We are beginning to see signs that indicate a shift in our local market. The attendance at our open houses has dropped somewhat significantly along with the number of private showings. The number of offers that we are receiving on many of our listings has also decreased substantially, as buyers appear to be taking a breather and sitting on the sidelines. There are many factors contributing to this, with the two most obvious being the rapid increase in rates and the slumping stock market. Rates have almost doubled since December of last year. Historically, we have never seen rates rise so quickly from a percentage standpoint. The tech heavy Nasdaq has shed approximately 22% since April 1 with the other indexes losing significant ground as well. The tech industry and the wealth that it has created has been the lifeblood of the Bay Area market. The majority of current buyers in the Tri-Valley work in the tech and have been utilizing their high riding stocks to either purchase homes with cash or for down payment purposes. With the Nasdaq shedding 20%+ in the last few weeks, many of these buyers have seen significant losses in their stocks and are likely hesitant to liquidate at these levels or no longer have enough to liquidate. Throw in the massive payment shock associated with mortgage rates increasing into the mid 5% range for many buyers, and a market slowdown was inevitable. The slowdown is resulting in an increase in available inventories to a level that we have not seen for quite a while for most cities in the Tri-Valley.
Here’s a comparison of today’s inventory levels as compared to May of 2021:
Pleasanton: 101 (+43) – Dublin: 94 (+41) – San Ramon: 100 (+36)
Livermore: 116 (+47) – Danville: 106 (+42) – Alamo: 24 (-12)
Mortgage Rates
Rates have almost doubled since December of last year and have increased at a historical pace from a percentage standpoint. The Fed’s misinterpretation of inflation as being transitory caused them to be late to the game in terms of rate increases to help curb the massive inflation that we are experiencing. They have indicated that they will continue with the rate increases until inflation falls back to their 2% goal, so mortgage rates are likely to continue to increase in the foreseeable future. There are some bond experts out there that are predicting a recession in early 2023, which will force the Fed to reverse course on the rate increases and begin easing again. If this is the case, we could see a return to low rates again sometime in 2023, so it may be worth considering a 5 or 7-year fixed loan at a lesser rate for the interim and then refinancing into a 30-year loan when and if rates do revisit their previous lows. I would recommend that you discuss the options with your lender and financial advisor experts.