New Year’s resolutions often come about as we turn the calendar page on a new year despite reports that find 43% of all people expect to fail before February, and almost one out of four quit within the first week.
A New Year for us to a great extent involves trying to predict what will affect the real estate market to help our clients understand the landscape, better plan our business and our time away from it. Unfortunately, predicting what will happen in the real estate market has about the same odds as staying true to those New Year commitments.
Rather, with over 30 years in the industry, we turn to our experiences in similar economic circumstances and evaluate as best we can, what may lie ahead in the coming year—all things being equal. That’s the wild card—“all things being equal”, as they never are. That’s what can throw what otherwise might be a rather predictable year, into a year wherein nothing resembles the past, and what evolves from that is new territory—as in what happened in 2019 with the pandemic.
During the past seven months we strongly encouraged our buyers not to try and read too much into the pullback in home sales. There was no overriding element that seemed it was fueling the pullback except higher interest rates and lower stock portfolios, with the former of the two affecting the decision to buy, in direct conflict with the rational choice theory heuristic.
The tech sector layoffs were almost entirely predictable as many companies increased hiring during the pandemic, and just like the soaring demand in home sales, we experienced a regression to the mean once the dust settled from the COVID pandemic—enough at least to assure ourselves that we had turned the corner on its management.
Early in 2023, we’re seeing a strong uptick in home sale prices on the Peninsula, despite what you may be hearing in the news—here’s why:
- The media gets third party information for their reporting such as data from Case-Shiller®—whose very reports lag real-time by three months.
- The media’s reports are on a national scale—not local—often cited for example is the National Association of Realtors®.
- Their data compares YOY (Year-over-Year) and so while prices are lower than last year at this time—a period when the housing market was experiencing the most robust run up in home values ever seen—they’re higher than they were a few months ago.
These are a few of the overriding triggers for the increase:
- The lack of supply is clearly impacting the volume of homes sales and prices as multiple offers are once again driving home values higher—seller’s unwillingness to give up their 3% mortgage rate for a 5% one when they can do an addition to their home and stay put is putting pressure on inventory.
- Buyers are understanding that even in an overbid, they are still paying prices that were lower than a year ago.
- Buyers have become more accustomed to the higher mortgage interest rates and are beginning to move on with their life’s plans.
- Buyers have calculated that it’s better to get in now before rates go any higher, and refinance if they go lower—effectively hedging their bet against increases.
San Mateo County Home Sale Statistics:
|Jan. 1-Mar.1||Sale Price||RATIO Close Price By Original List Price||Price/SqFt||Sq Ft Total||DOM|
What is driving this relative stability in the market is clearly the lack of supply. Despite many buyers pulling back from purchasing, the number of homes sales during this same period—Jan. 1 to Mar. 1 dropped 82% in 2023!
Clearly, despite what you may be hearing, the sky did not fall last year. What we saw was an unprecedented run up, followed by a downturn landing us where we started—as if 2022 had never happened effectively making 2022 a zero sum game…
Drew & Christine Morgan are REALTORS/NOTARY PUBLIC in Belmont, CA. with more than 30 years of experience in helping sellers and buyers in their community. As Diamond recipients, Drew and Christine 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 email@example.com.
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.