How Do We Know When the Market Shifts?

How will you know when the market's about to turn? The market continues to be red hot right now. Everyone's wondering, is there going to be a shift? Is the market going to cool down? To answer that we have to watch signs that the market provides.

Currently in Los Angeles, it is a seller's market and homes are selling in about 21 days. In Los Angeles, buyer's market is usually defined by an environment that a house sits on the market for about 90 days. We have a long way to go before it's a buyer's market. But what's going to happen on the way there? What are the metrics I follow are interest rates? Right now there are about 3%,, depending on the type of loan. But when those rates creep up to 3 ½% or 4 ½% and heavens forbid 5% interest, you're going to see buyers pause. Which will cause houses to stay on the market longer. We may see houses stay on the market for 30 days or 40 days. This is still not a full-blown buyer's market, but it will help with inventory once houses are on the market for 30, 40, 50 days. You will see price reductions begin when the days in the market creep up to 50 and 60 days. Next, you will see some houses not selling at all and just expiring right around the time we get to 60, 70 days on the market. You're going to feel like prices are starting to soften but understand this: Prices will not drop equally with all houses. Some houses will feel the effect. Highly desired homes are going to hold their value. However, homes that are next to a freeway or are not in a great location or have other issues are going to drop first and most. These homes are going to be the real deals.

That's what to keep your eyes on to access if we are in fact in a buyer's market. Will we get there? When will we get there? Your guess is as good as mine. I'm watching the metrics. I'm watching the news. If you have any questions reach out, we're happy to chat.