Written by Kelsey Lane
It's February 1st and now that we have enough of 2023 under our belt, I thought I'd weigh in on the state of the real estate market. Even though I called this the current "San Jose Real Estate Market" it's really the trends for Santa Clara County. Because of the economic weight of Silicon Valley, San Jose is the epicenter that affects much of the Bay Area real estate market.
Almost everyone whether or a realtor or homeowner, or wanna be homeowner, freaked out about the market starting to soften during the last half of 2022. By now, you've already heard it has been generally because of inflation and higher than typical mortgage rates. In October and November of last year, interest rates hit the highest they've been in 20 years, so it's no joke.
Additionally, home prices came off of the pandemic-frenzy prices, softening.
Since then, I've been attending many economical forecast summits and real estate market workshops, and I've noticed a few common threads. First of all, most industry leaders believe that if homebuyers employ the strategy of buying at today's softened prices that when mortgage rates go down, there will be an opportunity to refinance having locked in a good price on a home. Since over time home prices tend to go up 5-10% average annually in the Bay Area if you hold a home long enough, I see the insight in this plan.
Brian Buffini, who trains Realtors nationwide and who is typically right in his annual predictions purports that owning property is the best hedge against inflation. His logic is that if you have cash sitting in the bank it will dwindle at the rate of inflation, whereas if you invest it, over time it will grow.
I have clients ask me lately if it's a good time to sell a house in the Bay Area now. For the most part, I don't believe in trying to time the market. I've observed that people who attempt this, usually end up selling after the peak or before the peak. A better approach is to evaluate your reasons for selling, and whether it's the right time in your life to make the move. Since you'd likely be buying somewhere, if the market is soft you'll be getting a deal on your purchase. There are ways to enhance sales price, and then maximize a bargain during your home buying - I'm happy to discuss if you want to go to coffee or have a phone chat. (We have signature systems for both.)
As for specifics in the San Jose and surrounding area, inventory of homes is up slightly both from where it was last month and also last year at this time. Where it was taking about a month to go through the current "supply" given the number of buyers in the market, now it's taking about 2.5 months. Homes last year were selling in 2 weeks, and then in January in about month - currently days on market is 35. In the grand scheme of "days on market" this is still relatively short. Many other states in the U.S. experience that even 3 months average is decent for days on market statistics. What I'm seeing in the actual marketplace is that the more desirable homes in good condition and nice locations is they're selling quickly with multiple offers even in this market. Challenged homes in other areas can still be finessed to have similar results.
While last year, homes were selling way above the list price, the average now is just barely under the list price. That doesn't seem so horrible to me if I think about my 20 years as an agent. The average price of all properties in Santa Clara County is up already from last month, from $1,505,797 to $1,647,953. Single family home sale price averages have dipped just below 2M after seeing incredulous peaks in 2022 much higher than that.
For additional counties (e.g. Alameda, San Mateo, San Joaquin, Contra Costa, San Francisco), please let us know and we'll make sure we get the information to you.
All in all, the market is stabilizing and it's projected that interest rates will come down a bit. Inflation is promisingly on a downward trend. Inventory will begin to go up and climb and then start going down at the end of the year - because of this, buyers in the market for a new home will have more to choose from. Their other added benefits will be time to think, do due diligence, make a wise decision, and have a variety of homes to choose from as they shop. Home sellers will have an easier time on their "up leg" as far as identifying a home to move into and getting their offers accepted (this would of course apply to downsizers as well).
Brian Buffini also projects prices to remain mostly stable this year, with a possible 1% gain. Next year he said there would be about a 4 to 5 % gain.
Usually what I see is that a move, whether buying or selling, means change. Change can be exciting, and it can also be difficult. People move for new jobs and to be near family (like a new baby), but they also move for divorce or sell a family home due to the death of a family member. While not pleasant to talk about, it's reality and it affects whether timing is right when it comes to real estate decisions. Some people buy or sell strategically to reach their goals. No matter what the reason, taking time to assess what is right for you in your own life can mean a world of difference compared to only looking at numbers and statistics. As always, I'm happy to talk it over whenever you like.
Kelsey Lane has been a Realtor in the Silicon Valley since 2003 and is a Master Certified Negotiation Expert through the Real Estate Negotiation Institute, specializing in listings. She works at Compass. She is also coaching certified through the Life Purpose Institute and approaches her real estate business through the eyes of a life coach. Cal-DRE #01390557