SLO County Housing Brief - September, 2024
"I still think buying a home is the best investment any individual can make." - John Paulson
As we head into the final quarter of 2024 we see an interesting market. Interest rates are finally falling while inventory levels are finally rising. Last month we said, "While buyers are gaining some ground, we remain in a seller's market." I believe this statement holds, however, September brought us an interesting development. Let's take a look...
3 Key Points & Summary
1. Both New Listings AND Sold Properties dropped 12.2% month-over-month.
2. Year-to-date Median Price remains 3.8% higher than 2023.
3. Active inventory is at its highest point since September 2020 (636)
Summary:
The FED has finally reversed course after roughly 3 years of rising interest rates. Despite this, the market appears to be signaling an end to the manic post-pandemic buying period. The norm is for Active Inventory to fall in September, but ours continues to surge upward with a 12.4% month-over-month gain. As we head into the final quarter of 2024, it will be interesting to see if demand continues to falter, setting up what could be a very interesting 2025.
Year-Over-Year
The end of the year always brings a housing market lull, however, New Listings and Active Inventory remain up year-over-year. Prices sag slightly as Sold Properties hit the lowest total for any September of the past decade. (Possibly more, didn't run those numbers.)
So let's see how 2024 compares with the past few years...
Jan-Sept for each year since 2017This is why we have to take a wider view. Just looking year-over-year gives a picture of wild inventory swings. AVG Inventory was up 30% over Sept 2023 along with New Listings jumping nearly 18%. Those numbers are only possible because of the historic lows we saw in 2023. We're still nowhere near "normal" in terms of pre-pandemic levels.
Somewhat curious is the lack of effect on sold properties. Total Closed is still up YTD, but September saw a drop. This is despite many news outlets reporting that August saw year-over-year increases in mortgage applications. Median Sold Price remained basically even from last year but dropped month-over-month. All while competition (percent sold above asking) threatens to fall below 30% for the first time since 2020.
It might be easy to see some of these numbers and make wild predictions about the market heading for a crash. We're clearly out of the post-pandemic buying frenzy period. However, we still have a ways to go before we can assume a full reversal in the market.
That said, we have one interesting data point that we'll be following as we head into 2025...
What do we see aside from falling interest rates and rising inventory? The big thing I see is that AVG Inventory has not yet peaked and continues to rise sharply.
Why is this a big deal?
Aug-Sept used to signal the "end" of the season. Inventory would peak in July or August, and begin to drop in August or September, continuing to fall through the end of the year. Let's illustrate this...
Pre-pandemic saw a pretty mild change, but a change nonetheless. The pandemic saw a buying frenzy which amplified this trend. Inventory was shrinking, but buyers were still eager to purchase. That frenzy is clearly over.
We're still short on listings, but we're even shorter on buyers. AVG Inventory gained 12.4% last month. Aside from a wild 3-month period in 2022, this is the largest month-over-month percent gain over the last decade.
But inventory is so low, does a high percent gain matter?
AVG Inventory jumped by 64 units in September. This is larger than any single-month gain in 2018 and larger than all but one month in 2019. So even by pre-pandemic standards, our inventory jump is significant. Especially considering this is a late-in-the-year jump.
So what does this mean? Has the market shifted? Will prices come crashing down in Q4 and into 2025?
Expect prices to fall through 2024, but that isn't anything new. Prices always fall as the year ends. As for 2025, only time will tell. However, I don't think we should expect drastic changes in competition and pricing. I expect 2025 will continue our trend of "normalizing" the market toward pre-pandemic levels. This could mean a softening in prices. But barring a major economic shock and huge job losses, I don't think anyone should expect wild swings in our market.
Remember... Inventory rose rapidly in the 3-4 years leading up to the great financial crisis in 07/08. In other words... It takes years before the market fully shifts from a seller's to a buyer's market.
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