By Patrick McCarran, Real Estate Broker
As we approach the 4th quarter of 2022 we enter a new cycle in the Real Estate market. While many may see the apocalypse I don’t believe it will be another crash like we saw in 2008, primarily because the banks have not been irresponsible and the buyers for the most part have 30 year fixed loans, many with solid down payments. We have now transitioned from the record breaking years into a more balanced market. Those of you that know me are aware that I have been predicting this for some time. The market is largely driven by supply and demand but is tempered by factors such as affordability which is tied to interest rates, salaries and home prices.
While most markets have not seen a decline in year over year growth, the market has definitely slowed and the median days on market is roughly 30 day a stark change from 10 days in the first quarter of the year. The rapid climb is at an end and multiple offers are not the norm.
Interest rates have been unnaturally low largely due to the Fed keeping the prime rate low and Government pressure. Although not directly tied to the prime rate when the Fed increased the amount banks pay to borrow money allowed banks to raise their rates. Interest rates are primarily determined by demand or what buyers are able or willing to pay. Much like gas they go up until no one is buying then they will move down and the banks will roll out programs such as ARMs to help borrowers qualify.
The good news is that rates are still very low compared to past history, remember in the early 2000’s rates were 6%-7% . Inventory is up in most areas and probably most important Sellers may be willing to negotiate, a pleasant change to the ruthlessness we often saw in the bidding frenzy of the last few years. This enables borrowers to get a closing cost credit to help with a rate buy down, simply pay closing cost, or both. If you do not plan to make this your forever house a 5:1 ARM can be a very attractive option and even if you don’t sell before the rate adjusts, it will overall save you money when compared to a 30 year fixed.
Since low-interest rates contributed to California’s housing market craze in
Inventory overall continues to remain at historic lows. Buyers are still looking. I think the primary difference today is the Buyer are adjusting and do not seem to have a sense of urgency to rush making an offer. Buyers are waiting to find the right home and also to see where prices are going. I think it is important to point out that the primary cause of the market falling in price will be an increase in interest rates. So overall you payment will be much the same. So buy now if you plan to buy while rates are low. Remember if rates drop you can always refinance.
If you have a plan to move and are considering selling then why wait, no one has a crystal ball. I can say that home values ALWAYS go back up, homes never go bankrupt, and they’re making less land every day. So give me or your preferred agent a call and get your ducks in a row to maximize your profit by given Buyers what they are looking for, a turnkey home.
As always it has been a roller coaster going up and now going down. For all those buyers that have been waiting on the sidelines for the market prices to drop for the last several years, they have missed out on the opportunity for some solid equity and the stability that owning can bring.
All in all, the 2023 California Real Estate market should remain strong, based on the strong California economy. Change is inevitable but overall it may be good for both buyers and sellers
Patrick McCarran is a local Realtor and Broker DRE# 01325072. He can be contact by phone or text at (925) 899-5536, firstname.lastname@example.org or www. CallPatrick.com. An independently owned and operated office. In association with Realty One Group Elite DRE# 0193160. Equal Housing Opportunity.