We are constantly bogged down in so many details. Details of transactions, details of analysis, details of statistics. Sometimes it is just refreshing to sit back and pause, try to relax and focus on the big picture and get a feeling for where this market is going. So I did that this morning as I was taking my shower (don’t ask and certainly don’t try to visualize…). Although it’s based upon recent trends, it’s not really scientific. More of an intuitive feeling derived from the day-to-day experiences and conversations I’m having with buyers, sellers, lenders, etc., mushed together with the other macro indicators I follow, including the 10-year Treasury Bond and Federal Reserve Board (FED) rates and comments. Filtering it all out I came up with (drum roll…):
Let’s start with where we are at the moment. There’s both good and not so good news here. So far this year, the market has been sluggish at best, with inventory up, sales down (as compared to last year) and interest rates climbing. But the economy of San Diego County remains solid and employment continues to grow, althoughat a slower pace than in the recent past. Homes that are priced and marketed correctly and show well are generally selling within a reasonable timeframe.
So what’s up for the near term future? Here’s my intuitive best guess.
What happens during the next 60-days will be revealing in that it will likely define the story for the remainder of the year. There are definitely buyers in the market right now, but many are tentative, waiting to see if list prices come down or interest rates continue to go up. Many also want/need to complete their purchase as soon as they find the right “value” in the home they are seeking.
The key will be mortgage interest rates. Rates have steadily risen so far this year. This is both a real and a psychological factor for buyers. If interest rates begin to level off and stabilize (right now hovering at about 6.8% for a 30-year fixed rate mortgage, assuming no discount points or loan origination fees), it should bring a degree of confidence to the market. Sales should start to pick up and when that happens the market will gain a bit of traction. Not the craziness of the past several years, but a steady and sustainable amount of sales activity. Assuming the statistics over the next month or two confirms this, more buyers who have been waiting on the sidelines will then be more likely to enter the market (possibly motivated by the realization that pricing is, at a minimum, going to remain stable).
Regardless, whether you’re a buyer or a seller, it is important to acknowledge recent comparable sale prices. It’s a different market from six months ago. Neither “overpricing” by sellers nor “lowballing” by buyers will best serve your interests or your goals.
But, as I said, it all depends upon interest rates starting to behave better. Well, my shower is over. Time to get back to work and to the details.