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Why is the Inventory Continuing to Drop?

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Why is the inventory continuing to drop? Today, I’m going tell you why. Scott Himelstein with the Scott Himelstein Group. All right, so today we’re talking about in detail why the inventory has continued to drop so significantly over the course of the last 30 days.

A lot of our clients are asking us, well, Scott why is that actually happening? You know, we’re looking for homes. We hear on the media that homes are sitting for a lot longer and that it’s actually easier to buy a home. So why is this change taking place? There’s a few reasons, but before we go into those reasons, I think it’s important to look at the numbers of the current inventory right now.

So we’ve literally seen a drop in inventory in Los Angeles County of 30% of active listings from September of this year to where we are currently. And so here we are pretty much almost in the middle of December, and you’re looking at a 30% drop. Now, if you could take that to 91326 in Porter Ranch it’s a 27.3% drop in inventory. We went from almost 88 homes on the market down to 63 as we’re filming this video. So what’s causing all of this?

Well, the first is interest rates, and we’ve talked about this throughout the course of the year. So at the beginning of the year, interest rates were at 3.25%, and they went all the way up to about 7.5% in September. That’s really when we started to see the market shift even more dramatically because it just priced out so many more buyers. Ovver the course of the last few weeks, just right around after Thanksgiving, we’ve seen the rates drop and now you’re looking at rates hovering in between the mid fives to high fives, so under 6%. That’s resulted in a lot of the buyers jumping off the fence. The buyers are trying to take advantage of the opportunity with the lower interest rate.

So you combine that with the fact that the inventory was already dropping seasonally. So obviously this time of year, a lot of the sellers decide to take their homes off the market if it wasn’t selling and just because they don’t want to have to deal with it during the holidays. So inherently, you already have less inventory this time of year, and you combine that with the fact that the interest rates are dropping just makes for a recipe that now you just have so many fewer homes currently on the market. So with more buyers out there right now we’re actually starting to see multiple offers again if the home is priced right.

For example we just had one of our listings, it was a townhouse in Northridge at the $600,000 price point. We had nine offers on the home nine offers and multiple offers and the property actually sold $20,000 over the list price. So it shows you right now that the buyers are out in full force, even though it’s the middle of December and we’re in the holiday season. So the buyers are continuing to buy right now.

Now, there’s another reason why you’re continuing to see the inventory suppressed and really not many people are talking about it but I can tell you firsthand because we’re dealing with it with several of our clients that it’s something that probably should be discussed. A lot of people who have rentals that maybe don’t want to be landlords anymore and with all the restrictions here not only in LA County, but as well as the city  of LA, they’re not able to get rid of their tenants if the tenants are not paying. So with all the evictions being on hold right now in LA County and LA City, you know, for these landlords even if they want to sell the property, they can’t due to the moratoriums in place. That is a large amount of inventory that’s not coming to the market right now.

Now we expect that to change in 2023 with what is what is expected from LA County and LA City but currently that is inventory that’s not coming on the market.

Last, and finally we’ve talked about it before but a lot of the sellers that may want to buy another property be closer to schools, family their job, whatever the case may be due to the interest rates being higher since so many people have a sub 3% interest rate. So all those people that may want to move up to a different house, they’re not able to do so just because they either can’t afford to or it doesn’t make sense since the interest rates are still higher than what they either bought at or refinance recently. So I think you have to put all that into the pot, and as a result, you’re seeing the inventory continuing to drop.

So if you’re a buyer, what in the world does this mean for you?

Well, if you’re looking to buy a property in 2023 I think it’s really critical right now that you get all your ducks in a row, have your buyer presentation and consultation with your real estate agent to learn what you need to do to be successful in getting your offer accepted and what you have to do and educate yourself so you are ready to go.

As interest rates have dropped as inflation is starting to go down we’re seeing more and more buyers enter the market. So you’re going to see more and more competition as we go into 2023. So for a buyer you know you’re going be expecting more competition as we move into 2023.

If you’re a seller it’s still a really good time to sell right now. Yes, we’ve seen the market shift about 15 to 20% in most neighborhoods. Yet at the same time we’re starting to see things stabilized because the rates have gone down a pretty decent amount over the course of the last 30 days. So we’re starting to see some multiple offers. Again, it’s not like it was once was back here earlier in the spring, that huge seller frenzy. We’re starting to see a lot more activity on our listings and multiple offers again. So still a great time to sell.

Any real estate questions always feel free to reach out. 818-396-3311, 818-396-3311 and thanks for watching our vlog.


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