Summer 2018 Market Report -- The market it is a changin’

The market is a changin'

A sudden spike in inventory combined with quickly rising interest rates is giving signs of a slowdown in price appreciation

Demand drops as buying a home gets more expensive

There are two charts that really capture the shifting momentum in the real estate market in southern California.  First, as has been predicted by us and everyone else and recently telegraphed by the Federal Reserve, rates have likely seen their lows for quite some time.  As they continue to rise, mortgage payments follow suit, resulting in reduced buying power for buyers.  Simple translation?  As interest rates rise, a house with the same price will get much more expensive to buy.  This usually results in fewer buyers and buyers who can afford only lower priced homes.  It is not unusual if rates continue their upward trajectory to start seeing price reductions and much longer time spent on market for sellers looking to sell.

Sellers face increased competition as inventory dramatically increasing

Suddenly, something has changed. More homes are coming on the market, a lot more homes. The active listing inventory spiked in the past two weeks, adding 436 properties, a 9% increase. Granted, the overall inventory, 5,016 homes, is still very low compared to the long-term average, but there is a palpable change in the air.  As the number of homes available for purchase increases, buyers will become more discerning.  It is absolutely critical to price homes correctly and not try to ‘see what we can get’ with an inflated price.  Homes are sitting more and there are price reductions.  If a buyer isn’t found in the first few weeks after being listed, buyers will start to smell blood and start throwing out lowball offers, resulting in frustration for sellers and listing agents alike.                   

Orange County Active Listing Inventory (Year over year)

Chart 1.JPG

Inventory chart shows massive increase
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Focus on the future:

For buyers, if you intend to live in the home for quite some time (4+ years), then now is likely the best time to buy as rates are still very low and you can lock in a payment that you can afford, you can ride out any minor price retracements quite easily.  If you wait, it might produce more options, but it is also likely that increasing rates will make the home you want in 6 months much more expensive than if you bought it now.  With rising levels of inventory, in most cases there is no need to bid above asking and you should find an agent that can help you take advantage of the leverage that buyers are starting to enjoy. 

For Sellers, now is likely the best time to sell as rising rates and inventory levels is starting to erode at the solid position that sellers have been enjoying.  While still in control, the grasp on the upper hand in negotiations seems to be waning a bit.  If you are thinking of selling, get it listed now and price it correctly.  Now is not the time to get ultra-greedy on price and to test and see how much more you can get over the last comparable sale in your tract.  Price it modestly higher than the last comp, get a buyer and close.  Don’t look back and appreciate that you might have just nailed the absolute top in the market!

Whether you are looking to buy or sell, let's get together and plan your approach.  Call Today, Christine DiCarlo (949)433-4372


Christine DiCarlo

Real Estate Broker License #01290192

949.433.4372 Mobile