February 22, 2022 Snapshot
The transformation of the housing market occurs over time. It just does not change in the snap of a finger. Houses are not traded on Wall Street. They are not stocks that are easily bought and sold. Instead, they are homes, a place to rest, relax, and unwind, a place to start or raise a family. Everyone needs shelter and must live somewhere. It is understandable that in tracking housing, new trends slowly shift the tide and eventually reveal a change in the housing market.
For the market in 2022 to experience a similar shift. Mortgage rates cannot substantially drop from here. They must persist at these higher levels, between 3.75%and 4%, and then eventually climb above 4% with staying power. If that occurs, as more homes come on the market during the spring and summer, demand will be muted, and the inventory will substantially climb for the first time in 3-years. Higher rates must endure for that to occur.
The active listing inventory increased by 92 homes in the past couple of weeks, up 6%, and now sits at 1,629 homes. It is the Winter Market. Cyclically, that is when very few homes come on the market because it just is not the most favorable time for a family to make a move, during the middle of the school year. That all changes in the spring, but that is still another month from now. Until then, get used to very few new homes entering the fray. Plus, this year is even worse. In January, there were 1,316 fewer new FOR SALE signs compared to the 3-year average before COVID (2017 to 2019), or 30% less. For the first two weeks of February, there were 25% fewer signs. The trend of fewer and fewer homes coming on the market is just magnifying the inventory crisis. Buyers are already sitting on the sidelines waiting for the next new listings to arrive on the housing scene. When there are buyers waiting in the wings, most homes coming on obtain offers in less than a week and are slapped into escrow almost immediately. It is like a revolving door, making it extremely difficult for the inventory to grow.
Demand, a snapshot of the number of new escrows over the prior month, increased from 2,407 to 2,541 in the past couple of weeks, adding 134 pending sales, up 6%. The current demand level is the lowest reading for this time of the year since tracking began a decade ago. The lack of available homes combined with fewer homes coming on the market is taking a significant bite out of today’s demand readings. Expect demand to continue to rise, but at a slightly slower pace until it peaks sometime between mid-April to the end of May. Lower demand will translate to fewer closed sales compared to last year as well until the trend of fewer new listings subsides. Only
time will tell when that will be.
With both the supply and demand rising at the same rate, the Expected Market Time (the number of days to sell all San Diego County listings at the current buying pace) remained unchanged at 19 days, still a record low since tracking began a decade ago, matching levels reached in both April and December of last year. At 19 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 22 days, similar to today. The 3-year average prior to COVID was at 55 days,
substantially slower than today and a Hot Seller’s Market (between 60 and 90 days).