11/07/2019
The housing market just dramatically improved as the
inventory plunged and demand increased. Sudden Improvement: The Expected Market Time just dropped by 5%.
Was it the nanny? How about the next-door neighbor? The uncle or family friend? Classic “whodunit” movies are
intentionally designed to keep the audience on the edge of their seats attempting to figure out the identity of which
character is behind the mystery. The writers keep you guessing as you anxiously shovel handfuls of movie popcorn and
wash it down with a Classic Coke. Finally, the plot twist is revealed. You may be surprised because you missed all the
signs.
In the same way, housing has been slowly evolving, flashing signs of change regardless of all the chatter that housing is
about to collapse. The twist? In the past two weeks, the market improved significantly, and the Expected Market Time
dropped to levels not seen since May, during the tail end of the Spring Market.
This did not come out of left field. 2019 has been characterized by the gradual evolution away from the housing slowdown
at the end of 2018 back to a much stronger Southern California housing market. Everyone stopped talking about the lack
of homes on the market as demand came to a crawl. It’s basic supply and demand. When the supply of homes increases
and demand falls, housing tilts towards the buyer’s favor. That is precisely what occurred from November 2018 through
January of this year. When the supply of homes consistently drops as demand remains reliably strong, housing tilts in the
seller’s direction. That is storyline since July.
Fueled by a return to historically low mortgage rates, demand has not budged much since peaking back in April. From
July to today, it has only dropped by 3%, an uncharacteristically small decline given the shift from the Summer to Autumn
Market. Last year, it dropped by 16%. The active listing inventory plunged from 14,193 homes at the end of July to 12,423
today, shedding 1,770 homes or 12%. Last year it increased by 14%. As a result, the Expected Market Time (the time
from the initial FOR SALE sign to opening escrow) dropped by 9% since July of this year, the largest since 2012.
