Why It's A Good Time To Buy A House | November 2023 Market Update
Many people think the winter time is a bad time to buy or sell a home. I’m going to share with you why I think this time of the year can benefit both buyers and sellers based on my 18 years of experience representing more than 500 clients on the peninsula.
In my opinion, the winter market can actually be a pretty good time to buy a home, because you may be able to get a lower price with less competition.
These seasonal opportunities have been given even more of a jolt by the most recent jobs data and the recent drop in interest rates but I’ll come back to that in a minute.
First let’s talk about the inventory. At this time of year there are many homes that came on the market in September and did not sell before the holidays. Of course, many sold, but many homes are still available.
Why is that? Oftentimes they were priced incorrectly. These asking prices were totally unrealistic based on what comparable homes sold for recently. So, while they may be awesome homes, the prices those sellers are hoping to get are simply too high.
What does this mean? This means that our buyers can be way more aggressive writing offers on these properties with the hope of buying at a lower price. I love negotiating on behalf of our clients. Now, it doesn’t mean all situations are like this - far from it.
Now, on the flip side, the winter season can also benefit sellers. There are so few new listings coming on the market, you’re competing with fewer sellers than you would be if you put your home on the market in the spring. And with less competition, buyers have less to choose from. Early December is one of my favorite times to put a new listing on the market. Sure, there are fewer buyers looking in December than say May, however, I typically have a number of buyer clients who engage with me in the fall, and none of them say, hey Raziel, by the way, if a great home for us pops up on the market between now and the holidays, please, we’re not interested, don’t tell us about it! No one says that.
The other benefit in the winter is it’s really the only time of the year when you can consider writing a contingent offer. A contingent offer is when you write an offer that is dependent on selling your home. This is super attractive for many people because you basically only own one home at a time, and you don’t have to move twice. Generally most sellers would never accept a contingent offer, and for good reason - they have to wait 2-3 months while you get your home sold, and theoretically there’s a lot that can go wrong, even with the best intentions, if not managed well.
At this time of the year, for a seller who had their home on the market for a while, and a strong offer came in, they could be willing to wait for a buyer to go through the process of selling their home first. I’ve done a handful of contingent transactions in my career and when they work out, they are very rewarding for our clients.
As I mentioned, the current economic data should give the real estate market a much-needed boost. On November 1st, the jobs report came out with numbers that inspired the Fed to pause on rates, and all of a sudden the stock market had its best week in a long time.
Interest rates dropped almost 1.5% in the last two weeks which is awesome. Some forecasts are saying later next year we could see sub 5%. While I don’t know if that will happen, I do think it’s safe to say we’ve rounded the corner from peak interest rates and I expect the market to be stronger this spring than it was this past spring.
Let's take a look at the data, and first, let's see an illustration of the recent drop in interest rates.
While new listings are similar to last year, we are still down quite a bit from what we experienced in 2021 and 2020.
Again, sales volume is still pretty low. Everyone would love to see more new listings!
This is very interesting..
In the first 3 days of November, daily average 30-year interest rates suddenly plunged to 7.38% after hovering about 8%, but as of the daily reading today (7.41% per Mortgage News Daily), they've barely changed since. Below are 2 charts - short-term and long-term - based on the weekly average rate published by Freddie Mac this morning. (The daily rate chart through 11/3 was included in the November Bay Area newsletters announced on Tuesday.)
Though a little down so far today, stock markets have seen a big rebound since late October after their big decline in most of that month. Note that the percentages highlighted refer to year-to-date changes.
NAR published Q3 national statistics this morning. Below is the national existing single-family-dwelling median sales price since 1989, which is up 2.2% year over year, and then appreciation rates over various periods of time.
Metro-Area prices and year-over-year appreciation rates: "More than 80% of metro markets (182 out of 221) posted [year-over-year] home price gains in the third quarter of 2023...Year-over-year prices in the third quarter retreated by 10.3% in Austin, 1.5% in Phoenix, 1.2% in Salt Lake City and 1.1% in both Dallas and Houston. However, prices rose by 9.6% in San Jose, 8.7% in both Anaheim and San Diego, 6.6% in Boston and 5.7% in Miami." Note that metro areas typically cover much wider regions than just the cities they are named for - for example the San Francisco-Oakland-Hayward metro area includes SF, Alameda, Contra Costa, Marin & San Mateo Counties (with the 2 east bay counties dominating sales volumes). The San Jose metro includes Santa Clara and San Benito Counties (and is utterly dominated by Santa Clara sales).
Eight of the top 10 most expensive markets in the U.S. were in California, though not all are included on this table.
U.S. Housing affordability: "Housing affordability worsened in the third quarter because of increasing home prices and mortgage rates. Families typically spent 26.8% of their income on mortgage payments, up from 25.3% in the prior quarter and 23.5% one year ago."
New-home prices: Median prices for new-construction homes have fallen in 2023, even as their percentage of total national sales has increased due to the huge drop in resale listings. Part of this may be a change in either 1) where most of the new homes are being constructed and sold, and 2) the median size of homes being built. Or it may simply have to do with builders dealing with the increase in interest rates by reducing their prices.
Soaring stock markets: The percentages below reference changes in the stock market indices since the year began, but one can see the tremendous jump that has occurred in the last 2 weeks.
The daily average interest rate - illustrated below - is roughly where it was after the big decline in early November (after the Fed announcement of a continued pause in Fed benchmark rate increases) - substantially down from October highs. The 11/15/23 reading was 7.45%. The new weekly average reading from Freddie Mac comes out tomorrow, but based on interest rate changes over the last week, it seems likely to stay relatively close to last week's reading (7.5%).
Jumbo loan rate chart: As of yesterday's reading, running at about 7.6%.
Median house sales price appreciation since autumn 2019:
Comparative median $/sq.ft. house values:
Percentage home sales declines - in # of residential sales reported to MLS - since autumn 2019:
The national unemployment rate ticked up slightly in October - which financial markets liked since it indicated some cooling in the economy, which presumably influenced the Fed in their decision not to raise the benchmark rate - but remains close to historic lows.
October unemployment data for the Bay Area has not been released yet, but through September, the general picture is similar: Close to historic lows.
