In the last ten years, it has been very difficult for buyers—especially first-time buyers to enter the Bay Area housing market.
Multiple offers drove home prices up and out of the reach of many would-be homeowners.
In the first quarter of 2022 we saw an unprecedented run up in home values, fueled primarily by buyers wishing to purchase a home before interest rate hikes made housing even more unaffordable.
But by mid-April 2022, that influx of furious demand wanned. The light switch that was flipped on by buyers reentering the market in 2012, turning into a dimmer. As interest rates began to rise, and the stock market declined, buyers started to pull back.
This has significantly cooled the superheated Real estate market in the Bay Area.
With tech companies announcing layoffs, this cool-down will result in home values receding.
This is what savvy buyers have been waiting for. Less competition means fewer multiple offers and lower purchase prices.
The biggest mistake we have seen in our over 30 years in this industry, is Buyers waiting too long to get back into the market after a period of uncertainty.
The downturn in 2007 is an example worth evaluating. The market began its decline in 2007, and essentially leveled off by 2009. Yet it took many buyers until 2012 to reenter the housing market. By then it was too late. Multiple offers became the norm and remained so until just this April. Buyers who carved their own path and bought homes in 2009-20011 came out far ahead of the pack.
Higher Interest Rates
Higher interest rates will of course affect the ability to borrow money and lower purchasing power. But as we discussed in this post, playing the field with interest rates is a fool’s game.
Interest rates are still at a 40-year average low. Buying a home now, even with higher rates than one could have obtained a year ago, protects the homeowner from future increases in rates. If they go up, the buyer has already lock in a rate, if they go down, which we suspect they will not, one could always refinance at a lower rate.
Making a Move
There are opportunities that arise in uncertain markets. Investors that remain paralyzed and want to wait until the masses renter the market giving them comfort in their buying decisions, will find themselves in company with thousands of other buyers who will all renter the market at the same time−turning the light switch of multiple offers back on.
Finding balance is key to making smart home buying decisions. If buyers wait until the housing markets and economy reach perfect stabilization, it will be too late to take advantage of opportunities. Job stability should be the number one driving factor in a buyer’s decision to purchase a home in a slow housing market—not interest rates of where on the curve home values lie.
Drew & Christine Morgan are REALTORS/NOTARY PUBLIC in Belmont, CA. with more than 25 years of experience in helping sellers and buyers in their community. As Diamond recipients, Drew and Christine are ranked in the top 50 RE/MAX agents nationwide and the top 3 in Northern California. They may be reached at (650) 508.1441 or emailed at firstname.lastname@example.org.
The information contained in this article is educational and intended for informational purposes only. It does not constitute real estate, tax, insurance or legal advice, nor does it substitute for advice specific to your situation. Always consult an appropriate professional familiar with your scenario.