Perhaps I need to clarify… Over the past several months we have had extraordinary activity. The results included double digit annualized price increases, substantially reduced days on market, and a frenzied atmosphere in many (but not all) local submarkets. The activity was fueled by a severe shortage of inventory coupled with very low interest rates.
For many months the pace of purchase exceeded the inventory of new homes coming on the market. We started to see a trend reversal, albeit small in late April. JTR posted weekly stats for inventory in the NC community. Similarly new sellers felt entitled to unrealistic list prices that were not backed by comps but placed on the market based on the frenzied atmosphere. Predictably a few homes sold but some did not. Thus inventory continued to grow and did exceed the number of homes sold.
Even before the interest rate spike of the past week we already had experienced some fairly solid gains in the inventory for many communities I track. Make no mistake, these gains in no way, shape, or form, signalled an unhealthy market or a buyers market. They simply signalled a return to a more normalized market.
The interest rate been a wake up call but more for those on the bubble (being able to afford a given submarket) then anything else. More telling has been the move of 100 basis points in less then 6 weeks.
I don’t anticipate this to be a major trend reversal at all but a perfectly predictable reaction to what was an unsustainable period over the past 6 months/1 year. I anticipate more inventory growth and some price corrections that are more built on improper initial list pricing then anything else.
Understand this discussion is for SFH owner occupied homes in the more desired submarkets. School districts such as PUSD, TP and north county areas. Other areas may see some of the same. It is not for investor condos. Similarly other areas with a more modest price point, for instance Mira Mesa are still pretty scorching.
