January 29, 2022 Snapshot

jan29mkt > January 29, 2022 Snapshot - California Real Estate Expert Robert Wolf - California Real Estate Expert Robert Wolf >

The supply chain problems have been well documented across the United States and around the globe. One of the hardest hit industries is new cars. The supply of available new cars has dwindled down to record lows. As a result, dealers are adding a “market adjustment fee,” a lineitem cost above the MSRP. The fee ads anywhere from a few thousand dollars to as much as $20,000 more for a popular model. It has everything to do with supply and demand. Consumers looking for a new car are confronted with very few options and rising car prices. To get their hands on one, many are willing to pay the surcharge. Housing feels like it too is suffering from the supply chain problem with seemingly nothing available to purchase. Last year the inventory in San Diego County started the year at an all-time low with 2,556 available homes. It hit 2,175 on April 1st, rose and peaked in August, and then continued to plunge until only 1,254 homes were on the market on January 1st of this year, just a few weeks ago. Today, there are 1,841 homes, adding 587 during the first few weeks of the year. The difference between this year and last year’s record low is striking. There are 575 fewer homes today, 24% less. Every price range has been impacted except for homes between $750,000 and $1 million, where there are 16% more than last year. Comparing today to every year since 2017 is mind blowing. In 2019, prior to the pandemic, there were 5,072 additional homes on the market, 276% more, three-and-a-half times the number of homes today. In 2017, 2018, and 2020, there were around 2,800 additional homes on the market in each of those years, about 153% extra, two-and-a-half times more than today. Comparing today’s level to prior years illustrates just how acute today’s inventory crisis has become. The inventory was already trending lower prior to the pandemic, but the pandemic accelerated the issue as fewer homes were placed on the market despite soaring demand. In 2020 and 2021 combined, there were 12,800 fewer FOR-SALE signs compared to the average number between 2017 and 2019, 12% less.

The active listing inventory increased by 388 homes in the past couple of weeks, up 27%, and now sits at 1,841 homes. It is still the lowest reading for this time of year since tracking began 10 years ago. It is the Winter Market. There just are not enough homes that come on the market during the winter months until the housing hits the second half of March. This is coming on the heels of the slowest housing patch of the year, October through December in terms of the number of homes placed on the market. With today’s heightened demand, homes are placed into escrow as fast as they are coming on the market, like a revolving door. It is just too difficult for the inventory to rise much until spring, so expect it to remain flat or even drop for the next several weeks. The only caveat to this is rising rates. If rates rise another half a point and breach 4%, then the inventory will rise sooner. Last year, the inventory was at 2,416, 21% more, or an additional 425 homes. The 3-year average prior to COVID (2017 through 2019) is 5,402, an extra 3,561 homes, or 193% more, nearly triple compared to today. There were a lot more choices back then. For December, there were 2,056 new FOR-SALE signs in San Diego County, 136 fewer than the 3-year average from 2017 to 2019, 6% less. Every single missing sign magnifies the inventory crisis.

Demand, a snapshot of the number of new escrows over the prior month, increased from 1,744 to 2,022 in the past couple of weeks, adding 276 pending sales, up 16%. With such a limited number of homes available, just about everything that comes to market is being thrown into escrow. Homes start coming on the market at a faster pace as the month of January progresses, gaining steam throughout the month of February as well. Expect demand readings to surge over the next four weeks. With surging demand and a flat inventory, the market will only grow hotter. Market times typically drop to its lowest point of the year sometime in March.Even with rates rising in the past four weeks, it has not dampened demand at all. It would take a much higher climb for the impact to be felt within the real estate trenches. Last year, demand was at 2,445, 21% more than today. Year over year comparisons will be off through February due to market changes because of COVID. A much better comparison is looking at the 3-year average prior to COVID (2017 to 2019), which was 2,308 pending sales, 14% more than today. With a larger surge in the inventory compared to the surge in demand, the Expected Market Time (the number of days to sell all San Diego County listings at the current buying pace) increased from 25 to 27 days, its lowest level for this time of year. At 27 days, it is an insane, Hot Seller’s Market (less than 60 days) where there are a ton of showings, sellers get to call the shots during the negotiating process, multiple offers are the norm, and home values are rising rapidly. Last year the Expected Market Time was at 30 days, similar to today. The 3-year average prior to COVID was at 72 days, much slower than today and approaching a Slight Seller’s Market (between 60 and 90 days).

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