“You will not laugh, you will not cry, you will learn by the numbers. I will teach you!” So said Gunnery Sergeant Hartman in Stanley Kubrick’s 1987 classic, Full Metal Jacket.
He likely wasn’t talking about California real estate. But we are, and this day has been on the horizon for a while now. Take a look and learn by these numbers:
- 12% fewer Southern California condos and houses sold this February than one year prior;
- this February marked the fifth consecutive month that sales fell compared to previous years;
- listings rose 30.5% in the Inland Empire while sales declined; and
- all this while the median Southern California home price remained 19% higher than one year prior.
If it hasn’t been clear over the past several months of our reporting, the writing is most certainly on the wall now. Inventory is up, sales are falling and prices are still too high — a recipe for regional downturn if we ever saw one.
Over the past several weeks we’ve reported on other factors that ought to give you pause. Large investors are quite clearly bowing out of the California markets. The real estate trade unions have fired up their propaganda machine to calm their anxious constituents. And wages and general employment have shown no real signs of progress, contributing to what is now clearly seen as a state of secular stagnation.
Of course, the eternal reaction in times like these is to throw up one’s hands, powerless against the autonomous machine of the market. Here’s one thing that agents and brokers ought to do right now to gain some control over this hydra-headed monster: refuse the bidding war, make a sober cost-sheet analysis with your client and, above all, justify value.
Justifying a property’s price in the current market is an essential service for any ethical real estate agent. It’s also something that is becoming harder to do each day as prices remain artificially inflated. But it looks like they have leveled off and will start to fall. The challenge may soon be to wait for another bottom (sigh).