Q4 2022 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
Employment growth in Southern California continues to slow, with only 33,400 jobs added over the past three months. Annual growth also slowed: only 141,100 new jobs were added, which is down from 347,700 added between September 2021 and September 2022. Total employment in the counties covered by this report is still 305,300 shy of the region’s pre-pandemic peak. Los Angeles County still has the largest shortfall (-310,000), followed by Orange County (-36,800) and San Diego County (-19,500). Employment levels in the Riverside and San Bernardino markets remain well above pre-pandemic levels. The region’s unemployment rate in November was 4%, down from 5.4% a year ago. The lowest rates were in Orange County (3%) and San Diego County (3.3%).
Southern California Home Sales
❱ In the final quarter of 2022, 28,953 homes sold. This is 43.9% lower than the same period the year prior and down 24.5% compared to the third quarter of 2022.
❱ Pending home sales, which are an indicator of future closings, were down 30% from the third quarter, suggesting that sales activity in the first quarter of this year may also be down.
❱ On a percentage basis, sales fell the most in Riverside County, but all markets pulled back significantly. Compared to the third quarter, sales were down 24.5%, or 9,400 units.
❱ Lower number of sales can be attributed to more listings in the market, which were up 83.5% year over year, and higher mortgage rates, which make homes less affordable.
Southern California Home Prices
❱ Fourth quarter home sale prices were .7% higher than the same period the prior year but were 2.5% lower than in the third quarter of 2022.
❱ Mortgage rates, which peaked in October, have impacted both the number of sales and prices. Median listing prices were down 4.9%, which indicates that sellers have been adjusting their expectations, but I believe they will fall further before stability in the market is restored.
❱ The region had very modest price growth in all markets other than Orange County, where prices fell 2.8%. Compared to the third quarter of 2022, prices were lower across all markets other than Los Angeles County, where they rose .2%.
❱ Mortgage rates have started to pull back. If this continues, I am hopeful that the second half of 2023 will be more active, resulting in rising sales and home prices.
Mortgage Rates
Rates rose dramatically in 2022, but I believe that they have now peaked. Mortgage rates are primarily based on the prices and yields of bonds, and while bonds take cues from several places, they are always impacted by inflation and the economy at large. If inflation continues to fall, as I expect it will, rates will continue to drop.
My current forecast is that mortgage rates will trend lower as we move through the year. While this may be good news for home buyers, rates will still be higher than they have become accustomed to. Even as the cost of borrowing falls, home prices in expensive markets will probably fall a bit more to compensate for rates that will likely hold above 6% until early summer.
Southern California Days on Market
❱ In the final quarter of 2022, the average time it took to sell a home in the region was 37 days, which was 15 more than the same period the year prior and 11 more than in the third quarter of 2022.
❱ Compared to the third quarter of 2022, market time rose 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 market time increased in all counties year over year.
❱ More choice and higher mortgage rates appear to be sidelining some buyers. Whether they resume their search for a home in the spring may depend on the direction of mortgage rates and whether prices start to stabilize.
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.
Job growth has slowed, which may be at least partly attributable to businesses expecting to see the economy slow as we move through this year. The housing market is very susceptible to economic turbulence. This, combined with higher financing costs and softening prices, has caused a lull in the market.
There is no doubt that regional home values are resetting following the frenetic market during the pandemic when mortgage rates were artificially low. I expect prices to move modestly lower this spring before stabilizing and starting to rise again in the second half of the year. All things considered, I have moved the needle to a neutral position, favoring neither buyers nor sellers.
About Matthew Gardner
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.
Spring Home Selling Tips
It is that time of year when flowers begin to bud, birds sing and the sun shines a little brighter. As spring starts to blossom it is also a time when lots of people consider buying a home. If you are in the market to sell your home we have lots of information designed to help you prepare your home for spring selling season. The following spring home selling tips are grouped by topic in order to help you apply this to your own situation.
It may seem obvious, but the best practices used for selling a home during the bustling winter months or the color explosion of the fall months are drastically different from selling a home in the Spring.
Spring Cleaning is Top of the List
Many people take advantage of the better weather and longer days in order to tackle their list of cleaning chores. Listed below are some of the most important parts of your home that need special attention when preparing to sell the property.
Main Entry
- Give a thorough dusting to the lights as well as the actual switches that control the light
- Clean the entire door along with the trim around the door. Then clean the floor, ceiling and the walls.
- Shine up the door knob, on both sides, with appropriate cleaning solution
Living Room
- With a cleaning cloth or duster, wipe the walls, ceiling, electrical outlets and switches for the lights
- Thoroughly clean each window as well as the surrounding sill
- If the room has carpet, vacuum the entire carpet and then have the carpet steam cleaned
- If the room has hardwood floors, check with the instructions from the manufacturer and clean accordingly
- If the windows have blinds, use a gentle cleaning solution to clean away dust or other dirt from the blinds
- Vacuum and clean any dirty spots on couches, chairs, recliners and ottomans
Bathroom
- Deep clean any and all vanities along with the supporting cabinets
- Organize all objects on and near the sink. Clear out as much clutter as possible
- Deep clean both the outside and inside of the commode. If you are handy with tools, remove the actual commode seat in order to clean around the bolt areas.
- Clean the liner for the shower/tub. It may be necessary to replace the liner
- Deep clean the tub and/or shower.
- Use cleaning solution to clean the mirrors, light switches and the light fixtures
Kitchen
- Deep clean the sink and counter tops. Remove as much clutter from counters as possible
- Go through the refrigerator and clean out any old items. Thoroughly clean the inside of the fridge. Don’t forget to clean the tip top of the fridge too!
- Do the same cleaning for the freezer
- Deep clean the stovetop and the oven. Pay particular attention to the glass section on the oven door
- Wipe down the walls, floors, and ceilings
- Pull out all of the appliances away from the wall and clean
- Clean up any dust or grime along the coils of the refrigerator
- Clean every light
- Clean out the dishwasher and then run a complete cycle without any dishes to ensure cleanliness
Lawn Care and Other Outdoor Ideas
Many people will look at pictures of your home online or drive by the property and take a quick peek. Since the lawn, walkway, front door and shrubs are available for all to see, it is important to make these areas look as good as you can. Developing a good impression with the yard will improve your chances of getting that important showing of the house. Here are just a few ideas to help improve your property’s curb appeal.
Gutters – Clean out all of the gutters. Also, go over each section of the gutter to see if there are any types of leaks. Clear out any debris that may be blocking the downspouts.
Clear away dead leaves – With the end of a long winter, there are bound to be some leaves in the yard. Remove the leaves in order to give the grass time to grow and shine. It will also give any fertilizer a better chance to work.
Trim the lawn, shrubs and low branches – It goes without saying, but now is the time to give the grass a fresh mowing and trim any shrubs. It is also a good idea to cut back any low hanging branches that may obscure a vision of the home from the road.
Clean up the walkway and driveway – If you have a pressure washer, or do not mind renting one, clean the driveway as well as the walkway leading to the front door. Making these areas look fresh and clean will really improve the appeal of the home.
Pay attention to colors – If you wish to plant flowers, use a pattern of colors that complements the exterior of your home. Make the scheme of colors uniform throughout the garden.
Inspect the roof – Make sure there are no missing shingles from the roof. While inspecting the roof, look for signs of potential leaks and have those addressed by a professional contractor. Be sure to know your roofing options as well.
Choosing a Real Estate Agent
Readying yourself and your home for a sale includes choosing a real estate agent. The agent will be responsible for various things throughout the selling process so it is important that you choose wisely. Here are some guidelines for picking an agent.
Listing a Home at the Correct Time
In order to get your home sold during the spring, your agent will need to list it at the correct time. If the home is listed too soon in the spring, there may not be enough interest in your property. Conversely, if the home is listed too late in the season then you may miss your potential buyer.
Picking the Right Price
Choosing the correct sales price takes a bit of work. The real estate agent will need to factor in things like
- Recent home sales in your neighborhood/area
- The similarity of your home with the homes recently sold
- Distinguishing characteristics of your property that make your home more valuable
- Outside variables that affect price (school district, proximity to shopping, condition of roads, crime rate)
It may seem that the best bet would be to price the home a bit high and simply wait for the right buyer to come along and negotiate. However, not all buyers are willing to haggle. It is wiser to consult with your agent and get their input before settling on a price.
What Happens Next?
After you have sold your current home, what happens next? Do you plan to buy another home in the same general area or do you plan to move out of state? Are you depending on the proceeds from the first sale to facilitate the purchase of your next property? If you are in need of a contingency, then you will definitely want to explain this to your agent. Your agent can present a sales contract in such a way that protects your best interests while also moving the sale along.
As you can see, there are a lot of items that need your attention when it comes time for selling your property.
Keep in mind that this is a process, almost like a marathon, that will take dedication. It is a good idea to write out a plan of all the things you wish to complete and tackle them one at a time.
Our goal with this article is to provide you with not only a big picture view of selling your property but also some practical actionable items that can be put to use right away.
We hope this information will be of use as you prepare to sell your home in the upcoming spring home selling season.
