Good morning and hope you are enjoying the lovely sunny days now~

I am writing to share how the real estate market is currently flowing and this year it is playing out much differently than expected. 

Nobody anticipated crammed weekend open houses, multiple offers and sales prices above asking prices. With today’s high mortgage rate environment, values were expected to continue to fall throughout 2023 because that is also what occurred in the second half of 2022 when mortgage rates continued to soar higher and buyer demand decreased, at that time the inventory climbed and peaked at its highest level in two years. But that all changed as the inventory plunged to crisis levels. 

MBS Highway’s May 2023 Housing Survey showed that home prices have passed an inflection point and are moving higher; May marking the 5th-straight month of improving activity levels and sentiment. But why? Well, the Millennial generation is ready to buy their first home. They’ve finished college, they have dual income, babies are coming and the family is growing, and they’ve now been working for a few years and have the rapor and the taxes and the income to buy.... They're ready…On the other hand, current home owners have seen price value and interest rates skyrocket and at some point during the covid record low interest rate hype they may have refinanced locking in a sweet low interest rate, so they’re comfortable, they’re hunkering down,and DO NOT want to sell at any time for now. 

Naturally, everyone anticipated that high rates would enormously impact affordability and weaken buyer demand. Yet, very few anticipated that high rates would inhibit so many homeowners from listing their homes for sale and we are now facing the effects of supply and demand. During the first three months of 2023 in Los Angeles County, 36% fewer homes were placed on the market, or 8,053 missing sellers and the inventory has only continued to dwindle. So in today's market, it is a fact that the active inventory in Los Angeles County is at its lowest level in May since tracking began in 2012. Housing is experiencing a crisis, a catastrophically low level of available homes.

Quarter 1: Market Updated 2023 from Linda Mendoza

Hello! 

I hope that you have started the new year on the right track. In regard to real estate, it has been looking brighter than how we ended 2022. From me, my colleagues, and other professionals in the real estate industry our observations have been the following: things picked up as soon as we started the new year. Coming January, we saw a large increase in showings, properties that had not received any offers throughout December suddenly had multiple offers, and interest rates came down reaching 5.5% mortgage rates.

December was like when getting to a movie theater early or being seated immediately at a popular restaurant before the dinner rush. Yet, in the blink of an eye, January arised, and the movie theater was packed, and similarly that favorite restaurant now had an hour-long waitlist. That is precisely what we saw in the housing market these last 60 something days. A month ago, open houses were empty, showings were scarce, and there was little real estate activity as everyone’s collective brains were still in the shifting market and holiday spirit. Seemingly overnight, the new year hit and buyers returned.

What caused such change? Well, in December we ended the year with interest rates in the 7’s. This was a huge shift from what covid rates offered at an all time record low. Especially because property values have significantly increased in the past few years, interest rates like the ones in December almost made home ownership financially impossible. We are seeing a rapid rate decrease entering the new year, from 6´s to mid 5.5%. When comparing numbers a point to a point and a half make out a huge difference in what a monthly mortgage would be.

By mid January, ending the week of 1/13/23, mortgage demands increased as interest rates decreased---mortgage application submissions saw a huge 27.9% surge with another 7% increase for the following week ending 01/20/23. Refinance application also soared 32% from when compared to December.

Below is a snapshot of the last 30 days with pending sales activity. You can see the jump of 38% in just the past couple of weeks, adding 862 listings to pending, in escrow status. This has been the strongest demand reading since early November! However it is important to note that demand is still at shallow levels for this time of year. It is 34% below last year at the start of February and 30% below the 3-year average before the pandemic (2017 to 2019).

Something that hasn't really fluctuated is inventory. From the first week of January to today, the inventory has remained nearly unchanged and currently sits at 7,902 homes in LA County. It usually rises by 8% during this time of year. The 3-year pre-COVID average was 10,267, 30% higher than today. In result, for the past two weeks alone, the Expected Market Time, the time between coming on the market and changing to pending status, tumbled from 108 to 76 days; shedding 32 days, its lowest level since September of last year. So currently, if a home is well priced according to its Fair Market Value, considering location, condition, upgrades, amenities, and age, it will acquire immediate attention and sell quickly.

Back to mortgage demand, after rising for three consecutive weeks in January, mortgage application submissions dropped 9% during the week ending 1/27/23. The word that the Fed´s would increase rates quickly spread sparking fear in buyers. Indeed the Federal Reserve raised rates by 25bps. It is important to note that these hikes are not necessarily meant to increase mortgage rates, instead they hit short-term rates like car or credit loans. However, looking at the bigger picture, indirectly they do slightly impact the housing market which are considered long term rates but when you hear that the Federal Reserve's rate is a certain % don't be confused by thinking that is the current mortgage rate. Normally, the Fed's rate is higher than the mortgage rate.

So what is the future forecast? Well, first off, a note for sellers. Home values are NOT climbing right now. Overpricing a home in this market will result in a lack of success and waste valuable market time but if priced correctly your property will sell at the current fair market value. A note to buyers, lowball offers are not really getting any success right not. Sellers are starting to understand that the market time is now longer than what it was a year or two ago. Sellers are also not very desperate to sell because their next home will now have a much higher interest rate and with property value increasing, they´ll be paying a lot more than expected for that new home. So yes we can negotiate and possibly obtain a $5-25k price reduction and some credits and/or repairs but a $50-100k under asking offer will almost most likely not be entertained.

Lawrence Yun, chief economist and senior vice president at the National Association of Realtors recently said “As inflation calms further … the Fed will adjust to a no-rate increase by the middle of the year and even a rate cut by December,” he added, “That is good news for mortgages and the housing market.” Industry experts are expecting mortgage rates to drop or remain steady, ending the year with mortgage rates in the 5% 's, eventually leveling back to pre pandemic interest rates. Now if you are looking to buy, have a good steady job, and need a bigger place, it is still a good time to buy. Buyers are no longer competing nor giving an arm and a leg. You can shop without the madness and still obtain credits and negotiate price reductions. If one of your goals is to buy a home soon, give me a call. It is my job to be of service and guidance. Thinking of selling, consider my knowledge and expertise. My job is to price your property correctly so it sells quickly and still at top dollar. I am always here to further assist you, your friends, and family. My cell phone number is 510-927-6588. Feel free to call or text me anytime.

With Care,
Linda Mendoza

Quarter 4: Market Update

The market has shifted… It is clear. Buyers now have the upper hand when negotiating in today’s market, which means sellers must price their home according to its Fair Market Value based upon its location, condition, upgrades, amenities, age, décor, and overall appeal. 

For nearly two years sellers got away with arbitrarily pricing a home where nearly everything sold instantly, with multiple offers, and closed sales prices way above their asking price. It was an auction-like atmosphere. Homes were listed FOR-SALE and, in some cases, buyers were only allowed to see a home during a three-hour window on a Saturday, and then all offers had to be submitted by the following Monday at 10AM. After sifting through 10, 20, 30, or more offers, only one lucky buyer won. All the other buyers had to go back to the drawing board.

Pricing a home was so random, that many homeowners wanted even more than the price suggested by the real estate professional, leaving us professionals scratching our heads in disbelief and often, they were still able to procure multiple offers and ultimately sell above the asking price. The housing market was out of control and values surged higher and higher as time proceeded. Not only did the record low mortgage rate accelerate demand, but the inventory also plunged throughout the pandemic. The mismatch between supply and demand paved the way to a historic rise in home values. 

It all started declining about 6 months ago. Mortgage rates have unfortunately continued to climb at a rapid pace as the economy works itself out of the COVID-19 pandemic era of quantitative easing. The latest 30-year fixed-rate mortgage average came in this morning at 7.37%!! The last time rates averaged above 6% was in 2008 and the last time they were hovering around the 6.9% mark was 2002. Permits for new homes also fell to its lowest level in two years. With this changing market, CAR has predicted that California house prices will fall almost 9% in 2023. Closed sales are also forecast to decrease 7.2% next year to 333,400 transactions which would be the lowest number of closed transactions since the housing bubble burst in 2007. If next year’s forecast is accurate, house sales will be 25% lower than in 2021…. Yep, the cards are shifting. 

The Federal Reserve has slammed on the brakes and done everything in their power to “reset” the housing market. Affordability has taken an overwhelming hit and demand is now down by 42% compared to last year. With muted demand, the active inventory has ballooned and increased by 35% year-over-year, so now there is much more inventory than what we had a year or two ago. Consequently, the Expected Market Time, the amount of time from hammering in the FOR-SALE sign to opening escrow, has grown from a record low of 30-days in March, an insane pace, to now 90 days today. Meaning, things are now taking months to sell. 

Demand, a snapshot of the number of new escrows over the prior month, decreased from 3,839 to 3,619 in the past couple of weeks, shedding 220 pending sales, or down 6%. In the past four weeks demand has dropped by 13%, or 537 pending sales. The market is still absorbing increasing mortgage rates as the pool of potential buyers continues to shrink. Affordability is a major issue and with rates surpassing 7%, the issue grows even more challenging. Last week the Consumer Price Index was again higher than market expectations, so do not expect the Federal Reserve to slow their resolve to continue their aggressive fight with inflation. Mortgage rates will remain at these elevated levels for the rest of the year and may rise through the end of the year. Expect demand to remain incredibly slow and continue its descent through the end of the year and holiday season, which is also typically the slowest time of the year for real estate.

2022's Pumpkin Carving Contest!!  

Good evening, 

I'm sure you've heard and seen the flood of news segments describing the real estate slowdown, along with the countless of YouTube and TikTok videos describing how the housing market is about to crash causing some to be convinced that the Los Angeles County housing market is on the brink of collapsing.

Yes, homes are taking a lot longer to sell and we are seeing a lot of price reductions in the past couple of months. And as a result, many buyers are sitting on the sidelines assuming that prices will plunge so they can get a deal, a total bargain. But based on data, it is still a slight Seller’s Market with 78 days from the time when a property goes up on the market to when opening escrow; a slight seller’s market is measured between 60 and 90 days. A Balanced Market is between 90 and 120 days, and a Buyers Market is 120+ days.

Basically right now we are back to pre pandemic timeframes. The issue is that everyone had grown accustomed to the past two years of an auction-like atmosphere where there were only a limited number of homes available and an ocean of buyers willing to purchase, willing to give an arm and a leg because affordability was that much better due to the historically low mortgage rates. It was not uncommon for homes to procure 20 or 30 offers in just days after hitting the market. Sales prices soared above their purchase prices. The trajectory was up, up, up, and up. That market was extremely unique and home values rose nationally at a record pace. Flash forward to today and the housing market is distinctly different. Most homes are not selling instantly. It is not uncommon to see the same home host open houses for several weeks in a row. Price reductions are also quite common in today’s market. There are fewer multiple offers, and most homes are selling at asking price or below. This is what a normal market looks like. The issue is that nobody has experienced a normal market in several years and it is hard to recall when housing was just ordinary.

So what is currently going on? Well, an astounding 34% of the active inventory has reduced their asking price at least once. The price adjustments reveal the considerable number of homeowners who simply overpriced and did not cautiously approach pricing for this new market. When the Expected Market Time drops below 40-days like it did between February 2021 and April of this year, sellers got away with stretching their asking prices. Many of us real estate professionals scratched our heads in disbelief as sellers picked arbitrary prices much higher than what was suggested by us professionals and they were still able to obtain multiple offers and sell above their inflated asking price. That market is now in the past.

My advice to sellers is do not expect a sales price in line with what sold earlier this year when there was nothing available and buyers had to pay way over asking price. Stretching the asking price above the last comparable sale will result in limited activity and the need to readjust pricing. In order to find success, sellers must carefully consider the most recent pending and closed sales (meaning 30 days or less) and take into consideration the condition, upgrades, and amenities of the property.

My advice to buyers is if you were hopeless 6 months to a year ago, give it a shot again. If you have a family, a stable job and are paying a large monthly rental payment, explore your options. As a buyer, you now have options!! From home selection, to loan programs. The active listing inventory in Los Angeles added 184 homes in the past couple of weeks and now sits at 11,011 homes, its highest level since November 2019. Although interest rates have risen, during that crazy hot sellers market, a large majority of First Time Home Owner Programs were eliminated. Well, guess what? They are slowly coming back!!! So there may be a beneficial program available for you as a first time home buyer. There are also great ARM products and bridge loans for those who have previously owned a home. To pump you up a tad bit more, mortgage rates have also dipped below 5% for the first time in nearly 4 months averaging 4.99% this past week ending August 4. The week prior, the 30-year FRM averaged 5.30% and weeks prior, rates had reached 6%!

So don't give up! Like my mother always said, when there’s a will, there’s a way!!! You just need to strategize. Always know that my job is to be of service and work for your best interest. I am here to assist with all of your real estate needs and I will work hard to facilitate the process. At any time, if any questions arise do not hesitate to contact me. My cell phone number is (510)927-6588. You can call or text me anytime. I wish you an awesome rest of the week and thank you for taking your time in reading this.

With Care,
Linda Mendoza