2022 In Review & Looking Ahead
In this article I’ll share 2022’s real estate data points along with trend information that will put our market performance into perspective. For those who know me, I often reference the long-term benefits of holding real estate and its contribution to building wealth. I still believe that buying real estate in the San Francisco Bay Area is an excellent investment not only financially but for the diverse culture and lifestyle choices available.
Year Over Year Sales Prices
Not surprisingly, most Bay Area Counties saw a drop in the median and average sales price when comparing December 2022 to December 2021. Using Santa Clara County single-family homes to illustrate the changes in the market, we found that:
- Inventory – the number of homes available for sale – steadily declined since its peak in July 2022. December 2022 had approximately 400 homes in active inventory versus 1,200 in July.
- Closed Sales – Given lower inventory and rising interest rates, the number of closed sales dropped 43.6%. It’s important to note that there are still buyers looking for homes. The challenges are the continued lack of available inventory, the increased interest rates, which have impacted affordability, and the impact of the volatile stock market.
- Days on Market – It’s taking more time to transition from an open listing to a ratified contract. The days on market in December averaged 30, when we it was 16 in December 2021.
You can see each county's market report for single-family homes and townhomes/condoes, comparing December 2022 to December 2021:
Mortgage Rates Lowest Levels in 5 Months
The Fed raised the overnight interest rate by .25% on February 1st, lower than its previous hike of .50% in December, and four consecutive .75% bumps occurring in November, September, July and June. The overall inflation rate is dropping, yet Fed Chair Jerome Powell warned that additional – albeit smaller – rate hikes are likely in 2023.
The Fed rate doesn’t directly affect mortgage rates; mortgage rates are typically based on bond markets. The good news is that home borrowing rates are at their lowest levels in five months. Anecdotally, my local network of mortgage brokers are reporting higher activity and more application submissions. This uptick coincides with the positive movement I’m seeing in the market. Given 2022’s lackluster stock market performance, I’m not surprised to see buyers ready to invest in their future by buying real estate.
One of the mortgage lenders I follow also shared information that will help put things into perspective. The Mortgage News Daily reports a conventional 30-year fixed rate is coming back down, with some aggressive lenders quoting rates in the 5% range. Plus, the average lender is now back in line with the lowest levels in roughly 5 months. That’s very positive news as we prep for the spring real estate season.
In times like these, buyers often turn to Adjustable Rate Mortgages (ARMs), which provide lower short-term interest rates, allowing them to accumulate equity, positioning them to refinance when the fixed rate mortgages cycle lower. This is a viable strategy, especially when you plan on holding onto the property for the long term. There’s a reason why the saying, “Marry the house, date the rate,” is so appropriate.
Job Growth Counters Recession Predictions
The January 2023 Job Report showed widespread growth across industries. Wall Street experts made big predictions for 2023, including a recession triggered by raising interest rates. So far job growth and low unemployment numbers are proving those predictions wrong.
Several major high-tech employers have announced layoffs, including Amazon (9%), Google (6%), Meta (13%), Microsoft (5%) Salesforce (11%), and Twitter (68%). While these layoffs are concerning, it doesn’t show the bigger picture. The following are national, state, and local unemployment rates.
- In January the national unemployment rate dropped from 3.7% to 3.4%.
- The latest California’s unemployment rate data is from December; it remained steady at 4.1%.
- The San Jose-Sunnyvale-Santa Clara unemployment rate, as of December 2022, dropped to 2.1% from 2.4%.
So, it’s not all doom and gloom for the national and Bay Area economy. According to the Bay Area Council Economic Institute, the nine-county Bay Area ended 2022 strong. 14,000 jobs were added, further lowering unemployment rates. Even so, we’ll need to keep a close watch as the recent tech layoffs aren’t yet reflected in the jobs data and employment rates.
Less Inventory, Fewer Sales
I’ve seen contraction in both the available inventory and buyers completing sales. As a result, the market is less out-of-balance than others areas in the country. While the market has shifted, home values are still above pre-pandemic levels. According to the California Association of Realtors, the SF Bay Area median price of a detached home in December 2019 was $908,750 compared to December 2022’s $1,084,500. That’s a 19.3% increase over 24 months. I anticipate inventory levels to remain low but will keep an eye on what’s happening as we approach the spring season.
Setting Expectations for Buyers & Sellers
Opportunity favors the prepared. Buyers should be ready with clear and realistic criteria when searching for a home. This includes having financing ready along with a liveable budget to make the numbers work. There are gems available, you simply need to have knowledge of the area and their individual neighborhoods. In the last week or two, I’ve seen homes sell for all-cash and others receive multiple offers. As a result, buyers need to be prepared and have reasonable expectations when it comes to negotiating.
On the seller side, deciding to list your home is a personal decision regardless of market conditions. I’ve navigated all types of markets, and that experience pays off for my clients. While the market has changed, we can use the low inventory and your home’s unique attributes to your advantage. As we develop your selling strategy, it is important to prepare your home to appeal to buyers. We’ll discuss realistic expectations, and well as the latest market conditions, so that your home is positioned to maximize its potential.
Lessons From Recent Winter Storms
The January “atmospheric river” storms were unprecedented and caused unexpected damage to our homes. As your Realtor, our relationship extends past a transaction close. I have a vast network of local professionals – including contractors – that can help you address the expected and unexpected. Let me know if you need a recommendation and introduction.
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.
December 2022 Market Reports
Santa Clara County
