By Patrick McCarran
Real Estate Broker
Happy New Year and new market conditions. As we continue to experience a down cycle in the Real Estate market, the doom and gloom apocalypse has not materialized. The last two quarters of 2022 were certainly a roller coaster. The FED raised the rates like crazy and mortgage rates followed, this year we have seen the rates come down from the 2022 highs and although they are still high compared to the last few years they are low historically.
I am still not expecting an catastrophic crash like we saw in 2008. The economy is still strong and while there have been layoffs, California companies are overall in good shape. The banks have not been irresponsible lenders as they were in the early 2000’s and the buyers for the most part have been qualified for their loans which have largely been 30 year fixed loans with fixed payments, many with solid down payments and therefore money that owners are less likely to walk away from.
We have now transitioned from the record breaking years into a more balanced market, and most likely will see a decrease in overall prices on 2023. Most of the decline in the past year has been more from anticipated gains than actual year over year declines in values. We are coming up on the “spring thaw” which is traditionally when the uptick happens as buyers get back in market form the winter and the holidays. I think this will tell us where the market is going this year.
Interest rates are still historically low and the banks have been rolling out programs such as ARMs to help borrowers qualify. An ARM is a loan with a fixed rate for the first period, often 5 years, and then converted to variable rate with full amortization.
Inventory is up in most areas and probably most important Sellers may be willing to negotiate, which 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 knows what the future holds but if you are ready then why wait? 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. Rents are high and most likely will only get higher especially as many people new to the market will opt to rent as they wait for stability in the real estate market. This will serve to drive up demand for rentals that have a limited supply.
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.