There's one simple reason prices are going up. There are no homes to buy.
You can see that we are seeing almost a 50% reduction in units sold.
Compared to prior years, we're seeing fewer homes priced over $1.3M. I don't believe this is because prices have dropped, but more because of sellers not trading up. People seem very content, or risk averse to change or maybe they don't want to exchange their low interest rate loan for today's higher rate. It's also possible that COVID pushed forward the migration to detached homes whether it was to bay area suburbs or out of area.
Last January through March was also a very strong seller's market and it cooled off in April with the Fed's decision to raise rates. This also tempered buyer's behavior and caused a reduction in home prices. You can see that by looking at the Monthly Market Activity.
What's different about this Jan to March period vs. last year is that last year, rates were around 3%, technology jobs were easy to acquire, workers were calling the shots and no US bank was teetering on failing. Today interest rates are around 6%, technology companies are laying off, and forcing workers back to the office, banks are failing and more are expected to fail.
So why are homes getting multiple offers, and selling for more than the previous sale? Why are buyers not cowering like they did last April when the Fed announced their plan to slow down inflation? I ask my buyers this question as well. Their thought is that today I'm paying lower prices than last year this time, and though my monthly housing payment today is higher than those who purchased last year with rates around 3%, in the future I expect rates to be lower and I'll be able to refinance and find my housing payment become lower.
I plugged in the price of a median home sold in March 2022 with a 3% interest rate to compare it to what a median price home sold for in March 2023 with a 6% interest rate and than calculated what the payment would be like if rates drop to 4% in the future.
Today's buyer's are paying about $1200 more per month in this example but in the future they would be paying almost $300 less per month with a refinance.
This market is clearly set-up to be volatile, it's important to do your math when purchasing, we'd be happy to help you understand the numbers in your purchase decision.
Feel Free to Reach Out for a Free Consultation.