Rate talk seems to permeate almost every real estate article and conversation these days. (I wrote about rates in a blog post last month so for those that want to get a better understanding, I’ll refer you to that post). No doubt rates are important, but rates are only part of what is driving the current real estate market. Right now it’s all about affordability, motivation, and quality inventory. Looking across the broader South Bay market, after peaking in June, there are currently 500 single family attached and detached homes for sale with a median price of $2.2M. Over 32% are priced above $3,000,000 while only 27% are priced below $1,500,000. There are less than 40 houses available under $1M. In other words, you have to make or have a lot of money to put towards a down payment to buy a home in this market, low rates or not. The next factor is motivation. Moving is more than just the math, it’s about need and desire. The D’s continue to drive real estate sales – Diamonds, Diapers, Diplomas, Divorce, Death, etc. Finally, inventory – there is simply just not many new properties hitting the market. Why? Blame it on the rate lock-in effect. With most owners sitting on mortgages under 4%, it take a lot of motivation for a seller to want to move (refer back to the D’s of real estate).
For those motivated to move, there is still plenty of opportunity. Need to sell? Currently sellers face less competition as inventory either declines or gets stale (average days on market is 75 days). Looking to buy? Those sellers hanging on to the hopes of selling in 2025 are usually looking to make a deal the closer we get to the end of the year. Rates are the best they’ve been in 12 months, so it’s not a bad time to go deal hunting. In the meantime, the majority of the market seems content to settle in for now, hanging on to their low mortgage and hoping for another Dodgers World Series win.
-Summary-
The Good
- Improved affordability with lower rates and flat home price appreciation
The Bad
- Less motivated buyers
- Softening labor markets keeping more owners in place
- Rate lock-in effect for owners with rates in the 2’s and 3’s
- Limited new inventory coming into the market
Q: Why would it be a good time to sell? A: Less competition from other sellers
Q: Why is it a good time to buy? A: The lowest rates in the past 10-12 months, sellers more willing to negotiate, less buyer competition
