It has been a VERY busy few months in San Diego real estate…at least for me. Now I am taking some time to enjoy the calm after the storm, and to help buyers find great properties. There has definitely been a change in the real estate market here, and in many areas across the country, as home prices are no longer on the upward trajectory (or not like they have been over the last 2 years).
We are definitely headed toward a buyer’s market, and some areas are already there. Many wonder what that means…a buyer’s market is when the buyers have the upper hand and have a stong opportunity to determine sales price, versus a seller’s market – where the seller’s can list for high prices and usually get list price or even higher.
Many have asked my opinion on the local market and where I think we are headed, and I agree that we are headed into a buyer’s market. Here are the reasons:
1. Time of year: With the end of the summer “selling season,” and as we head into the holidays – when many potential buyers put property searches on hold to be with family, travel and celebrate the season – serious sellers with homes on the market may need to reduce prices. In fact, there has been a LOT of that going on in my area lately!
In the City of Carlsbad alone, there have been 162 price reductions since October 1. There are currently 413 homes on the market in Carlsbad, so there are about 40% of properties that are reducing prices right now.
2. Inventory levels: Inventory levels have been low for a long time here in San Diego, historically speaking. High and climbing prices and low inventory are what kept this a seller’s market for a long time. But given all the factors involved in the market right now I feel that we will see more inventory as we head into the new year, as potential sellers feel they have the upper hand as buyers, allowing them to finally move (either upgrade or downsize, move to another area, etc.). This is because prices will not continue to rise and will likely even drop. Those who do not have a place to sell will benefit the most, as they will be able to take advantage of better negotiating power under the circumstances.
3. Enough of climbing prices: As I have blogged about before, many buyers are/became fed up with the price increases we have seen in the last few years. Lots of buyers went into rental properties because they were priced out of neighborhoods or could not/would not compete in multiple offer situations. When their leases are up they may decide to take advantage of buyer-centric market conditions. More buyers and higher inventory will put more negotiating power in their hands.
4. Interest rate increases: This is another factor to consider – from a buyer’s perspective if prices come down or at least stop increasing, and there is more inventory, but where interest rates are rising, it still could be a great time to buy at the right price. Historically interest rates are still very low, and price reductions + higher inventory would make great reasons for buyers to get out there and make offers, despite small interest rate increases.
5. Many buyers are shut out of markets: This really is part of number 3, but touches not only on the buyers’ frustration with prices (thus leading to opting for renting instead in many cases), but also the inability to afford areas and neighborhoods that were affordable just a few years ago. Many buyers are being forced to look at areas they would not prefer – usually those farther away from work or, in the case of San Diego County, further inland (away from the coast).
The bottom line is that the market is changing, and it should be a great time for buyers heading into the new year and the Spring/Summer selling season. If you do your homework, get preapproved, and watch the market – inventory, prices, days on market and reductions – you will be ready to make an offer when the time is right.