Real estate market update

Recent data reveal a more consistent pattern

The last time I checked in on the Inland Empire real estate market, I suggested that the market was in a slowdown and not necessarily a downturn. As more information rolls in about summer dynamics, the market still appears warm, but there are more signs of cooling off. Anecdotal data from agents and real estate companies suggest that uncertainty is in the air. Read on for more data from two excellent sources on current conditions.

Data from the California Association of Realtors (CAR) shows that the Inland Empire’s Unsold Inventory Index jumped to 3.6 in July – it had been hovering under 2.0 for most of the last two years and started increasing in May. This is still a low statistic historically speaking, indicating warm conditions, but the sharpness of the change is notable.

Median house prices (seasonally adjusted) in the IE declined for the second straight month. In July they were $575,000. This is still significantly higher than the pre-pandemic levels of around $400,000, but the decline is notable. Finally from the CAR, median time on market has increased over the last two months and is now at 15 days, up from the extremely hot conditions of a year ago when they registered at 7-8 days, but still below the pre-pandemic average of 30 to 40 days.

Overall, the CAR data are less positive than just a few months ago when prices were increasing and inventory still low, and the trends indicate a slowdown through the rest of the year now that the summer buying season has ended.

Realtor.com is another excellent source of real estate market data; on some metrics it contains more up-to-date information on the market by tracking listings and the price dynamics of active listings.

According to their data, the ratio of price reductions to price increases on active listings (within a representative week of July) in the IE during this period was about 15. This indicator has increased dramatically in just a few months. While price reductions are generally more common than price increases in good and bad times, the sudden increase in this metric is notable. Indeed, we haven’t seen a ratio of 15 at any point over the last 5 years. See the chart below.

The dramatic increase in the number of price reductions suggests sellers are having to increasingly adjust to a buyer’s market. The price reductions also suggest generally that agents and sellers are misreading a quickly changing market, where home values are considerably lower than what current conditions might suggest.

One silver lining from this analysis is that the ratio of price reductions to increases in the Inland Empire was slightly below the median among the top 20 metro areas, meaning the IE is, at this point, weathering the storm a bit better than other metros.