Understanding market behavior is surely an art and as one who prides himself on knowing the numbers, in this context I am a bit of an artist. However, explaining market behavior in 2024 goes beyond just being an artist.  In fact, I think you’d have to be an Old Master to understand what’s happening today because this market can be described as nothing short of unpredictable.

As we neared the end of 2023 it became apparent that we were going to be starting 2024 with very low inventory… again.  How low, you ask?  Try lowest on record save for the 2021-22 transition.  We started 2022 in greater southern California with something like 12,000 listings (vs. 23,000 today) and my local Conejo Valley at just under 100.  I am sure I don’t need to tell you that 100 mobile homes, condos, single family homes and estate homes for sale in a community of nearly 200,000 residents is meager to put it mildly.  But when we started 2024 with 181 I could only shake my head.  That’s 7 fewer than we started 2021 and 2023, when we saw substantial appreciation to start the year.  Of course, 2023 also saw interest rates climb to 8% at one point which had substantive cooling but still…  I can’t say that I’m surprised.  The same conditions that plagued the market during those years still exist today.  The only difference is the cost of money is much higher meaning it’s harder to qualify and fewer can afford homes today.  The same conditions are specifically, Millennials starting household formation, Baby Boomers not selling and instead aging in place, a lack of new single family home construction and the “Lock-In” effect where people who might otherwise sell aren’t because they don’t want to lose their historically low interest rate.  The other big factor is the continued presence of Wall Street hedge funds buying single family homes to rent and thus tightening supply even further since once in the hands of a hedge fund, those homes don’t sell.

As with any market, the confluence of supply with demand is what establishes market value.  So long as one doesn’t go up while the other goes down, you get price stability (Find out what your home is worth here).  It is this phenomenon that is most evident today.  Even though there are fewer buyers, there are fewer homes for sale.  However, it would appear there are by a small margin, more buyers than sellers.  As a result, we are seeing prices move higher, even with increased borrowing costs and higher rates.

1446 Calle Yucca – For Sale!

A week ago, a home came on the market in the same neighborhood as a listing of mine for a price I considered to be pretty ridiculous and yet it sold on multiples.  Go figure, but this is the kind of thing that happens when the real estate universe is as warped as it is right now.  It’s really challenging for all involved but good for sellers for sure.  I was recently on a listing presentation and the sellers said they wanted a price that was beyond even my highest price in the range.  I told them this but then added, but I could be wrong and if you want it let’s try it (Contact Tim here).  These aren’t sellers in a hurry because the higher, “we can always come down” approach usually leads to longer days on market.  It’s the “prove me wrong” approach to pricing.  Not my favorite but hard to argue with in this environment.

For what will happen in the weeks and months ahead, we will just have to watch and listen, but by the looks of it, I’d suggest we’re going to continue to see prices rise, at least through the spring selling season.