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Shift Happens 10 Signs of a Market in Transition The property information herein is derived from various sources that may include, but not be limited to, county records and the Multiple Listing Service, and it may include approximations. Although the information is believed to be accurate, it is not warranted and you should not rely upon it without personal verification. Not intended as a solicitation if your property is already listed by another broker. Real estate agents affiliated with Coldwell Banker Residential Brokerage are independent contractor agents and are not employees of the Company. ©2019 Coldwell Banker Residential Brokerage. All Rights Reserved. Coldwell Banker Residential Brokerage fully supports the principles of the Fair Housing Act and the Equal Opportunity Act. Owned by a subsidiary of NRT LLC. Coldwell Banker, the Coldwell Banker Logo, Coldwell Banker Global Luxury and the Coldwell Banker Global Luxury logo service marks are registered or pending registrations owned by Coldwell Banker Real Estate LLC. CalRE#00616212 Michael Edlen DRE 00902158. Typically, the housing market goes through major up and down cycles about every 8-10 years. The last big shift began in 2008 and recovery started in 2013. We anticipated the next market correction around 2018-2019. As we know, that did not occur, primarily due to the government taking effective measures to keep interest rates at increasingly lower levels to stimulate the economy. As the cost of money became less and less, more and more people were able to afford homes that would have been too costly even a couple of years earlier. The increased demand for housing was even greater due to the millen- nial generation maturing into a point of being able to save enough money for a down payment and purchase a starter home. The market challenges were compounded by a gradual lessening of sufficient supply of homes available to purchase, which added even more upward pressure on prices well beyond 2018. This short- age of available inventory was largely due to fewer owners being willing to sell their homes than would have in previous years, both to avoid paying high capital gains taxes as well as due to having no better alternatives in mind to move to than where they had been living for many years. In addition to that, builders were constrained by a lack of sufficient vacant land or tear-down homes which would otherwise have become new homes to meet the steadily growing demand. As with all cycles, eventually things stop moving in the same direction, and then are seen to have begun a shift in the other direc- tion. I believe that such may be the case beginning this summer. Even though all statistical reports coming out still indicate this is a strong seller's market, and it will take a substantially greater inven- tory of homes for sale before the market will be in balance between buyers and sellers, there is a definite feeling below the surface that a shift may well be beginning. Want a trusted advisor on your side in this changing market? Get my bottom-line recommendation for potential buyers today – just text "bottom line buyer" to 310-600-7422. Current owners who want to maximize their equity position should text "seller bottom-line" today to 310-600-7422. At your service, Michael Edlen Michael@EdlenTeam.com | 310-600-7422 What are some signs that this may be the situation? 1. Fewer people attending open houses in the last few weeks. 2. Fewer multiple offers when a listing is priced just at the theoret- ical market value. 3. Buyers being less willing to waive some contingencies, and more demanding of the sellers after doing their inspections. 4. Lenders reporting fewer loan applications being made. 5. Investors being less willing to outbid others to secure their next project site. 6. More escrows being cancelled for a variety of reasons, including more "buyer's remorse". 7. More listings showing price reductions. 8. More listings expiring or being withdrawn from the market. 9. An increase in the length of time it is taking to get into escrow. 10. More articles in the media about the market changing. The actual cost of home ownership has increased tremendously in the last 6 months. Buyers were able to purchase homes with a cost of money as low as 3% earlier this year. Today's rates are at 5% or more. Considering that the majority of homes are purchased using a loan of 70-80%, this increase in interest rates has effectively increased the monthly payments between 30-60%! It is understandable therefore that the market eventually had to begin slowing down, as it has since the beginning of June. One can envision a phase where the market will soon approach being in greater balance between buyers and sellers. This will require inventory to double in size at the same time that the rate of sales might dip by 25-50% from where it is as we enter July. This could gradually or not so gradually occur between the end of 2022 and the middle of 2023, depending on a number of factors too numerous to speculate about in this context. No "crystal ball" is very useful at this time, regarding what the future holds in store for housing values. However, as one of the few agents who have been through the last 3 major housing cycles, one thing is always true about pendulums: eventually they swing the other direction.