The Hard Part is Over
“Challenging and creative” are the two words that consistently came up in my year in review poll of real estate service providers* when describing 2023. Higher interest rates, higher prices, lower inventory, and an exodus of insurance companies in high fire areas all led to significant challenges that oftentimes necessitated very creative solutions.
Home Prices
Prices went up by roughly 5% (maybe a little more or less depending on the area) in 2023 driven in large part by a fundamental lack of inventory.
Higher Interest Rates
Interest rates were volatile throughout the year oscillating between 6.375% at the beginning of the year to 8% during the 4th quarter. Currently rates have come back down below 7% with some lenders quoting 6.625%.
Buyers flocked to adjustable-rate mortgages when advantageous, sought out down payment assistance, and or seller incentives such as interest rate buy downs or credits towards closing costs to lessen the sting of higher interest rates.
Lower Inventory
Inventory was down 20-30% year over year. Higher interest rates and the associated replacement cost of giving up a sub 4% mortgage was certainly a contributing factor inhibiting sellers from moving. Lower inventory also kept prices high as demand for well-appointed homes with the right pricing strategy consistently attracted multiple offers.
Insurance
Most, if not all, insurance companies have stopped writing new policies in high fire areas and some existing homeowners have reported their policies were not renewed. As a result, premiums have increased across the board. The California Fair Plan which was established as a last resort vehicle has now become the default in high fire areas.
2024 Forecast
I believe that interest rates are going to trend lower based on Federal Reserve Chairman Jerome Powell’s recent statements and therefore "the hard part is over" (Goldman Sachs newsletter - 12/23).
Lower interest rates will bring more buyers into the market which will increase competition and push prices higher.
Lower interest rates and higher prices will also motivate more sellers to sell which will help raise inventory levels according to the National Association of Realtors.
I can’t think of a time in the last 10 years when having the right realtor has been more important. This is not a market where homes are sold “As is” and receive top dollar. Buyers are too stretched. Conversely, buyers must be current on how to overcome the challenges of higher interest rates, low inventory, multiple offers, and homeowner’s insurance just to name a few.
Please let me know if you or someone you know is planning on making a move. I would love to share how my Award-Winning service and value-added results have benefitted both buyers and sellers throughout the Bay Area.
Happy Holidays and Best Wishes in the New Year!
David
Special thanks to the following individuals for their insights and contributions:
Eilo Baboneh – Bank of America
Tim Baltes – PNC Mortgage
Kathy Fuller – Cross Country Mortgage
Adrianne Peixotto – Insurance Solutions
Caffeine – my guiding light and true north star
David Holmes
Broker Associate
Compass
(510) 325-6479
DRE 01901395
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Who Am I?
Award winning realtor, amateur landscape photographer, passionate animal lover, meddling homebrewer
Top 3-5% of all realtors in Alameda County and Contra Costa County
Best of Oakland – Top Real Estate Agents
Who’s Who Luxury Real Estate
Zillow Premier Agent – Best of
5 Star Professional Award Recipient 2021 and 2022
