Surprise! Economic indicators have been a bit challenging lately, especially since the fall selling season started. Vexingly, interest rates have been on the rise since early October. On top of that, stock markets have been experiencing a bit of a dip since midsummer, after reaching some pretty impressive highs earlier this year.
The good news is, our country narrowly avoided yet another federal government shutdown. Sadly, this has become de-rigueur and can hardly be considered newsworthy at this point. Of course, we now have to brace ourselves for another potential crisis like this just around Thanksgiving.
I think all of us are coming to grips that this volatility is just a part of American life now. But it’s interesting how the market can often react in unexpected ways, like responding negatively to good economic news, such as employment numbers, the U.S. having added a stunning 336,000 jobs in September.
When it comes to mortgage interest rates, a strong job market doesn’t bode well for a rate cut. And it seems like lenders are always on their toes, eagerly awaiting new inflation numbers or any sign of a weakening economy that might get the Fed to loosen up on the federal funds rate.
And of course, inflation remains the Federal Reserve’s bugaboo, and the September numbers don’t bode well there either. U.S. wholesale inflation increased in September, driven largely by surging fuel and food prices.
It’s worth noting that the effects of these strong job and inflation numbers on real estate markets might not become clear until we start seeing Q4 data. Keep in mind that volatility can also cause indicators to change rapidly. Just keep your seatbelts firmly fastened – which it seems that most would-be buyers and sellers are already doing.
Q3 2023 Market Brief – Santa Clara, Santa Cruz, Monterey
The Santa Clara County market is among the strongest in the Bay Area, which is not surprising. The median price of a house sold in Q3 increased by around 9% over Q3 2022 (the increases for condominiums and townhouses were less significant). The number of available listings is still quite limited, well below historical averages. The third quarter saw a 15% decrease in home sales year over year, primarily as a result of the limited quantity of properties available for purchase, while loan rates also had an impact. Sales of luxury homes costing $4 million or more in Q3 actually rose 9% over Q3 2022.
The median house sales price for Santa Cruz County in Q3 2022 was down modestly from Q3 2022 (several counties in the Bay Area continue to experience reductions from year to year). September saw an increase in new listings compared to the same month last year, and the overall number of listings available for purchase has only recently started to rise. This is good news for buyers as there has been a prolonged period of decreased inventory. In Q3, there were around 11% fewer home sales than the same period last year.
The wider Carmel-Pebble Beach-City of Monterey region experienced a significant quarterly increase in home prices, with the county’s median house sales price rising by approximately 6% from Q3 2022 to Q3 2023 (which is probably certainly an abnormal variation). By long-term, pre-pandemic norms, the supply of postings for sale is still rather low. The third quarter saw a 15% decrease in home sales year over year, primarily as a result of the limited quantity of properties available for purchase, while rising interest rates also had an impact.