Let’s talk about the market today, because it’s been a rocky month. We have some predictions and guidance to share. Given recent geopolitical events, the Federal Reserve’s rate increases to counter inflation, and an uptick in yet another wave of covid, it’s no surprise that buyers and sellers are getting nervous. We’re watching the data closely in our East Bay bubble and noting that median home prices for the month of April hit record highs. But the data is backwards-facing. We’re seeing a few strong signals that a shift is upon us, and we want to offer some predictions: Serious buyers will get more competitive. Buyers that are seeking a new home because of persistent and omnipresent pressure will bear down due to a renewed sense of urgency. A new family with a ticking clock until the due date, a family that can’t bear to hear one more pass of the commuter train outside their bedroom window, a grandparent who wants to be near their swiftly-growing grandchildren…all of these buyers will recognize that the very reason why they want to move is still compelling them. These folks will dig deep and find a way into a home despite the increasing rates and reduction in inventory. For example, we are working with a client right now who has been thinking of their home search in a few phases:
Phase I: In the near term, they are seeking the 100% perfect home
Phase II: If they don’t find it by July, they’ll start to adjust expectations and re-prioritize the characteristics of the “dream home” so that they’ll be more competitive.
They’ve been referring to this compromised home as the “July home” because they have been giving themselves until July to find the dream. You can guess what happened next…they let us know yesterday that the July home is now a May home and they are ready to adjust their priorities sooner than anticipated just to get into a home. They suddenly got much more serious and competitive. Home buyers with flexibility and choice in their timeline will get pickier. A home buyer that is on the search because they like the idea of homeownership, but are not under a timeline or external pressure will continue to peruse. But given the cost of borrowing money, they will justify a home purchase only for “the perfect home.” The number of offers on a listing will decrease and sellers (and their agents!) will have to work harder to find the best offer. Inventory will shrink. Any homeowner who is locked into a 2.75% interest rate - and has the choice whether or not to move - will have to face a significant leap in interest rates if they decide to sell their home to buy a new one. The general uncertainty of the market and doubling of interest rates since 2021 will put a slow to new listings. Here’s our advice. Buyers: Don’t wait. The cost of waiting to buy (to “time the market”) can be devastating. The increase in interest rates combined with marching appreciation will stack up. Someone who waits a year to find the “perfect” kitchen could have bought a home for much less money and have invested in their own asset with a kitchen remodel, thus increasing their equity and having the perfect kitchen! Sellers: Recognize that buyers will only get choosier as the market squeezes. While it may seem counterintuitive to invest more in preparing your home for a new buyer when the market shifts, we are crystal clear on this: you want to be the home that everyone wants. Now is not the time to cut corners or scrimp on upgrades. While the gross data may show a slow-down in median price, the best-looking homes in our area will still outperform, and you want to be part of that equation. We’ll continue to watch the market carefully and offer advice where we can. Please don’t hesitate to reach out if you have any comments or questions!