The Summer slowdown was in full effect this year, with a noticeable dropoff in new listings and homes in escrow and prices decreasing MoM. However, I don’t see prices going down as an ongoing trend. Summer is often sluggish here in LA, with so many people traveling, but prices are bound to recover with rates on the way down.
|
Year-over-Year (YoY) |
Month-over-Month (MoM) |
|
|---|---|---|
|
Homes for Sale |
+25% |
-3% |
|
New Listings |
+10% |
-11% |
|
Homes in Escrow |
-2% |
-11% |
|
Closed Sales |
-5% |
-3% |
|
Median Sale Price |
+3% |
-4% |
Condo prices saw the biggest decline MoM, down over 5%. This comes as no surprise as the condo market has felt very soft. This is due mainly to a constant increase in supply throughout the year.
Will Prices Continue to Drop?
The short answer is no. It’s not entirely uncommon for prices in LA to drop between July and August. A lot of people take off during Summer and don’t want to deal with buying a home, and experienced buyers know there will be more inventory to choose from after Labor Day. However, experienced buyers also know Summer can be an excellent time to get a deal due to decreased competition. This year was no different, and I noticed an increase in price reductions and homes back on market all through July when most of the homes that closed in August would have entered escrow. Plus, with rates on the way down, prices will stabilize again and likely increase. It does feel like market sentiment hit the bottom around July, and prices will climb again with both buyers returning and new buyers entering the market. There is the wildcard of the election. However, economists predict that dropping rates will overshadow any uncertainty buyers feel.
Interest Rates
The Fed is guaranteed to lower rates in a couple of weeks. The question will be, by how much? There’s growing pressure they will need to be more aggressive than just a .25% decrease, with many economists predicting that .5% is required to help stave off a recession. Multiple buyers, including my own, were quoted rates in the low to high 5%’s last week. That’s 2% lower than this year's average highs, resulting in a buyer's purchasing power increasing by about 20%. As more word spreads about buyers getting rates in the 5%’s, two things will happen. It will spur both new buyers and buyers off the sidelines, increasing competition. However, the silver lining should be that homeowners who have the rate lock effect with mortgages in the 3%’s or 4%’s will decide a rate in the 5%’s is good enough for them to give up their current rate and put their home on the market, freeing up much-needed inventory The big question is, will there be enough inventory to match the increased demand? Keep in mind these homeowners need homes to buy, too. This is very hard to predict, and we must wait and see.
Jobs Report
The all-important unemployment report will be released tomorrow. Last month's report put investors into a spin, causing the stock market and mortgage rates to rapidly change. Numbers released this week have already pointed to unemployment possibly increasing, so we will have to wait and see how investors react when the numbers are official.
