Price Reductions on the Rise!

Last newsletter I talked about the different influences that the Big Bear real estate market had working to slow down the market.  While we still need several more months to see how these influences have affected the market, let’s look at what can determine.  From what I can see from working in the business is that price and a little patience is much more important than in the past year. Last year no matter what price you listed your property, you would get offers.  This was because there was a lack of inventory, and the market was over heated.  As you know I like to back up my opinions with facts so let’s look at some data.   First, I looked at the current inventory of listings to see if we had any listings with price reductions and was really surprised. On 5/19 out of 251 active listings, 25% had price reductions.  On 5/24 out of 245 active listings, 30% had price reductions.  On 5/26 out of 248 active listings, 32% had price reductions. In the 0-$800,000 market the average price reduction was $41,000.  In the $800,000+ market the average price reduction was $100,600.  Once I saw this, I logically assumed that we have started with sold prices starting a decline.  And usually in a declining sales price market we also have a slowdown in sales.  So, I looked at more data and this is what I found. While sold price reductions might be true in future sales, this hasn’t been true so far. Prices are staying level and sales while they may be down from last year, is probably due to a lack of inventory, at least in the 0-$800,000 market.  Let’s look at some graphs and see what exactly we have so far.

First, we know that people are reducing their prices right now. We will have to see if these price reductions have an impact on final sales prices.  Many of these listings may have been overpriced to begin with.

Second, if we look at the first two graphs we can see in both price ranges, 0-$800,000 and $800,000+ that current sold sales prices are staying consistent so far.

Third, if we look at the second two graphs, we get sales vs listings for the two price ranges.  In the 0-$800,000 graph in 2021 we had in April 121 sales vs 313 listings and in May we had 138 sales vs 396 listings.  In 2022 we had in April 97 sales vs 233 listings and in May we had so far 60 sales vs 263 listings. So, the lack of sales in the 0-$800,000 price range in 2022 may be from lack of inventory. 

In the $800,000 + graph in 2021 we had in April 32 sales vs 79 listings and in May we had 18 sales vs 83 listings.  In 2022 we had in April 22 sales vs 94 listings and in May so far, we have 13 vs 111 listings.  So, in the $800,000+ market sales are down a little from last year even with the increase in inventory.

Fourth, if we look at the third set of  graphs, we get Original Price vs Sold Price.  In the 0-$800,000 price range we had a close price of about 101.5% of Original Price in 2021 and 102% of Original Price so far in 2022.  In the $800,000+ price range we had a close price of about 100% of Original Price in 2021 and 2022. This will change when the current listings that have just reduced their price move into the sold category.

So, what is all this telling us:

In the 0-$800,000 market.  The current inventory is dropping their prices.  People see through the media that we are having an economic adjustment.  So far this hasn’t affected closed sale prices.  One thing that is helping is the lack of inventory. If more people list their cabins because of economic reasons which could include the higher vacancy rates on Short Term Rentals we may have in increase in inventory while at the same time have a lower number of sales.  This combined with higher interest rates, we are going to have pressure for sellers to lower their prices.  

In the $800,000 + market.  Just like the 0-$800,000 market. The current inventory is dropping their prices.  People see through the media that we are having an economic adjustment.  So far this hasn’t affected closed sale prices.  But the number of listings are up and sales are already lower than last year. When you combine the higher inventory with higher interest rates and an economic downturn, sales may go lower but should not go into the level we saw before 2021.  And of course, this will put pressure on prices to go lower.