Factors for a Market Adjustment are Here

In all Financial Markets the only constant is change. The changes are determined by forces that influence that particular market. As in most financial markets there are international events (like a war or pandemic), national influences (US monetary policies, inflation ) and of course local government policies (restrictions on short term rentals). All of these factors have some degree of influence on supply and demand, and affordability. When you read the write ups that I write about on the real estate market in Big Bear you see where I put at the end of those write ups the possibility of changes and what some of those influences might be. Well some of them are here and I think that change (adjustment is sales and prices) is coming this year. I don’t think this year will have drastic changes, especially if the supply of listings stays so low. Currently the amount of listings is still at a very low level. Last month we were averaging about 50-60 listings on the market at any given day where yesterday we had 95. While we have more listings available a more normal level would be around 250 for this time of year. So we have a situation where supply is low but because of the smaller amount of people coming up to Big Bear the demand is also lower than it has been in the last 2 years. It will be interesting to see how this all plays out during our summer real estate buying season. Given all of these factors I think this is the year that gets the ball rolling for an adjustment in prices for the Big Bear real estate market. This could be just prices stabilizing and not going up at such a rapid pace like we have had in the last few years or maybe a slight decrease. Let’s take a look at what is going on.

First the pandemic caused a tremendous up swing in sales and price increases. I have written about this in past post’s. This was primarily fueled by people not being able to travel by plane or travel restrictions on many of the normal destinations where people went for vacations. So the amount of people coming up to Big Bear doubled compared to what it was normally. We had historically low interest rates, which have a lot of pressure to go up because of inflation. You also have the ability to rent the property as a short term rental to pay for, or help pay for the cost of ownership.

Now we have the crowds back to a normal level. We have interest rates that will probably go up some but not a lot. But every bit that they go up it takes away the amount of the purchase price that buyers can afford. The two areas that give me the most concern are first the crowds. With out the crowds the amount of people that are filling the short term rentals is starting to diminish. Sometimes the short term rentals are only filled up 60%. This hasn’t had an effect yet but it will. So far the owners of the short term rentals are accepting the vacancies, but how long will that last. Usually the owners start to lower rental prices which has an effect on what people are willing to pay for a cabin that they can have as a short term rental or to help them with the cost of owning a cabin in Big Bear. So basically market effect is starting to kick in. The lower rental rates and higher vacancy factor will regulate the amount of short term rentals. But there is a group of people that want to put the amount of short term rentals into the local government’s hands. Here is the second problem. There is a group of people who live in Big Bear that have started to gather signatures to put on the next ballot, a limit on the amount of short term rentals. They want to limit that amount to 1,500. I get various numbers from different people but from what I hear there are between 2,000 to 2,400 short term rentals in Big Bear right now. If this passes then no one will be allowed to have their cabin as a short term rental until 500 to 900 cabins that are short term rentals are taken out of the market. The people that want a cap also wanted an increase in the rental tax and city fees. This has already happened to some degree. I have included a flyer that I was mailed last July on what they want to do. These two factors could have a big effect on sales and prices on cabins in Big Bear.

I don’t expect a big change in the real estate market this year but in every major market upswing there has to be a correction. We may have the reasons for that correction starting to take place. As always I will keep you posted on the influences and potential influences on our real estate market.

If you have any questions on the market and how it may make an influence on your decision on selling your cabin now or in the near future, feel free to call me at 909 744-4601 or send me an email talktoty@gmail.com.