As we enter Q4 many are wondering where the real estate market will stand for the remainder of the year. I am going to break down my predictions for October as well as the significance of the new SB 9 Bill that was recently passed.
Let’s start by taking a look at our inventory levels which have been consistently down for almost 2 years now. We came out of last month with 16% less inventory and I expect the downward trend to continue in October. The other indicative factor when analyzing the market is looking at the number of closed sales, which are down by 8.9%.
One area we have seen an increase in is the number of pending sales we have. We had some new inventory pop up around August and that resulted in a slight increase in pending sales. While they’re still down year-over-year, they have shown a month-over-month increase. This upward trend of transaction volume will likely continue through October into the end of the year.
So what’s the bad news for the month? We still have low inventory and if demand picks up by even a small margin, we’re likely to continue to see prices increase. Last month, 1,544 homes showed up on the market in traditional San Diego and North County areas, but 3,400 homes were actually sold during this period.
What is Senate Bill 9?
If you haven’t already heard, SB 9 has been passed and it’s likely to positively impact many homeowners with relatively large lots. This bill, which will take affect in January 2022, will allow homeowners to create more inventory across California providing some much needed respite during this low inventory phase.
SB 9 allows either an existing homeowner, or one who buys a property and signs an affidavit stating that they will live in the property for at least 3 years, to split their lot into two properties, provided they have an adequate lot size to begin with. There is a 40% rule, whereby you can’t split off a section of the property arbitrarily. It must constitute at least 40% of the overall area. This will allow people to either sell the other half of the lot or even build a new property on it. Not only can you split your lot, but you can also add a house and an ADU (Accessory Dwelling Unit) onto both lots. Essentially, a lot split followed by a two-unit project on each of the two new lots would result in four total dwellings on what was formerly one single-family residential lot. This opens up countless opportunities for income potential on a single lot!
The most pertinent advice I can give sellers out there is to stop listing your unrenovated properties. I’ve seen far too many properties go onto the market with bad carpeting, unpainted walls, etc. and this type of presentation turns many buyers away and lowers the potential for the highest possible closing price. You can instead take advantage of our hands-free selling where we front you the capital for renovations and come in and personally renovate and stage the property to get it in tip top shape. We do all of this upfront, and collect the funds at the close of escrow. We are getting insanely higher closing prices on properties that we’ve fixed up and staged well, so do not list your property unless it’s actually market-ready.
I strongly suggest all buyers out there get and remain active during the holidays. While most buyers put off looking for deals during the holidays, investors take advantage of this season to find good deals so I’d suggest you get onboard with this as well.
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