Preparing for Spring

When spring is in the air, we look forward to new beginnings and are reinvigorated after the long, cold winter months. Though still a few weeks before the official shift from winter to spring, we can anticipate positive real estate market changes in home inventory based on historical increases for the same time period year after year.

The Central Coast market for 2022 started strong and as the months went on, it started to reflect the markets prior to pre-pandemic. This is not a bad thing since the real estate market prior to COVID was strong. And, because change is as much a given as death and taxes, proverbially speaking, we are already seeing another small shift as January 2023 closes into February. Interest rates have come down. Freddie Mac (freddiemac.com) has January 26, 2023, rates at 6.13 percent. This is well above the 3 percent and 4 percent rates we saw in 2021 and early 2022, but it is down from peak rates of 7.08 percent in November 2022. Experts are even predicting that we should be seeing the rates fall into the 5’s by the end of 2023.

We’re beginning to see that the change of interest rates is translating into a higher number of showings we’re receiving for each listing in our market. Market data shows that a home in the 93422 zip code is receiving an average of 7.7 showings per month so far for the first month of the year. Compared to 3.5 showings on average per month in October 2022. The rise in the number of showings can be interpreted by the lower interest rates and springtime flurry.

Though hopeful, the increase in showing numbers can only be sustained if there is a healthy supply of homes. You may have heard someone in the real estate field say, “we have two months of supply in our market.” But what does that mean? To break it down, it means that if the real estate market was to receive no new listings, how long would the current inventory of homes take to sell? This number is based on the current sales pace. If you take the total number of homes for sale (inventory) and divide it by the number of closings for the past month, you would get the market’s number of months of inventory. Does that inventory number make any difference? It absolutely does! It determines if we are in a seller’s market or a buyer’s market. It determines the number of closings possible in the future months. At this time, our 93422 zip code has 1.5 months of inventory. This is a very low number that puts us in more of a seller’s market. Typically, it switches to a buyer’s market with around six months of inventory. If you were to look back at history, starting in 2008, Atascadero had 18 months of inventory. That meant lots of choices for buyers. I remember my buyers having to narrow down their viewing choices because there were too many options.

Today, a buyer is lucky to have one if not two properties to look at. Continuing this abundant supply trend, in 2009 there were 9.3 months of inventory, 2010 saw 8.8 months of inventory. A notable change was apparent as we came out of the foreclosure and short sale era; the number of months of inventory continued to drop. From 2013 to 2019, we had been hovering between 2.5 and four months of inventory. Fast forward through COVID and we were seeing inventory around 0.8 to two months. Can you guess what month and year had the lowest amount of inventory? December 2021 only had 0.8 months of inventory. That’s not even a month of homes available!

With the holiday season behind us, the trees are starting to bloom, the hills have turned green, and the feeling of hope that inevitably fills the air during spring has started. It may be time for people on the “to sell or not to sell” fence to focus and lean one direction or the other.

Starting your home buying or selling process now will set you up to be able to move by early summer. Should you be using your time now to prepare and ready your home for the real estate market if you plan on selling?

Absolutely! Now is the time to devise a strategy to figure out how you are going to make your home stand out and capture a buyer’s attention; and more importantly their qualified offer to purchase. With the demand in our area starting to pick up again, both buyers and sellers would greatly benefit, and appreciate, an increase in home inventory.