Can you believe it’s already holiday time? Crazy to think we are on the closing end of 2018 already!
Since we’ve been asked about the market a lot lately, we thought now would be a good time to send you some fresh data. Click on the following counties to view their Q3 real estate market reports: San Francisco, San Mateo and Santa Clara Counties.
There has been much chatter in the press lately about a “real estate market correction” or “slowing” in the Bay Area. Much like in the financial world, in real estate the term correction is used as a metaphor for decline or loss in value. While there is some truth to the fact that the market is changing, we don’t believe values are necessarily declining or that a bubble is about to burst. More likely, we are simply seeing a slowdown from the double-digit growth we’ve seen year over year for the last 8 years.
It should be noted that on a yearly basis, the market typically slows in the Bay Area from around the beginning of November until the end of January/mid-February. This is characterized by lower inventory levels, longer days on market, less appreciation, fewer buyers in the market and fewer sales for the period. The market historically will slow during election time(s) as well.
What we know about the current market is we have more inventory – unit sales and appreciation rates have slowed when compared to the same period for the last 8 years. However, we caution you not to read this the wrong way (i.e. a sharp and steady drop in values for the foreseeable future). To put this into perspective, in Santa Clara and San Mateo counties a healthy market would be one in which inventory levels hover around the 6-8-month level (this comes out to approximately 5,000-6,000 available housing units for sale at any given period of time in either county). For the last 8 years we have hovered well below 1,000 housing units for sale, and now in the slowing market we have maybe 2,000 housing units. Homes in both counties which have averaged between 7-14 days on market to sell in the last 8 years now hovers in the 18-21+ day average. Anywhere else in the United States, our current market would be considered a “smoking hot” sellers’ market! But in the crazy world of Bay Area real estate, it is classified as “slowing.” Though we have been seeing homes not receiving as many offers and homes not selling as far above asking as we have in the past, we still have serious room to grow.
The jury is still out on what is actually happening in the market, and we don’t think we will be able to draw any solid conclusions until the 2019 spring selling season is well under way. But what should be noted is that the underlying economics (low inventory with above average demand and a great economy) have not changed. It is our opinion that we have a combination of the typical seasonal slowdown, interest rates creeping up slightly, some buyer fatigue and hesitation about next year’s tax laws going into effect. If you look at 50-year historical data on home sales in the Bay Area market, our periods of double-digit appreciation tend to last on average around 5-7 years (we are now pushing 8+ years) so we are due for an adjustment.
The California Association of Realtors (and the National Association of Realtors) have forecast a slight increase in inventory, less home unit sales and slower home appreciation (low to mid-level single digits for our market) for 2019. This would echo what we have been seeing ourselves.
Keep in mind it is a great time to both buy and sell. If you are thinking about selling, we recommend waiting out the holidays and shooting for mid to late February. However, if you need to sell now you can still get a great price (if you work with a great Agent, which is where we come in!). Make no mistake, we are still in a strong sellers’ market for homes which are priced correctly.
If you are thinking about buying, we say there is no better time than the present – interest rates are set to continue to rise through 2019 so if you’re waiting for values to drop before purchasing you should consider if this lower purchase price will be better at a higher rate. Additionally, you can take advantage of the current lull we are seeing to nab a property close to (or god forbid) even below the asking price on a non-competitive property that has been on the market for longer than 14 days.
We are here to help in any way we can, so if you have any questions about your specific situation, please do not hesitate to contact us! Josh Felder: jfelder@apr.com/650.400.7142, Lindsay Hiken: lhiken@apr.com/650.224.4130