So we’re one month into 2022 and the housing market is still going crazy. Has the housing market hit its peak? Will the steep upward trajectory start to level off soon? Never say never… anything is possible, but right now in this current moment it doesn’t look like a big slowdown is coming anytime soon. Just take a look at news headline after headline…
“Hottest January Housing Market On Record”
“It could be years until we see a normal housing market”
one report headline stated “It’s Harder to find a home than LOVE!”
Here in the Bay Area we’re used to a hot housing market. We’re used to expensive homes. We’re even used to low inventory. But even in the Bay Area this is a new level of low inventory and a new height of expensive. But it appears the bay area housing trend has spread to many parts of the country as well. Just look at these latest headlines.
“As housing market booms, more North Carolina homeowners now “equity rich”’
“Hot housing market playing into Tucson’s skyrocketing rent prices”
“Police, firefighters and teachers getting priced out of Arizona housing Market”
“Austin’s Housing Market Value Surged Twice As Fast As The U.S.”
And the reports just go on and on and on….Idaho, Washington, Nevada, Florida, Texas, Massachusetts, Virginia,….
I pulled the numbers for the East Bay Area city where I live, Livermore, to compare the December market to the January market and here is what I found…
In December there were 67 detached single family homes sold with a Median sold price of $1,022,500 and average price of $1,232,958. In January just 48 detached single family homes were sold with a Median sold price of $1,222,500 and an average price of $1,340,648.
That’s an average sold price increase of $107K and a $200K increase in the Median sold price. From December to January. It’s easy to see why the headlines are saying it’s the hottest January market ever recorded.
It’s not uncommon for real estate agents to mail out letters to homeowners letting them know they have a buyer looking to buy a home in their area and ask if they’re thinking of selling. It’s something agents do in every market to generate business. You would think with sellers being able to almost name their price for selling their home why aren’t more of them doing it?
Now.. if you’re relocating selling at a premium high price to a ready, willing and able buyer makes complete sense. And if you own a home in California, especially anywhere in the Bay Area and you’re moving out of the area now or in the next year or two you don’t want to miss out on this amazing sellers market.
So how long will this market last? Will it keep climbing?
The current market is extra challenging for first time homebuyers. Homebuyers looking at buying an entry level priced home. Many who have worked hard to save up for the down payment and closing costs have found themselves not able to save fast enough to keep up with the increase in housing prices. They are facing competition not only from other first time homebuyers, but also those looking to downsize into smaller more affordable homes but also from corporate investors buying those same homes because they make great rental properties. I don’t think this is a big problem in the Bay Area because truthfully our cap rates for buy and hold rental properties just aren’t that appealing to institutional buy and hold investors, but I am seeing a lot of older, smaller, outdated, homes being bought by investors, remodeled in a few months and back on the market for top dollar. This makes it harder for a first time buyer with a limited down payment budget to buy in at a lower price and fix it up over time by putting in some sweat equity.
But even with this being a sellers market that doesn’t mean buyers should sit it out and wait. Renting a few more years will cost you money too. If you pay $2500 a month in rent that’s $30K dollars per year you will lose paying rent. $150K in just 5 years assuming your rent doesn’t in crease, but rent have been on the rise too just as much as home purchase prices. Being priced out of a market doesn’t just happen to home buyers, It’s completely possible to get priced out of your rental market too. I’ve seen it happen many times to many people I know. They end up having no choice but to relocate to where rents are lower often times giving them longer commutes. Waiting can also impact your monthly mortgage payment even if prices come down because the interest rate is likely to increase later this year.
So tell me… if you’re a first time homebuyer how long have you been looking for a house? How many offers have you made so far? And if you already have a house and are thinking about moving… what’s keeping you from selling? Are you waiting for the peak?