For most of the year, housing inventory was steadily increasing across the nation. In California, it appeared that inventory hit a bottom in February of this year. At that point, there were 109,000 homes available for sale. The latest figures going out to October showed 127,000 homes available for sale and this was down from 134,000 reached in August. There has also been a steady decline of homes available for rent. The cash investor crowd is still out buying in large numbers.
The drop in inventory is typical for the fall and winter selling seasons in normal markets. However this drop in inventory is likely being brought on by additional factors including the jump in interest rates and also, the perception that the market may be softening. The number of listings with price cuts was 17 percent earlier this year. Today it is up to 28 percent. This trend is not only impacting California but the rest of the nation as well. Inventory was moving up steadily but the impact of higher rates does seem to be softening the market.
In California, many investors bought single family homes for the purpose of renting. However, over the summer the number of homes available for rent in the state has declined sharply. The fact that only one out of three households can afford a California home is partly due to this but also to a slight decline in sales for the state. Being out bid by investors and also, simply being unable to buy have increased the number of renting households. The cash crowd has been a dominant force nationwide as well, with more than 30 percent of sales still going to this group. Given the massive rally you would expect mortgage balances to be soaring for regular households but they are not. The housing market seems to be at a pause trying to decide where it will go. Home prices in California are up 25 percent over the year, clearly this is an unsustainable pace.
The California housing market is addicted to a boom and bust cycle. We are in a boom of sorts so to think we’ll have a steady market following the latest boom simply goes against recent history of the market. If you are out in the market, you may find the selection of housing better than it was early in 2013 but the number of new inventory coming up may be limited. The cash crowd is going to find it more difficult to make money flipping and finding good yields on rentals therefore we are seeing some slow down in cash buying although it is still very high (in SoCal it is still 27.5 percent of all buyers). Hearing from sellers and talking to contacts in the industry, the market has definitely softened and many are planning to hold off during this fall with the hope for higher prices in 2014.
Zillow real estate research and by Dr. HousingBubble Michael Kayem is a Realtor with Re/max Estate Properties serving Culver City and the Westside since 2001.
You can contact him with your questions at (310) 390- 3337 or email them to him at: homes@agentmichael.com
