The frenzied bidding wars for homes with escalating prices may have peaked, sending a shockwave through the industry, according to a new report from Sotheby’s International Realty and an executive at the brokerage.
“I’ve never seen a market in my 42 years that changed as quickly as this market. It’s like someone pulled a plug,” Michael Williamson, Southern California regional manager for Sotheby’s, said.
Sotheby’s International recently released its Greater Los Angeles Q2 2022 report. It shows that closed sales declined 21 percent in a year-over-year comparison during the second quarter. The report covers the area spanning downtown Los Angeles to the Westside and the beach cities of Santa Monica and Malibu. Its information was taken from deals recorded on MLS.
Williamson said while agents seem to be catching their breath from the market change, the slowdown will be felt most acutely for first-time buyers who are affected the most by interest rate hikes. He said that the luxury market continues to be active, although buyers are more cautious.
Studies from other real estate companies have shown that the market across the United States has been slowing down for the past few quarters. But the second quarter of this year came as a shock because a number of trends declined at the same time, Williamson said.
The stock market fell and the cryptocurrency market crashed, which was bad news for people financing their real estate with crypto. Also, the Federal Reserve implemented interest rate increases not seen in a generation.
The degree of the slowdown depends where an agent works, Williamson said. The decline was not so steep for sub markets such as Beverly Hills, where second-quarter sales declined only 14 percent. Also, since the 2021 market was red hot, it is unfair to compare sales to such an atypical year, he said.
The slowdown has been felt acutely by real estate agents who got used to the go-go market of 2021, said Derek Reilly of Keller Williams. The most stark example is open houses. Before May, more than 100 people crowded a typical open house. Traffic has slowed to just a trickle for many homes, he said.
“Basically, we’re going to have to work again. The days of posting a listing, having one open house and then having 67 offers are over. This business is no longer reality TV. It is reality now,” he said.
He forecast that tough times may mean some brokers leave the business, but that will just mean more market share for those who stay in the game.
Reilly’s colleague Zane Widdes at Keller Williams has worked as a real estate agent for 33 years. He counseled that the recent slowdown is nothing compared to the market freezes of the past.
“I’ve been through earthquakes, fires, floods and a few recessions,” Widdes said. “This is not a Black Friday. It’s not an earthquake thing where everything halts. It’s a gradual shift.”
Robert Maschio, a star of the hit TV series “Scrubs,” left acting to go into real estate six years after the series ended in 2010. The current slowdown hasn’t made him regret leaving entertainment.
“People will always buy and sell homes. They’re just more prudent about the moves they make,” said Maschio, now at Compass.
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