Market Update - September 2022
Market Action Index - 57
The Market Action Index (pictured) is the best snapshot I can give you of where we stand today. This is still considered a seller’s market but as you can see it continues to trend more towards the middle. I’ve done several open houses this past month which gives me a great opportunity to chat informally with many potential buyers that are shopping for homes. As a whole, buyers are feeling more reserved and seem to be likely to wait. It seems that many buyers who believe we’re going to see a ‘crash’ of sorts. I think we may be in the midst of an adjustment, but overall we’re not going to see anything that resembles a crash like we did in 2008. With that being said, I don’t think there is any reason for homeowners to panic sell. There’s still limited inventory and lending practices have improved drastically and legislated out since the issues in 2008.
Where we might see a bigger price adjustment is IF job losses increase. Chart 1 shows the data regarding unemployment as of today. California posted its lowest unemployment ever at 3.9%. Of course, the type and quality of jobs that people are employed in is up for debate. In summary, we likely won’t see a major price crash because people are employed, home inventory is still low, and risky loans that could force a homeowner to sell are practically non-existent.
Chart 1 - Unemployment Rate, July 2019 - 2022
Chart 2 - Market Profile San Diego Single Family Homes
Mortgage interest rates are always a big point to note as they directly affect affordability. While it’s true that the higher the interest rate, the more you’ll pay in interest over the life of the loan, the bigger issue for most borrowers is Debt to Income (DTI) ratio. This is determined using gross monthly income and debt payments due each month. As homes have gotten more expensive in San Diego, DTI has been exceptionally important as most loans won’t be approved with more than 50% DTI.
While the FED met on Friday 8/26 and decided not to raise the interest rates, their comments caused some volitility. As of today, avg. 30 year fixed rate is 5.95%. While the two rates (FED and Mortgage interest rates) are linked, they do act independently based on other factors in the markets. For example, loan mortgage originators have dropped rates after the FED has raised rates the last two months. The reason is purchase applications are down and they’re trying to generate loan business.
If you’re a buyer, but still have not updated your pre-approval it would be a great time to do so considering how much rates have changed over the past 8 months. I’d be happy to connect you to a few different mortgage brokers to have it updated!
Median List Prices have dropped below $1M from $1.05M last month (chart 2). Three major data points continue to hover including 1. median list price, 2. inventory, and 3. % of listings that have decreased their price. These figures all closely resemble each other from one month ago. One that has had a sizable jump in the last month is Median Days on Market which has gone from 21 days to 35 days.
Even as we trend more toward a buyer’s market, it’s still a good time to sell! This is especially true if you’re looking to be a contingent buyer – meaning you’d be making an offer on a house contingent on selling your current home. Contingent offers haven’t been considered in the last few years due to the demand, so sellers that have wanted to buy a replacement home haven’t had the option. NOW is your time!
Additionally, buyers who know what they want have a true opportunity to get into a house without many of the restrictions they’ve faced in the previous 3 years. This market isn’t a good fit for everyone, but WOW is there tons of opportunity out there. Reach out so we can discuss if it’s a good time for you to buy or sell. Have a great September!