Thankfully, we finally just got some less good news! The much anticipated jobs report released yesterday was a sigh of relief, as it showed the pace of hiring slowed, which makes the economy appear less at risk of overheating again. The unemployment rate is at a nice, low 4.2% and the Fed is now less likely to feel the need to raise the Fed Funds rate at the next FOMC meeting, which was looking increasingly possible before this data was released. Also, despite geopolitical tensions, the oil market has mostly shrugged off the anxiety of the last few months, and oil futures are currently trading at $68, which is where they were before the military action began. The Dow Jones Industrial Average just hit another all time high, marking an 18% increase over the last year, and those who bought shares in semiconductor companies are seeing annual gains between 40-80% so they are feeling a substantial wealth effect. Mortgage rates have moved up and down in a pretty narrow range for the last few months, so no meaningful change there. Local inventory has also remained in the same range, and while a couple of months ago it looked like we were seeing a surge in new listings, that has slowed, and leveled off. So with no meaningful change in inventory or interest rates, how fast are properties selling? The data can be confusing! Remember that “median days on market” is not the same as “average days on market”. The average time a home currently spends on the market in Los Angeles County is 103 days, while the median days on market is 48. Median means half the homes sold faster and half sold slower. if you have a well priced single family home in a desirable neighborhood, it will likely go under contract within 14 days, but properties priced over $4 million, or those requiring significant repairs routinely sit for 80 to 180 days. There are also fewer of these more expensive listings, so it skews the data, making it look like the market is slower, when it’s really just a different market for different types of properties. How do you use this information to your benefit? If you're a seller, resist the urge to overprice, and if you're a buyer, be realistic: The seller has equity and will not give you the house for free! I’m seeing a lot of new listings on properties that were purchased in 2021-2022, the peak years for ultra-low interest rates. This tells me that the interest rate lock-in effect we’ve seen playing out for the last 4 years is waining. Eventually, people need to move for all the same reasons they always have: Job relocations, families expanding or contracting, people wanting more or less house, or a different location, and they’re hitting the tipping point when those reasons outweigh the value of a lower monthly payment. Many of these houses are not selling for much more than the owners paid for them a few years ago, not because the market has dropped, but because the cost of financing is higher, and buyers are much more cautious. Good homes are available for the patient and the strategic, and the balance of power between buyers and sellers looks very balanced right now, so it can be a very good time to make a trade. |
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