Could the hot Southern California housing market be cooling down? It seems to be going in that direction, at least, based on the recent report from Spectrum News.
According to the report, housing inventory is on the rise while demand is slowing down.
However, it wasn’t enough to bring down the skyrocketing prices of Southern California homes.
In Orange County, in just two weeks in March, housing inventory went up to 2,348 homes from 2,240. It was the largest increase since May 2020, which was two months after the declaration of the COVID-19 pandemic.
Meanwhile, in Los Angeles, housing inventory was at 7,443, which rose from 7,185 over the same two-week period.
The last time Los Angeles saw a similar increase in inventory was in October 2020.
How will this affect prices?
According to the law of supply and demand, when the price increases, people will supply more but the demand will lessen.
In a way, it was expected that the inventory would increase.
The law of demand also dictates that people will want less of something when the price of the commodity becomes too much.
Orange County homes have a median price of $835,000, a 10.6% increase from last year’s price. Los Angeles homes, on the other hand, have a median price of $750,000, which shows a 17% increase from last year.
But there is a kind of frustration that was gleaned from how the demand for houses cooled down.
Homebuyers were actually frustrated with losing the homes they were eyeing through a bidding war.
“The current environment is sidelining some buyers after being on the losing end of multiple attempts at securing a home,” economist Steven Thomas told Spectrum News 1.
Take this story of a Sacramento home that received 122 offers last March.
There was nothing special about the property. The house was 1,400 square meters with three bedrooms and two bathrooms. The property included a swimming pool.
It was listed for $399,000 and received 122 offers in just two days. One offer was for $500,000. Although, the winning bid was somewhere in the mid-$400,000.
The lengths people go to
That was how it was in March. People were willing to pay more than the asking price.
In some cases, houses that have not even been officially listed on the market are already sold. That’s how hot it was.
Actually, the housing market remains hot. There is just a slight decrease in the demand compared to the situation in the first quarter of the year.
After months of bidding, some of these homebuyers--or potential homebuyers--have gotten tired.
Some buyers have said that they will just wait until the end of the second quarter to look for houses again.
Incidentally, with COVID-19 vaccines already administered to the general public, homebuyers can go to open houses again.
Aside from the law of supply and demand, Thomas said that the increase in housing inventory is also seasonal.
“The inventory typically rises during the spring and summer market, but that is only part of the story behind the new evolving trend,” said Thomas.