Trying to game the home buying market is like trying to find discounted tickets to Europe at Christmas. Bonne chance!
The personal stories of one Realtor’s battles and triumphs in the highly-competitive Bay Area Real Estate Market, seeking to illuminate and humanize the very real ups-and-downs of homeownership.
My family is headed to France on Christmas day. I know it’s not the typical time to visit the French Riviera and yet, for us it makes sense. My nieces live in London and Boston and it’s much easier for them to join us in Europe than the other way around. Moreover, the only time, my sister, Jill, and I can squeeze in a vacation together is when things quiet down in our neck of the woods. For those of us on the West Coast, there’s no denying it’s a trek, but one that’s well worth the effort. (Sarah and Kate will keep the home fires burning while we are away.)
‘The going rate’ is what it is
Since Jill and I were purchasing several fares for our respective family members, we carefully tracked the price of plane tickets for months, hoping they’d come down. Who flies on Christmas day? Turns out, LOTS of folks do. At some point, we just had to pull the trigger and pay the prevailing rate. It’s France after all and I’m excited to see the villages dressed up for the holidays, OR to put it more bluntly, Christmas in Europe isn’t coming at a discounted rate. C’est la vie!
“Paying the prevailing rate” is a concept that many Buyers eagerly embraced during the run up of 2021-2022 when properties were selling substantially over their list prices (up to a million dollars in many cases), and Buyers were coming up against rabid competition. Now that the market has softened, many of these same Buyers are not so happy with what they belatedly perceive as “overpaying.” Conversely, others believe they can heavily discount the homes they’ve long coveted.
In both cases, they’d be mistaken.
To be clear, “overpaying” is a concept that’s only understood through a rear-view mirror. Nobody “overpays” in the moment; you pay what the market will bear and during the last few years, that price often came at a steep premium. When the market began correcting in 2022-2023, home values softened considerably as interest rates rapidly rose. (It’s an inverted relationship.) Which means that if you bought in the last two years and now hope to move, chances are you’ll be taking a hefty hit. It bears repeating that Real Estate was never meant to be a short-term investment. If you hope to sell for more than you paid, my advice is that you hang on and wait for the market to improve.
That being said, “supply & demand” is still the biggest driver with respect to value which is why you haven’t seen prices tumble, but contract. Depending on the house, the location, and its condition, the price of some properties may have shifted very little. Even so, those Buyers who step in now will likely find scant competition as others wait on the sidelines for both prices and interest rates to come down further. (Cue the music, this may be a prime opportunity.)
Be forewarned, when interest rates DO decline, you’re likely to find yourself back in competition once more, which (you guessed it) will drive prices back UP! Take heart, for every point the interest rates decline, Buyers will realize 10% more in purchasing power.
Silver lining alert
With news that inflation seems to have settled down, and that the FEDs may drop rates three times in the coming year (rates rose 11 times starting in 2022), lenders are expecting to see a reprieve in interest rates as early as March of 2024 which should coincide beautifully with the Spring Market. In other words, get your ducks in a row; there should be LOTS of good inventory available if our personal book of business is any indication.
And Jill, Kate, Sarah and I ARE indeed busy working on properties that run the gamut from a cool industrial loft, to the perfect Craftsman, to a classic central Piedmont home, to a fully renovated Mid-Century offering easy breezy, level living (and that’s just a small sampling). Add to those, our 450 East Bay COMPASS colleagues who are also gearing up for Spring introductions and things are looking brighter. Ho, ho, ho!
In the meantime, we wish you a bright and cheery holiday season, whether close to home or much further afield. See you when I return. Au revoir!
Julie Gardner & Sarah Abel | Compass Realty
Not just Realtors, but consultants in all things house and home, we’re here to educate, explore, examine and refer . . . In short, you may count on us to take care of your home as if it were our own and anyone who knows us, knows we take pretty darn good care of our homes.