Q3 2023 Southern California Real Estate Market Update

The following analysis of select counties of the Southern California real estate market is provided by Windermere Real Estate Chief Economist Matthew Gardner. We hope that this information may assist you with making better-informed real estate decisions. For further information about the housing market in your area, please don’t hesitate to contact your Windermere Real Estate agent.

Regional Economic Overview

The Southern California market areas contained in this report have been experiencing a fairly significant slowdown in job growth. That said, the region has added 164,700 jobs since the third quarter of 2022, representing a growth rate of 1.7%. The end of the writers’ strike will add a little boost to the Los Angeles area, which has still added over 89,000 jobs over the past 12 months. Orange County employment has grown by 34,100 jobs; San Diego County is higher by 31,400; and employment was up 9,700 jobs in Riverside.

The region’s unemployment rate in August was 5.2%, which was up from 4.2% in the third quarter of 2022. The lowest jobless rate was in San Diego County, where it was 4.3%. The highest rate was in Los Angeles County, where 5.8% of the workforce was without a job.

Southern California Home Sales

❱ In the third quarter of 2023, 32,398 homes sold, which was 16% lower than in the third quarter of 2022 and down 8.6% compared to the second quarter of this year.

❱ Pending home sales, which are an indicator of future closings, were 8.2% lower than in the second quarter, suggesting that closing numbers may be down in the final quarter of 2023.

❱ Compared to the third quarter of 2022, sales fell the most in San Bernardino County, though there was a significant decline in all markets. The quarter-over-quarter decline was disconcerting given that the number of homes for sale rose more than 14%. Rising mortgage rates are clearly taking their toll on the market.

❱ It’s discouraging that there were fewer sales despite rising inventory levels. Mortgage rates are definitely hobbling the market and until they start to drop, I think things will continue to be lackluster. List prices have started to pull back in response, as sellers realize that the market is not what it once was.

A graph showing the annual change in home sales by county in Southern California from Q3 2022 to Q3 2023. Orange County had the least drastic change at -12.1%, while San Bernardino had the largest change at -18.9%. San Diego and Riverside County are in the middle at -17.1 percent.

Southern California Home Prices

❱ Home sale prices were up 5.7% from the third quarter of 2022 and were 3.8% higher than in the second quarter of 2023.

❱ Affordability continues to be a major constraint in the region, which is being magnified by persistently high mortgage rates. Prices are holding, but growth has slowed significantly.

❱ Year over year, prices rose in all the markets contained in this report, with significant increases in San Diego and Orange counties. Compared to the second quarter of 2023, Riverside County saw prices fall by 5.8%, but they rose in the balance of the market areas.

❱ I expect price growth in Southern California to hold at or near the current pace. However, it’s very possible that home sale prices could drop a little if list prices fall further.

A map showing the real estate home prices percentage changes for various counties in Southern California. Different colors correspond to different tiers of percentage change. San Diego had percentage change above 5% and is represented in the corresponding navy color. Los Angeles and San Bernardino were in the 2-2.9% range. Riverside was in the -1-1.9% range and is represented in the light grey color on the map.

A bar graph showing the annual change in home sale prices by county in Southern California from Q3 2022 to Q3 2023. Riverside County is represented by the at the bottom at 1.2% increase. San Diego is at the top with a 11.1% increase.

Mortgage Rates

Mortgage rates continued trending higher in the third quarter of 2023 and are now at levels we have not seen since the fall of 2000. Mortgage rates are tied to the interest rate (yield) on 10-year treasuries, and they move in the opposite direction of the economy. Unfortunately for mortgage rates, the economy remains relatively buoyant, and though inflation is down significantly from its high, it is still elevated. These major factors and many minor ones are pushing Treasury yields higher, which is pushing mortgage rates up. Given the current position of the Federal Reserve, which intends to keep rates “higher for longer,” it is unlikely that home buyers will get much reprieve when it comes to borrowing costs any time soon.

With such a persistently positive economy, I have had to revise my forecast yet again. I now believe rates will hold at current levels before starting to trend down in the spring of next year.

A bar graph showing the mortgage rates from Q3 2021 to the present, as well as Matthew Gardner's forecasted mortgage rates through Q3 2024. In Q3 2023 Mortgage Rates hit 7.04% and Matthew Gardner predicts rates will decrease steadily over the next 4 quarters.

Southern California Days on Market

❱ In the third quarter of 2023, the average time it took to sell a home in the region was 27 days. This was up two days compared to the same period of 2022.

❱ Compared to the second quarter of 2023, market time fell six days and was lower across all counties covered by this report.

❱ Homes in San Diego County continue to sell at a faster rate than other markets in the region, but it took two fewer days to sell a home than it did in the third quarter of 2022. Orange County saw days on market fall by one day compared to the third quarter of 2022, but market time rose everywhere else.

❱ Homebuyers saw rising inventories, and those who chose to make offers did so relatively quickly, even though the total number of sales fell. If the number of homes for sale continues to rise, it may also cause market time to rise as buyers become more selective.

A bar graph showing the days on market by county for homes in Southern California in Q3 2023. San Diego County had the lowest DOM at 19, while Riverside County had the highest at 35. Los Angeles is in the middle at 26 days.

Conclusions

This speedometer reflects the state of the region’s real estate market using housing inventory, price gains, home sales, interest rates, and larger economic factors.

With inventory levels rising, and sales and asking prices falling, it would be easy to suggest that home buyers have the upper hand. However, home prices are still rising, albeit slowly, which tends to favor sellers.

The quandary really comes down to the fact that while inventory levels have risen, they remain remarkably low compared to historic averages. It’s also likely that the buyers who are still in the market are looking to move more from necessity than desire, which makes sense given today’s high mortgage rates.

A speedometer graph indicating a light seller's market in Southern California for Q3 2023. The meter is solidly in the “balanced market” portion of the chart leaning closer to “seller’s market” than the center of “balanced market.”

That has put us in a very unusual situation. Although sellers are being a little more competitive, as evidenced by the drop in list prices, they have not totally capitulated. Taking all these factors into consideration, I have moved the needle back to the middle of the speedometer. I simply don’t see either side as having the upper hand at the present time.

About Matthew Gardner

Matthew Gardner - Chief Economist for Windermere Real Estate

As Chief Economist for Windermere Real Estate, Matthew Gardner is responsible for analyzing and interpreting economic data and its impact on the real estate market on both a local and national level. Matthew has over 30 years of professional experience both in the U.S. and U.K.

In addition to his day-to-day responsibilities, Matthew sits on the Washington State Governors Council of Economic Advisors; chairs the Board of Trustees at the Washington Center for Real Estate Research at the University of Washington; and is an Advisory Board Member at the Runstad Center for Real Estate Studies at the University of Washington where he also lectures in real estate economics.


Ready to Buy a House

8 Signs You Are Ready to Buy a House

We have all heard the saying that renting is like flushing your money down the toilet. Well, we have heard that nonsense too. The truth is, not everyone should buy a house. Homeownership is a major milestone that many people dream of reaching one day. However, there are a variety of factors to consider when making one of the biggest financial decisions of your life.

So, if you have been thinking about becoming a homeowner, but are not sure if you’re prepared, you’ve come to the right place. We’ve laid out 8 questions to help you decide if you are ready to get the ball rolling on buying a house.

8 Signs You Are Ready to Buy a House

Do you frequently find yourself wondering whether to keep renting or buy a home? Here are eight signs that you are ready to make the switch from renter to homeowner.

1. You Have Dependable Income

Regular, dependable income and stable employment is critical to qualifying for a mortgage. A home is a long-term investment, so your source of income is one of the main factors mortgage lenders look at when assessing your eligibility for a loan. If you do not have proof of steady income or have a shaky employment history, you may find it difficult to qualify.

But even if you can demonstrate financial stability on paper, you should only buy a house if you think your income will remain steady for the foreseeable future.

2. Your Debt-to-Income Ratio is Low

You do not have to be completely debt-free to buy a home. Between car payments, student loan debt and other bills, most lenders understand that it is unrealistic to expect borrowers to be totally debt-free these days. Essentially, they want to know that you will be able to afford your mortgage payment based on how much money you have coming in versus what you need to pay out to other debts.

To figure this out, lenders look at your debt-to-income ratio, or DTI, to determine whether you can afford to take on a new loan in addition to your existing debt. The higher your DTI, the more likely you will be stretched too thin financially.

Your debt-to-income ratio (DTI) is the percentage of your monthly debt compared to your monthly gross income. Credit card payments and loan payments and the payments on your new home are examples of the debts lenders include in your DTI calculations. Your DTI should ideally be below 40% when you include your proposed mortgage payment. Some lenders have stricter requirements. The lower your debt in comparison to your income, the better chance you have of qualifying for a mortgage.

So, before you buy a house, knock out a good portion of your debt as fast as possible. Once debt is under control, get busy stockpiling money in an emergency fund. Then your budget will be secure and you can focus on saving up a down payment.

3. You Have a Good Credit Score

Some renters cannot make the leap to homeownership because they do not qualify for a mortgage. Low credit scores are a common reason why: A history of late payments or too much debt will hurt your score. Your credit score is a number that represents your creditworthiness. Credit scores typically range from 350 to 850 with higher numbers representing better credit. Your credit score is calculated with information from your credit report, including payment history, debt and the length of your credit history.

One of the most common questions first-time buyers ask is, “what credit score is needed to buy a house?” While there is no set number for this, you will likely need a minimum credit score of 600 for approval. Although borrowers with a credit score as low as 500 can qualify for some home loans, they will be required to make bigger down payments and pay higher rates. A good credit score gets you better interest rates and loan terms. To qualify for the most favorable rate, however, work on improving your credit score and wait until you have a score of 700 or higher.

4. You Have a Good Down Payment

It can take a long time to save up enough money for a down payment on a home. Although the common perception is that first-time homebuyers need to have a 20% down payment to purchase a home, that is simply not the case. Depending on the lender and type of home loan, you may be required to put down at least 3% (FHA loans, however, typically require at least 3.5%). For instance, a home that costs $300,000 with a 3% down payment requirement will require you to put down at least $9,000.

It is important to remember that the larger your down payment, however, the lower your monthly payments will be and the less interest you will pay during the life of your loan. Do not forget to factor in closing costs, which can be anywhere from 2 to 5% of the purchase price.

5. You Can Cover the Additional Costs of Buying a Home

When you think about buying a home, many only think about their down payment and monthly mortgage payments. But buying a home carries additional costs you need to factor into your budget. Some of these costs are one-time expenses that you won't have to think about again, while others need to be paid regularly.

Other financial aspects of homeownership may include:

  • Property taxes: Local governments raise money through property taxes to fund things like schools, law enforcement, fire departments and (supposedly) fixing potholes.
  • Homeowners insurance: Sure, homeowners insurance adds more dollar signs to your house payment. But paying for coverage will be way less expensive than trying to replace all your stuff out of pocket if your house ever burned down. Plus, your mortgage lender will require you to have it.
  • Private mortgage insurance (PMI): Remember: You can avoid PMI if your down payment is 20% or more. But if you make a smaller down payment, expect to pay around $75 a month per $100,000 that you borrow.
  • Homeowners’ association (HOA) fees: Houses located in specific neighborhoods or gated communities sometimes have homeowner's associations (HOA). Almost all condominiums and townhouses have HOAs. When you belong to an HOA, you pay fees for the services and amenities the association provides. The amount and frequency of HOA payments varies.

6. You Have Savings to Cover Maintenance and Repairs

Owning a home means you will have to maintain your property. While you may have enough to purchase a home, you will need to make sure you can also cover the costs of owning one. When a pipe bursts or the air conditioner goes out in a rental unit, you do not have to worry about paying for it: That is the landlord’s responsibility. The same goes for property taxes and routine maintenance expenses. When you are the owner, though, all those costs are your responsibility — so you need to have enough extra money to handle the added expenses.

Many realtors and insurance companies recommend following the one-percent rule. Tuck away one percent of the value of the home you intend to buy each year to cover maintenance and unexpected repairs.

7. You Plan on Staying Put for a While

Another thing to think about is whether you are at a place in life where you are ready to stay in your city for more than a few years. It takes time to build equity in your home through paying down your loan and home price appreciation. If you plan to move too soon, you may not recoup your investment.

8. You Have an Expert Real Estate Agent You Can Trust

It can sometimes be difficult to find a house you love that is also within your budget, but it is a whole lot easier when you have a top-notch real estate agent on your side. Plus, working with a buyer’s agent brings two other big benefits:

  • Saving money: In most cases, the home seller pays the commission for your agent—so you pay nothing to get expert help! Even better, a buyer’s agent can save you thousands of dollars on your dream home by fighting for your best interests at the negotiation table.
  • Saving time: Without an agent, you’ll have piles of paperwork to wade through. Life’s too busy for that! Let an expert who knows all the laws and regulations specific to your city take care of the red tape for you.

Find the Right Agent

Buying your house should be a fun and fulfilling experience. If you have done your research and evaluated what you can afford and what you truly need, finding a new home can be exciting. Learning more about the purchase process eliminates the fear of the unknown and lets you search for a home with peace of mind.

Windermere’s community of real estate professionals is our greatest asset. We have experts in all areas of real estate, from your typical starter home to condos, luxury properties, and new construction. While residential real estate is the mainstay of our business, Windermere also has offices and associates who specialize in property management, commercial real estate, and relocation services. To further facilitate the home buying process, Windermere has affiliated partners in certain regions to provide mortgage, title, and escrow services.

Call us today with any questions or concerns. Our professional Real Estate Agents will help you through this exciting process. (951) 369-8002


Q2 2023 Southern California Real Estate Market Update

The following analysis of select counties of the Southern California real estate market is provided by Windermere Real Estate Chief Economist Matthew Gardner. We hope that this information may assist you with making better-informed real estate decisions. For further information about the housing market in your area, please don’t hesitate to contact your Windermere Real Estate agent.

 

Regional Economic Overview

The Southern California market areas contained in this report added 222,700 jobs over the past 12 months, representing a decent growth rate of 2.4%. Although layoffs in the tech sector and the writers’ strike have been dominating headlines, payrolls in Southern California continue to expand. The Los Angeles market has added over 60,000 jobs through the first five months of this year. This was followed by Orange County, which added 19,000 jobs. San Diego County added 16,600 jobs, and employment grew by 6,700 jobs in Riverside County. The region has seen the pace of employment growth slow, but this appears to be more an issue of labor supply rather than a lack of demand. The region’s unemployment rate in May was 4.3%, up from 3.7% in the same quarter of 2022. The lowest jobless rates were in Orange County (3.2%) and San Diego County (3.5%). The highest rate was in Los Angeles County, where 4.8% of the workforce was without a job.

Southern California Home Sales

❱ In the second quarter of 2023, 35,381 homes sold, which was 25.9% lower than in the second quarter of 2022 but up an impressive 27.7% compared to the first quarter of 2023.

❱ Pending home sales, an indicator of future closings, were 13.9% higher than in the first quarter, suggesting that sales activity has room to rise further as we move into the second half of the year.

❱ Compared to the same quarter in 2022, sales fell across the board. However, the market heated up in the second quarter compared to the first quarter of 2023: sales were up 36% in Orange County, 29.6% in Los Angeles County, 28.4% in San Bernardino County, 24.3% in Riverside County, and 20.5% in San Diego County.

❱ The growth in sales was even more impressive given significantly rising financing costs in the second quarter.

A graph showing the annual change in home sales by county for Southern California from Q2 2022 to Q2 2023. Orange had the least drastic change at -23.4%, while San Diego had the most largest change at -28.9%.

Southern California Home Prices

❱ Compared to the second quarter of 2022, home sale prices were 5.5% lower. However, they were 2.1% higher than in the first quarter of 2023.

❱ Affordability continues to be a significant constraint in the region. With median list prices rising 21% in San Diego County and 20% in Los Angeles County compared to the first quarter, it appears that sellers’ confidence levels continue to rise, which will further impact housing affordability.

❱ Year over year, prices pulled back across the region, with a significant drop in Los Angeles County. Compared to the first quarter of 2023, Los Angeles prices fell 4.1%. Closed sale prices rose in the rest of the market areas.

❱ The region has demonstrated significantly more resilience to higher financing costs than expected. As we move through the balance of 2023, I expect prices to rise further, but at a very modest pace.

AA map showing the real estate home prices percentage changes for various counties in Southern California. Different colors correspond to different tiers of percentage change. Los Angeles County has a percentage change in the -10% to -8.1% range. San Bernardino County is in the -6% to -4.1% change range. Orange County is in the -4% to -2.1% change range and Riverside and San Diego counties are in the -2%+ change range.

A bar graph showing the annual change in home sale prices by county in Southern California from Q2 2022 to Q2 2023. Riverside County tops the list at -1.7%, while Los Angeles County had the greatest decline at -9.3%.

Mortgage Rates

Although they were less erratic than the first quarter, mortgage rates unfortunately trended higher and ended the quarter above 7%. This was due to the short debt ceiling impasse, as well as several economic datasets that suggested the U.S. economy was not slowing at the speed required by the Federal Reserve.

While the June employment report showed fewer jobs created than earlier in the year, as well as downward revisions to prior gains, inflation has not sufficiently slowed. Until it does, rates cannot start to trend consistently lower. With the economy not slowing as fast as expected, I have adjusted my forecast: Rates will hold at current levels in third quarter and then start to trend lower through the fall. Although there are sure to be occasional spikes, my model now shows the 30-year fixed rate breaking below 6% next spring.

A bar graph showing the mortgage rates from Q2 2021 to the present, as well as Matthew Gardner's forecasted mortgage rates through Q2 2024. After the 6.79% figure in Q4 2022, 6.35% in Q1 2023, and 6.51% in Q2 2023, he forecasts mortgage rates going to 6.55% in Q3 2023, 6.31% in Q4 2023, 6.03% in Q1 2024, and 5.72% in Q2 2024.A bar graph showing the mortgage rates from Q2 2021 to the present, as well as Matthew Gardner's forecasted mortgage rates through Q2 2024. After the 6.79% figure in Q4 2022, 6.35% in Q1 2023, and 6.51% in Q2 2023, he forecasts mortgage rates going to 6.55% in Q3 2023, 6.31% in Q4 2023, 6.03% in Q1 2024, and 5.72% in Q2 2024.

Southern California Days on Market

❱ In the second quarter of 2023, the average time it took to sell a home in the region was 32 days, which was 16 more than in the second quarter of 2022 but 13 fewer days than in the first quarter of 2023.

❱ Compared to the first quarter of 2023, market time fell in all counties covered by this report.

❱ Homes in San Diego County continue to sell at a faster rate than other markets in the region, but all counties saw market time increase from a year ago.

❱ Home buyers appear to be resigned to the fact that supply levels are unlikely to improve any time soon and believe that prices are not going to fall further. This is leading them to pursue buying a home even if mortgage rates remain very high, with the hope they will be able to refinance when rates eventually fall.

A bar graph showing the days on market by county for homes in Southern California in Q2 2023. San Diego County had the lowest DOM at 20, while Riverside had the highest at 44.

Conclusions

This speedometer reflects the state of the region’s real estate market using housing inventory, price gains, home sales, interest rates, and larger economic factors.

Home prices have stabilized and are starting to trend higher again. This is counterintuitive, especially given that mortgage rates are higher than the market has seen in over 15 years. However, the reason for this is straightforward: a lack of supply is bolstering home values. It will only be when supply levels rise to match demand that we will start to move toward a more balanced market. The issue, though, is that 85.7% of California homeowners with a mortgage have an average interest rate below 5%, and 30% have rates at or below 3%. I find it highly unlikely that homeowners will give up their current rate unless they absolutely have to, which is holding back supply.

A speedometer graph indicating a seller's market leaning toward a balanced market in Southern California for Q2 2023.

Homeowners who do decide to sell are aware of this and are increasingly confident in their ability to sell their homes regardless of mortgage rates. Given these factors, I have moved the needle into the seller’s sector of the speedometer.

About Matthew Gardner

Matthew Gardner - Chief Economist for Windermere Real Estate

As Chief Economist for Windermere Real Estate, Matthew Gardner is responsible for analyzing and interpreting economic data and its impact on the real estate market on both a local and national level. Matthew has over 30 years of professional experience both in the U.S. and U.K.

In addition to his day-to-day responsibilities, Matthew sits on the Washington State Governors Council of Economic Advisors; chairs the Board of Trustees at the Washington Center for Real Estate Research at the University of Washington; and is an Advisory Board Member at the Runstad Center for Real Estate Studies at the University of Washington where he also lectures in real estate economics.


Disclosures

Understanding Seller’s Disclosures in Real Estate

When you are buying a house, you need to be aware of any potential issues with the property. The seller has an obligation to disclose any issues they are aware of. Proper disclosure means the buyer gets a more comprehensive view of the property, and the seller lessens their chance of getting sued by the new owner for hiding information.

A seller’s disclosure is a document that sellers are legally required to provide buyers. This piece of paperwork will include all the undisclosed details related to the property that negatively affect its value.

Familiarizing yourself with the seller’s disclosure form will benefit all parties—buyer and seller alike.

What is a Seller’s Disclosure?

A seller’s disclosure statement form is a standard checklist form containing material defects and features of the property. It provides information about the property that may negatively affect the value of the house.

If there are material defects in a property that may impact the value of the property AND the seller is aware of them, the seller should disclose them. However, sellers should report these defects to the best of their knowledge and in good faith. From pest infestation to pending legal issues, you should disclose any known information. This will help you avoid future disputes.

Remember, every state has different seller’s disclosure laws. So, it is advisable to review the form with your real estate agent or lawyer as per the statutes in your state. Usually, the disclosure form is completed along with the listing paperwork – especially in the Multiple Listing Service (MLS) provided by the listing agent.

Seller Disclosure Basics

Here are four important things to know about property disclosure statements.

They Differ From One State To The Next

While a few disclosures are federally required, most disclosure requirements are state-specific and vary from one state to the next. Therefore, an experienced real estate agent should be familiar with the state's disclosure laws.

They Must Be Written

Real estate disclosures, like all documentation related to the sale or purchase of your home, must be submitted in writing

Inspection Reports Are Not Made From Disclosure Statements

Although disclosure statements are required by law, not all sellers conduct a pre-inspection, and not all buyers opt to have a home inspection.

Disclosures Do Not Require Investigation

You must report all defects or issues in your home. However, you do not have an obligation to search for them. Instead, check the state laws to ensure you understand the details.

Why is a Seller’s Disclosure Important?

A seller’s disclosure protects the buyer by informing them of any issues or defects the home and surrounding property may have. It also safeguards the seller from being sued by the buyer after the transaction if the seller’s disclosure was completed correctly.

For buyers

The goal of the seller’s disclosure is to inform the buyer of the property’s history so buyers can make an informed decision. If the seller’s disclosure reveals a major issue with the home, buyers can back out of the deal without losing earnest money. Any problems documented in the seller’s disclosure can also give the buyer some negotiating power, such as the price of the home or requesting the seller make any necessary repairs.

For sellers

The seller’s disclosure can only protect the seller if done accurately and honestly. If done correctly, this document will protect the seller from being held legally liable for any issues that may develop with the home in the future. This is only the case if the seller made the buyer fully aware of all home defects before the completed purchase. The seller only needs to disclose what is required by their state.

What Should a Seller’s Disclosure Include?

A seller’s property disclosure should include a full list of issues. The exact issues that need to be listed vary from state to state, so make sure to find out your state’s requirements. Some general problems with seller’s disclosures issues across the country include:

  • HVAC
  • Mold
  • Pest infestations
  • Water damage
  • Leaks
  • Foundational integrity issues
  • Lead paint
  • Asbestos
  • Additions and improvement projects (without a permit)
  • Any major repairs made by the seller or previous owners
  • Insurance claims made

When Do You Receive the Seller’s Disclosure?

In many cases, you will get the seller’s disclosure form before you make an offer on the property. The form will be ready for all prospective buyers. But in some states, the seller must provide the disclosure a certain number of days after your offer is accepted or a certain number of days before closing.

Review the seller’s disclosure notice carefully and talk it over with your real estate agent. Before you move forward, you will need to sign the property disclosure statement acknowledging that you received it.

Can the Buyer Walk Away After Receiving the Seller’s Disclosure?

In many cases, yes — but state law may have a say. You generally have a chance to back out of the sale within a certain number of days after receiving the seller disclosure statement. Also, if you don’t get a seller’s disclosure and the sale doesn’t fall under one of your state’s exemptions, you may be able to cancel the purchase without penalty.

What if the Seller Lies?

If your seller lied on the property disclosure statement, and you have already closed, you need to be ready to prove that information was intentionally withheld in a court of law. The buyer can sue for damages sustained due to omitted information bear in mind that there is a statute of limitations. If too much time has elapsed, you no longer have a case, although you may still be able to sue for fraud.

As a seller, keep in mind that you can be held liable for damages and repair costs if you are caught lying on the seller’s closing disclosure.

Check your state’s guidelines and stay informed. Familiarize yourself with the laws and requirements and do your best to purchase from a reputable seller.

Get a Home Inspection Even With a Seller’s Disclosure

In addition to the seller’s disclosures, the buyer should always have an inspection done. No matter how thorough or trustworthy the seller may be, a seller’s disclosure is no substitute for a thorough home inspection by a licensed and qualified professional. Most buyers are not trained to look for and identify the issues that can affect the average home. Before you buy, it is in your best interest to get an inspection.

Find the Right Agent

Windermere’s community of real estate professionals is our greatest asset. We have experts in all areas of real estate, from your typical starter home to condos, luxury properties, and new construction. While residential real estate is the mainstay of our business, Windermere also has offices and associates who specialize in property management, commercial real estate, and relocation services. To further facilitate the home buying process, Windermere has affiliated partners in certain regions to provide mortgage, title, and escrow services.

Call us today with any questions or concerns. Our professional Real Estate Agents will help you through this exciting process. (951) 369-8002

 


home inspection tips

12 Common Things That Fail a Home Inspection

Once you have a buyer for your home, you may start thinking the home selling process is basically over, except for finalizing paperwork. But you still have a big step ahead of you. The home inspection!

A home inspection examines the parts of a home, from the roof to the foundation. Inspections are often requested by buyers interested in a property, sellers who opt to do a pre-sale home inspection and homeowners who want some peace of mind. Inspections are not mandatory but recommended for buyers to ensure they are not purchasing a home with major, costly issues.

A home inspector can reveal things that fail a home inspection that may affect the house’s safety, functionality, and value. By being aware of these potential issues, buyers can approach the home buying process with confidence and make informed decisions about their investment.

How Does A Home Inspection Work?

A home inspector should take several hours to complete a detailed walk-through of the home in question. During that time, the inspector will take notes and pictures. Most importantly, the inspector will provide an objective opinion on the home’s condition. A home inspector does not necessarily determine whether your home is compliant with local building codes.

They also will not comment on anything aesthetic, unless it suggests that a larger problem lies beneath. Although inspectors should have a keen eye for detail, they will not be able to detect the unseen. That means hidden pests, asbestos, mold or other potentially hazardous substances might go unnoticed.

Areas that are not readily accessible, like the septic tank, will not be covered, either. Those sorts of issues can require specialized evaluations.

12 Common Home Inspection Fails

These are the 12 most common things that fail a home inspection. Some may surprise you:

1. Foundation Problems

A foundation inspection is when a structural or foundation engineer inspects your home’s foundation. They will walk around your home, checking out key areas that may be showing signs of foundation issues. The goal of this inspection is for the inspector to make you aware of any foundation damage they are seeing in the home, how it could affect your safety and what can be done to rectify the situation. Inspectors will also be aware of any relevant building codes and if the home’s foundation is properly up to code.

 What to look for:

  • Cracks on the exterior walls of the home
  • Leaning or tilting chimney
  • Sagging or uneven floors
  • Cabinets separating from the wall
  • Windows and doors that don’t open or shut properly
  • Cracks in interior walls and ceilings
  • Bowing walls

2. Roofing Issues

One of the most common things that can result in a failed home inspection is the condition of the roof. If your roof is in bad shape, it can be a major problem for potential buyers. Leaks, missing shingles, and other damage are often signs that the roof needs to be replaced, which is a major expense.

If you are selling your home and you know that the roof needs to be replaced, it is best to replace it before putting your home on the market. This will give you a much better chance of passing the home inspection, and it will also make your home more appealing to buyers.

If you are buying a home and the roof needs to be replaced, you can attempt to negotiate with the seller to have them replace the roof before you close on the house. If they are unwilling to do this, you may be able to get them to give you a credit that you can use to pay for the roof replacement.

 What to look for:

  • Damage to the shingles
  • Missing shingles
  • Missing flashing
  • Signs of water damage on the roof and in the attic
  • Decay
  • Signs of sagging or weak spots

3. Water Damage

One of the most serious and financially damaging issues in a home inspection is water damage. It can cause significant problems such as foundation damage and mold growth. Water damage and high humidity can lead to mildew and mold issues in your home. Unfortunately, black mold is expensive to fix and highly dangerous to your health and the health of anyone moving into your home.

What to look for:

  • Visible leaks coming from exposed pipes
  • Signs of water, including stains and mildew
  • Sounds of running water or dripping
  • Low water pressure
  • A rise in your water bills, but not in your usage

4. Electrical Issues

Safety is perhaps the most important factor when buying a home, and electrical issues can threaten that safety immediately. Home inspectors will typically look for electrical problems that may cause fires, though they cannot always check ceiling interiors. In fact, most house fires are caused by bad electrical wiring. The bad news is that it can cost a massive amount of money to fix. Good inspectors will notate any code violation found during the inspection along with spliced wires which are more easily fixable. If an inspector cites issues, you should hire an electrician to give an estimate.

 What to look for:

  • Faulty, damaged or exposed wiring
  • Outdated or damaged electrical panel
  • Overloaded breakers
  • Switches or outlets that don’t work

5. Plumbing Problems

Plumbing issues and leaking pipes are frequent reasons for a home inspection to fail. These difficulties might be as basic as a slow drain or a leaking faucet, or they can be more complex, such as cross-connection problems (where water from another source contaminates domestic water).

In some situations, pipes will have to be replaced altogether. Plumbing is a major source of concern because if a hidden leak is left unattended, it can result in mold spreading throughout the home.

To locate leaks, the home inspector will look for signs of mil damage, and fractures around pipes throughout the home. Additionally, they will inspect the ceiling for wet stains or fractures.

 What to look for:

  • Mold growth on cabinets or walls
  • Brown spots on the ceiling
  • Unpleasant smells coming from the drains

6. HVAC Problems

HVAC systems and ductwork should be in working order to ensure proper air quality and temperature regulation in the home. Certain HVAC issues can fail a home inspection due to a matter of safety. Your inspector will want to know your system is working properly, has proper ventilation and isn’t leaking carbon monoxide, refrigerant or any other harmful toxins.

What to look for:

  • Refrigerant leaks
  • Cracks in ductwork
  • Loose electrical connections
  • Squeaks, noises or bangs coming from your unit
  • The smell of gas
  • The presence of carbon monoxide (using a detector)

7. Mold

Not all mold is a major health concern, but certain types are: including black mold. If an inspector finds black mold on the property, it is going to become a major issue with completing the sale. Black mold is most commonly detected within crawlspace or basements which can make it go unnoticed to the untrained eye. Aside from the potential health threat, mold can also be symptomatic of structural issues or even plumbing issues. In either case, the source of the problem must be addressed. Depending on the depth of the issue, this process can be a very expensive ordeal.

 What to look for:

  • Standing water
  • Musty smells
  • Actual, physical mold

8. Termites and Other Pests

Infestations by pests like termites can cause significant damage to the structure of a home and require costly repairs. According to the University of Kentucky, the estimated annual cost of termite damage is in the billions.

What to look for:

  • Rodent droppings
  • Scratching and rustling noises
  • Nest materials
  • Holes or gnaw marks in your wood
  • Swarming
  • Buckling wood
  • Swollen floors or ceilings
  • Visible tunnels in your wood
  • Mold or mildew smells

9. Windows and Doors Issues

It is important for the windows and doors in your home to function properly for safety’s sake, including making sure that they all open, close, and lock properly. Foundation issues can cause doors and windows to become unstable and unreliable, but other issues might have a hand in this too, such as cracks in the wall or problems with the framework.

While it is not always expensive to replace doors and windows, it becomes a much bigger job if the structure of the home causes the issue. Bear in mind that if a home inspector tells you there’s something wrong with them—you’re likely not seeing the root cause.

What to look for:

  • Difficulty opening or shutting doors and windows
  • Broken or malfunctioning locks
  • Large, uneven spacing at top of closed doors
  • Broken windows
  • Windows letting in outside air or water

10. Building Code Violations

Building code violations are another common problem that can raise red flags for potential buyers. These violations can range from minor things, like not having the proper permits for your renovations, to major issues, like not having the proper supports in place for your deck.

If you are buying a home that has building code violations, you need to be aware of the potential risks. You may be liable for the costs of repairing the violations, or you may be forced to demolish the offending structure.

Home inspectors are not building code inspectors. However, they tend to find secondary defects in the structures that were not installed properly. Items such as improper electrical or windows too high for emergency situations. It is recommended that buyers check for any permits on alterations or structures that were added prior to the close of escrow.

If you are selling a home with building code violations, you need to disclose them to potential buyers. You may also need to get the violations corrected before you can close on the sale.

 What to look for:

  • Permits for any additions or other projects done on the home
  • Violations based on your specific city’s codes and ordinances

11. Structural Issues

Many houses sustain some, albeit usually minor, structural damage from problems in one or more of the other categories, such as foundation walls, floor joists, rafters, or window and door headers. These issues are more prevalent in older homes.

What to look for:

  • Sagging floors, rafters or roof
  • Sloping floor
  • Cracks in exterior brick or mortar
  • Wood rot
  • Cracks on walls or around windows and door frames
  • Damp subfloors

12. Drainage Problems

This issue is frequently associated with water damage, as improperly graded homes prevent water from draining properly.

The inspector might notice spongy earth around the home’s foundation and basement leaks. Different circumstances can result in a variety of concerns around the house.

When the terrain surrounding the home slopes downward toward the house, this might result in moist or wet crawl spaces, foundation movement, or foundation cracking. Should water wick up the house’s foundation, it can cause rot and mold in the walls.

What to look for:

  • Overflowing gutters
  • Flooding in your yard
  • Water pooling near the home
  • Water leaking into the basement
  • Musty smells
  • Mold and mildew
  • Efflorescence on your basement walls

Do You Have To Fix Every Problem Found During A Home Inspection?

A home inspection report is not a to-do list; you do not need to fix everything a home inspector thinks could stand for improvement. Basically inspection repairs fall into three categories: fixes that are pretty much required, according to the inspector; fixes that typically aren’t required; and fixes that are up for debate. Here’s how to know which is which.

There are some repairs that will be required by lenders before they will release funds to finance a buyer’s home purchase. Typically these address costly structural defects, building code violations, or safety issues—sometimes in the attic, crawl spaces, and basement—and others related to the chimney or furnace.

An inspector will also check whether your septic system and heater are in good condition and verify whether there’s a possible radon leak or the presence of termites (homeowners tend to have many questions on these topics). Other conditions of the home that an inspector may report on include those related to the roof, electrical systems, and plumbing lines and the condition of your HVAC system.

If a home inspection reveals such problems, odds are you’re responsible for fixing them. Start by getting some bids from contractors to see how much the work will cost. From there, you can fix these problems or—the more expedient route—offer the buyers a credit so they can pay for the fixes themselves. This might be preferable, as you won’t have to oversee the process; you can move out and move on with your life.

Find the Right Agent

Buying your house should be a fun and fulfilling experience. If you have done your research and evaluated what you can afford and what you truly need, finding a new home can be exciting. Learning more about the purchase process eliminates the fear of the unknown and lets you search for a home with peace of mind.

Windermere’s community of real estate professionals is our greatest asset. We have experts in all areas of real estate, from your typical starter home to condos, luxury properties, and new construction. While residential real estate is the mainstay of our business, Windermere also has offices and associates who specialize in property management, commercial real estate, and relocation services. To further facilitate the home buying process, Windermere has affiliated partners in certain regions to provide mortgage, title, and escrow services.

Call us today with any questions or concerns. Our professional Real Estate Agents will help you through this exciting process. (951) 369-8002

 


improve home value

How to Improve Your Home’s Value

If you are looking to increase the value of your home to sell, or are just looking to make some upgrades you will need to know the improvements that will hold their value.

Many of the tips are DIY, while others require some professional assistance. But whichever route you decide to go, select the options that make the most sense for you and your home. Last thing you want is to spend more on improvements than you will get back when you sell.

Below you will find some of the most cost-effective things you can do to improve your home’s value, while also ensuring a healthy return on your investment.

1. Increase Useable Square Footage

Adding to the square footage of your home is another way to increase your value, although consulting with a professional will ensure you make the right addition and yield the best return on your investment. When real estate agents and prospective buyers pull comps (comparable sales) to see if the home’s value aligns with the asking price, this is a significant factor.

Here are options to consider:

  • Accessory dwelling unit: This could be an additional living space on your property, such as a garage or shed that has been converted into a guest living quarters, an additional room for a large family, an office or a rental unit.
  • Finished basement: Turning your basement into finished habitable living space for guests, as a recreational room, gym or office can significantly boost value and eye-appeal for prospective buyers.
  • Finished attic: Just like the basement, turning your attic into a habitable space can increase your home’s value.
  • Bedroom addition: The more bedrooms you have, the higher the price of the house. Depending on how much space you have to work with, add another room or rooms to match preferences and trends in your local housing market.
  • Bathroom addition: Likewise, the more bathrooms, the greater the property’s appeal, especially for families. An additional bathroom or half-bath is worth it, particularly if you only have one bathroom.

2. Small Changes Can Add Up to a Big Difference

The little things matter. Compared to remodeling your kitchen or installing hardwood floors, it’s relatively inexpensive to:

  • Add a new coat of paint or change loud paint colors
  • Stain your deck, fence, cabinets, or any other area where wood is looking worn
  • Update dated light fixtures, knobs, ceiling fans, and hooks
  • Plant a tree or some flowers near the walkway to the house
  • A new mailbox is inviting and feels homey

3. Improve Your Outdoor Space

When people talk about adding value to your home, you often hear curb appeal, but don’t forget the backyard (or the sides). Your property is another opportunity to expand its living space. Adding a deck or patio, with room for seating and a built-in or freestanding grill, is a way to create a defined space for outdoor living on a large or small scale.

But whatever you do, really weigh the pros and cons before you add expensive features like a swimming pool. While buyers in some markets see pools as a major plus, others do not want the added expense, ongoing maintenance, or potential liability.

4. Update the Bathrooms

Bathrooms are one of the most critical rooms in a home. If your bathroom is over 10 years old, a facelift is necessary if you want to make your home more attractive to prospective buyers, or sell it at a higher price.

Upgrades like a fresh coat of paint; replacing the cabinets, faucets, showerheads and countertop; or installing a new sink or tiles can go a long way. Many of these ideas, you can also do yourself for a few hundred dollars.

5. Remodel Your Kitchen

Many buyers narrow in on the kitchen as the central feature of a home, so if yours is outdated, it can ultimately affect how much you garner from a sale. If updating your entire kitchen is too big of an undertaking, a minor remodel could still have an impact on your home’s value — think coordinating appliances and installing modern hardware on your cabinets. Talk with a real estate agent about what makes the most sense and what will command the most dollars from prospective buyers.

Before embarking on a kitchen remodelling project, speak to an interior design or real estate professional to understand what features will help your house sell or enhance its value. They will also be able to tell you the types of kitchen trends that customers prefer now, and are willing to pay more for. That way you can avoid wasting your money.

6. Do a Deep Cleaning

It should go without saying, but you can increase the value of your home with only a little elbow grease plus the cost of some sponges, gloves, and cleaner. And now more than ever, homebuyers want a home that feels clean and safe.

Move furniture and appliances. Take out personal items and clean out drawers.

7. Making the Home Energy Efficient

Lowering your home's energy costs will save you money for as long as you live there and is expected to be a major selling point down the line. Indeed, "energy-­efficient" was second only to "safe community" on the list of attributes that would most influence a purchase decision.

Things That Do Not Actually Increase Value

Before we dive into how to improve home value, it’s important to be aware of some myths about what increases home value, so you can avoid spending too much on upgrades that don’t typically boost home value.

These home value improvement myths include:

  • over the top landscaping
  • water features
  • bridges
  • pergolas
  • fancy electrical wiring e.g. copper pipes
  • swimming pools
  • hot tubs
  • saunas
  • white appliances
  • solar panels

Find the Right Agent

Home improvements that add value mean more money when you sell and more joy while you live in your home. When you understand how to increase the value of your home, you are setting yourself up for success now and in the future. Be sure to add unique touches to make your home feel cozy and welcoming. These steps will go a long way toward helping your home stand out from the crowd.

Windermere’s community of real estate professionals is our greatest asset. We have experts in all areas of real estate, from your typical starter home to condos, luxury properties, and new construction. While residential real estate is the mainstay of our business, Windermere also has offices and associates who specialize in property management, commercial real estate, and relocation services. To further facilitate the home buying process, Windermere has affiliated partners in certain regions to provide mortgage, title, and escrow services.

Call us today with any questions or concerns. Our professional Real Estate Agents will help you through this exciting process. (951) 369-8002

 


turn off home buyers

14 Features of Your Home That Turn Off Potential Buyers

Homebuyers can be fickle and a bit snobby. You will see them turning their noses up at the smallest things simply because the house does not fit every point on a dream home checklist.

Once your house goes on the market, you essentially begin living in a museum that needs to stay perfect in case a last minute showing is scheduled. Making sure everything is in place and the staging will attract buyers can help ensure that the house sells fast so you can move on to the next phase. Open houses and private showings are inconvenient and intense for the whole family. If you do not properly prepare for it, odds are good you will not get any offers, or the offers will be for less than you wanted.

Not every home for sale will suit every buyer’s wish list or needs. However, home sellers can take steps to make their property more attractive to potential buyers.

The following are fourteen of the top turn-offs for home buyers you should avoid when putting your home up for sale:

1. Clutter

Decluttering is the first thing we recommend doing before you put your house on the market because it can have an enormous effect on the presentation. Clutter makes any space appear smaller, dirtier, and overall less appealing to buyers. While it’s easy to think buyers can just look past the clutter, it has a subconscious effect on how buyers feel in a space and actually distracts from the positives that are buried beneath it. When a potential buyer walks through the door - or first looks at the listing photos online - you want them to see their home, not your home.

Take the time to declutter the entire house, clearing off all the surfaces, thinning out the decor, and even paring down on how much furniture is in the home to encourage a nice, easy traffic flow and serene setting.

2. Carpet

While carpet reigned supreme for many decades, today’s homebuyer generally prefers hardwood flooring. They are very easy to clean and do not retain dirt like carpets do. Even newer carpet can appear dingy and cheap, especially in high traffic areas.

While lush carpeting feels great underfoot and keeps the room warmer during winter, the majority of buyers now want to see hardwood. They will always be in style, and work with any decor scheme.

3. Bold or Distracting Colors

As a seller, you might love a brightly colored house, but many potential buyers prefer homes with neutral colors.  You may love the bright yellow accent wall in your kitchen, but a buyer can see it as unsightly. This does not mean that you have to paint every room beige. But consider painting rooms decorated in themes, in particular kids’ rooms done in bright colors. And consider painting the exterior of your home in a more neutral color that will appeal to a wider range of buyers.

4. Outdated Appliances and Features

Buyers do not want to feel like they time-warped to another decade when stepping into your house. Ditch the shag carpet, tarnished doorknobs, disco-era light fixtures and ancient ceiling fans. Something as simple as updating the cabinet hardware and doorknobs makes a huge difference. The same holds true for dated ceiling fans, light fixtures and kitchen appliances.

Homes that have old fans, lights, ovens, microwaves, ranges and dishwashers can really turn a buyer off. As the seller, you may be tempted to think that the buyers can take care of that but it is going to hinder you from getting the highest price possible for your home."

5. Bad Lighting

The outside appearance of a home can be significantly enhanced by lighting. Illuminating front doors, garden paths and driveways can increase a home's appeal during winter and in the evenings. Make sure your front porch and entryway are well-lit, and consider adding some outdoor lighting to highlight your home's best features.

That holds true for the inside too. Most buyers are turned off by dark spaces because they feel smaller and less inviting. Allow as much natural light into each room as possible with the right window treatments and trim back plants or trees that could be blocking the sun. If any rooms do not have access to good natural light, install attractive artificial lighting to make sure each corner is well-lit. Bright, open homes always show better to buyers.

6. Evidence of Smoking

Smoking is a personal choice. However, many buyers are turned off when the home is permeated with the smell of cigarettes. When they walk into a home that smells of cigarettes, some buyers will walk away immediately. We have found that non-smoking buyers are very unforgiving when it comes to houses that smell like smoke.

If you are a smoker and planning to sell your house, stop smoking in it now. You should also start taking steps now to remove the smoke odor. Washing the walls is an obvious first step, but painting them may be necessary, too. Also wash or steam clean fabrics including drapes, furniture, carpet and the rugs.

7. Lack of Storage

This can be a deal breaker for some, especially if they are moving from a larger home. There may not be enough space to put all of their belongings or they may have to spend extra money on storage units.

It is important to organize your home before putting it on the market so that potential buyers can see the full potential of the space. If you do not have enough storage, consider renting a storage unit or using creative solutions like under-bed storage containers.

8. Lack of Privacy

One of the quickest turn-offs for any buyer is a lack of privacy when it comes to interior or exterior backyard space. So, if the neighbor’s window looks directly into your yard, or worse, into a bedroom, this can be a huge turn off for a potential buyer. For the most part, privacy issues can be overcome by planting a tree or building a fence. But lack of privacy is usually a red flag.

9. Pools

Do not be mistaken into thinking that your pool is a feature that will attract all buyers. Most buyers will consider a pool to be a major eyesore. This is especially true for above-ground pools which tend to leave dead spots in the grass. Even an in-ground pool is a huge turn-off due to the high maintenance required to care for a pool. Not to mention the liability involved with owning a pool. Having a pool can even increase the homeowner’s insurance premiums that the next homeowner will have to pay.

10. Converted Garage

If you have converted your garage to a home office, an extra bedroom, a personal gym or anything else, then convert it back to a garage. Do this before you begin showing your house.  People want a covered parking space so that they have a safe place for their car—especially in areas where street parking is at a premium. Additionally, people often use their garage as storage space.

11. Popcorn Ceilings

The shag carpet from the '70s was replaced long ago. But acoustic popcorn ceilings, another artifact of that era (and of the '80s, too) might remain. They badly date your house.

If you cannot afford the cost or the mess to remove the overhead popcorn, be prepared to credit a buyer in certain markets in order to close a sale. The popcorn acoustic ceiling is a major, major turnoff to buyers these days.

12. Wallpaper

Wallpaper almost always looks tacky. Especially if it has been up there for the better part of the decade. Today's buyer doesn't want wallpaper, no matter how much your grandma liked it. Not only is wallpaper extremely personalized, it is also quite hard to remove.

13. Misrepresented Homes

Nothing angers buyers more than showing up to a home that was misrepresented in ads.  Sellers use photos and words to make their homes enticing on the multiple listing service. But sometimes the words and pictures paint a false portrait. Sellers are going to paint the best picture they can but they need to be honest at the same time.

14. You

Along with the pets and kids, most realtors say the homeowners shouldn’t be around, either. It is usually best for homeowners to leave when potential buyers tour the house. Hovering or offering tidbits of information can make buyers feel uncomfortable and even be annoying. As the seller, it is hard to resist the temptation to walk around with the potential buyer and put in your two cents' worth.

Find the Right Agent

First impressions still matter. Just like with curb appeal, the way you stage your rooms can make or break a buyer’s interest in your home, so it’s important to put your best foot forward. Be sure to add unique touches to make your home feel cozy and welcoming. These steps will go a long way toward helping your home stand out from the crowd.

Windermere’s community of real estate professionals is our greatest asset. We have experts in all areas of real estate, from your typical starter home to condos, luxury properties, and new construction. While residential real estate is the mainstay of our business, Windermere also has offices and associates who specialize in property management, commercial real estate, and relocation services. To further facilitate the home buying process, Windermere has affiliated partners in certain regions to provide mortgage, title, and escrow services.

Call us today with any questions or concerns. Our professional Real Estate Agents will help you through this exciting process. (951) 369-8002

 

 


Q1 2023 Southern California Real Estate Market Update

The following analysis of select counties of the Southern California real estate market is provided by Windermere Real Estate Chief Economist Matthew Gardner. We hope that this information may assist you with making better-informed real estate decisions. For further information about the housing market in your area, please don’t hesitate to contact your Windermere Real Estate agent.

 

Regional Economic Overview

Following annual revisions to the data, the Southern California market added only 194,000 jobs in 2022, which was far fewer than the over 676,000 added in 2021. The first two months of data for 2023 showed a net loss of 14,800 jobs. Because the data is not adjusted for seasonality, I am not overly concerned by this decline, but I will be watching as we move through the spring to see if declining job growth is becoming pervasive. Total employment in the counties covered by this report is still 266,400 jobs shy of the pre-pandemic peak. Los Angeles County continues to have the largest shortfall of jobs (-260,000), followed by Orange County (-37,100). Job levels in San Diego County match their pre-pandemic peak, while employment levels in the Riverside and San Bernardino markets are each higher by more than 15,000 jobs. The region’s unemployment rate in February was 4.6%, down from 5% at the same time in 2022. The lowest jobless rates were in Orange County (3.4%) and San Diego County (3.7%). The highest was in Los Angeles County, where 5.3% of the workforce was without a job.

Southern California Home Sales

❱ In the first quarter of 2023, 27,577 homes sold, which is down 34.8% from the first quarter of 2022 and is 5.2% lower than in the final quarter of 2022.

❱ Pending home sales, which are an indicator of future closings, were 25.4% higher than in the fourth quarter, suggesting that sales activity in the second quarter of this year may pick up.

❱ On a percentage basis, sales fell the most in San Bernardino County, but all markets pulled back significantly. Compared to the fourth quarter, sales were higher in Riverside County (+7.1%) but fell across the balance of the market.

❱ The drop in sales can mainly be attributed to a lack of inventory: the number of homes for sale was down 27.6% from the final quarter of 2022. Additionally, mortgage rates rose by more than a full percentage point in February, which likely also impacted sales.

A bar graph showing the annual change in home sales for various counties in Southern California from Q1 2022 to Q1 2023. All counties have a negative percentage year-over-year change. Here are the totals: San Diego at -31.5%, Orange at -32.7%, Los Angeles -34.9%, Riverside -35.4%, and San Bernardino -39.5%.

Southern California Home Prices

❱ Compared to the same period last year, home prices fell 2.5%. However, prices were 1.9% higher than in the fourth quarter of 2022.

❱ Affordability remains a significant issue, which has been exacerbated by elevated financing costs. That said, median listing prices in the quarter are up in every market other than San Bernardino, which suggests that home sellers may be starting to think that the worst of the price correction is behind them.

❱ Year over year, prices fell across the region but rose in all markets compared to the final quarter of 2022. Of note is that price growth was very solid in San Diego, Riverside, and Orange counties.

❱ While I expect mortgage rates to start stabilizing as we move toward summer, I think there will be some additional downward pressure on home prices. That said, things should start to turn around again in the second half of the year with a return to rising home prices.

A map showing the real estate home prices percentage changes for various counties in Southern California. Different colors correspond to different tiers of percentage change. Orange County has a percentage change in the -6% to -5.1% range, Riverside is in the -5% to -4.1% change range, San Diego in the -4% to -3.1% change range, and Los Angeles and San Bernardino are in the 2%+ change range.

A bar graph showing the annual change in home sale prices for various counties in Southern California from Q1 2022 to Q1 2023. All counties have a negative percentage year-over-year change. Here are the totals: San Bernardino at -0.9%, Los Angeles at -1.6%, San Diego -3.5%, Riverside -5%, and Orange -5.7%.

Mortgage Rates

Rates in the first quarter of 2023 were far less volatile than last year, even with the brief but significant impact of early March’s banking crisis. It appears that buyers are jumping in when rates dip, which was the case in mid-January and again in early February.

Even with the March Consumer Price Index report showing inflation slowing, I still expect the Federal Reserve to raise short-term rates one more time following their May meeting before pausing rate increases. This should be the catalyst that allows mortgage rates to start trending lower at a more consistent pace than we have seen so far this year. My current forecast is that rates will continue to move lower with occasional spikes, and that they will hold below 6% in the second half of this year.

A bar graph showing the mortgage rates from Q1 2021 to the present, as well as Matthew Gardner's forecasted mortgage rates through Q1 2024. After the 6.79% figure in Q4 2022 and 6.37% in Q1 2023, he forecasts mortgage rates dipping to 6.26% in Q2 2023, 5.78% in Q3 2023, 5.43% in Q4 2023, and 5.28% in Q1 2024.

Southern California Days on Market

❱ In the first quarter of 2023, the average time it took to sell a home in the region was 45 days, which is 24 more than in the first quarter of 2022 and 9 more days than in the fourth quarter of last year.

❱ Market time also rose in all counties covered by this report compared to the fourth quarter of 2022.

❱ Homes in San Diego County continue to sell at a faster rate than other markets in the region, but all counties saw market time increase from a year ago.

❱ Higher mortgage rates and lower affordability still have some buyers sidelined. I expect to see increased activity once buyers become confident that mortgage rates have stabilized and that housing values have found a bottom.

A bar graph showing the average days on market for homes in various counties in Southern California for Q1 2023. San Diego County has the lowest DOM at 34, followed by Orange at 42, Los Angeles at 43, and San Bernardino and Riverside at 54.

Conclusions

This speedometer reflects the state of the region’s real estate market using housing inventory, price gains, home sales, interest rates, and larger economic factors.

The Southern California housing market is still trying to find its footing. Mortgage rates are not only still at elevated levels, but they are also moving erratically depending on events in the broader economy (e.g. inflation, bank failures, etc.) Although sellers seem to be more confident, buyers are remaining cautious, which suggests that the market recovery will take more time.

A speedometer graph indicating a balanced market in Southern California in Q1 2023.

Lower inventory levels, higher pending sales, higher listing and sale prices, and an improving absorption rate all favor sellers. However, the market is not completely in their favor. As such, I have left the needle in the “balanced” section of the speedometer. I have tilted it slightly toward home sellers though as there continues to be strong demand for appropriately priced, well-located, and well-appointed homes.

About Matthew Gardner

Matthew Gardner - Chief Economist for Windermere Real Estate

As Chief Economist for Windermere Real Estate, Matthew Gardner is responsible for analyzing and interpreting economic data and its impact on the real estate market on both a local and national level. Matthew has over 30 years of professional experience both in the U.S. and U.K.

In addition to his day-to-day responsibilities, Matthew sits on the Washington State Governors Council of Economic Advisors; chairs the Board of Trustees at the Washington Center for Real Estate Research at the University of Washington; and is an Advisory Board Member at the Runstad Center for Real Estate Studies at the University of Washington where he also lectures in real estate economics.


principal interest

Principal and Interest: Defined and Explained

When you take out a mortgage, one of the challenges that people often face is understanding the long list of complicated terms and lingo. Two common terms often used in the world of banking, including mortgages, are principal and interest. First-time home buyers, in particular, may not fully understand how their mortgage payments are determined. Simply put, it all comes down to principal and interest.

Below, we explain the difference between the two and apply these concepts to help you manage your personal finances.

What Is Your Principal Payment?

The principal is the amount of money you borrow when you originally take out your home loan. To determine your mortgage principal, just take the sales price of your home and subtract the amount of your down payment.

For example, if you buy a home for $300,000 with a 20% down payment. In this instance, you would have put down $60,000 toward your loan. Your mortgage lender would then cover the cost of the remaining amount on the loan, which is $240,000, which would be your principal balance. Your principal is the most important factor in deciding how much home you can afford. The principal you borrow accumulates interest as soon as you take it out.

Each month, part of your mortgage payment will go toward lowering your principal balance. It’s important to be aware that the principal starts accumulating interest as soon as you close on your loan.

What Is Your Interest Payment?

The second major part of your monthly mortgage payment is interest. Interest is money you pay to your mortgage lender in exchange for giving you a loan. Lenders charge interest as a way to profit from lending money. That means you have to pay back what you originally borrowed plus some extra. However, the amount of interest lenders charge differs from one lender to the next, as well as between different types of loans.

The amount of interest you pay over the life of your loan will depend on your interest rate. When you apply for a mortgage, your lender will evaluate your eligibility and offer you an interest rate based on factors that include your:

  • Credit score
  • Income
  • Down payment
  • Debt-to-income ratio
  • Housing market

Interest Rate vs. APR

It is also worth mentioning that the interest rate on your loan is not technically the same as its annual percentage rate (APR). Though these terms are sometimes used interchangeably, they are two different things, and both are important to understand.

  • Interest rate on your loan is the cost you pay to borrow the funds from the lender.
  • APR reflects the interest rate plus other expenses, like mortgage points, fees and any other charges associated with borrowing the money.

The APR is a broader measure of what it will cost you to pay back the loan, so it is typically higher than the pure interest rate. If you are comparing loan offers from different lenders, be sure to examine the APRs and interest rates separately. Do not compare the interest rate from one lender with the APR of another, for example.

How are Principal and Interest Calculated?

Lenders multiply your outstanding balance by your annual interest rate, but divide by 12 because you’re making monthly payments. So if you owe $300,000 on your mortgage and your rate is 4%, you will initially owe $1,000 in interest per month ($300,000 x 0.04 ÷ 12). The rest of your mortgage payment is applied to your principal.

Is It Better to Pay Off Principal or Interest First?

As a general rule, it is better to pay off your principal first. Although your amortization schedule will outline a plan for paying off your loan, you may be able to pay it off faster and avoid some interest by putting extra money toward your principal. The faster you pay off your loan principal, the less you will pay in interest.

Using a loan principal and interest calculator is a good strategy for helping you make a plan for paying down your principal balance faster. By understanding all of the terms and conditions involved with personal loans, you can get a better idea of the money you’ll ultimately owe.

When you make monthly payments to the lender, everything you pay above the interest payment amount goes toward paying off the principal. The more you deposit into the credit account, the faster you reduce your principal balance, and the less you usually have to pay in interest.

Other Components of Your Monthly Mortgage Payment

While your principal and interest make up most of your monthly mortgage payment, you may also pay money into an escrow account as part of your mortgage payment each month. Your lender will then take the money in your escrow account to pay important mortgage-related expenses on your behalf.

These expenses most often are:

  • Property Taxes

All homeowners must pay a property tax, which goes to their local government to fund public services such public schools, roads, recreation fire departments and libraries. Taxes are one of the most overlooked parts of owning a home, and they can also be one of the most expensive. Property taxes go to your local government and fund things like.

The amount you pay in taxes depends on the value of your home and the local amenities your community offers. Part of the reason you get an appraisal when you buy a home is so your local government can correctly calculate your taxes. Taxes can vary from year to year, and your county might require you to get a new appraisal every few years.

  • Homeowner’s Insurance

You are not legally required to have homeowner’s insurance to own a home. However, most mortgage lenders will not give you a loan without insurance. Homeowner’s insurance protects you against damage from fires, break-ins and lightning storms, just to name a few examples. You may need an additional policy to protect yourself from damage caused by flooding and earthquakes.

Mortgage insurance is calculated as a percentage of your home loan. The lower your credit score and the smaller your down payment, the higher the lender’s risk, and the more expensive your insurance premiums will be. But as your principal balance falls, your mortgage insurance costs will go down, too.

If the amount you owe in homeowners insurance, property taxes or both changes over the life of your loan, your lender will reassess the amount you pay into escrow each month and raise or lower your monthly payment accordingly to ensure these costs remain covered.

Find the Right Agent

Buying your house should be a fun and fulfilling experience. If you have done your research and evaluated what you can afford and what you truly need, finding a new home can be exciting. Learning more about the purchase process eliminates the fear of the unknown and lets you search for a home with peace of mind.

Windermere’s community of real estate professionals is our greatest asset. We have experts in all areas of real estate, from your typical starter home to condos, luxury properties, and new construction. While residential real estate is the mainstay of our business, Windermere also has offices and associates who specialize in property management, commercial real estate, and relocation services. To further facilitate the home buying process, Windermere has affiliated partners in certain regions to provide mortgage, title, and escrow services.

Call us today with any questions or concerns. Our professional Real Estate Agents will help you through this exciting process. (951) 369-8002

 


Home Staging

How to Stage Your Home to Sell It Quickly

One of the most important steps of selling a home is proper staging. This takes a little bit of work but could make a huge difference. The way you stage your home truly sets the mood for your entire sale. It is imperative that your staging is harmonious and work well with your surroundings. Making your home as eye-catching as possible will help you stand out in a competitive real estate market and attract motivated buyers.

Below, our expert team has compiled some home staging tips to help you add a one of a kind stage design to your home with a flair of personality.

What is Home Staging?

Simply put, staging is the art of decorating a home to sell quickly and for more money on the real estate market. It includes renovating, rearranging furnishings, adding subtle pieces of décor or even taking some décor away for a cleaner look. Staging a property for sale implies preparing it to appeal to the greatest number of buyers, boosting the chances of selling fast and for a higher price.

As a seller, you have the option of staging your own house, enlisting the assistance of your Realtor, or hiring a professional home stager. Home stagers set the stage for potential home buyers to imagine how they could live in a property and make it their home. This can be as “simple” as rearranging what the home seller already has. Or it can include bringing in new furniture, accessories and art to make the home appeal to more buyers.

Every Detail Counts

To attract more buyers and a higher offer, home staging makes the space visually pleasing and draws attention to the home’s best features.

Home stagers also get rid of clutter and depersonalize the home so that potential buyers will be able to see themselves living there.

Too much and the home looks bland and boring. Too little and potential buyers are distracted by thinking about the people who already live there.

Every detail counts in selling a home for top dollar. From cleanliness to the state of repair. And from furniture placement to lighting, color, art and accessories.

Home stagers attend to all of these details for their home staging clients.

Home Staging Tips

First and foremost homes sell quickly with staging, if you want to sell your house quickly and for the highest potential price in top dollars, staging is one of the simplest methods to do it. Also the value of your home increases.

Staging a house ensures that buyers view it in its best light and may assist demonstrate what a property has to offer without requiring a whole home design overhaul. Potential buyers will be more encouraged to make a competitive offer if they can envision themselves living in the property.

Start With a Deep Cleaning

A clean home shows potential buyers that you have taken good care of the property. Ideally, you should clean every part of the house, from the floors to the ceilings—and everything in between. While some buyers might not care about a little bit of clutter or dust, it could turn others away. If your appliances in the kitchen are older, make sure they are spotless. Likewise, make sure your bathrooms sparkle, from the corners of the tub, to the sink drain, to that spot behind the toilet that you don’t think anyone can see. Your goal should be to make everything look new and exciting.

Declutter

Clutter distracts buyers from your home’s features and it makes the home seem like it has less space. When you are about to put your house on the market, be sure to box up and put into storage the things you do not need on a day-to-day basis (knickknacks, games, papers, seasonal clothes, and messy hobbies). It is also time to get rid of things you no longer need—like the expired food in the back of the cabinets, and the clothes and toys that the kids have long since outgrown. The more empty storage space you have, the better.

Define Rooms

Make sure that each room has a single, defined purpose. And make sure that every space within each room has a purpose. This will help buyers see how to maximize the home’s square footage. If you have a finished attic, stage it as an office. A finished basement can become an entertainment room, and a junk room can be transformed into a guest bedroom.

Even if the buyer does not want to use the room for the same purpose, the important thing is for them to see that every inch of the home is usable space.

Remove Most Personal Items

You do not have to remove every single personal item from your home before you sell it, but the majority of your belongings should be boxed up and stored elsewhere. That includes items like old family photos, family heirlooms, refrigerator art and knick-knacks. Buyers need to be able to envision themselves in your home. Keep clothes hidden away as much as possible, and make sure the bathroom counters are empty (except for hand soap and a towel, of course). Likewise, put away all the toys and anything else that is highly personal or evocative of the home’s current inhabitants.

Stay as Neutral as Possible

Your realtor will most likely going to tell you that you need to keep your furniture and decorations as neutral as possible. Yes, that bright red accent wall really shows off your personality. But you need to tone down the colors. Neutrals are your friends. You will also want to make sure to keep spaces gender-neutral. Your home’s new owners will not necessarily use the rooms (or decorate them) the same way you do. As a general rule, you want potential buyers to be able to walk into a home and envision themselves living there. Having neutral furniture and decorations is going to create a blank canvas for them.

Focus on Fresh

A few potted plants can do wonders to make your home feel fresh and inviting. If you have a lot of plants, space them out strategically so they do not overwhelm any one area. Of course, dead and dying plants do not do much to make your home look well-tended so be sure to prune them back or ditch them altogether.

Another way to make your home seem fresh is to get rid of odors. Pets, kids, last night’s dinner, and many other conditions can make your home smell. Inexpensive tricks for ridding a home of odors and giving it an inviting aroma include baking cinnamon-coated apples or cookies in the oven, or burning some mild scented candles.

And do not forget to take out the trash!

Furniture

Make sure furniture is the right size for the room, and do not clutter a room with too much of it. Furniture that is too big will make a room look small, while too little or too small furniture can make a space feel cold. Arrange the furniture in a way that makes each room feel spacious, homey, and easy to navigate.

Whenever possible, do not use cheap furniture. You do not have to pay a lot of money to switch out your existing furniture—and you may even be able to rent furniture to stage your home. Either way, make sure the furniture looks nice, tidy and cozy. You can use throw pillows to add contrast and a splash of color.

Lighting

One of the easiest and most effective ways to make a home more eye-catching is to improve the lighting. Take advantage of your home’s natural light. Open all curtains and blinds when showing your home. Add fixtures where necessary, and turn on all the lights for showings (including those in the closets).

Make sure that all of the bulbs throughout your home are bright and working correctly. Painting the walls a bright and neutral color is another simple way to improve indoor lighting. This makes your home appear more inviting. If you think your existing fixtures are fine, be sure to dust them and clean off any grime. Otherwise, outdated and broken light fixtures are easy and cheap to replace.

Find the Right Agent

First impressions still matter. Just like with curb appeal, the way you stage your rooms can make or break a buyer’s interest in your home, so it’s important to put your best foot forward. Be sure to add unique touches to make your home feel cozy and welcoming. These steps will go a long way toward helping your home stand out from the crowd.

Windermere’s community of real estate professionals is our greatest asset. We have experts in all areas of real estate, from your typical starter home to condos, luxury properties, and new construction. While residential real estate is the mainstay of our business, Windermere also has offices and associates who specialize in property management, commercial real estate, and relocation services. To further facilitate the home buying process, Windermere has affiliated partners in certain regions to provide mortgage, title, and escrow services.

Call us today with any questions or concerns. Our professional Real Estate Agents will help you through this exciting process. (951) 369-8002