George Cooke January 3, 2023 (this report continues to be a work in progress).
I am asked this question every day, and here is my state of the market report for 2023. This report covers the markets for Rancho Bernardo, Poway, and the I-15 corridor.
The strong Seller’s Market continues with very low inventory and strong buyer demand, although the number of transactions has slowed somewhat due to some remaining Corona Virus Restrictions. Although inventory levels are lower than ever, housing prices are at all-time highs due to supply and demand. Buyer demand and prices continue to be strong.
Buyer demand has slowed a little, but the result of very low inventory is causing the few properties that are listed to sell quickly. Prices are at record levels, but the number of sales has slowed due to lack of product. The market is expected to pick up when we see more inventory..
The big question has been, “Where is the Inventory?” Sellers are reluctant to sell, even at higher prices, primarily because they do not believe they can find suitable replacement housing. Home owners who are locked in with low interest rates and low property taxes are less likely to sell.
Free markets are driven by supply and demand. When the demand exceeds supply, prices rise and sellers are in control. This is known as a seller’s market. On the other hand, when supply exceeds demand, we have a buyer’s market, with buyers in control to find the best values with the lowest prices. In a balanced market, supply and demand can more easily accommodate the needs of both buyers and sellers. Prices will be more stable and it will be easier for transactions to occur. It helps to have an adequate supply of homes at prices that buyers can afford. Demand occurs when we have buyers who are willing and able to buy. Strong employment, wage growth, and low interest rates are factors that enable buyers to buy. A good supply means we have enough homes to meet normal demands. This occurs when sellers are selling and when enough new homes are being built to meet the housing needs of the population.
The long running Seller’s Market continues due to low inventory. Prices rose to new heights because there were not enough homes available to meet the strong buyer demand. Because the market is "out of balance", it may be vulnerable to slowing down at some point.
Buyer demand is also driven by a "wild and crazy" rental market. Who wants to pay astronomical rents, especially when they increase every year? If you are able to purchase a home, instead of renting, your monthly mortgage payments can be fixed for 30 years, and your property taxes are fixed thanks to California’s Proposition 13.
It is said that the average person will buy and pay for one house during their lifetime. You can buy that house for yourself or you can buy that house for your landlord.
Many homeowners face the dilemma of needing to sell before they can buy. They’ll need the proceeds from their sale to finance their new purchase. Most people prefer to buy and sell concurrently, so they won’t need to move twice. That is more difficult when it is hard to find a replacement property, (harder when downsizing, somewhat easier when upsizing). They can sell their existing home, (especially in the smaller home market), but finding their replacement home will be a challenge.
In a seller’s market, sellers are euphoric, and in some cases unrealistic as to what their home is actually worth. Buyers, on the other hand, are more likely to have feelings of sticker shock and remorse. When they finally find the right home to buy, they may learn that 10 other people are trying to buy the same home, and it may end up selling for more than the listing price. When they finally get into escrow, they may come to realize they paid more than they intended for a home not meeting all of their needs. We are in a market where it is more difficult to improve your circumstances when downsizing. This is because San Diego has an affordable housing shortage. The current market is "out of balance".
Basically, you want to find a house to buy, and then have your existing home ready to sell, so you can try to close on both transactions concurrently. To do this successfully, you can first list your home for sale, “subject to finding replacement property”. You’ll be looking at the homes for sale at the same time. As soon as you have a buyer for your home, you’ll move quickly to make an offer on a house you would like to buy. Your Purchase Offer will need to be “contingent on the sale and closing of your other property”. An experienced agent can help convince the seller that you’ll be in a strong position to buy, and in fact, already have your other property in escrow. With this approach, you can protect yourself in case the other transaction falters.
If you are able to separate the two transactions by arranging temporary housing, you’ll have more flexibility to make the best deal possible on each of your two transactions. You’ll focus first on selling your existing home at the best price, then you’ll move to temporary housing, and search for your new home as a strong buyer with cash in hand.
Markets tend to go through cycles, and they are always dynamically changing. An experienced agent can help you understand what the market is currently doing. This is essential when developing market pricing strategies.
Call George Cooke at (858) 472-4286 if you'd like to discuss your own situation.
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