You know what they say: Shift Happens

Ever hear the ancient Chinese curse, “May you live in interesting times”? I bet you have. But it turns out it is neither ancient nor Chinese in origin, but regardless, it feels like these are the times that it was written for.

There are many things about these times that are interesting, and since real estate underpins literally everything civilization is built on, we shouldn’t be surprised it’s not just fascinating, it’s downright riveting. To me, anyway.

When it comes to the Bay Area real estate market – actually, every real estate market, coast to coast – it feels like many are just waiting for some shoe to drop. The tension is palpable.

First, there’s the drama about interest rates. For years now, just about everyone has been saying that rates will be coming down “soon”…next quarter, the second half the of the year, maybe early next year…yet time and time again, the Federal Reserve keeps a tight reign on rates. Including at their most recent meeting last week, where they decided, yet again, to hold rates steady, having walked back hints about possible rate cuts this year.

Many buyers on the fence, are waiting for rates to drop before buying, believing that will make homes more affordable. At the same time, many sellers are also waiting for rates to drop, feeling that this will allow buyers to pay more for their homes. Who’s going to win by waiting, I wonder?

My sense is that sellers have been keeping their homes off the market, waiting for cheap money to flood the market so they can sail away to greener pastures on a cushion of inflated equity. Little do they know, it’s the fact that so many sellers are keeping their homes off the market which is what is really keeping home prices as high as they are.

But what if that were to change?

Spoiler alert: it already has changed.

Last month there was a surge of new inventory hitting the market. Actually, new listings were up 27% in the Bay Area in April 2024 vs. April 2023. And 37% more homes reduced their asking prices in April this year versus last year.

The good news for sellers is that the active inventory (the total number of homes available for purchase on any given day) was up only 8% year over year in April. That means there is a little more for buyers to choose from, and sellers only have more modestly more competition to worry about this year than last.

For me, the tension in the real estate market really isn’t so much about mortgage rates at all. True, the higher mortgage rates are working to tamp down demand. But as I’ve said before, the real story about the Bay Area real estate market is this lack of inventory – the low supply – that is keeping prices at elevated levels.

With no foreseeable change in interest rates, and with a blossoming supply of homes for sale, we may be on the cusp of a time when the balance of supply vs. demand finally starts pulling prices down.

If we have another month or two of surging inventory like we saw in April, I would be surprised if we didn’t see significant decreases in sale prices here in the Bay Area. There, I said it.

Fortunately, if you’re a seller, you may still have time to get your home on the market before this happens.

Anecdotally, it seems that many people postponed their plans to sell this year due to the thankfully bountiful rain we experienced.

But now with clearer skies and warmer weather, we may be looking at a deluge of newly listed homes for sale, in lieu of raindrops. That will be welcome news for buyers, of course – but it may come with a heaping helping of regret from sellers who sat too long on the fence before making the decision to sell.

If you’re looking to make a move in these most interesting times, I’m here to help! Please feel free to reach out to me anytime so we can discuss how you can make your next move the best one yet.