Rate hikes, stock market dips affect Bay Area real estate

Uncertainty plagues the Bay Area housing market amid another federal rate hike and an ongoing stock market slump.

While sales are cooling across the region, market analysts believe we’re not in a buyers’ market locally — yet. “We’re obviously going through some sort of market correction,” said Patrick Carlisle, chief market analyst at Compass. “…The market may be slowing down and adjusting, but there is currently no economic evidence that anything like the 2008 crash will happen.”

Instead, the term “balanced market” is being thrown around, a new interpretation of the phenomenon of buyers (slowly, cautiously) regaining power they haven’t had in years. Kenneth Hogan, a real estate agent in the East Bay for two decades, said some buyers have pulled out of the market entirely due to stock market declines, but he has also persuaded clients to take advantage of the current climate of less competition. “It used to be a free-for-all, but not anymore,” Hogan said. “It’s slowly coming to the buyers’ turn. Buyers are able to negotiate more and ask for things they couldn’t get before.”

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In a recent survey of more than 1,000 real estate agents by real estate technology company HomeLight, 72% of agents reported an increase in the contingent liability that Bay Area buyers often forego in order to make a competitive offer. At the same time, 86% of agents said sellers have become cocky about listing properties since the “pandemic home buying boom.”

“It’s an odd feeling that this is a standoff,” said Jeff Tucker, senior economist at Zillow. “The flow of new entries decreased by 18% from July to August. This suggests to me that the sellers have been digging in their heels. They think, ‘I don’t have to sell, so I’ll just wait.’”

Average home prices rose 6% nationwide in August, while San Francisco and Oakland were the only two metro areas to see prices fall year over year, according to the latest real estate report from Redfin. “From everywhere,” Tucker said, the Bay Area has emerged as something approaching a buyer’s market. “I think the only thing stopping me from saying that [outright] Buyers still don’t have many options to choose from. Stock is still low.”

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According to Zillow’s latest market report, home values ​​in the Bay Area are down 3.4% since July, despite rising 25.6% since August 2019. “The market has cooled dramatically,” Tucker said. “The month-on-month decline is the sharpest of any major metro in August. To me, that’s a major indication that homebuyers in the Bay Area have declined sharply.”

Carlisle, on the other hand, is slightly more bearish and believes it’s too early to say we’ve arrived at a balanced market. “We are still in an adjustment phase,” he said. “We’ll have to see how many of these economic developments get worse or better.”

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Recent Compass data showed Bay Area home sales were down 32% year over year, but Carlisle said 2021 was an “overheated market.” August is usually a slower period before a September surge and data will not show whether this cyclical trend will continue until next month.

“We are in a place where buyers, sellers and brokers are waiting to see how things play out,” Carlisle said. “It’s an uncertain market and we’re trying to figure out what’s next.”

Carlisle cautioned against the rosy picture of market equalization in the Bay Area. “The problem is actually that the force swings back [to buyers], they still have to deal with interest rates that are double what they were a year ago and stock market portfolios are down 20%,” he said. “There’s nothing to celebrate yet. That wasn’t Christmas in July.”

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