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LA Housing Market Update! Is a Crash Coming?

July 2022 market update (FB)
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What’s going on with the Los Angeles real estate market for July, 2022? Stay tuned.

Hey, Scott Himelstein with the Scott Himelstein group. Welcome back to our vlog. So today, excited to talk to you about the real estate market update for July, 2022. Well, if you’ve been watching our videos over the last couple of years, you know that it pretty much sounds like a broken record. We haven’t seen a lot of changes in the market. And ever since COVID, where the market just took off like a rocket ship, pretty much everything has been the same when it comes to reporting what’s taking place. Well, now that’s changed. There are a lot of changes that have taken place in our real estate market here in Los Angeles. And I’m excited to go over with that with you today.

So the first thing that we always like to do is give you the number of new homes that have come on the market for sale. And that number is down 12.1% from June of 2021. So that means that fewer homes have come on the market in June compared to June of 2021. So that’s number one. So there’s a drop there. There’s also a drop in the number of homes that have gone pending, and that number has dropped 38.7%. So basically 39% in LA County. So both the number of new homes on the market and the number of pending homes on the market have dropped primarily because of the interest rate hikes.

So I’m sure if you’ve been paying attention, unless you’ve been living under a rock, that the mortgage interest rates, they were at 3.25% At the beginning of the year. Now they’re hovering in the high fives at the time of recording of this video. In addition, they had recently just peaked out at 6.25. So that’s a huge difference for buyers. And obviously that makes a big difference in the buyer’s monthly payment. As a result, you’ve seen a lot of buyers pull back a bit and maybe even actually leave the market all together. So how does that affect everybody? Well, you got to think of it as if rates go up, and we usually, we kind of give the numbers, that for every 1% rate that goes up, that takes about 10% of the purchasing power away from the buyer. So again, if you’re going from the high twos, low threes, now to the high fives and low sixes, that’s a huge difference for the buyer and what they’re going to be able to purchase as far as their purchase power is concerned. That’s something that you have to really take into consideration with what’s going on right now in the marketplace. So that makes sense, a lot of sense, if you really think about it, why that the number of pending homes has declined 38.7% from the same time a year ago.

What it has done, yes, that new homes are down on the market, but pending homes are down substantially more. That has increased the overall supply for homes for sale on the market. The homes for sale on the market, that number is up 38% from the same time a year ago. And again, doesn’t take a lot of common sense to figure out why that might be. So now we’re seeing that homes are taking a little longer to sell, so that the days on market is up almost 7% from this time last year. It’s a little lower, what I personally, I think what I would expect, but I think it’s going to take a little time where I expect that number to keep creeping up as more and more homes stay on the market.

What’s really happening right now is mortgage rates are rising, you are seeing fewer buyers looking at homes, and you have a lot of people at the top of their budget. Then mortgage rates increase and they’re basically out of the market. Now the good news is that for those buyers that are still in the market it has created some really great opportunities. We’re seeing more and more sellers willing to give you a bit of time to one, come see the home and complete your inspections. Heck, even if you need a credit, that’s on the table now. So these are type of things that we really didn’t see two, three months ago in the marketplace. You might not even be able to see the house at all, even be able to just get an appointment to go inside the house was difficult. So now that you’re be able to see credits from sellers, among closing costs, buying down the rate, these are all things that we’re now starting to see that we didn’t see before.

So what does this mean for everybody? Well, what we’re seeing is that some sellers who just want to get out of their homes, they’re right now, they’re taking a discounted price right now. But overall, we’re seeing the prices peel back a little bit here in Los Angeles County. Don’t know if it’s going to be a marking crash. I don’t think anybody can predict that for sure. We don’t anticipate that. I think you’re going to see one of two things happen. Either one, buyers are going to accept the fact that interest rates are in the mid to high fives, maybe in the low sixes, or they’re going to reject it. If they reject it, then obviously you’re going to start seeing homes sit on the market for a much longer period of time. If you’re looking to sell a home, we’re telling all of our sellers, this is a really good time to sell. Especially if you’re looking in the next two to three years, you probably want to consider possibly putting on your home on the market sooner than later. If you’re a buyer, there are some great opportunities for you right now to find the house that you’ve actually been looking for without all of the competition that you had before.

Any questions about the real estate market, give me a call (818) 396-3311. Thanks for watching our vlog.

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