The Market is Starting to Adjust

It had to happen. There are just too many influences on the market. The second home Real Estate Market is usually the first to change and it looks like it has started to make some adjustments. In the next newsletter I will go into more depth on our market but let’s take a preliminary look at what is taking shape.

First what are these influences? There are several. Inflation, Short Term Rental rates and vacancy factor and changing city ordinances are three of the main ones in Big Bear. I will get into all of these in the next newsletter, for now let’s take a look at our main influence, inflation. Everyone has talked about it and with the increase in fuel costs it finally had to be addressed.

Second what has inflation done to the market? There is two phases. In the graphs below we see the effect of the knowledge people believe that change is coming. This is the first phase. The change people were anticipating is an increase in interest rates. Let’s go over those number first. In the first graph you can see that prices in the 0-$800,000 were down for the first two months of the first quarter in 2022 but had a big increase in March. What this tells us is that the 0-$800,000 market is still strong but I think that the increase we had in March may get adjusted down in the following quarter. In the second graph the $800,000+ market prices have gone down about $270,000 in the last quarter. I don’t think that this market will go down much more but it may continue to drop some in the next quarter. As you can see by the third graph Sales in the 0-$800,000 market are down about 40% from last year. If this continues into the next quarter it will put pressure for prices to go down. Again I don’t think they will drop that much. The fourth graph shows that sales in the $800,000+ market are up about 30% compared to last year. This could be because of the prices in this market dropping about $270,000 over the last quarter.

The second phase is how the market will react now that we have an increase in interest rates because of inflation. In the last 30 days mortgage rates for a second home have gone from 3.6% to close to 5%. We have known that rates will be going up for the past few months and the graphs I have below reflect the fact that we knew rates were going up. The second quarter graphs will give us how the market reacts to the actual change in rates verses the first quarter where the market reacted to an anticipated change. I don’t think that there will be large changes in the next quarter and most of the changes may have already be worked into the market. The second quarter will be interesting.

If you would like further information on how these changes may effect your situation feel free to give me a call or send me an email.