September 7, 2023
Rates have continued their upward trend as the FED’s stance on inflation remains aggressive, with more rate hikes likely. Despite the current rates being at their highest level since 2001, there is still a healthy buyer demand, and local property values are projected to continue to increase at least through 2024. The extremely low inventory levels are driving the value increases, as there is much more demand than available inventory. The ultra-low inventory levels are not expected to improve in the near future for many reasons, including potential sellers being “rate-locked.” With more than 50% of existing mortgages under 4% and more than 85% under 5%, very few sellers are willing to sell their homes and give up their existing rates. This explains why the vast majority of current sellers in our market fall into one of three categories:
This does not hold true for all Bay Area markets, as most buyers moving into the East Bay are selling their homes in the South Bay and relocating here.
Despite the healthy demand and low inventory levels, it is essential to price a home correctly, as buyers are willing to take their time and not overpay for a home. Homes priced correctly (not overpriced) are selling quickly, often with multiple offers. On the other hand, overpriced homes sit on the market for extended periods before selling, usually after one or more price reductions.
I expect the current conditions to continue through the rest of the year and likely throughout a good portion of 2024, when rates may decrease to the point that some of those rate-locked sellers are willing to move.
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