January 2020 Market Update

HAPPY NEW YEAR FOLKS!!! A new decade is upon us and honestly, I can’t be more excited for the Bay Area Real Estate Market! Currently we have 5 properties in contract slated to close escrow early this year, many of which are selling below the list price. Yes, you read it right, BELOW the list price. Buyers who were able to capitalize on the winter season got some good deals, specifically with new construction. In speaking to many of the sales people in the new developments, they started to feel a pinch these past couple months so they offered some great incentives and price reductions to move their new homes before the next phase of homes are built in the Spring. Inventory is not selling as fast as it used to, so now, finally they are more flexible with pricing and terms. That’s great for buyers! Also great news is that the rates are still really low (3.5% today) with rumors that they will get even lower in 2020. On top of that, last month the Federal government increased the conforming loan limits for single family homes in the Bay Area to a $765,600. What does that mean for us the consumer? That means we now can take advantage of the better rates and terms associated with conforming loans up to $765,600 vs the  previous limit of $726,525. In addition, first time home buyers with good credit and enough income to cover the payments can now borrow up to $765,500 with as little as 3% downpayment.  That’s going to help keep our Bay Area prices stable this year. What I have been noticing is that millenials make really good income, but their problem is downpayment. Hopefully this will encourage millenials to take a plunge into homeownership this year.

Here’s an example: In November, one of my buyers (with great credit, good income, and a $50,000 downpayment) wanted to buy a home in a specific area, but couldn’t because the conforming limit in Contra Costa County was only $726,525. Their $50k downpayment plus the conforming loan limit in November capped them at purchase price of around $764k. Homes in the new development they were targeting were priced at  $830,000, so they were $66k out of reach.  Until the limits were raised, their options were to buy an older home in a different area, wait another year to save more downpayment or apply for a different type of loan with a higher rate, which would have made it unaffordable for the family.  However, once the Fed raised the conforming limit to $765,500 in mid December and builders started offering incentives and credits for closing costs, it was the perfect opportunity for them to make a move. They offered below the list price and struck a deal with the builder  to include closing costs and are now purchasing in the area they really wanted to live while staying within budget.  Everything aligned. 

Many of you would-be buyers are still sitting on the fence waiting for the market to crash. I have to say, I honestly do not believe a crash is happening anytime soon. The economy is doing well. The stock market is still at an all time high (Last week Tesla was on the quest to hit $420/share and is now at $430/share and all other markets are up).  What is happening though, is an adjustment of the market. It’s balancing out right now and I still believe that purchasing is better than paying high bay area rent.  If thinking of buying, now is the time to get your preapproval in place and see where you stand. Start the search before it gets busy. No two homes are exactly the same, so if you see something you like, try and get a good deal on it now rather than wait, because you may not find anything like it later in the Spring and it will be more difficult when competition picks up. 

For sellers, the market doesn’t really “pick up” until after Superbowl, so if you want to sell your home with less competition, now is the time. The buyers are out there. If you don’t over price and the house is presentable, it will sell. The strategy is to price just slightly below market to attract as many offers as possible, and be patient for the right buyer to love your property. It is very important that the home looks its best and is clean and empty at its worse. Many first time buyers are lacking in imagination and if they can’t imagine themselves living in your home as it is, you may end up sitting on the market for longer than you want. Once you hit over 60 days on the market, that’s when the sharks start circling

For more information on your specific market, feel free to contact us for a no obligation consultation! We are here to help!