Market Update - August 2023
Market Action Index - August 2023
Well…. that’s strange. Feels like a phrase I’ve used repeatedly over the last few months. This month, for better or worse, is no different. San Diego home prices are back up 3.1% YOY (year over year) BUT there are fewer sales…. Among things that appear to be the new normal is the shortage of inventory. “San Diego had 2,581 home sales in June — the lowest for that month in records going back to 1988.” In fact, I have a potential listing coming in my neighborhood which consists of almost 2,000 homes. If this owner decides to list their home right now, they’d be the only single family home on the market that’s less than 2,000 square feet. Let that sink in. It’s extremely advantageous to sellers who don’t intend to purchase - OR - are taking their California dollars elsewhere. Median list prices have generally stayed the same over the last month. Where we are seeing some change is both in DOM (days on market) and the number of offers received on homes we’ve listed. 15 months ago we would see double digit offers on most of our listings. Today we’d be happy to have 5. What hasn’t changed in the last 15 months is the prices of those offers. We’ve come complete full circle since home prices started to lose ground about this time last year.
Market Profile - August 2023
The big headline is always centered around interest rates - where are they headed and what is going to happen when. I wish I had the answers to each of those questions. I’d be selling my economic predictions, not houses if that were true.
Interest rates have been on the rise since April and recently hit a nine-month high. The average 30-year fixed-rate mortgage jumped to 7.24% . This rise was expected to slow down after July's lower inflation, but rates kept climbing. Oil and food prices, along with the chance of a smooth economic slowdown in 2024, made some think the Fed might not raise rates again. However, rates have been going up despite inflation cooling, and they'll likely stay high through the third quarter until the Fed clearly signals its next move.
“San Diego had 2,581 home sales in June — the lowest for that month in records going back to 1988.”
Median Home Prices on the rise…again - August 2023
HOT TOPICS
Housing Affordability - C.A.R. (CA Assoc. of Realtors) just dropped its latest report on housing affordability in California. Only 16% of households can actually afford a regular single-family home - the lowest since ages ago in 2007. Mortgage rates shot up, making borrowing crazy expensive. Mortgage payments spiked 8.1% from Quarter 1 of 2023 and 5.3% from Quarter 2 of 2022. You'd need at least $208,000 in income to cover a $5,200 monthly payment on a mid-priced home, assuming a 30-year fixed-rate mortgage of 6.61%. This income requirement hit a new high in Quarter 2 of 2023, the second time it passed $200,000 in three quarters. With interest rates staying sky-high, housing will stay tough on the wallet for hopeful homebuyers in the next few quarters.
Inflation - Even though prices are going up by about 3.2% year-on-year, the monthly bump of 0.2% in July wasn't as big as last year's 0.5% average hike. The basic cost of living, without some extra stuff, went up a bit slower too, from 4.8% in June to 4.7% in July. Over the last three months, prices only went up around 3.1%, which is the slowest since September 2021. House prices are still high. Used cars and trucks are getting cheaper, and plane ticket prices took a nosedive compared to last year. But don't get too comfy – gas prices are climbing again, and food prices for businesses are going up too. Political tensions and weird weather might mess with prices for food and energy, and the trend of prices going down might flip in the next few months.
Consumer Sentiment - After hitting a high not seen in almost two years in July, the University of Michigan's consumer sentiment report barely moved in August. The index for August 2023 ticked down a tad , but it's still way better than the rock-bottom it hit in June 2022. People felt a bit better about prices, with their guess for inflation in the next year going down. Even though folks seem to think inflation is chilling out, they're not changing their minds about interest rates. Most folks still think interest rates are going up in the next year.
Small Business Optimism - Small businesses got a bit more upbeat in July, making the index rise for the third month in a row to 91.9. Still, even with this bump, it's been 19 months straight below the usual score of 98. Business owners were feeling better since prices weren't going up as fast, things were looking up economically, and they thought they'd sell more stuff in the future. The boost in good vibes also means more spending ahead, with 27% of owners planning to invest more money in the next few months, up a couple of points from June.
Now more than ever, let's buckle down and keep pushing forward. Things will improve, but it won't be an instant fix. It's like we're all in survival mode, and really thriving might have to wait until another phase of life. Let’s remember there's still plenty of chances out there. Keep an eye on new construction – builders might offer sweet interest rates. It could mean the difference between snagging a home now or waiting until next year. Have an awesome August! We’re all getting ready for school to start again. I'm here for anything you need. Reach out anytime! Call, text, or message me 😊
Brendan
P.S. I live on referrals (and will love you forever) if you send someone my way. It’s among the greatest compliments I can receive. I will treat them like family. Thank you in advance!
Brendan