November Market Update

I hope you all had a Happy Halloween! From what I saw on social media, it was all about school parades and costumes parties this week. Glad you all had fun. 

In the real estate world all is still good in this transitional market. Both the real estate and stock market are going through a slight correction and we're all trying to make sense of it. Is it just the season? The upcoming elections? Social unrest? Increasing interest rates? Trade wars? Whatever it is, thankfully the sky is NOT falling and people are still buying homes...Buyers these days are just being more picky and are waiting for the perfect property to pull the trigger. Gone are the days when buyers compromise their "must haves" just to be able to land a home in the Bay Area. 

Even with the holidays approaching, new listings continue to hit the market every day, but they are just not flying off the shelves like before. My "stager friend" currently has 75 homes staged and 25% of those properties are requesting extensions past their 2-month contract times. Price reductions are becoming more frequent for certain types of properties and new listings are listing for much lower than market value to attract as many buyers as possible out the gate. Sellers are in no way taking losses, for the most part, they're just getting less profit than expected. The extremely desirable properties, however are still getting bid up substantially higher than list price, but they aren't getting 15+ offers like before...it's more like 5-8 for the really exceptional homes. Typical homes are accepting offers as they come in.

In addition to more properties entering the market, I am also seeing more cancelled and withdrawn listings as well. I sent mailers to the sellers of some of these homes to see if I could win the listing and discovered that they either withdrew from the market for the holidays or just didn't want to compete with so many other properties. They plan to re-list in early 2019 in hopes that there will be less competition and more buyers by then. 

Interest rates have also risen and are now up to 5% or more for first-time home buyers with imperfect credit so the starter homes and entry level properties are starting to take a hit. I bought a condo from an old client for $400k and have plans to flip it and sell. When I decided to buy it from him, the last sale was $565k and an outlier even sold for $605k a month before, so I figured it was a large enough spread to make a profit after needed repairs. We closed escrow on his property on September 21. Now, just a little over a month later, there are listings as low as $478k (but hoping to sell in the low $500k's). Darn! This market just took a 15% turn in such a short amount of time. What does this mean?  I think the list prices are compensating for the increase in payments due to the interest rate....Good for the buyers....Risky for flippers....

I have seen this before in 2008. Next type of home that will take a hit is going to be the marginal neighborhoods...(ie: the east side of 101 on the Peninsula the flatlands of Oakland, Hayward and the 80 corridor, condos without views in SOMA and areas of the city like the Excelsior District, Visitation Valley and the Bayshore). Those areas tend to have buyers with lower downpayments, so an increase in the interest rate definitely affects affordability as buyers will need lower purchase prices to compensate for the higher interest rate. 

We are in a market ripe for those with money to buy who were priced out in previous months! If you need to get a loan, take advantage of the rates before they go up again in the Spring. Some banks are now locking rates for buyers without even having a property in contract, so if you are thinking of buying, this would be something worthwhile to look into. 

As I mentioned before, we have many micro markets in the Bay Area and we would be happy to let you know what's going on in your particular neighborhood.  We currently have 5 properties to sell before the end of the year and would love to help you too!  Please check out our website for more information. Call Hatch Realty Group today! We are here to help!