Prices decreased MoM for the first time this year. It felt like the market had slowed down, so seeing it in the numbers is unsurprising. Closed sales were noticeably down, indicating that maybe the wind had been blown out of the sails. Or it could be seasonal. Typically, in July and especially August, we see a noticeable slowdown out of the spring selling season, but it appears it has arrived early this year.
|
Year-over-Year (YoY) |
Month-over-Month (MoM) |
|
|---|---|---|
|
Homes for Sale |
+22% |
+1% |
|
New Listings |
+10% |
-10% |
|
Homes in Escrow |
-4% |
-11% |
|
Closed Sales |
-15% |
-12% |
|
Median Sale Price |
+5% |
-2% |
Buyers have to rejoice hearing prices dropped last month. The problem is it’s still bad news for buyers with new listings dropping MoM. Talking to other agents, it does feel like maybe there will be a decent-sized inventory drop in the weeks after July 4th, so fingers crossed for buyers that is the case.
Price
It must be very frustrating for sellers who are having a hard time selling their homes when all they have heard is that prices are increasing and some homes sell within a couple of weeks. The main reason behind this is price. A lot of sellers are still unrealistic in their price or have it on the market with a “make me move” price. This makes the market look sluggish because it gives the impression there’s a lot of inventory. However, ask any buyer, and they will tell you it’s not the case. Yes, there might be inventory, but much of it is overpriced or in an undesirable location. And in some cases, both.
Interest Rates
Overall, rates are better than they were a few months ago. Gone are the days of rates in the 7% range, and we are comfortably in the mid-to-high 6% range now. Even though this is encouraging, the rates still aren’t low enough to get a large percentage of homeowners off the sidelines. Yes, homes for sale are up YoY, but you have to remember that 2023 had the lowest inventory levels by a huge margin compared to pre-COVID years.
So Hard to Predict
This is one of the most challenging markets, not only to predict what will happen but also to explain what market we’re in. As mentioned above, some homes sell quickly, and others sit. It’s almost a tale of two stories. A home has to check nearly all the boxes to sell. And if it doesn’t check enough boxes, it’s not selling. Then, just last month, we had prices decline MoM for the first time this year. However, we also saw a big drop in new listings. So typically, if there are fewer homes to buy, that will push up prices or at least hold them steady. But at the same time, talk on the street is that more inventory is coming. It’s simply a weird market, and with the election creeping closer, don’t expect it to normalize anytime soon.
ULA Ruling
The chances of the ULA (mansion) tax being overturned are getting even less likely. The CA Supreme Court has blocked all hopes of a new vote on this year's ballot. A group was lobbying to allow residents to vote again, citing that there was too much misinformation last time or voters were unsure what they were voting for. There is one chance left to overturn the tax: later this year, when the matter goes to the U.S. Court of Appeals. The ULA tax imposes a 4% transfer tax on sales $5M and above or a 5.5% tax on sales $10M and above. The entire sales price is taxed at this tax rate, not just the amount above $5M or $10M. It applies to both residential and commercial transactions.
