June 2023 Market Update
So far, 2023 has not brought the collapse in real estate values in the South Bay that many buyers were hoping for, and some economists even suggested. Instead, buyers have adjusted to the higher interest rates and are letting life changes dictate their need to buy or sell real estate. As we start summer, Inventory is hovering around 60% of pre-Covid seasonal levels (2013-2019) and as a result, sellers continue to have the upper hand in the market. What discounting we are seeing is approximately 1-2% of the list price and roughly half of all inventory is selling at or over the list price. Cash sales have picked up along with the recent rise in interest rates, especially in Palos Verdes.
The most significant driver of the current market is the reality that many sellers don’t want to give up their low mortgage rates and are simply unwilling to sell. This is often referred to as the “Rate Lock-in Effect.” Eventually personal needs may impact the decision to sell, but with less than 1% of homeowners having negative equity in their properties, economic distress doesn’t look to be a motivating factor to sell in the short term.
Where do we stand at the halfway point in the calendar year?
Compared to 2022 (rolling 6 months)
Inventory 512 v 518 (+1.2%)
Closed Sales 2097 v 1349 (-35.7%)
Median Price $1.295M v $1.215M (-6.2%)
Compared to 2019 (rolling 6 months)
Inventory 942 v 518 (-81.9%)
Closed Sales 1882 v 1349 (-39.5%)
Median Price $930K v $1.215M (+23.5%)
As more participants return to the market, I once again encourage buyers to focus on fundamentals. Buy a property you can afford and don’t over extend yourself. If you have plans to move, the low inventory means less competition and it is a good time to sell, just don’t fall into the trap of overpricing because buyers don’t have the easy access to more debt they did when rates were much lower.
Overall market rating: Seller’s Market.