The Winter Market
With demand rising fast, the housing market is heating up, and the market time is plunging.
Going to an amusement park as soon as it opens is a considerable advantage. There are no crowds and the most popular rides have no line for those willing to scramble to the queue as quickly as possible. Yet, in the blink of an eye, the park is filled with people, and the wait times for everyone’s favorite rides grow longer by the minute. By late morning, the swarm of people is dizzying, and it’s the busiest time of the day.
That’s how the Winter Market feels for housing. It is still the Holiday Market in early January, which runs from mid-November through the first couple of weeks of the New Year. That is when there is very little buyer activity, demand, and the supply of homes available establishes a bottom for the year. The slow pace of the first couple weeks of January quickly fades as housing transitions to the Winter Market.
The Winter Market runs from mid-January through mid-March. In mid-March, housing transitions to the busiest time of the year, the Spring Market. Winter essentially sets up the spring. This year’s Winter Market will be no different; the frozen housing market has already begun to quickly thaw, ramp up, and grow hotter from week to week. The season is characterized by the inventory increasing slightly, buyer demand surging higher, and the Expected Market Time, the speed of the market, dropping substantially.
With the holidays in the rearview mirror, many buyers who placed their search for a home on hold due to their desire to enjoy all the festivities of the season, return and jump right back into the housing market. As a result, demand (a snapshot of the number of new pending sales over the prior month) increases rapidly. The 3-year average rise before the pandemic (2017 to 2019) was 49%. Last year, demand grew by 49% and soared by 60% in 2023. In the past two weeks, the start of the Winter Market, demand climbed from 2,303 to 2,873, up 25% or 570 pending sales. Demand will continue growing weekly in February and March, building momentum until it peaks in the spring. Expect demand to closely resemble 2023 and 2024 demand levels.
In the meantime, the active inventory, the supply of available homes, increases slightly as many homes that come on the market, especially those priced right and in excellent, turn-key condition, are snapped up quickly, many times with multiple offers. These homes promptly become pending sales, accumulate, and add to the overall demand reading. The 3-year average rise in supply before the pandemic (2017 to 2019) was 4%. Last year, the inventory increased by 7%, and it dropped by 12% in 2023. In the past two weeks, the inventory has risen from 9,668 to 10,307, up 7% or 639 homes. In February and March, the supply of available homes will slowly increase. From there, as housing transitions to the Spring Market, the inventory will grow considerably faster, with more homeowners opting to sell their homes during the springtime than at any other time of the year.
The Expected Market Time (the number of days it takes to sell all Los Angeles County listings at the current buying pace) takes into consideration both supply, the current active inventory, and demand, recent pending sales activity. With supply slowly rising and demand rapidly climbing, the Expected Market Time dramatically changes almost instantly in the blink of an eye, dropping substantially. The 3-year average before the pandemic (2017 to 2019) was a drop from 90 to 60 days, shedding 30 days. Last year, it plunged from 91 to 65 days. In 2023, it dove from 108 to 60 days, down an astonishing 48 days. In the past two weeks, the Expected Market Time has already declined by 18 days, from 126 to 108. It will continue to fall slightly and reach its hottest point of the year, the lowest market time reading, between March and April.
The winter thaw for Los Angeles County housing has already begun. Many mistake winter as an extremely slow season for real estate, but that is not the case. Instead, it rapidly develops with a giant push in buyer activity and a subsequent spike in demand, new pending sales. More homes come on the market during the Winter Market than during the holidays, but it pales compared to the number of homeowners who opt to sell in the spring. As a result, the inventory has trouble growing as the number of pending sales surge.
