Welcome to our September newsletter.
This month, we discuss the effects of decreased inventory coupled with increased sales in Southern California, which includes median prices soaring near all-time highs. We also dive into the larger trend of working remotely and how it might affect the region. As the market ebbs and flows, we continue to provide you with the most up-to-date information, so you feel supported and informed in your buying and selling decisions.
In this month’s newsletter, we cover the following:
The pandemic has tested the efficacy of large-scale remote work. Early in the pandemic, corporate giants, like Facebook and Google, announced that their employees would work remotely until at least summer 2021, which is a trend that many companies have adopted. What started as a presumably short-term safety measure has likely turned to a long-term trend for companies: hiring employees from different parts of the country without requiring those employees to relocate near the office. As a result, companies and employees are even less restricted by geographic location than they ever have been in the past.
Though remote work is making it possible for people to move to other areas, U.S. metro areas are not going through an abnormal population exodus; rather, fewer people are moving to cities for job opportunities because of remote work. Despite fewer people moving to major metros, demand remains high, especially for single-family homes. Renters who can afford to purchase houses and homeowners who want to move within a city are still in the market. We’ve found that substantial buyer demand and lower inventory in Southern California has brought median home prices to all-time highs in Riverside and San Diego while Los Angeles and Orange are both less than $10,000 away from their previous peak median price.
A note on the data: We utilize data from the California Association of Realtors®, which provides an incredibly rich data set. In an effort to bring you these reports in a timely manner, for the month of September, we are using July’s numbers to analyze market trends over the first half of the year.
Single-family home prices climbed back to the highest median price on record as inventory waned and sales increased. The condo market saw an increase in median prices as well.
Year-over-year, single-family home and condo prices saw significant gains up since this time last year.
The inventory of homes for sale has seen a noticeable decrease over the summer months, which we can see reflected in the increased median home prices. Lack of supply compared to demand typically buoys Southern California’s prices, which still remains true. Demand has remained high in the summer months, and the area may see an increase in new listings as sellers enter the market to capitalize on the favorable seller’s market.
To fully appreciate the year-over-year decline in inventory, we must look at the ways in which sales behaved in 2020. During the initial months of the pandemic (March, April, and May), buyers and sellers hesitated to enter the market or entirely withdrew from it. Sellers began to reenter the market in May, thereby increasing inventory, but not to last year’s levels. Without the usual inventory, buyers have had fewer options from which to choose, and yet, sales have rebounded, surpassing last year’s numbers. We’ve seen a large year-over-year sales increase, which is an amazing recovery from the lows in May. The increase in sales shows that there is still high demand in the area, despite the lower-than-usual inventory.
We can look to Months of Supply Inventory (MSI)—the measure of how many months it would take for all current homes for sale on the market to sell at the current rate of sales—as a metric to judge whether the market favors buyers or sellers. MSI has an average of three months in California, which indicates a balanced market. An MSI lower than three means that buyers are dominating the market and there are relatively few sellers, while a higher MSI means there are more sellers than buyers. The MSI for single-family homes fell below the three-month mark in all markets, indicating that the market is favoring sellers.
The Days on Market (DOM) decreased, corresponding to the increased sales, and is more in line with what we typically see in the summer season. We suspect that the DOM will remain low during this time of undersupply.
In summary, the decreased inventory has made the market favor sellers. We believe sales will continue to trend upward, which could bring more homes to the market to satisfy the demand for housing in Southern California. The housing market has shown its resilience through the pandemic, remaining one of the safest asset classes.
As always, we remain committed to helping our clients achieve their current and future real estate goals. Our team of experienced professionals are happy to discuss the information we have shared in this newsletter. We welcome you to contact us with any questions about the current market or to request an evaluation of your home.
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