Real Estate Economic Update
New economic data and forecasting came out recently and we wanted to share with our readers. We’ve included the full presentation from Jordan Levine, Vice President and Chief Economist of the California Association of Realtors here, and a brief review of some of the highlights with graphics below.
There is some concern in the market right now for a few reasons. For example, why are prices still high as interest rates continue to climb making houses more and more difficult to afford? How big of a threat is inflation to the housing market? Why do we continue to experience such low inventory? The data in this presentation shares powerful insights to these questions.
Here is one of the graphics I found interesting. We are simply not building enough homes to keep up with our population.
Here’s another graphic that really depicts what’s happening in the luxury space over the past couple of years. “Big increases this year, but still way below normal” refers to the number of active listings as they relate to their price points. We’ve seen an incredible demand for luxury properties 5M+ selling quickly and sometimes over asking price. Just a few years ago our Monterey Peninsula luxury market was not nearly as strong as it is today. We see in this chart how low the luxury inventory has been, and we know the wealthy buyers are moving their finances from stocks to tangible, less volatile assets like California coastal real estate after a very successful couple of years in the stock market. The yellow represents properties in the $800-1.2M range, which is the range for many first time buyer and move-up buyers in our market. This range is heavily impacted by fed rate hikes we’ve experienced the last couple of months. A 1M home is over $1000 more expensive per month than it was at the beginning of 2022, but rates are scheduled to continue to increase, and buyers are still actively pursuing homes.
After reading through the full study, I think homeowners considering selling will be more incentivized to list their homes as rates increase resulting in more inventory, but there is still so much demand and money in the market that I wouldn’t expect prices to decrease this year. It’s a difficult market for buyers right now, and I believe it’s a good time to consider selling or tapping into your home’s equity.