January Market Update

2024 is here, and starting with the lowest inventory levels I have seen in my 27+ year career. The conditions that kept inventories low in 2023 have not changed, as mortgage rates are still near the multi-decade highs we experienced in October and November. The FED appears to have changed its stance on inflation, and most believe that we’ll see rate cuts in the 2^nd quarter, but some well-known figures in the financial world are forecasting rate cuts early in the first quarter. We did see a hotter-than-expected inflation number this morning, which could potentially delay the cuts. However, the treasury market seems to have shrugged the report off, as the yield on the benchmark 10-year treasury is currently lower than this morning’s opening prior to the report. Regardless of timing, rates are expected to return to the low 5% range, with some outliers expecting them to dip under 5%. Buyer demand has remained strong throughout the rising interest rate environment. It will only get stronger as rates drop, setting the stage for another seller’s market this year unless inventories rise dramatically. Hopefully, rates will drop far enough to free up some of those homeowners currently “rate locked.” As I’ve described in the past, a large percentage of homeowners took advantage of the historically low-interest rates and locked into 30-year mortgages at or below 4%. Those fortunate enough to be in this position do not want to sell their homes and take on a mortgage in the 6-7% range or more for their new home. This is playing a significant role in our inventory shortage and is the reason why the bulk of my recent listings have been sellers moving out of the Bay Area or out of state and heirs selling their family homes. The National Association of Realtors is forecasting a 30% increase in listings this year, which would help ease the inventory issue but would not get us back to a more balanced buyer demand level.

Current inventory levels as compared to January 2023:

City                              Today              January 2023

Pleasanton                  28                    45

Dublin                           22                    44

Livermore                   44                    54

San Ramon                 37                    38

Danville                       33                    56

Alamo                          11                    16