An interesting set of events has played out in the real estate market recently. These events stretch from late 2016 into current 2017. They show marked variances between the two years. All in all, these variances look more like opposites in market trends. Why? Let’s take a look at my real estate market critique through 2017 2nd quarter. Let’s see what last year’s market reflected versus this year’s to date.
Real Estate Market Critique Through 2017 2nd Quarter, Facts and Figures
It’s generally known that the real estate market was slower in 2016, as compared to it’s stance today. In fact, 2017, thus far, has produced a strong seller’s market. Although, what brought about the sudden switch?
As we know, mortgage interest rates make a huge impact on any home purchase activity. If rates are high, the buyers pool can become lean. If low, buyers become quite incentivized to act while the rates stay low. With that in mind, you may recall that in Dec 2016, interest rates went to 3.6%. Although, in early 2017 they hovered at 4.7%. As a result, buyers felt pressured to purchase sooner than later, before rates jumped again. Of course, that makes perfect sense, and that explains why, in large part, the seller’s market gained strength in 2017. Although, the facts and figures of this real estate market critique through 2017 2nd quarter tell us more than that. You may ask, “What exactly?”
In the new year, the interest rates factor I told you about merged with a historically, low level of housing inventory. With the level of available homes for sale being low, active home sellers typically got multiple offers. In some cases, offers received amounted to 10 and more. As a direct end result of that, home values increased by 8% or more to date. In addition, demand from buyers has been further fueled by mortgage interest rates settling back down. They are now hovering at 3.75%. As a result, buyers want to make their move before the rates get less attractive again.
Real Estate Market Critique Through 2017 2nd Quarter, Bay Area
Home inventory, interest rates and demand form the foundation of our real estate market in the U.S. Also, any one of these factors can gain dominance in the market. In fact, let’s look at the micro-market of Bay Area real estate today. Let’s take a unique look at 2017 dominance factors in the market.
Over the past 12 years, I’ve seen inventory go from around 1,900 active listings to below 1,000. As a result of the drop in inventory, prices of single family homes went from as low as $625,000 to a current, record median sales price of $1,250.000. I don’t think anyone denies that is a huge shift in home values. In fact, it is the direct result of a record drop in Bay Area inventory.
There’s something else especially interesting about the low inventory factor. Since fewer homes are available, more buyers compete for the same home. As a result, many buyers are willing to bid higher than the list price. They want to secure the home for themselves and overbid. As a result, instead of list prices being negotiated down, they went up, Way up!
Summarizing the Real Estate Market 2017 2nd Quarter
I want to sum up my real estate market critique through 2017 2nd quarter as follows. The Bay Area in particular has lower inventory with less home sales prospects but much higher selling prices in the prospects. Also, this low-inventory dominance in the market and its effect is expected to continue. In fact, it looks like it’s heading to even lower levels. That heading seems to be on course, steady as she goes.
I hope you found this critique helpful. You can also refer to my monthly newsletters for more detailed info. They are San Mateo County RE Report, San Francisco County RE Report and Santa Clara County RE Report.
Feel free to share the info with anyone, who may be interested. Also, if you or someone you know would benefit from my San Mateo County real estate know how, let’s connect. Let me know by email. Or, just call/text me directly (650) 743-7320.