Knowing the Numbers
In July, 54% of all Los Angeles County closed sales sold below their original list price, the highest level since February 2023.
Back in the 1990s, before navigation apps existed, driving around an unfamiliar area without a map often left many feeling completely turned around and lost. It was necessary to find a local gas station and purchase a map. Once that special guide was carefully unfolded, it was much easier to ascertain precisely where they needed to go to arrive at their desired location successfully.
Many buyers approach the market today without a proper roadmap. They rely on how they think today’s market should unfold without really knowing the facts. To help navigate the Los Angeles County housing market effectively, they should carefully consider the best, most revealing roadmap: current data and statistics.
In July, 54% of all Los Angeles County closed sales sold for below their original asking price. That matches the level reached last December, which was the highest since February 2023, at 60%, when home affordability initially crumbled. Mortgage rates skyrocketed in 2022, from 3.25% in January to 7.37% in October of that year. Home buyer demand collapsed due to unaffordability, and the inventory rapidly rose; as a result, more homes sold below their original asking price. In April 2022, only 19% of all homes sold for less than their original asking price. That is when the limited number of homes on the market was flying off the market. It eclipsed 50% of closed sales in September 2022 as rates soared. The height was achieved in January 2023 at 73.3%. In July 2019, before the pandemic, when the housing market followed normal, cyclical trends, 53% of all sales closed below their original asking price, similar to today.
A revealing 46% of all July closed sales sold below their last list price (the final list price of a home when it became a pending sale). The median number of days on the market was 43 days. The median sales-to-last-list price ratio was 96.8%, indicating a sale 3.2% below the last list price. The median amount shaved off the asking price was $35,000.
But not everything is sold below the asking price. 10% sold at the original asking price, and the median time on the market was only 13 days. An illuminating 36% sold for more than the original asking price with a median time on the market of 13 days. The median amount paid above the asking price was $30,000.
Many are asking, “How in the world are that many homes selling above the asking price in today’s sluggish market?” It is a great question. Many homes that come on the market almost immediately become a pending sale. Homes that are priced right, in excellent condition, nicely upgraded, in turn-key condition, ready for an immediate move-in, and have a good location do not last long and acquire the most attention. Buyers who are entrenched in the market are often waiting for something outstanding to come along. When something pops up in an area that checks all the boxes, it frequently checks all the boxes for more than one buyer. When that occurs, buyers need to be prepared to write offers above the asking price. The market as a whole may be sluggish, but not for that one turnkey property when multiple buyers are vying for the same home, simple supply and demand kicks in. The buyer willing to pay the most is typically the buyer who wins.
When a buyer is interested in a home, they must consider all the data that is unique to that home:
· How long has the home been on the market?
· Has it been exposed to the market before?
· Has the price changed?
· How’s the condition, location, upgrades, and amenities?
· What is the home’s Fair Market Value based on the most recent comparable and pending sales?
It is also crucial to understand the current local housing market. Some cities, areas, and neighborhoods are more desirable than others. In Los Angeles County, as a whole, there are 15,310 homes on the market, and 34% reduced the asking price at least once. It appears that the inventory may be reaching its normal summer peak, and, after peaking, it will likely slowly fall for the remainder of the year. Demand (a snapshot of the number of new pending sales over the prior month) is currently at 3,792, not much different from the late-year peak in June at 3,908 pending sales. It has been rising over the past month because interest rates have dropped to their lowest level of the year, improving affordability. The Expected Market Time (the number of days it takes to sell all Los Angeles County listings at the current buying pace) is at 121 days, the highest level for mid-August since tracking began in 2012, and significantly higher than last year’s 88 days or 2023's 68 days. With improving rates, the Expected Market Time has been dropping recently. It was 128 days a month ago.
An Expected Market Time of 128 days means that many homes are not selling instantly. Homes that require work, have deferred maintenance, are in a poor location, lack updates and upgrades, or are overpriced will tend to linger on the market. These homes are excellent candidates for buyers looking to negotiate. As sellers languish on the market without success, they are more inclined to sharpen their pencils, dial back their expectations, and negotiate.
It is incumbent upon buyers to examine all the data, which serves as a roadmap to securing a home. Know the market. Know the stats. Know the property—every property for sale is unique.
