Market is Shifting...Why You Shouldn't Panic

Things have been shifting over the past 5 months, guys. Sales have declined, with September 2018 falling by the largest margin since March of 2014. Homes are staying on the market longer, the median number of days on the market has risen to 23 days.

Some sellers have even had to discount their properties again which was not heard of just 6 months ago. Home inventory has gone up, the highest level we have seen in years.

But this slowdown doesn’t mean we are headed for a crash. You see, the risky financing that was happening in 2007-2008 is not present this time. Buyers are putting more money down, securing fixed-rate mortgages, and needing high FICO scores.

The majority of the economy is really strong with the unemployment rate hovering at 40+ year lows, and home equity borrowing is still low.

This is good for buyers and sellers. For buyers, acting now could lead to significant savings on you monthly mortgage payments by getting into a mortgage before interest rates rise further in 2019.

Also, buyers have a better advantage sine more properties have hit the market. Longer days on the market and increasing discounts mean that buyers can begin to negotiate again, or at least enjoy less competition from other buyers.

Last but not least for sellers, things are not as bad as they seem. Yes, prices are slowing down, and homes are taking longer to sell. However, being on the market just 23 days is not bad. That’s actually a good time frame.

Similarly, with discounting: many active listings have had price reductions and the number of homes sold at a discount has begun to rise. However, the median discount is a modest 1.5%—prices remain near all-time high levels. And, to the extent that sellers will become buyers soon after they sell, they can also benefit by getting into their new home before interest rates rise further—even if they must accept a slightly lower price on their current home.

Ultimately, there IS clear evidence that the market continues to shift and that our supply problems have lingered for so long that they have begun to create problems on the demand side of the equation. However, there is also little to no evidence to suggest California is on the brink of a severe downturn circa 2009. For many buyers and sellers, there is still plenty of reason to be in the market.