As mortgage rates remain high, many homeowners have been unable to sell their homes. The trend has only intensified in recent months.
Lack of Sellers
Compared to the average before COVID, there were 38% fewer sellers from January to April. The number of missing for-sale signs exceeds 6,600.
The spring of 2020 changed everyone's lives. The real estate market was adversely affected by COVID's "stay at home" order. Pandemic shock deterred many buyers from purchasing homes, as well as many homeowners from selling theirs. There were 22% fewer sellers in Riverside County in March than the 3-year average before the pandemic. In April, it reached 41%. After that, it dropped by 27% in May and 16% in June. By July, there were more sellers listed than the three-year average. From March through June, there were 4,926 fewer absent sellers, a 27% decrease.
Overall, there were 4,802 missing sellers in 2020 as opposed to the 3-year average, a 10% decrease. By 4,045 sellers, or 8%, less people sold in 2021. Everything was different in 2022. Despite the fact that COVID no longer controlled the nation, fewer homeowners chose to sell their homes. A startling 7,152 missing for-sale signs, or 14% fewer homeowners chose to sell.
In Riverside County, it is predicted that 18,600 missing sellers will exist after the first four months of 2023. Although many homeowners would prefer to move for a variety of reasons, many choose to stay put and take advantage of their low fixed monthly payments. They may not have their ideal home, but they are happy with their existing loan.
Many people question as to when more homeowners will decide to list their properties and eventually sell them. That will happen when interest rates on mortgages fall to 5.5% or less. Many homeowners will eventually decide to market their houses for sale as the difference between their current underlying fixed rates will eventually close. At that point, you'll feel the want to get moving. the requirement for an expanding family to buy a bigger property. downsizing is necessary for empty-nesters. While many are already selling today due to the desire to live closer to the children, the number of sellers will increase as a result of cheaper rates bridging the gap. The 2023 inventory will remain restricted until then.
Active Listings
The active listing inventory is now at 4,138 properties, its lowest level since the beginning of June of last year, down 79 homes or 2% over the previous two weeks. The inventory typically peaks in Riverside County around February and then declines a little before increasing once more in the fall. With 1,348 homes lost since January, a decrease of 25%, this year is distinct from previous years because the decline has continued throughout the year and has not yet reached a bottom. With 1,348 homes lost since January, a decrease of 25%, this year is unique because the decline has continued since the year's beginning and it has not yet reached a bottom. From its incredibly low level right now, the inventory is struggling to increase. It seems like purchasers are vying for scraps in the marketplace. Due to a tendency that has only gotten worse since last year, there aren't many sellers entering the market. Any new residences that come on the market will be quickly bid on and placed into pending status, provided that the sellers do not overprice, as the supply of new sellers has been significantly reduced. From here, the inventory will likely increase gradually until it reaches a high between July and August.
Due to their present underlying, fixed-rate low mortgage that is locked in, homeowners continue to "hunker down" in their residences. Many homeowners are prevented from offering their houses for sale and relocating because of the substantial disparity between their underlying rate and the current average rate. Until the mortgage rating drops, this will continue. In Riverside County, 2,758 new sellers entered the market in April, 1,848 fewer than the 3-year average before COVID and 40% less. Any possible increase in inventory would be offset by these missing indications.
Demand
Over the past several weeks, demand, which is a snapshot of the number of escrows over the preceding month, fell from 2,661 to 2,587, losing 74 pending sales, or 3%. The current May level is the lowest since 2020. The current environment of high mortgage rates is stifling demand. Not everyone can afford to buy due to the present mid-sixes range in mortgage rates. Demand is a snapshot of the number of recent pending sales, thus the reading would be substantially higher if there were more homes available for buy. Simply said, buyers cannot get what is not made available. The housing market feels insanely hot as a result of the tremendous rivalry for the few available homes.
Demand was 3,169 last year, 582 higher than it is right now, or a 22% increase. Prior to COVID (2017-2019), there were, on average, 620 more pending sales every year than there are right now, at 3,207.
Since June 2022, when supply and demand both decreased at about the same rates, the Expected Market Time in Riverside County to sell all listings has been stable at 48 days. Although the shortage of supply rather than record-breaking demand is to blame, the market is currently much hotter than it was at the start of the year, when it had 108 days. While faster than it is right now but cooling quickly, the Expected Market Time for previous year was 31 days. The 3-year COVID average was 80 days, which is slower than the present pace.
Information for this report was provided by Steven Thomas.
A hit to the housing market can be a sign of economic uncertainty, and it's important for both buyers and sellers to stay informed about market conditions and be prepared for potential changes. It's also important to work with a knowledgeable real estate agent or broker who can help navigate the market and make informed decisions. That's where I can help you.
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