March 14 Snapshot
Many mistakenly believe the Summer Market is the busiest time of the year for housing, yet it is the Spring Market that we see the most real estate activity, year in and year out. Spring officially begins on Saturday, March 20th, and it is also the start to housing’s Spring Market, the busiest time of the year for housing.
The issue this spring is that there will be a tremendous number of buyers competing against each other and clamoring to purchase every home that hits the market. While demand levels may be less than prior years, the real story is that the scarcity of homes available will result in just about every home that enters the fray obtaining a massive number of showings, multiple offers, sellers calling all the shots, and sales prices typically above their asking prices.
The active listing inventory increased by 26 homes in the past couple of weeks, up 2%, and now sits at 1,655 homes, the lowest level by far for this time of year since tracking began 10 years ago. More homes are coming on the market, starting with this month. Cyclically, an elevated number of homes enter the fray from March through August. The issue is that it has been very hard to build the inventory as homes are placed into escrow nearly as fast as they are coming on, like a revolving door. The inventory has risen from 1,453 to 1,655, up 14%, or an additional 202 homes. Yet, these inventory levels are absurdly low. For comparison purposes, the 3-year average inventory prior to COVID (2017 to 2019) grew from 5,283 at the start of the year to 5,547 today, a 264-home rise. At 5,547, there were a lot more homes available compared to today’s anemic levels, 3,892 more, or 235% higher, more than triple. Expect the inventory to continue to slowly rise from here and peak sometime during the summer. The only way inventory can increase at a faster rate is if interest rates rise and break higher than 4%, which will ultimately begin to mute demand and allow for the inventory to rise. Yet, rates have dropped recently due to the war in Ukraine, which will only continue to fuel demand.
Demand, a snapshot of the number of new escrows over the prior month, increased from 2,541 to 2,599 in the past couple of weeks, adding 58 pending sales, up 2%. Yet, the current demand level is still the lowest reading for this time of the year since tracking began in 2012. The lack of available homes combined with fewer homes coming on the market continues to impact and damper the demand readings. Fewer available homes mean fewer pending sales. But, with an elevated number of homes coming on the market now that spring is just around the corner, expect demand to continue to methodically rise. As the time changes this coming weekend, more light and longer days are the first real signs that the Spring Market has arrived. Demand will rise from here and peak between April and May.
Last year, demand was at 3,165, 22% more than today, or an extra 566. The 3-year average prior to COVID (2017 to 2019) was at 3,045 pending sales, 17% more than today. In San Diego County, current demand readings have obviously been muted by a lack of available homes and not enough coming on the market.
With the inventory 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, the lowest level ever reached since tracking began almost 10 years ago. 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 (less than 60 days).
Despite the volatility on Wall Street and the increased geopolitical turmoil, the luxury market is still white hot. The luxury market in San Diego County slowed slightly in the past two weeks. The luxury inventory of homes priced above $1.5 million increased by 35 homes, up 9%, and now sits at 449. Luxury demand increased by 17 pending sales, up 5%, and now sits at 343. With inventory rising at a slightly stronger pace compared to demand, the overall Expected Market Time for luxury homes priced above $1.5 million increased from 38 days to 39 days, an extremely hot market for luxury.
Year over year, luxury demand is up by 12 pending sales or 4%, and the active luxury listing inventory is down by 195 homes or 30%. Today’s lack of luxury homes available is no different than the lower end. There simply are not enough homes available to match current demand. The Expected Market Time last year was at 58 days, exceptionally hot for luxury, but slower than today, indicating just how unbelievably hot the luxury market is right now.
For homes priced between $1.5 million and $2 million, the Expected Market Time in the past two weeks remained unchanged at 22 days. For homes priced between $2 million and $4 million, the Expected Market Time increased from 33 to 35 days. For homes priced above $4 million, the Expected Market Time increased from 106 to 142 days. At 142 days, a seller would be looking at placing their home into escrow around July 2022.