Softening Market Hits Riverside

In the two months since my last report, there's been a rise in inventory and a general flattening of prices. Buyers have become rather ambivalent now that there are more homes to choose from. Many are hoping that sellers will drop their prices, but how much they can depends on their level of debt and whether or not they can get a lower price on their next home. In addition, the recent rise in interest rates has also had an effect on buying ability, so that motivated buyers simply can't go as high as in the past.

Back in May, there was a noticeable difference between the average value of available properties and the average of closed sales. That difference is still there, especially in the larger houses, thus revealing a top-heavy inventory. In other words, it's a buyer's market primarily in the upper ranges where there are fewer qualified buyers. Among the smaller houses, the average price of available houses has dropped a bit, but the average of pending houses is only slightly less than before, and that of closed sales is actually up. This is because there's a real lack of houses in good condition in the bottom range of the market. Interestingly, the trend among 3-bedroom houses has been very similar.

2 and less bedrooms
Active: 155 Avg. Price: 385,269 Avg. Days on Market: 54
Pending: 51 Avg. Price: 351,995 Avg. DOM: 49
Back-up: 6 Avg. Price: 342,150 Avg. DOM: 51
Sold: Avg. Price: 353589 Avg. DOM: 41
Expired: 24 Avg. Val: 363112 Avg. DOM: Unavailable


3 bedrooms
Active : 941 Avg. Price: 448,905 Avg. DOM: 56
Pending: 224 Avg. Price: 408,203 Avg. DOM: 57
Backup: 51 Avg. Price: 432,240 Avg. DOM: 79
Sold: 243 Avg. Price: 412,975 Avg. DOM: 49
Expired: 262 Avg. Val: 444,649 Avg. DOM: Unavailable

4 or more bedrooms
Active: 1187 Avg. Price: 640,865 Avg. DOM: 60
Pending: 200 Avg. Price: 532,059 Avg. DOM: 51
Back-up: 55 Avg. Price: 546,378 Avg. DOM: 80
Sold: 275 Avg. Price: 564,320 Avg. DOM: 47
Expired: 318 Avg. Val: 645,014 Avg. DOM: Unavailable

As there are fewer condos, the data becomes rather more anecdotal, but there has been a drop-off in the average price of those actually sold. The prices of 2-bedroom condos are up, but it remains to be seen if they will remain thus and if buyers are forced up to be able to get anything at all. Definitely, it's been the lowest priced 2-bedrooms selling most recently, so that the average of the pendings is a little over 30k below that of closed sales.

Condos:
2 and less bedrooms:
Available: 62 Avg. Price: 279,931 Avg. DOM: 46
Pending: 9 Avg. Price: 239,866 Avg. DOM: 31
Back-Up: 1 Avg. Price: 279,900 Avg. DOM: 81
Sold: 15 Avg. Price: 270,120 Avg. DOM: 29
Expired: 5 Avg. Val: 250,580 Avg. DOM: Unavailable

3 bedrooms
Available: 26 Avg. Price: 347,023 Avg. DOM: 47
Pending: 12 Avg. Price: 357,690 Avg. DOM: 46
Back-Up: 1 Avg. Price: 297,000 Avg. DOM: 73
Sold: 10 Avg. Price: 339,940 Avg. DOM: 35
Expired: 3 Avg. Val: 319,266 Avg. DOM: Unavailable

4 or more bedrooms
Available: 8 Avg. Price: 428,325 Avg. DOM: 43
Pending: 0
Back-Up: 0
Sold: 0
Expired: 4 Avg. Val: 439,650 Avg. DOM: Unavailable

As always, these numbers are from the IMRMLS and only include properties listed there. Sold and expired info is as of 5/26/06. Errors by listing agents may skew the numbers.

Do I expect prices to come down? People keep asking me this. I ask them if they expect gas prices to go down. Home prices will drop if interest rates go up significantly. Motivated sellers who have enough equity will sell for less. However, those who can't get enough on their homes to cover their debts and/or get into another home are likely to stay put until prices rise again. We are beginning to see some foreclosures and short sales, but very few are admitting it yet on the MLS, and their lenders will have the final ok on a non-contingent buyer for a short sale.

Here's a link to yesterday's NAR article on the softening market.
Existing Homes Sales Flattening