Signs Of A Market In Flux Emerge in Q2 2023
Our second quarter real estate market took an interesting turn. Activity shot up while the pace of inventory remained sluggish, creating unique conditions that are more reminiscent of our more extreme pandemic-era market. Read on to learn more about the second quarter market and how things could line up for the rest of the year. The figures and analysis below are comprehensive of the desert resort cities, stretching from Palm Springs to Indio. If you are curious about the state of the market in a specific city, neighborhood, or community, reach out to your local Bennion Deville Homes real estate expert. We have the resources, market knowledge, and network to help you determine your best path forward. We will unlock possibilities for you.
In a somewhat surprising twist, market activity spiked in the second quarter of 2023. Although historically the second quarter marks a period of high activity for desert real estate, the underlying conditions leading into April weren’t promising. Home sales and inventory levels were low, keeping prices at elevated yet stable levels. Meanwhile, interest rates were still on their way up, casting uncertainty over demand and the buyer appetite for a combination of higher home prices and elevated mortgage rates. Fast-forward to the end of the second quarter and activity far exceeded first quarter levels despite fewer homes coming to market.
Overall, the stats from the second quarter indicate the market could be undergoing another transition after seeing more balanced months to kick off the year. The median sale price for homes increased, pushed by dwindling inventory. The sale pace quickened compared to the previous quarter but is still close to 60 days. The listing discount remained flat quarter-over-quarter, indicating buyers still have leverage at the bargaining table. However, with inventory remaining low this is a metric to monitor as strong demand from buyers will give sellers an edge. The current market presents an opportunity for sellers looking to cash in on realized equity as the supply of available homes remains low and demand is firm.
Based on how the second quarter fared, there are two keys we are watching closely for the rest of the summer and beyond. The pace of inventory going up for sale, and overall inventory levels, will significantly impact home prices. If demand continues to surpass the pace of supply, prices will remain stable, and possibly rise should a surge in demand occur. Although summer has traditionally been a slower time of the year for property sales, the pandemic-era market has demonstrated that buying and selling homes in the desert has become more consistent year-round. The second key is what happens to mortgage rates. With additional rate increases teased for later this year, we expect the shortage of inventory to continue as homeowners with locked in low rates stay in place. The combination of high rates and high prices could be freezing would-be market participants. As has been echoed by many industry experts, we expect to see activity pickup once interest rates drop, with many citing a benchmark of 5.5%.
The second quarter saw 2,136 homes change ownership, a 37% surge quarter-over-quarter but a 17.6% decrease from the same quarter last year. Over the 3-month span, 2,597 homes hit the market, an 8.8% dip from the prior quarter and a 26% plummet from the prior year. Additionally, 2,062 homes went under pending status, a 14.4% jump over the first quarter of this year and a 13% decline from the same period last year. The median sale price of a home finished the quarter at $609,700, a 1.4% upward nudge over the previous quarter and a 1.1% dip from last year’s figure. The price per square foot ended at $426, a 4.2% increase quarter-over-quarter and a 1.3% drop year-over-year. The average days on market for a home, or sale pace, clocked in at 55 days, a 6.2% drop (faster) from the previous quarter but a 104.9% increase (slower) than the prior year. The listing discount, calculated by dividing the sale price by the list price, was 96.3%, the same as it was in the first quarter of 2023, but a 4.9% drop from the same quarter last year when most homes were selling for over list price. Overall, there are 2.3 months of inventory on the market, a 38.6% drop from first quarter but a 79.5% increase over last year. A 6-month supply of inventory is considered a balanced market, indicating that the market is shift back toward more favorable conditions for sellers.
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