Lower Ranges Fading Away
The lower, entry-level price ranges have been slowly disappearing with far fewer closed sales and homeowners choosing not to sell their homes.
There were an astonishing 57% fewer closed sales and 65% fewer FOR-SALE signs below $1 million this year compared to before COVID.
Thanks to inflation, everyone is paying a lot more for just about everything. From 2019, pre-pandemic, to today, a loaf of bread has increased by 55%. Milk has risen by 31%, ground beef by 34%, and potato chips and a 2-liter soda have soared by 48%. Used cars are up 41%. A Big Mac was priced at $3.79 in 2019 compared to $5.17 today. Wallets have been squeezed. While the inflation rate may be cooling, higher prices are here to stay.
Housing is no exception. According to Freddie Mac’s Home Price Index, since the summer of 2019, the Los Angeles/Orange County metro has increased by 40%. As home prices climbed, what was considered the entry-level to homeownership slowly diminished over time.
Looking at 2013 helps illustrate how the goalposts have been moved for the lower ranges. In 2013, 48% of all closed sales were below $500,000, and 4,928 were detached. In 2019, only 23% were below $500,000, and 404 were detached. In 2023 through July, it sank to 9%, and 23 were detached. Buyers today do not expect to secure a detached home for less than half a million dollars. That price point has faded away.
The data illustrates just how severe the shortage of lower-range homes has become. In 2023, through July, 77% fewer homes were placed on the market below $500,000 compared to the 3-year average before COVID. There were 74% fewer between $500,000 and $750,000. From $750,000 to $1 million, 40% fewer homeowners opted to sell. In total, below $1 million, there have been 12,404 missing FOR-SALE signs. Overall, in Orange County, 44% fewer homes have been placed on the market. Yet above $1 million, there were 16% more sellers, an extra 1,054. Due to fewer sellers in the lower ranges, the active listing inventory has plunged to unprecedented ultra-low levels, 2,434 homes, the lowest readings since tracking began in 2004.
Excerpt taken from an article by Steven Thomas.