Welcome to the first week of spring! It’s hard to believe that the first quarter is almost in the rear view mirror…and what a quarter it’s been. The power of a new year is showing itself again, as the real estate market appears to have renewed its lease on life.
Without a doubt, median home prices are down by double digits versus last year at this time in most counties of the Bay Area. And the number of homes which are being listed and sold is down an average of 30-40% in most parts of the state, if not the country.
But if you talk to anyone trying to buy a home in the greater Bay Area, they’re likely to report that there are few homes for sale, homes are selling quickly, and that most homes are receiving multiple offers.
In other words, it still feels very much like a seller’s market…to most buyers, anyway.
However, it’s definitely not the seller’s market of yesteryear. While there are recent reports of some sellers receiving dozens of offers on their homes, that is much less common thus far in 2023 compared to this same time a year ago.
This year, sellers may be receiving only a handful of offers in a multiple-offer situation – and many homes are still selling only for full asking price, or just 1-2% over asking price. The days of homes selling 30-40% over asking are fading into the mists of time.
So far this year, buyers are acting much more cautiously than they were a year ago. Last year, buyers threw caution to the wind, because that’s what it took to beat out the 10-20 other buyers with their hat in the ring on any given property.
This year, buyers don’t feel like they have to go for the jugular with quite the same urgency as they did last year.
I think there are two reasons for that. The first is that buyers are much more financially constrained this year than they were last year, due to the cost of borrowing. It was a lot cheaper to overpay for a property last year. This year, buyers literally cannot afford to be so devil-may-care about the purchase price they agree to.
The second reason I feel is that consumers simply are not very confident about the state of…everything. Check out this consumer confidence index:
Consumer confidence at the outset of 2023 is very low. It’s not a record-breaking low, and it’s actually higher than it was a year ago – but it’s still low.
The combination of high(er) mortgage rates, low consumer confidence, and a shaky banking system are no doubt keeping a lid on buyer activity.
Despite all this, buyers are out there. There’s a lot of pent-up demand from buyers who were unable to get a home last year, plus all the new buyers for 2023. Household formation is up and the demand for housing is stronger than ever, and it’s keeping enough buyers in the market that any seller who takes the time to properly prepare, position, market, price, and negotiate their property will still be able to make an excellent deal on the sale of their home.