Bright Spots Amid Uncertainty

As we head towards year end, the news seems to be full of economic doom and gloom. Yes, there are challenges but I’m also seeing opportunities for both buyers and sellers. Let’s look at the numbers we’re seeing in the fall months of 2022.

Home Sale Pace Slows Down

Not surprisingly, the number of home sales showed declines for the fourth consecutive month in September according to the National Association of Realtors. With rising mortgage interest rates, the market is seeing fewer buyers and fewer sellers. That’s to be expected, given that the Fed wants to curb inflation and dampen spending. Yet, there are still some positive stats hidden behind the headlines.

The Federal Reserve Bank of St. Louis reported the median sales price of houses sold in the U.S. Q32022 showed a (modest) increase to $454,900 from Q22022’s $449,300, a +1.25% improvement, even though the Fed began raising rates in March 2022. And, when you look at the home value graph over time, home appreciation has sharply risen in the last decade. That’s the view I encourage my buyers to have, investing in a home you’ll enjoy over the long term.

Mortgage Rates Are in Flux

Mortgage interest rates are expected to rise, influenced by the Fed’s multiple announcements that more rate increases will most likely occur to fight inflation. These rate hikes are expected in December and into their early 2023 meetings.

The average 30-year mortgage rose to 7.08% according to Bankrate’s national survey of large lenders. And when you look at jumbo rates – any loan that exceeds $970,800 – the average 30-year jumbo loan is slightly lower at 6.84%. So when you are looking at rates, look at both conforming and jumbo loans depending on your situation. Also note that, in 2023, the Santa Clara County conforming loan limit will increase to $1,073,000 (a 10.5% increase).

You may have heard the phrase “marry the house, date the rate.” Rates, by their very nature, fluctuate. Yet, the reason why people buy and sell homes don’t necessarily follow market conditions. Families grow, people relocate for new jobs, divorces and death are also a part of life. While rates may be currently inconvenient, you’re not locked into your mortgage rate forever. Adjustable mortgage loans are a viable option that shouldn’t be overlooked.

Buyer Opportunities

With less home-buying demand, the buyers now have less competition. This is certainly a welcome opportunity for first-time buyers who lost out when the market was super hot. The number of months to sell jumped from 0.7 months in September 2021 to 1.4 months in September 2022. The average sales price has dropped nearly 5%, from $2.05M to $1.95M. Even so, buyers need to be prepared to pay list (or near list) price and have their financing ready.

Winning Strategies for Sellers

As I mentioned earlier, life changes happen regardless of market conditions. If you’re looking to sell a home, there are winning strategies for selling in a changing market. Recently I’ve sold homes with very positive results for my clients. This is where having more than two decades of experience navigating all types of markets pays off. Remember, every home and neighborhood is unique. I invite you to call me to discuss your situation and options.

California Numbers

The California Association of Realtors (CAR) tracks home sales activity by region and county. We’re seeing fluctuations across the state and within the SF Bay Area. The following graphs show single-family home values across California from August to September 2022.

Month over month, five SF Bay Area counties saw a positive change in median sold price.  Alameda, Contra Costa, Marin, San Francisco, and Santa Clara Counties saw gains ranging from 0.8% to 6.7%.

Santa Clara County

Here’s a comparison of October and September statistics so you can see month-over-month (MoM) as well as year-over-year (YoY) data.

Single Family Residences

• Monthly sales transactions. The number of closed sales dropped significantly MoM and YoY.
• Days On Market (DOM). It took a few more days on the market (DOM) to transition from an open listing to a ratified contract. Months to sell decreased slightly from 1.4 to 1.2 months.
• Single-family residence inventory. Inventory shows a downward trend that started in mid summer.

Townhomes & Condos

• Monthly sales transactions. The number of closed sales have dropped MoM and YoY.
• Days On Market (DOM). It took one fewer day on the market (DOM) to transition from an open listing to a ratified contract, from 28 to 27 days. Comparing MoM and YoY, it is taking longer to sell a townhome/condo.Townhome and condo inventory. The active inventory trend line shows a decrease over the last several months.

Santa Mateo County

Here’s a comparison of October and September statistics so you can see month-over-month (MoM) as well as year-over-year (YoY) data.

Single Family Residences

• Monthly sales transactions. The number of closed sales have dropped MoM and YoY.
• Days On Market (DOM). It took slightly fewer days market (DOM) to transition from an open listing to a ratified contract MoM. Months to sell has been lengthening, reaching 1.8 months to sell in October.
• Single family residences. The active inventory trend line shows fluctuation over the last several months.

Townhomes & Condos

• Monthly sales transactions. The number of closed sales rose slightly MoM yet have dropped YoY.
• Days On Market (DOM). It took fewer days MoM on the market (DOM) to transition from an open listing to a ratified contract. DOM dropped from 38 to 33 days and October’s stats shows that it takes an average of 2 months to sell a townhome/condo.
• Townhome and condo inventory. The active inventory trend line show a decrease in October.

Santa Cruz County

Here’s a comparison of October and September statistics so you can see month-over-month (MoM) as well as year-over-year (YoY) data.

Single Family Residences

• Monthly sales transactions. The number of closed sales have dropped MoM and YoY.
• Days On Market (DOM). It took a few more days on the market (DOM) to transition from an open listing to a ratified contract. YoY, DOM rose from 26 to 33 days. MoM DOM rose from 31 to 33 days.
• Single-family residence inventory. The active inventory trend line is relatively flat MoM.

Townhomes & Condos

• Monthly sales transactions. The number of closed sales have dropped MoM and YoY.
• Days On Market (DOM). It took a few more days on the market (DOM) to transition from an open listing to a ratified contract. YoY, DOM increased from 26 to 40 days. MoM DOM rose from 20 to 22 days.
• Townhome and condo inventory. The active inventory trend line shows a decrease which started in mid summer.

What I’m Seeing Now

• Even though we often see a reduction in available homes for sale during this time of year, there are more homes for sale when comparing October 2021 to October 2022. Buyers have more choices than they did a year ago.
• Sellers are having to adjust their expectations and timeframes. The median sales price is down minimally YoY, from $1.62M to $1.59M. I’m seeing fewer multiple offers, however well-priced homes, and homes that feel “move-in ready”are still very desirable to buyers.
  
  It’s also taking longer to sell, from 0.6 months to 1.2 months from listing to a ratified contract. But, to put things into perspective, a 4 to 6 month supply of inventory is considered a buyer’s market. Local inventory locally is still well below that. In most areas we’re still below 2 months of inventory. Buyer demand continues and inventory remains constrained, so this bolsters prices and results in the multiple offer situations that we’re still witnessing.  The Consumer Price Index (CPI) was stronger than expected, an indication that inflation may not be as strong as expected. Mortgage interest rates, while fluctuating, also show improvement.
• California’s real estate affordability index is currently 36. Compared to the national index of 59, it’s still difficult for first-time buyers to become homeowners in California. The SF Bay Area’s affordability index is 33, up from Q2’s 28, making it slightly easier for new buyers to afford a real estate purchase. We’re starting to see more projects approved by the Santa Clara County Board of Supervisors. They recently approved $31.5M for more affordable housing, including apartment and for-sale homes.

Reach Out & Connect

I’m meeting with clients via phone, video conferencing, and by appointment. Whether you’re looking to buy or sell, you need an experienced guide in this complex and fast-paced real estate market. I’ve helped hundreds of individuals like you successfully negotiate the most important financial transaction you’ll ever make.