Big Bear Real Estate Getting Ugly
What I am going to write about is going to be ugly. We have all seen financial markets go up and go down. We all know that given our current economy in the last 9 months we are going through the 3 phases of a changing market that is going down. In my last few write ups I talked about phase 1 and 2. Now we are in phase 3. These changes occur whether you are in an up or down market. Let me explain.
The first phase is the start of a changing market or the transition stage. This is where prices quit going one way, this can be up or down and they stabilize. This happens when we see good or bad financial news and decide that a change is coming. It’s kind of a pause before the market shifts. Then we have the second phase. The market shift. The market starts to go in the anticipated direction. This is where in our case with Big Bear real estate, prices started to go down in the spring. This can go on for months or even years. Like the rise in residential real estate for primary homes the last 8 years. Then you hit the third phase which causes the market to accelerate. This is where, whichever way the market is going it gets over heated, like we saw when prices were going up. Or instead of overheating it can be because of the accumulation of phase 2. This is where we are now with the Big Bear real estate market. We have seen a steady decrease in sales, you might say a steady accumulation of months since March with decreases in sales. And because of these steady decreases it has added up to a large drop in prices. Let’s look at some numbers.
In the first graph we have the overall Big Bear real estate market. We can see that sales have been going down since spring. But now it is getting very bad in November of 2022 we had sales of 57 compared to sales of 166 in November 2021. That is a drop of 66%. When we take a look at the second graph we see a steady decline since March of 2022. We went from an average price of $695,000 to an average price of $ 508,000 for a 27% decrease. When listening to all the financial experts through the media I have heard them predict the primary residential real estate markets throughout the country should drop somewhere between 15 and 30 percent by summer. Because we are a secondary market we are already at the top of the scale in November. We will drop more and faster than the primary market. Expect this drop to continue for the next 6 months or until there is a substantial uptick in the economy. I will break this down in more detail in January when I do the year end numbers for 2022.
So now we get to two questions. What do I do if I need to sell now or in the near future? And when are we going to see Phase 1 of a new market trend?
First if you need to sell in the immediate future sooner, is better. And pricing is going to hurt. Today 12-9-2022 there were 264 listings in Big Bear with 19 pending listings (properties in escrow). Expect a steep price reduction and if you don’t have an agent who knows the market and has a strong marketing plan you will be on the market for months while prices continue to decline. Obviously, there are only so many buyers in this market now. Properties are selling, I closed one last week. But I also had one fall out of escrow. If you are thinking about selling in the near future let me give you a realistic market analysis that is specifically for your property.
So when do we start a new Phase 1? Unfortunately I can’t give you an exact month but when the signs show up we will know what is going to happen next. First December, January and February are our slowest months. So we need to get through those months. Next we need two things from the economy. Primarily getting inflation under control so the Feds will bring mortgage rates down. 9 months ago we were at 2.25% now we are around 7.25%. And we need a strong jobs market. Hopefully rates will start coming down by the beginning of summer. If the rates are gradually reduced don’t expect the market to pick up until possibly 2024. This is due to the fact that rates will still be well over the 2.5% that people are hoping will return so they will hold off. That is unless prices go very low. Then the lower prices will make up for the higher rates. Especially since people can get the lower prices and refi when rates go lower. How low do prices need to go to bring back the buyers with the higher rates? It might take 35-40%. Now that would be ugly.
