Market of the Moment - 7/15/2022

[Alan Walker]

We continue to see the number of active homes rising. Largest increases were in the 400-500k and 600-700k ranges.

Days on market saw some big increases.

We haven't talked about absorption rate in a while because our inventory has been so low. Absorption rate is a metric that indicates, if we were to continue selling homes at the current rate, how long would it take us to run out of homes, assuming no new homes hit the market.

We got to under a month for quite a while. We are now at 2.93 months. The standard benchmarks to indicate a sellers or buyers market was 3-6 months of inventory was a sellers market, 6 months is a balanced market and 6-9 months is a buyers market. That gives you some insight into how crazy our market has been.

The question all of us have is, how will this impact prices in the short-to-medium term? I guarantee that 6-8% interest rates will become the new normal eventually, but how long are people willing to wait before they finally understand that 3% is a thing of the past?

I think the people that are losing out the most right now are the folks that could have bought in the last 2 years but were "waiting for the market to cool down". One factor that wasn't entering people's minds was interest rate. Its great it you get a house 50,000 less than it was last year, but you are paying 400 more per month for that 50,000 discount because of the interest rate.

So was it really worth the wait?

[Tim G.]

10% off peak pricing is already here in San Diego. Sellers and agents aren't thrilled to admit it, but the party is over. I wouldn't be shocked to see 20% drop from peak. Monthly absorption is interesting and I would like to see June sales volume as it's the first month with really ugly rates. I have a suspicion we have more months of supply (based on current demand) than expected. Prices will be coming down, will be interesting to see how far.