Nope. Not slowing down. Apparently the virus has made homeownership in our valleys a very attractive way to live.
Let’s look at the numbers first, then the graphs.
For the Conejo Valley, inventory is down 24% versus last year at this time, while sales are up 39%. Properties are flying off the mls as soon as posted. The number of sales versus last year (3 month’s worth of sales this year compared to last year) is up 39%. Add the 8-10% price increase to the increased number of sales, buyers have spent 52% more than last year buying real estate in the Conejo Valley. And even though sales are higher this year, there is only 1.1 months worth of inventory at this level of sales, about half the level last year. Looking at the bottom of this chart, notice the strong increase in the most expensive category of homes (over $1.5 million), more than double the number of sales last year (over the same three months). Sales are up strongly in all price categories, with the lowest category (under $750,000) weaker due to fewer and fewer homes available in that category.
Look at how the inventory compares to the past four years. It has been lower all year. 315 homes active on the market at a time when approximately 300 homes are selling every month. Every price category has lower inventory, with the lowest being the $1-1.5 million category.
Is there a shortage of homes? Is this shortage limiting the number of sales? That is difficult to measure. Look at the chart below to see how sales have compared in 2020 to the previous seven years. This has been a year of record lows and record highs. We usually begin the year with a drop in sales, due to the end of year holidays. Then in March sales recover. As Covid took over the economy in the month of March, we hit a second dip, a dramatic dip. The 8-week moving average dipped to the lowest level in eight years. Then it turned around, and one week showed the highest level of sales in one week (113) in the eight years shown. It not only has peaked, but seems to have leveled off at this very high level. Look at the level of 2020 sales in the box within the chart. May and June experienced a drop, and since then sales have been extremely consistent.
Have we made up for the missed sales due to Covid in April and May? To better see that, look at the cumulative sales chart below. This chart shows the total number of sales at any point in the year. You can see how the number of total sales has recovered and is now on track to end the year at a “normal” number, and perhaps a very high number.
What has this done to prices? From the initial chart above, we already know that prices for the past three months, compared to the same months last year, are up 8-10%. This chart additionally shows the effect of the massive increase in the highest dollar group of homes, over $1.5 million. In 2020, the Average price has exceeded $1 million for 50% of the months. Both Median and Average prices show a strong upward direction, but the Average price increase began earlier in the year, and is overall stronger, thanks to the impact of the highest dollar homes.
Now on to Simi Valley and Moorpark. Their active inventory is extremely low, down 40% from a year ago, with only 123 total homes on the market. Price increases are similar to Conejo, and even stronger, 8-12%. The dearth of inventory has affected sales, and I suspect it has severely limited sales, which are up only 11%. Totally there is inventory available to fulfill only a little more than two weeks worth of sales.
Simi/Moorpark sales are predominantly under $750,000 (last year these sales accounted for 79% of all sales). As of this moment, the homes available in this price range would provide less than two weeks worth of sales. Certainly sales have been restrained due to a lack of inventory. At the bottom of the chart, which compares the number of sales for the past three months of this year compared to last year, the number of sales under $750,000 is actually down 8%, while the higher priced categories are up strongly. Simi/Moorpark needs more under-$750,000 homes to be listed.
Let’s see how that inventory looks in a picture of this year versus the past four years. The usual rise in inventory available, peaking in the summer and declining in the fall, never took place. In the under-$750,000 category, there are only 60 homes on the market, 50% less than the number available in 2019 and 77% less than the inventory available in 2018. Again, this price level accounted for 79% of the total number of sales last year, the bread and butter sales for Simi/Moorpark.
Sales have certainly been constrained. The Covid dip this year, the second dip of 2020 in the chart below, forced the 8-week moving average to the lowest point in the past 8 years. And the recovery has pushed it to the highest point in the past 8 years, in spite of the shortage of inventory. If more inventory were available, this spike would be monstrous.
Due to the inventory constraint, the cumulative sales chart below is still below where it should be. With more inventory available, Simi/Moorpark would certainly have erased all the loses and gotten back to “normal” territory. Perhaps it still will. If not, prices will continue to rise, and those rising prices will eventually entice more people to list their homes.
Finally, how have prices reacted? In the middle of the year, prices rose strongly and continue to rise. Prices are going up throughout California, and Simi is certainly partaking in the price increases.
Finally, will this continue?
Nothing goes on forever.
This is the time of year when listings and sales decline. But, if you hadn’t noticed, this is not a normal year. Both valleys are excellent places to live. Covid has made working from home more acceptable.
Will people still return to offices to work? Probably, but not five days a week. Maybe three days, or two. Much of the work can be accomplished from home, and both companies and workers have found this to be beneficial. That is not the case for factory workers, but our economy has a very strong component of office workers who are experiencing this change.
The suburbs are more inviting, the idea of not having to spend hours driving to the office two or three days a week is even more inviting, and I believe we are experiencing a change that will continue past the pandemic. During the past year, the most expensive homes in our area have become a very strong element of our market. Rental prices in Los Angeles are on the decline. People are moving to the suburbs. This is a period of drastic changes, extremely strong forces pushing changes to happen more quickly than anyone imagined.
I think this market will level, but not fall. If our market is doing well in this period of covid lockdown, I believe the strength will continue as we defeat this disease and get back to normal life. While work life will return to normal, it will be a different normal, allowing office workers to perform their duties remotely and allowing businesses to cut down on the square footage needed for a productive office.
But how about you? What do you think? Please let me know.
Be smart, be safe.