As we head toward the latter part of 2018, our market is beginning to shift. Here’s what I mean.
What’s the latest news from our Southern California market?
Many economic observers are pointing to 2018 as the final period of market price growth. We’ve had an upward-trending market for the last eight years, and typical market cycles last anywhere from five to seven years. Between these cycles, there’s usually an 18-to-24-month market correction. Rising prices and interest rates coupled with salary stagnation and a generational delay in people wanting to become homeowners are creating an environment of declining market sales.
The latest year-over-year statistics prove this trend. New listings are up 0.8% for single-family homes and 7.5% for townhomes and condos, but pending sales have decreased 47% for single-family homes and 56% for townhomes and condos. The median sales price for single-family homes has risen to $715,000, while the median sales price for townhomes and condos has risen to $460,000.
Our month’s supply of inventory, meanwhile, increased 25% for single-family homes and 73.7% for townhomes and condos. This is a significant change because it means buyers have a lot more homes to choose from and sellers have to be more competitive in terms of pricing their home and preparing it for the market.
In our local area, there are 28,000 total homes for sale in our entire MLS, which is down 7.5% compared to last year. The number of active listings has risen by 3.2%, which doesn’t seem like a lot until you consider how far our pending sales and number of closings have dropped—pending sales are down 23% and closed sales are down 17.7%.
Our average days on the market have risen 21% to 23 days. Earlier in the year, properties were selling right away, but that’s not the case right now. Inventory has risen 6.5% to a 3.5-month supply. Generally speaking, when our supply of homes is over six months, we’re considered to be in a buyer’s market. When our supply is between three and six months, we’re considered to be in a balanced market. Any supply level below three months, then, is considered a seller’s market. This rise in inventory means we’re moving toward a more balanced market.
Lastly, the average combined sale price for single-family homes, condos, and townhomes in our MLS is $550,000, which is up 4% compared to last year, but down from our June high of $564,000.
What’s in store for the future? Obviously, we expect interest rates to go up this year and another four times next year, which should put additional downward pressure on prices because of the affordability issue. However, it’s still a great time to buy a property because you can lock in a low-interest rate over time.
If you’re thinking of waiting a year or two to buy or sell, that might not be the best idea, but if you’re trading your equity from one home to another or you’re looking to buy your first home, it’s still a great time.
If you have any other questions about our market or you’re thinking of buying or selling a home, don’t hesitate to reach out to me. I’d be happy to help you.