I’ve been hearing around some of my friends and colleagues that the action is a little slow. I personally haven’t felt it that much. For some of the buyers I represent we’re still seeing 13, 15 offers or more scenarios. With rising mortgage rates though, it isn’t that surprising if buyers pause to reconsider if they can afford the mortgage payment. I just don’t like to make claims without actual numbers supporting them or just based on my personal sampling size.
All Eyes On Inventory
A lot of folks ask me about the “B” word. First of all, just because something is priced higher than before, doesn’t mean it constitutes as a bubble. The two things I watch closely personally are inventory and inflation. Before prices can come down, inventory has to come up. It’s basic supply and demand. And what do you know, May we saw an uptick in new listings across the state.
Does that mean you should be worried? Not quite. It is back to back month of increase in inventory but it barely added 0.1 month, still far far away from the 6 months of inventory how we traditionally define as switching to buyer’s market.
Anticipated economic changes shifted buyers early
It is not really a surprise that the increase in inflation lead to the rise in interest rates. The Fed is projected to raise rates 4 times this year and they are track to do just that so far. This led to some buyers acting early, purchasing homes ahead of those rises in interest rates, which in turn led to a dip in May in prices in some Bay Area counties but year over year we’re still seeing strong gains, even double digits like Alameda and Santa Clara County.
About That pesky inflation
This has me worried, honestly, especially the threat of an all out trade war… Tariffs make the cost of raw materials or products more expensive. You might have noticed the jump in gas prices. We certainly are noting the higher costs of steel in our development projects. All that gets passed to the consumers. To cool inflation, The Fed typically raises interest rates. When you raise interest rates, mortgage rates tend to go up as well (although it technically has a closer relationship to the Treasury yield). When mortgage rates go up, less people can afford to buy houses, and when less people can buy a product… you know what I’m getting at.
All in all, the fundamentals remain solid. Unemployment rates are at record low. If you’re thinking about buying it’s best to put together a plan early as headwinds are expected to be even stronger in 2nd half of this year with rates keep going up. We have not seen any of these changes in inventory or mortgage rates translate to a dip in prices in the Bay Area yet.
If you have questions or concerns related to real estate, feel free to consult me.