Characteristics of Our Normalizing Homes Market
Last week in my video blog, I outlined how the Silicon Valley homes market is shifting into what we might term more normal market conditions. Where we were seeing 20+ offers for a house last year and before, a very unusual situation, we're now seeing a still healthy two, three or four offers for a good listing and plenty of demand out there.
We can sum everything up by saying that we are shifting into a more normalized market. I also mentioned that we have had a huge surplus of buyers and, despite some knocks to confidence recently, they are still very enthusiastic about buying a home.
Proof of that came earlier this week when Fannie Mae, the government sponsored, leading source of financing for mortgage lenders, reported that its Home Purchase Sentiment Index was at an all-time high!
The Fannie Mae data paints a national picture, of course, and again as I pointed out in last week's video, our market here can be quite easily divided between the upper 20%-30% of the market in terms of price point, where sellers outnumber buyers at the moment, and the bottom three quarters of the market, where there's still a very healthy seller's market with low inventory and a good number of buyers.
With the market normalizing comes the inevitable question are prices about to drop?
To answer that question accurately, it's necessary to view pricing trends over recent years. In Santa Clara County, for example, we haven't seen falling prices since 2007. It's also worth remembering why they dropped at that time. It wasn't because more sellers were listing their homes as they felt it was a good time to sell. In most cases the sale was forced on them due to foreclosure or short sales, related to the sudden collapse in the economy.
If we look at trends over an extended period, we can see that demand has remained relatively constant. Over the past three years prices have moved back to historic highs. That said, wealth and incomes haven't grown at the same rate. With inventory remaining low and affordability lessening, we've seen a falling away in the multiple bid effect I mentioned at the beginning of this article, as a normalizing market takes effect. This means that it may take a little longer to sell the home but, looked at as a whole, the situation is still very much in favor of the seller.
To summarize, it's important not to over-dramatize the shift in the market that we're currently experiencing. As this week's Fannie Mae data proves, buyers are still very, very motivated to lock-in today's ultra-low mortgage rates, so prices should remain robust for some time to come. The situation will change eventually, due to the cyclical nature of real estate, but not soon.
If you're thinking of selling and/or buying a home, I hope you've found these thoughts useful. Why not call us today for more specific guidance in your individual circumstances.