It Can Only Go On For So Long

The  comments in blue below are from Money Magazine

This spring’s housing market is already being characterized as another disappointingly slow season, with home sellers outnumbering buyers by the widest margin since tracking began in 2013 and a majority of people waiting for mortgage rates to fall before considering a move.

The number of sellers in the current market exceeds the number of buyers by 33.7% — a significant enough gap to lead to lower prices, according to a new Redfin report. The brokerage uses real estate listing data to track the number sellers, comparing it to an internal metric for buying activity.

In 2024, sellers outnumbered buyers by only 6.5%, and two years ago, homebuyers actually outnumbered sellers. Redfin is now forecasting a 1% drop in home prices by the end of the year, confirming that “the growing imbalance between buyers and sellers is the basis for that prediction.”

The Redfin report said buyers are gaining the upper hand in negotiations, and if the trend continues, home prices would likely fall.

So what do you think?   You are out there in the trenches.

Inventory is rising, and it is probably not because current homeowners want to sell their homes to purchase another.  But there are many other reasons why current homeowners want or need to sell.

For current homeowners, it’s hard to even think about moving when their new mortgage rates will be this high. “The lock-in effect is still very much in effect,” Laura Eddy, vice president of research and insights at Realtor.com, said in a release.

While Americans haven’t stopped dreaming about moving to new homes, many are delaying home purchases due to tough market conditions. The bank’s survey data shows that the percentage of people “holding off on buying” is at a three-year high. However, their optimism that the market will improve is also notable: 75% “expect prices and interest rates to fall and are waiting until then to buy a new home,” up from 67% a year ago.

Previously I quoted the Michigan Consumer Sentiment Index as an indicator of how homebuyers viewed the future, and it was bleak, near an all-time low of 50.2%.  A lot of that negativity was due to the chaos over tariffs.  I was expecting an even lower number this month.

Surprise, it increased to 60.5%.  Amazing, illogical, unbelievable.  Consumers are feeling much better about the future.    In one month.  But will that exuberance move them to be buyers?  (This was taken prior to onset of the Israeli-Iran War.)

An annual homebuyer report out last week from Bank of America reinforces many of the findings from Redfin and Realtor.com about ongoing housing market challenges and how prospective buyers are responding.  Bank of America’s experts wrote: “Consumers appear bent on holding off for lower home prices and rates.”

So are we to be pleased that the future looks rosy?  When will those roses bloom?

Our results this year indicate a repeat of last year and the year before.  Let’s start with the graph of cumulative sales.  We are on a path to duplicate 2023 and 2024, neither of which were good years.  Looking at the inset box, both 2023 and 2024 were only half of 2021 sales.

Simi Valley and Moorpark are behaving similarly.  As sales occur and total sales for the year accumulates,. we are not expecting much from 2025.  2025 is having a difficult time keeping up with those two previous years.

Another way to look at sales is to compare them as they occur as the year progresses.  For Conejo, the 4-year average of non-Covid years was 238 in May versus our current monthly total of 164,  You can also see the similarity of 2025 with both 2023 and 2024.  Nothing to brag about.

SImi/Moorpark follows the same pattern.

Next, let’s view the table that compares all these statistics with this year (mostly a three-month average figure) with last year.

Conejo Valley inventory is up 83% over last year, and prices are up 4%, consistent with general inflation.  The number of sales is surprisingly strong, up 11%.  We can see looking at the bottom half of this table that most of that strength continues to be in the highest-price category.  Homes over $1.5 million are up 33% compared to a year ago.  Even though inventory is high overall, 43% of the total listing inventory is represented by homes in excess of $1.5 million.  I don’t have numbers to show you, but I suspect most of those homes were bought for all cash.

Simi/Moorpark is a little different.  Inventory is also up, 88%.  However, sales are down 12% versus last year.  59% of the inventory is represented by homes priced below $1 million.  And that 12 % lower sales figure is spread throughout almost all sales groups.

Our final chart studies the active inventory as it moves through the year, and compares it to previous years, including pre-covid years.  We would like to think of 2018 and 2019 as “normal years”.  Prices over the past few years have increased strongly because available inventory was very low.  That is no longer the case.  Inventory has grown significantly, while sales have remained stagnant.

For Simi/Moorpark their inventory shortages during Covid caused prices to rise rapidly.  Just as with Conejo, inventory is no longer a problem, and lack of sales and growth of inventory may develop into a problem.

So can where we were help us determine where we are going?

I am not going to give you my forecast.  I am going to let you consider the information above and let you make your own decision.