We live in a world that seems to be getting more complex and unpredictable every minute. It feels like we are out of the frying pan and into the fire with two straight years of a global pandemic giving way only to an unprecedented invasion by Russia. Inflation is on the rise, the Fed is finally raising interest rates and the stock market volatility has just about everyone here in Silicon Valley feeling at least a twinge of concern.
People have been asking us about how all of this is impacting the housing market and the answer is…also complex.
Year over year from 2021 to 2022 we saw steep gains in housing prices here in the bay area. If you look at the stats in the chart below, you’ll see that house values in Santa Clara county climbed over 23% from last year. Days On Market (DOM) decreased from an average of 22 days to only 14 days. The primary driver of this data is low inventory, high demand and cheap money.
Yes, borrowing money is now more expensive than it was a year ago and that will impact some buyers’ ability to borrow money. But, so far, it is our experience that plenty of people have plenty of money and a jump in interest rates from 3.5% to 4.5% has not deterred enough buyers to make a significant impact on the overall market. And yes, inventory has come up just a bit from a crazy low last December, but like the interest rates, this slight increase in inventory has not yet satiated buyers’ thirst for buying homes. Accordingly, we are still seeing multiple offers on most well priced homes in “desirable” neighborhoods – especially the pretty ones that show well online. Right now we do not see any noteworthy indicators to suggest any of this will change anytime soon. The Bay Area economy appears strong and people around here sound confident about their jobs and income.
Yes, there are a lot of people moving to Texas, Oregon, Arizona, Idaho and the Carolinas but, it is our experience that just as many people are still moving to the Bay Area from Minnesota, New York and Washington – not to mention people arriving from other countries. We are working with a lot of people moving out of California but we are also working with a lot of young buyers who still see California as an amazing place to enjoy great weather and a robust economy.
So here’s the takeaway (for the moment – give us a week and things could change): If global politics don’t deteriorate we make the following predictions:
- Buyers will remain ready and eager to buy. The Bay Area is still amazing and people want to be here to enjoy the beauty, diversity and economic benefits.
- Inventory will improve slightly but sellers will keep their advantage. House prices will continue to rise but it won’t be the rocket ship it’s been this past year. Prices will begin to flatten out – but in most cases won’t decline.
If you’ve been thinking about selling your house but thought you missed your window of opportunity, think again. You are still going to be astounded by what your house is worth. Make sure your house is well presented in person and online and be realistic about your list price. Overpriced houses will be the losers in today’s market.
If you are a buyer, you will do well to find yourself a skilled, experienced real estate agent who knows how to get offers accepted. The competition is not going away anytime soon. The competition may soften a bit, but it is still going to be challenging – especially for the more desirable “turn key” houses in great locations.
If you have any questions about the housing market or anything in life, please feel free to reach out to us by phone or email. Also, we’d love to hear what you think in the comments below – especially if you think we’ve got it wrong or if you see it differently.