As we head into the final stretch of summer, it's time to take stock on what’s happened in our real estate market. While the national news may paint a certain picture, it's important reminder to pay attention to the local nuances.

The Bigger Picture

The San Francisco Bay Area is truly unique, as much of our economy is based on emerging technologies and innovation. Our local employers read like a who’s who on Wall Street. That’s why our real estate performance typically follows the NASDAQ.

Upticks in Bay Area unemployment rates

In June both the SF Metro and San Jose metro areas reported slight upticks to their unemployment rates in the last quarter. San Jose’s rate rose 0.4% reaching 3.7%. San Francisco is up 0.3% reaching 3.2%. Even so, they are near the national unemployment rate of 3.5% which is seasonally adjusted and below California’s unemployment rate of 4.6%.

Housing affordability is the lowest since 2007

Only 16% of California households can afford a typical single-family home. It’s not surprising given mortgage rates have pushed the borrowing costs to an all-time high.

Many major U.S. markets’ home values climbed

Zillow Research reported that a majority of metro areas saw home values climb when comparing June to July 2023. However, San Francisco home values dipped month-over-month by 5%.

Inflation expected to inch up in August

The Fed raised rates again on July 26th by another .25%. According to many news outlets, economists are expecting another hike during their September 19-20 meeting.

Consumer confidence jumped in July

The consumer confidence index (CCI) rose to 117.0 in July, up from June’s 110.1. This is the highest level since July 2021. According to The Conference Board, “despite rising interest rates, consumers are more upbeat, likely reflecting lower inflation and a tight labor market.”

Potential cooling in the Fall

The combination of rising mortgage rates and increasing inventory is likely to lead to a slight cooling in the housing market in the coming months, according to Altos Research.

Majority of homeowners have low-rate mortgages

According to a June Redfin report, 82.4% of homeowners have a mortgage rate below 5%. 62% have a mortgage rate below 4%. These low rates contribute to a “lock-in” effect where homeowners have little incentive to sell. Another reason sellers are staying put is in part that 60% of mortgage holders have lived in their home for four years or less. These two factors – below-market rates and tenure – further contribute to the supply shortage.

A Local View

• The value of Santa Clara County single-family residences remains relatively steady. When comparing July year-over-year prices, single family homes saw a slight gain, $1.78M from $1.72M. The percentage of those sold over list price was 6%, up from July 2022’s 1%. Active inventory remains low, creating competition amongst qualified buyers. The number of months from listing to closed sale has dropped by 50% – from 1.6 months to 0.8 months.
• Inventory levels remain low even during peak summer months. Even though there was a slight rise in the number of available homes for sale, 2023 levels are far below 2022.
• Fewer closed sales month over month. June 2023 had nearly 800 closed sales, down significantly from 922 in 2022. July 2023 sales were even lower, reaching the 600 mark.
• What does this all mean? There are fewer homes for sale. There are fewer sales transactions closing. And those homes that do sell are receiving on average ~6% over asking price.

What I'm Seeing

Often the national and local news headlines don’t reflect what’s happening at the neighborhood or micro-market level. While the stats can be interesting and helpful, I’ve found that every real estate transaction has its nuances. That’s why paying close attention to those details can make or break a deal. Yes, the number of sales is statistically lower when compared to previous months. That said, deals are happening every day.

Opportunity favors the prepared

This applies to both sellers and buyers.

• Sellers: With such low inventory, gems stand out.  Homes that sit typically don’t follow the market’s best practices: prepare the home properly by highlighting its best attributes. I do a thorough market analysis to frame our pricing and marketing strategies.
• Buyers: Rising interest rates have pushed some buyers out of the market. Yet, there is still a high demand for homes. As new homes come to market, be prepared to act quickly.

Pricing is crucial

I know I’ve touched on this point multiple times in the last few years. It still holds true. If you’re thinking about selling, it’s so important to price the home to market conditions. Sometimes these market conditions are changing before official numbers are reported. It’s one of the many reasons why clients choose to work with me as I’m in tune with what is happening in the market before it becomes public knowledge.

Inventory is stagnant

I don’t see this trend changing anytime soon. People are staying put as there’s no compelling reason to lose their record low mortgage interest rates. The reasons to sell are typically around major life events (e.g., divorce, death, job transfer).

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.

For buyers and sellers, I invite you to call me to discuss your situation and options.