The general sentiment has been that the real estate market is in a bubble due to pop. Yet on the ground, real estate professionals see something different.
The person standing between it being a huge financial mistake or a valuable asset is you, the agent. Still, the agent can only help as much as the buyer allows. As vital as having an experienced agent by their side is, there are things that first-time homebuyers have to do.
The volume of sales dropped drastically in the last quarter of 2022, and into 2023. But prices never dropped dramatically. We saw houses on the market for longer, and more favorable terms for buyers. Prices softened for sure, especially in less optimal locations and when a property was not market-ready. But a big drop in prices has not materialized.
A perfectly turned out three-bedroom, two-bath home in Upper Diamond in Oakland, Elmwood in Berkeley, or the East End of Alameda was getting multiple offers every month. Opportunities have popped up when a seller did not invest in fixing up the house, staging, or high-end marketing. There was more inventory and a slower-moving market. The best type of opportunity was not always in getting a better price, but in having a less frenetic process.
The absorption rate is how long it would take to sell all the houses in a particular area if no other houses came on. A balanced market, between buyers and sellers, in other parts of the country, is six months. In our fast-moving region, three months is balanced, or even two months. When we hit a two-month absorption rate in Alameda and Contra Costa counties, agents and buyers took notice. For the past two weeks, all the major markets in the East Bay have dropped below two months again.
Checking in with other agents I have been hearing of properties again getting 20 and more offers. One agent noted her listing received 27 offers.
Higher interest rates gave buyers pause. Those rates can be refinanced when the inevitable drop in rates follows an equally inevitable drop in inflation. As long as rates remain in the high 6%, or even into the 7%, we will see a more sluggish market. Sellers are not eager to sell homes where their rate is 3% or lower, and buyers are limited in their ability to jump into the market.
If there is a real estate bubble to be popped in the Bay Area, we have not heard it yet. And if the lenders I have interviewed are reading their crystal balls correctly, and interest rates come down in the spring, we may never see anything more than a softening of prices.