‘The market is cooling. Home prices are 20% higher than last year. First-time home buyers are discouraged. Investors account for nearly 20% of home sales.’ These are probably just a few of the headlines you have seen in recent says and weeks. The market is shifting and overall that is a positive indictor – balance and a return to ‘normalcy’ are a natural and needed part of the housing market cycle. But what does all of this really mean?
We all have that ‘beach on the brain’ feeling with the arrival of June so we just want to share 3 things to consider as you scour the headlines and think about your own next moves & opportunities:
#1: Median home prices are skewed towards the upper end of the market. CNBC reports that ‘sales continue to be more robust on the higher end of the market, where the supply is stronger. Sales of homes priced between $100,000 and $250,000 fell 29% year over year, while sales of those priced between $500,000 and $750,000 rose 19%. Sales of homes priced over $1 million increased 16% compared with a year ago.’ The median home price in Santa Clara County is $1,950,000 – same as last month and still 18.5% higher than this time last year. Home prices are not dropping – just stabilizing.
#2: Repeat buyers are out-purchasing FTHB’s. Nationally, 25% of all sales are cash, 17% are investors and 28% are first-time homebuyers (a figure that is historically 40%!). Prospective buyers are not only facing larger mortgage payments on account of rates, but ‘seller expectations for higher down payments seem to be rising’ according to Danielle Hale, Chief Economist at Realtor.com. CalFHA recognized this issue as a road block to first-time homebuyers and has rolled out the Forgivable Equity Builder Loan program, where first-time homeowners can obtain forgivable loans for up to 10 percent of the purchase price if they qualify.. Learn more here.
#3: Demand remains solid despite home price and rate trends. Hale reports that ‘The number of households interested in becoming homeowners remains high, despite waning confidence that now is a good time to buy…’. Even Barbara Corcoran was just quoted as insisting that ‘You have to get in with whatever house you can possibly buy, so you have a chip to play in the game and trade up and trade up and trade up. And that becomes a retirement fund.’ Days on market in our county is down to 10, while the sales to list price ratio is at 116.1%. You might only get 4 offers instead of 14 – but you are still likely to get over-asking price in under two weeks.
If you have any questions at all about if buying, selling or investing makes sense for you in this market, please do not hesitate to reach out. Different strategies also apply to the very different Silicon Valley micro-markets, and we are here for it. We’ve got you covered! ~ Mark