How's the Market? July 2023 Edition

One of the most common questions agents get is "how's the market?". Early on we're trained to respond with "well it depends on whether you are buying or selling". I never thought that was really the response people were looking for so I've posted countless market updates about activity in the Beach Cities, South Bay, Silicon Beach and points beyond over the years. So with that out of the way, let's answer the "how's the market" question for July 2023. Well it depends..... Only kidding.

Here's what we're looking at right now:

1. Incredibly low inventory almost everywhere in LA County.
2. Mortgage rates still close to a 20 year high.
3. Prices going up - which no one forecast. At all.

Last year at this time the discussion was primarily centered around what incentives sellers could give to entice buyers to make an offer. And that pretty much persisted until about when the calendar changed years. But then the buyers started to re-enter the market having recalibrated their expectations as to what their housing costs would be. But they found there was no inventory because sellers just weren't listing (more on that later).

Most buyers in the market right now are hoping that at some point mortgage rates will dip and they will be able to refinance. In my opinion, that's a pretty good bet. Whether it takes a year or two for rates to drop enough to make sense to refinance, chances are pretty good it will happen. By buying now, buyers will avoid the absolute feeding frenzy that will come when rates drop. A rate drop will also cause prices to go up so there may not be any payment relief and property taxes will be higher.

The buyers in the market now are moving because of family formation, job relocation, or downsizing.

About those sellers....

Most sellers listing their homes now are what I call "have to" sellers - as opposed to "want to". By have to, I am referring to those people who have been negatively impacted by divorce, a death in the family, disease and illness or less dramatically job relocation or loss. They have no option but to sell in most circumstances.

Everyone else seems to be hanging on to their sub 4% or in many instances sub 3% mortgages. As a result the number of sales and transaction are down, like really down.

You can click on the graphic above or this link to read further analysis about sales in the Beach Cities. Sales are lower for sure - in some instances dramatically so. Look at Redondo Beach for example. 447 sales the first six months of 2019 (pre-pandemic or what I refer to as the "before" times) now down to 255.

Two points I want to make about this data.

1. These results are not unique to the Beach Cities of Redondo Beach, Manhattan Beach and Hermosa Beach. They are just the examples I used. We'd see the same almost everywhere throughout the US with a few exceptions.
2. I'm not expecting that we will ever see the volume of business and number of transactions that we saw pre-pandemic. That will have a profound and transformative effect on the real estate industry writ large.

As for all those forecasts that prices would tumble with higher rates and we were looking at 2008 all over again - I never thought that was how this would play out.

So, in answer to "how's the market?", I really like the Altos reports. You can access them on the Market Reports page of ellisposner.com. Here's an explainer video on YouTube.

So that's about it for this edition. Whether you are thinking of buying, selling or are just interested in the market, feel free to ask me anything. About real estate that is.