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Real Estate Market News August 2022

Cooling Market Means Healthier Inventory

The rapidity of sales of the past two years in the real estate industry have created a dizzying whirlwind even for the most experienced professionals. So many houses going well above asking price with dozens of offers, we all got used to very short days on market and being able to price listings on the higher end and still anticipating a bidding war. Well, most of that is a thing of the recent past. However, the kind of “sudden” slowdown we have seen in the last 90 days is also not expected to last forever. Consumers need to adjust; sellers will have to be once again reasonable in both their pricing and expectations while buyers should have a wider range of homes to pick from. Due to the amount of equity that has been accumulated in recent years, combined with tight lending rules, people are not losing their homes, they just might have to reconsider what they qualify for when planning on buying a new one. Let’s take a look at the latest data from the California Association of Realtors and Chief Economist Danielle Hale to see what we should expect for the fall market.

Danielle Halle, who is a Chief Economist for points out the change in inventory with an 18.7% rise nationally compared to the same time last year. She explains that in June about 1 out of 7 homes had a price reduction. While that was highly unusual in the market we were in, during 2017-2019, price reductions were much more common with about 1 in every 4 listings.

New home builders have noticed the difference in demand as well, with sales dropping 17.4% compared to June of 2021 creating an inventory of about 9.3 month of new homes but still maintaining a price increase of 7.4% compared to last June. In response to the diminishing interest, builders have also started to introduce price reduction and buy down incentives.

The number of sales overall has declined in 49 of the State’s counties, most of them in the double digits bringing inventory to a two-year high and increasing the average days on market from 8 days in June of 2021 to 11 days for June of this year. Sales-price to list-price ratio also decreased from 104.1% to 101.3% during the same time period, however average price per square foot was $424 which is an increase from last June’s $391.

So, is the market changing? Absolutely. But we knew that was coming. There were many signs by the spring of 2022 of an expected slow-down. What next? We will adjust. We will learn to negotiate again with slightly more balanced terms on both sides. Sellers will have to get used to longer times on the market and receiving 1 or 2 offers instead of a dozen. Buyers will have a wider variety of homes to choose from, maybe even with some incentives but at a higher monthly cost. If interested to see how the current changes impact your home, reach out to a trusted local Realtor, we are here to help.