California home sales at lowest level in years; Bay Area buyers scramble

Loads of consumers are available in the market for a house — the issue is discovering one.

Persistently excessive rates of interest paralyzed the Bay Space housing market in November, stymying would-be homebuyers and pushing gross sales in California to their lowest stage in 16 years.

“Consumers are prepared to purchase, however there’s terribly low stock charges,” mentioned Thao Dang Pham, a San Jose-based actual state agent. The Bay Space had simply 1.8 months of provide in November — the bottom of any area in California.

With fewer householders buying and selling up, house consumers are left to compete over fewer out there properties. In consequence, costs are greater than they have been a yr in the past. The median value of a single-family house within the nine-county Bay Space was $1.25 million in November — a rise of 4.4% from a yr in the past, in line with data released this week by the California Affiliation of Realtors.

Bidding wars — whereas not as frequent as in the course of the frenzied pandemic period of three% mortgage rates of interest — are occurring.

Final week, dealer Christopher Ott submitted a proposal on a house in South San Jose listed at $999,000. The vendor had 30 presents to select from and ended up accepting a bid that got here in $300,000 over asking.

“There’s a delusion that there are fewer consumers in the marketplace,” Ott mentioned. “That’s not true — right here, now we have many extra consumers than sellers.”

Sellers aren’t itemizing as a result of so few of them are prepared to surrender the low mortgage charge they locked into lately simply to get a brand new house with greater borrowing prices. Three out of 5 householders with energetic mortgages have loans with charges beneath 4%, in line with Intercontinental Exchange, an organization that gives expertise to mortgage suppliers and servicers.

“Persons are handcuffed to their mortgage charges,” mentioned Perry Gastis, a Berkeley-based actual property agent. “Most properties right here within the Bay Space aren’t being offered in the event that they don’t should be.”

Two-thirds of counties across the state registered declines in energetic listings from final yr, together with Contra Costa, the place listings dropped 35%, and Alameda County, which dropped 33%.

After all, there are all the time homebuyers who do should promote — these relocating for a brand new job or coping with a dying or divorce — and people instances characterize the few properties in the marketplace proper now. These seeking to commerce up from their house to a brand new one often drive the housing market — however for now, they’re staying put.

Whereas the vacations are typically slower for gross sales, actual property brokers count on the market to select up in early 2024 as rates of interest decline. After hitting 7.79% in early November, the rate of interest on a 30-year mortgage slid to 6.95% as of final week, its lowest stage since August, in line with Freddie Mac. Many economists predict that charges will drop additional, based mostly on the Federal Reserve’s recent indications that it would proceed to chop charges.

However brokers are uncertain whether or not the decrease charges can be sufficient to assist the present supply-demand imbalance.

“I don’t know if it’s going to incentivize sellers to return into the market as quick as it will herald consumers who’re ready proper now,” Ott mentioned.

Many first-time consumers are desperate to get their fingers on a “starter house” which, within the expensive Bay Space, sometimes means a house within the $1 million to $1.5 million vary. These are the properties which might be seeing essentially the most competitors and frenzied bidding wars.

However these consumers are additionally delicate to the elevated rates of interest. For a $1.25 million house with 20% down, the month-to-month fee for a 30-year-mortgage at 7% is $6,653, in comparison with $4,490 for a pandemic purchaser who bought on the similar value with a 3.5% charge in 2021.