Chino Hills Homebuyers: What the Changing Market Means for You

The real estate market is changing. Here's what that means for you.

As of August 2022, Chino Hills home prices were down 1.2% compared to last year, selling for a median price of $816K. The number of Days on Market is up as well. On average, homes in Chino Hills now sell after 42 days on the market compared to 32 days last year. There were 50 homes sold in August this year, down from 91 last year.

Indeed a shift is taking place in the Chino Hills market—prices are dropping and it’s now favoring buyers over sellers. A recent Forbes article celebrates the fact that buyers nationwide are finally getting a break, stating: “The typical home sold below its asking price in August for the first time since March 2021, meaning buyers are having some success negotiating prices down, something that was essentially unheard of at the height of the pandemic home-buying frenzy.” Still, though, many buyers are frustrated by high mortgage rates which are making monthly housing payments unaffordable.

More and more Chino Hills buyers are deciding to remain on the sidelines due to being priced out of the market, and because of this, nationwide pending home sales are down 21% year over year, the largest decline since May 2020.

The drop in interested buyers is resulting in more sellers lowering their prices. In Chino Hills, we had 45.7% of sellers offering price drops last month, up nearly 23.8% since last year. These price reductions usually mean you buyers are gaining more leverage. Frustratingly though, for the few buyers who can afford the high monthly payment that comes with high mortgage rates, new listing inventory remains low—reducing the availability of choices.

Looking at data from the St. Louis Fed, it’s clear new listings in San Bernardino county are much lower than typical. As of September 2022, our county had 2,724 new listings, down 15.8% from September 2021 which had 3,208 listings. For context, here’s the new listing inventory we typically see this time of year:

Based on the above numbers, the average new listings we’ve seen in September for the last five years have been about 3,240, making this year’s numbers down nearly 16% from the five-year average. That’s significant. It means, according to Mike Simonsen at Altos Research, “Homeowners in America have decided there’s no urgency to sell… and very few seem compelled to sell into a market with weak demand.”

Though new listings are down, the total listing count is up in San Bernardino County due to decreased buyer demand for the listings that do hit the market. As of September 2022, total listings are up 7.9% year over year.

That rise in inventory may look promising, but when we look at the numbers from the past 7 years, we see how significantly lower the inventory still is in comparison to the total inventory from 2016-2019 where the average for the month of September during those years was 9,533. When we compare September 2022 to the pre-pandemic average, San Bernardino county’s total inventory is nearly 20% lower than typical.

Lack of affordability seems to be the main issue, especially with mortgage rates nearing 6.75%—a 16-year high—causing that monthly payment to be out of reach.

We’ve seen home prices decreasing, but 1.2% is hardly going to result in affordability for the typical home buyer. Inventory would need to increase substantially, and those mortgage rates would need to come down. Let’s talk about inventory first.

According to Mike Simonsen, “It’s hard to get supply and demand into balance when supply is so short.” And if you’re hoping that a recession might lead to more inventory availability, there’s some data that should be considered when factoring that in. According to Simonsen, when there’s significant unemployment, it takes “at least another year out in the future before the real estate market sees the resulting inventory from people who’ve lost their jobs and are forced to sell their homes. And since we are at very low unemployment now… it would be at least 2024 or 2025 before we see an inventory surge.”

New home construction would also help to increase inventory. But, according to Jonathan Lansner, using data from the US Census and St. Louis Fed, “Southern California developers have cooled their aggressive homebuilding plans, cutting the pace of permitting by one-fifth after the fastest start to the year since 2007.” Specifically addressing our region, he said, “the Inland Empire—homebuilding’s regional hotbed—had the summer’s biggest cooling. July and August permitting ran 32% below the first-half pace.” The reason for the cooling? Mortgage rates are making those new construction homes unaffordable to buyers and “industry executives are antsy. West Coast developer confidence, measured by the National Association of Home Builders, is at its second-lowest level in 10 years.” It’s an aggravating cycle: few can afford a home because prices are so high, driven higher due to low inventory, but those who create new homes for sale dislike the way the market looks at the moment (because unaffordable homes are keeping buyers out of the market).

According to Fannie Mae, 30-year mortgage rates are predicted to fall significantly, dropping below 4.5% in 2023. The Mortgage Bankers Association projects mortgage rates will drop to 4.8% by the start of next year. This is great news for buyers who want a more affordable monthly payment as well as sellers who will be more inclined to list their homes once more interested buyers enter the market.

Keep in mind, these are just projections, and both institutions have been incorrect in the past, but it is promising.

Since we’re in a period where inventory is rising, prices are starting to come down, and competition among buyers is low, if you’re in a lucky enough position to be able to afford a down payment consider contributing more toward that initial down payment, or buy discount points, you might want to scoop up that perfect house if it happens to become available.

Here are a few other options for reducing the cost of your loan:

A 30-year mortgage will cost you more due to interest. So if you want to save money over the long run, get a 15-year mortgage. It means a higher monthly payment, but a lower cost in interest over the long run.

Adjustable-rate mortgages (ARMs) offer lower monthly payments in the beginning, so if you anticipate having more income or the ability to refinance later, they may be an option to look into.

Discount points are a way to pay less per month. By buying discount points, you’re basically prepaying some of the interest the bank charges on the loan. In return for prepaying, you get a lower interest rate which can lead to a lower monthly payment and savings on the overall cost of the loan over its full term.

If you have a conventional mortgage, you can usually refinance into a lower interest rate as long as you’ve been making your payments regularly, keeping your credit score high, and maintaining your home in good condition for an appraisal. So, pay the high mortgage rate for a while, and then refinance once mortgage rates drop again.

Chino Hills is more than just a convenient spot for people to escape the high prices of So Cal’s urban centers. It’s also home to spacious yards, a short drive to many area attractions, and a picturesque location for upscale homes. These factors make Chino Hills an ideal place to settle long-term. Homeownership is an investment—one that will likely appreciate in value over many years to come. Over the last 47 years, home prices have appreciated 168 out of the 188 financial quarters. Outside of the subprime crisis, there have only been 6 quarters where home values depreciated. And in most cases, that depreciation was less than 1-2%. Remember, time in the market beats timing the market, so when individuals hold off on making a home purchase until the timing is right, they often miss out on the equity and appreciation they can enjoy as homeowners.

And now that competition is slowing, those who are committed to their home-buying plans will be able to take a grounded approach to the process, think through their decision, get the necessary home inspections, and rest assured knowing they weren’t rushed to make an offer on the wrong house.

When considering selling your current property and buying a new home, it’s important to consider what both scenarios will look like in the long term. What is your goal financially and how much equity would you need to meet that goal? Consider how much of a monthly payment increase you’re comfortable taking on as well as the length of time you expect to be paying on the loan.

It’s important to note that if you bought your home a few years ago, current mortgage rates are likely much higher. This means that taking on a new mortgage involves giving up that low-interest rate you locked in when you first became a homeowner, so be prepared for that high-interest rate to factor into your monthly payment. If this doesn't deter you from feeling ready for your next home, then now is likely the time for you to make a move.

Since buyers have more power right now, consider doing the necessary upgrades on your home to ensure your property gets top dollar.

Additionally, this statement from Redfin economist Taylor Marr in a recent Forbes article is essential to consider: “It’s important to remember that much of the housing market data being reported are based on home purchases that were agreed to a month or more ago when mortgage rates were a point and a half lower.” Now that mortgage rates are much higher, “Sellers should anticipate that buyers are unwilling or unable to pay a price similar to what their neighbor’s home sold for a month ago."

Here at Park Group Real Estate, we know that buying and selling a home is a big decision. We’re here to make the process less stressful and get you into your new home as quickly and efficiently as possible. Our team of experienced real estate agents are well versed in the Inland Empire market, so let us help you find your dream home.

Are you thinking of selling? Get a free home evaluation today and find out how much your home is worth!