Roylin Downs- Right now, with ever-changing forecasts about real estate, many people want to know what’s really going on with the housing market. These days I’m getting a lot of questions about home prices, interest rates, and whether the market will be more or less opportune this spring.
For more than twenty years and through multiple market cycles, I’ve been actively involved in Southern California real estate. Through those ups and downs, I’ve learned to separate correlation from cause and one-off blip from pattern. This has helped me make sense of today’s market.
Let’s run through the major forces that have shaped our market up to this point and where they leave us today. Along the way, I’ll give you my take on what’s ahead.
The Boom and Inflation
After the initial shock of the pandemic, in 2020 and 2021 demand for homes far exceeded supply. Interest rates were low, remote work compelled people to move, and investors raced to the residential market. Resale listings increased but couldn’t keep up, and new home construction stalled. The market expanded while prices soared; this was the “pandemic boom.”
Meanwhile, at the beginning of the pandemic our money supply increased 27%, but families and businesses were saving at a high rate. By 2022, spending picked up and the new money finally started circulating. Inflation hit a high of 8%, and the Fed responded with aggressive action. It worked; by January 2024, the 12-month inflation rate was down to just 3.1%.
Now, most pandemic-related moves have already occurred, investors have pulled back, and interest rates have risen, so there’s no reason to expect another sensational rally anytime soon. Barring a broader economic upset, lower-than-2023 rates should bolster the market in 2024, but the growth should be slow and steady.
Interest Rates
This past October, the average 30-year fixed mortgage hit 7.75%, and just a few months later it was down to about 6.6%. Potential buyers and sellers hoped this steep trajectory would continue, but it didn’t.
Mortgage rates fell sharply in late 2023 because the third-quarter inflation rate beat expectations, and again in early 2024 after the Fed announced a stop to the rate hikes. This caused banks to reduce mortgages, despite no actual rate adjustment by the Fed, because they set long-term rates based on short-term rate expectations. Now that they’ve already brought those potential reductions forward, what we’re seeing now are supply-and-demand driven fluctuations.
That’s why in February the average 30-year mortgage went up a few basis points. This caused some to worry that rates might to shoot back up. But I don’t think they will. According to a February prediction from mortgage research firm HSH, in 2024 the average 30-year mortgage should fall between 6.35% and 6.89%, compared to the current average of 6.90% (per Freddie Mac).
Market Activity
When the boom ended in late 2022, there was no “bust.” Instead, just like during the Savings and Loan Crisis of the 1980s, buyers and sellers both retreated. Transactions fell as much as 50%, with Ventura getting hit particularly hard. But our market proved resilient.
Currently, Ventura home sales are down 14% year-over-year, with 37 homes sold in January compared to 43 last January. In hard numbers, this marks a new 5-year low for the city, but our dataset is too small to conclude we’re trending downhill. Panning out to Ventura County, home sales are up 4.2% year-over-year (324 sales compared to 311 last January).
In Ventura County, and especially in Ventura, we saw a big uptick in listings over the last few months. This is due largely to rates dropping more than a point; sellers who had been holding off since 2022 finally decided to make a move. This drove inventory up quickly, and we didn’t see a commensurate number of new buyers enter the market.
However, demand had been outpacing supply since the fall, and our housing shortage remains severe. But the upshot in listings slowed the market down, as new sellers and existing buyers worked to find alignment. We didn’t see the market tip to favor buyers, but we did see longer selling cycles locally and a month-to-month dip in prices countywide (despite a substantial year-over-year gain).
That said, there’s a lot of “pent-up demand” across the country right now. With rates better than they were last year, many of these buyers are expected to enter the market this spring; here locally, I expect a strong turnout. I also expect more sellers to hit the market, and for transactions to increase overall. Annually, the National Association of REALTORS® is predicting 13.5% year-over-year increase in transaction volume in 2024.
Home Prices
In January 2024, the median home sale price in Ventura was $850,000, a 4.9% increase over January 2023. At that time, prices were down 3.8% year-over-year, so prices have more than fully rebounded from last year’s correction. The median hasn’t returned to peak levels, but homes have retained most of the appreciation earned during the surge. Consider that in 2019, January’s median was $602,000.
January’s performance coupled with growing demand suggests we may see slightly higher prices this spring.
Bottom Line
Currently, the Ventura market is strong. Prices are up, homeowners are sitting on an unprecedented amount of equity, and mortgages have a low risk of default. If a slowdown in the economy occurs, our market (nationally and locally) will weather it. If the economy ekes out a “soft landing,” we’re poised for steady growth.
All else being equal, this spring I expect a good, competitive market for sellers and more options for buyers. Homes that are prepared, priced, and marketed strategically will do the best, and buyers willing to look past cosmetics will find bargains.
If you have questions about the market or your own home, give me a call at 805-850-5443. I’m eager to get to know you and help make your next move a success!