Spring Housing Market Not Shaping Up

Last week's economic data showed that the US economy is slowing down due to the lagged effects of monetary policy tightening. Retail sales and inflation dropped for the second consecutive month, but prices for core goods and services remain high. As a result, the Fed may increase rates by 25 basis points at their May meeting. Consumers have also adjusted their expectations regarding inflation, although they remain generally pessimistic. Meanwhile, California residents are likely to continue to face inventory challenges in 2023 as fewer REALTORS® are listing properties during the usual spring home buying season.

San Diego's housing market is still puzzling many people. Even though mortgage rates are still high, they haven't affected housing prices as much as people thought they would. We continue to see multiple offers on homes located in desirable areas such as Rancho Penasquitos and Carmel Valley.

Sellers Not Selling

The driving factor in San Diego's Housing Market is lack of inventory. Low inventory in housing is a condition that arises when there are fewer homes available for sale than there are buyers in the market. This can occur due to a variety of factors, including a lack of new construction, increased demand from buyers, or a decrease in the number of homeowners willing to sell their properties. Low inventory often results in increased competition among buyers, which can drive up home prices and make it more difficult for some buyers to find the right property. Additionally, low inventory can create a seller's market, where homeowners may receive multiple offers and have the advantage in negotiations.

Inventory might get worse before it gets better according to REALTORS®:

The California Association of REALTORS®’ (C.A.R.) monthly member survey revealed that inventory could pose a challenge ahead of the spring home buying season. The percentage of REALTORS® with listing appointments dropped for the second consecutive month, moving in the opposite direction than usual this time of the year. With less listing appointments, less properties are consequently being listed for sale as evident in the drop-off of REALTORS® reporting listing a property in April. After trending up in the first quarter of the year, the share of respondents indicating having listed a property fell to 18.3%. What is more, they became more pessimistic about listings going up as the share dropped for the second consecutive month. Unfortunately, part of it seems to be reluctance from sellers to list as the share of those holding back from selling jumped to the second highest level on record since the inception of the survey began nearly two years ago.

More home sellers are sitting out of the spring housing market

New listings of homes for sale are down 25% from a year ago, marking the eighth straight month of double-digit declines. That’s making it difficult for buyers to find homes but giving some sellers a competitive edge.

People are reluctant to sell because they don’t want to give up their low mortgage rate, it’s hard to find another home to buy and many Americans recently moved. Although rates are down from their November peak, this week’s average is 6.27%; 85% of homeowners have a rate far below 6%. The bright side for homeowners who are listing now is that desirable, well-priced homes are being snapped up in bidding wars in markets where demand outpaces supply.

New listings fell from a year earlier in all 50 of the most populous U.S. metros, with the biggest declines in California. They dropped most in Sacramento and Oakland (-47% YoY apiece), San Francisco (-43.2%), San Jose (-42.9%) and San Diego (-41.4%). The scarcity of homes hitting the market, along with elevated mortgage rates, is holding back sales. Pending home sales dropped more than 30% in each of those metros, more than the 19% nationwide decline.

Tristen Campanella is a San Diego Realtor specializing in Holistic Real Estate. She is proud to be recognized as one of the top agents in the county by sales volume. Tristen is passionate about her clients long term success. She utlizes her Holistic Home Program to help San Diego buyers and sellers create success for their futures. CONTACT her today to discuss your unique situation.