As we cross over into the 2nd quarter of 2022, the housing market is everyone’s topic of conversation. The major points of discussion are:
Home values reach a new all-time high.
Yes, Southern California home prices seem to be completely out of control. Take for instance the largest increase in home values in the entire state of California: Irvine saw a whopping 49.4% jump in the median home value from February 2021 to February of 2022, reaching a median home price of $1,330,000 in February 2022, according to a recent article on Forbes. This is truly a staggering amount of increase in the median price of homes year over year. It is safe to say that we have not seen that in California before, ever. Perhaps nowhere in the nation.
On a more macro level, some of the most salient news on the market at the county level are:
The median sale price in Los Angeles rose by 11.2%, from $850,000 in February 2021 to $945,000 in February 2022 according to the same report from Forbes.
San Bernardino County home prices reached $468,107 in March 2022, a 21% increase from a year ago.
Orange County March 2022 median home price came in at $925,003, an 18% increase from last year.
Riverside County March 2022 median home price came in at $549,148, a 23% jump from last year.
Housing inventory reaches new lows
Housing inventory in the Los Angeles housing market declined by 28%, from 11,521 available homes in March 2021 to 8,194 homes in March 2022. A 29% drop in homes available for sale while demand continues to soar. It is no surprise prices continue to sky-rocket.
In neighboring counties in the southland, we see a similar pattern for the month of March from 2021 to 2022:
Orange County had 2,449 homes available in March 2021 and 2,037 in March 2022 – a 17 percent drop.
Riverside County had 4,541 homes available in March 2021 and 3,631 in March 2022 – a 20 percent drop.
San Bernardino County had 2,928 homes available in March 2022 and 4,812 in March 2021 – a 39 percent drop.
Source: CRMLS
New Listings On The Market
When it comes to new listings coming on the market, the numbers mirror available inventory; shrinking across the board. Los Angeles and Orange County are seeing significantly fewer homes coming on the market, in fact, 4 times higher reduction in new listings than Riverside for instance.
Los Angeles County’s new listings in March 2022 came in at 6,920 compared to 8,708 in March 2021, a 21 percent drop.
March 2022 new listings in Orange County were 2,010 compared to 2,541 in March 2021, a 21 percent drop.
March 2022 new listings in Riverside County were 3,680 compared to 3,993 in March 2021, a 8 percent drop.
March 2022 new listings in San Bernardino County were 2,755 compared to 2,885 in March 2021, a 5 percent drop.
Source: CRMLS
Interest rates reach a new three-year high.
The upward trend of mortgage rates continues into the second quarter of 2022. Based on the daily rate report at Mortgage News Daily, the average rate on a conventional mortgage hit 4.83% on April 1st, 2022, compared to 3.48 last year.
Looking at the chart below from the Federal Reserve Economic Datacenter (AKA) FRED, we are now about 1.25% higher in mortgage rates from the historic low of 2.65% on Jan 7, 2021 – just over a year ago.
The Bottom Line
The current Real Estate market is quite favorable for homeowners. Your property (ies) are appreciating at record speed, not seen before in history. If you are in a position where you don’t want to, or need, to sell, you have been watching your net worth go higher and higher every month.
Looking at the following chart, it is startling to see how much the median home price has jumped up in the last 13 years. Homes are worth almost 3 times now than what they were at the bottom of the crash in 2009.
Source: CRMLS
As the value of Real Estate has increased exponentially and mortgage rates had reached record lows in just the last two years, homeowners found a plethora of ways to take advantage of that “perfect storm”. House values increased, as monthly payments decreased at record levels. Quite the opposite for those who rent, as rents have gone up on the average 37% over the same period of 2009 to 2022 on a national level according to iPropertyManagement. In many areas here in the Southland, the increase in rent prices has caused many who are gainfully employed, to have to go on the street as they can not afford the rent with the wages that have not kept pace with the cost of housing.
What should you do now?
If you are a homeowner and don’t need, or want, to sell… enjoy the wonderful appreciation of your properties. If you are considering moving for whatever reason, ponder the fact that we are on a twelve-year run-up in house prices. Never before in history has that increase year over year lasted this long. Just a fact, not a fear-inducing statement. In fact, the Federal Reserve Institute of Dallas just published an article warning of a brewing housing bubble. If the housing bubble theory does come to reality, you may want to consider making a move now that you can get the most for your house.
For home buyers, it is a conundrum. As mortgage rates rise, purchasing power erodes. If prices continue to rise as they have been for the last 13 years, and rates continue to rise as seems likely to happen based on the Federal Reserve Board’s new policy on rates, then buying now may be the best option before it gets even less affordable. Many have expressed that they want to wait to see if home prices drop. That has not served them well over the past few years. Not to say that it won’t if they hold out long enough. And that is the dilemma. Only you, the homebuyer, know what is best for YOU. Given your present and expected future financial situation, the stage of life you are in, etc. etc. the decision could go either way.
