call more of the shots, but homes are not selling instantly, and home values are no longer soaring higher. In order to find success, sellers must carefully consider the most recent pending and closed sales and take into consideration the location, condition, upgrades, and amenities. While it may have been a place they called “home” for years, buyers do not have that emotional tie and will instead rely on the Fair Market Value based on comparable properties. With today’s higher interest rate environment, they do not want to overpay.
Buyers must understand that the market is still not lining up in their favor. Yes, Riverside County housing has slowed. They no longer have to make an instantaneous decision. They no longer are competing with a busload of other offers to purchase. They no longer need to write offers tens of thousands of dollars above the asking price. Yet, the market is still hot enough that they are not going to get a “deal” or buy a home at a “bargain” price. Values are not dropping. Instead, it is finally a normal market.
Riverside County Housing Summary
* The active listing inventory increased by 91 homes in the past two weeks, up 2%, and now totals 6,083 homes, its highest level since May 2020. In July, there were 7% fewer homes that came on the market compared to the 3-year average prior to COVID (2017 to 2019), 300 less. Last year, there were 3,273 homes on the market, 2,810 fewer than today, or 46% less.
* Demand, the number of pending sales over the prior month, decreased by 29 pending sales in the past two weeks, down 1%, and now totals 2,352. Last year, there were 3,422 pending sales, 45% more than today. The 3-year average prior to COVID (2017 to 2019) was 2,795, or 19% more.
* With the supply rising and demand falling, the Expected Market Time, the number of days to sell all Riverside County listings at the current buying pace, increased from 75 to 78 days in the past couple of weeks, a Slight Seller’s Market (between 60 and 90 days) that is no longer instantaneous. It was at 29 days last year, significantly hotter than today.
* For homes priced below $400,000, the market is a Hot Seller’s Market (less than 60 days) with an Expected Market Time of 54 days. This range represents 12% of the active inventory and 17% of demand.
* For homes priced between $400,000 and $500,000, the Expected Market Time is 54 days, a Hot Seller’s Market. This range represents 13% of the active inventory and 19% of demand.
* For homes priced between $500,000 and $650,000, the Expected Market Time is 78 days, a Slight Seller’s Market. This range represents 31% of the active inventory and 31% of demand.
* For homes priced between $650,000 and $800,000, the Expected Market Time is 91 days, a Balanced Market (between 90 and 120 days). This range represents 20% of the active inventory and 17% of demand.
* For homes priced between $800,000 and $1 million, the Expected Market Time in the past two weeks increased from 93 to 110 days. For homes priced between $1 million and $1.5 million, the Expected Market Time increased from 99 to 103 days. For homes priced above $1.5 million, the Expected Market Time decreased from 178 to 149 days.
* The luxury end, all homes above $800,000, accounts for 24% of the inventory and 16% of demand.
* Distressed homes, both short sales and foreclosures combined, made up only 0.5% of all listings and 0.5% of demand. There are only 33 foreclosures and 4 short sales available to purchase today in all of Riverside County, 33 total distressed homes on the active market, up 2 from two weeks ago. Last year there were 12 total distressed homes on the market, slightly fewer than today.
* There were 2,353 closed residential resales in July, down 34% over July 2021’s 3,540 closed sales. June marked a 22% drop from June 2022. The sales to list price ratio was 100.2% for Riverside County. Foreclosures accounted for just 0.3% of all closed sales, and short sales accounted for 0.1%. That means that 99.6% of all sales were good ol’ fashioned sellers with equity.
I hope this market update video has been helpful. If you are thinking about selling and would like to find out more on what your home would sell for or the selling process please reach out to me directly…. There will be contact information on the last screen. Thanks again and remember its important who you work with……….