Bay Area Housing Summer market and our broader economy

On this Memorial Day Weekend, we are bringing you the May 2023 housing market update in charts. Our local Bay Area Market performed well last month, with homes selling sooner after hitting the market, than they did just a couple months ago. (see the end of this newsletter for area specific numbers).

While mortgage for loans less than $1,089,300 (jumbo loans) again touched 7% * this past week, we are not in a crashing housing market here in the Bay Area. We continue to see multiple offers on homes that are priced appropriately, and the number of days between coming on the market and when a home is under contract is contracting, as is typical for the busy buying season, which we are in. Let’s dive right in.

The chart below shows the number of homes selling across the US at 4.28 million in April, down from a year ago, because of fewer homes available for sale, and higher interest rates that has made affording the same home a lot harder. Sales are down here in the Bay Area due to limited options for homebuyers and the tech layoffs (and down payments tied up in under water stock options or stocks right now) have signaled a pause for some families that would previously have transacted during the Spring and Summer home buying seasons.

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Home Are Selling Even as Pace Slides

Interest rates for jumbo loans are always going to be lower (0.25% to 1% depending on the loan program). Chart source – Keeping Current Matters

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GEOGRAPHY PLAYS A ROLE

In the Western United States, home sales are down more than elsewhere in the country by -6.1% compared to March 2023.

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AFFORDABILITY REMAINS A CHALLENGE IN OUR WESTERN US MARKETS

As demonstrated by the large gap between the median income of $99k per year compared to $140k required to be able to qualify to buy a home. The Midwest remains the most affordable part of the country for buying a home.

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INFLATION IS SHOWING SIGNS OF MODERATION

This is good news as mortgage rates are loosely tied to inflation, The April inflation report shows inflation around 5%, still higher than the long run average of just under 3% in the US, but a significant improvement to its peak a year ago!

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SO WHAT’S NEXT FOR INTEREST RATES?

After a few regional bank failures, the Fed has indicated a pause in rate hikes. One thing the Fed is doing differently than in previous economically challenging times, is that they are communicating in advance, what they plan on doing, thereby signaling their decisions ahead of time, in order for the broader markets to have time to react and essentially price these decisions in. Because we are starting to see what appears to be consistent declines in the monthly inflation results, and we know that mortgage rates are loosely correlated to inflation, national economists anticipate that rates are likely coming down in the not too distant future. Nobody knowns for sure though.

WHAT ARE YOUR GOALS?

We are currently working with families to create efficient strategies for buying and selling as life events continue to occur outside of what is happening with the broader economy.

For empty nesters, a popular strategy we work on is to structure transitions with the convenience of buying your next home before you sell, to ensure you don’t have to move twice, without having to rely on expensive bridge loans. If you are a first time homebuyer, time is not on your side, and our approach here focuses on crafting a strategy that allows you to move fast, by truly understanding your family’s priorities, and being very targeted in our search for your perfect home. With our CPA experience and having an array of custom financing solutions available depending on each family’s unique situation, we help you make quick work of your housing goals, whether you are buying or selling, moving up or downsizing.

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