Selling in Today’s New Market

If you have been reading my newsletter in the last year you have seen me post this statement “if you are thinking about selling your cabin, now is the best time in the history of Big Bear“. While the so called peak of prices going up is gone, cabins are still selling and the market is moving toward a normal market. It’s just not over heated, where you are going to be able to add $25,000 to the last comps and get 12 offers on your property. So if you are thinking about selling now you need to consider two things. First you need to understand the market now and how it is changing during the next six to twelve months. Second you need to choose a Realtor with experience that has the right company with a proven marketing background backing them up.

So where is the Big Bear Real Estate market now? The anticipated slow down has started. We are a second home market so we are going to get affected by a down turn in the real estate market first. The pressure for this down turn comes from many sources. Inflation has started to bring interest rates up. Four months ago second home 30 year fixed rates were around 3.6%, now we are looking at 5.4%. These rates will be going up. One way the mortgage industry has worked to combat the rise in rates is to offer a 7 year fixed rate at 4.2% and then the mortgage converts to a adjustable loan. This gives the buyer 7 years for rates to come back down and they can refi into a 30 year fixed with a lower rate. We don’t know where these new mortgage rates will end up. But we should have a good idea next time the federal reserve meets. Short Term Rental (STR) vacancy rates. These rates have gone up dramatically. In talking to 4 different companies up here they are witnessing vacancy rates of 40-60%. This is the slow season between the ski season and summer, but I would expect these numbers to stay the same because of the increased amount of STR’s on the market. Remember when I wrote about market conditions taking over and regulating the STR market. We didn’t need more city ordinances and limits on the amount of STR’s. We had an over abundance of people come up during Covid, this led people to believe that this influx of people would be here for ever. So more people added more properties to the STR pool (over a 1,000 more). This has caused the vacancy factor to go up and STR rental rates to start to go down. It looks like the initiative to limit STR’s in Big Bear Lake will have enough signatures to get on the November ballot. So here is where the initiative stands now. May 16th the petition can be certified. Council will have 30 days to adopt the measure or place on the ballot. The city counsel has proposed that an impact study be made on STR’s. This study will cost $45,000. It looks like the study idea will get passed. I will keep you posted on further development on the STR issue.

With everyone talking about the U.S.A and probably the world going into recession we can expect to have a slow down or what I would predict is a short recession. This is going to be driven by the current war with Russia and the Ukraine because of the war’s influence on energy supplies which effects the cost of almost everything. One way that this may only be short term is for Russia to get rid of Putin because of the mistake of starting this war. We may actually get a better government for Russia that would actually work with the rest of the world and help long term stability. Hey I can hope. It always amazes me how an event, with different countries can have such an affect on a cabin in Big Bear.

So how does all these influences add up for the Big Bear Real Estate Market. 1) The possibility of a recession. This carries the mental part of the market. When there is a recession, even a small one some people will hold off on making a large purchase like a second home. 2) Then there is the war. This along with dealing with Covid is causing inflation. Inflation is causing rates to go up. When rates go up people can afford less of a purchase price which puts pressure on prices to go down. But to help this out the mortgage industry is put out mortgages to help people get a lower rate so that they can buy now and refi later when rates go back down. 3) The STR market is going to shrink. In the short term this may cause some people to sell. I don’t expect the market to get flooded with listings but the inventory should go up. After a small shake up in the STR market vacancy and rental rates will stabilize.

So we have the three influences above that have cooled off the market and will effect the market for at least the next six months. We will have to follow these influences to see how much they change the market. My opinion is that we are going to witness a more normal market. In order to get to that normal market prices may come down a little. Cabins will be on the market a little longer. Competition to sell and get the highest price will go back to using an experienced agent who can understand the changes that are coming in the market and has the backing of a company with a strong marketing background.