How High Interest Rates Are Impacting The Housing Market | Bay Area Housing Market Report

How High Interest Rates Are Impacting the Real Estate Market. In this video Karan shares his insight on how these super high interest rates are affecting the local housing market. And how buyers and sellers are making decisions in this interesting real estate market. He also talks about where the current real estate market is right now and where it is headed. A very important point discussed: Are we headed in the direction of a market crash? If you are a buyer and want to know what you should be doing right now, tune in to correctly tune your real estate strategy.

Video Transcription:

In today’s video, I will share with you how these super high interest rates are impacting the Bay Area housing market, and how these rates are also impacting your local market, and what this is doing to the buying and selling decisions for consumers. Does a high interest rate market and a low, decreasing demand in the real estate market mean that there’s going to be a market crash coming? Let’s find out. So, let’s talk about some high-level pointers of what’s really, really happening in the market. We know that rates went up this year. In the summer months, as you’ve watched some of my previous videos, the rates we’re sitting at around six and a quarter. Now the conventional rate is at 6.625, so almost a half point higher, and high balance and jumbo rates right now, I just ran the pricer. Today is October 11th when I’m shooting this. They’re close to seven and a quarter. Now depending on your credit score, depending on the down payment, in some cases it may be lower. Let’s just assume they’re sitting at around 7% right now for a high-balance and a jumbo loan. Number two, buyer pool has significantly depleted. Buyer demand is very, very low compared to the same time last year. Obviously because the rates are high, some people just plain right can’t afford the home or are holding back hoping for the rates to come down, or the prices to decrease. National Association of Realtors is forecasting home volume sales this year to be around 4.8 million. The same number last year. Not the same number, sorry. The same stat last year was around 6.9 million. So, almost a 2 million unit difference in sales in 2022. Number three. Like I mentioned in my point earlier, a lot of people are priced out of the market and a lot of sellers are holding back because they are feeling that they’re not getting the value that they were getting a couple months back. And also they’re thinking, Okay, if we sell this house that’s at a 4% or a 3% interest rate on their mortgage, right now what are they gonna do once they sell it when the rates are sitting at 7% or 6.625%? They’re thinking, “We’re just gonna sit tight and wait what the market does.” So, a lot of sellers are also holding back. I hope you’re getting value out of this video because I love making this content for you. If you are, hit that Subscribe button, hit that Like button, and leave a comment to let me know how I’m doing. I love to hear from you. Please keep watching. I love you all. Now let’s go to the board and look at some local data to see what these rates are doing in your local market here in the Bay Area. So as you can see on the board, I have two cities listed. I have Hayward and Fremont. So, I’m comparing a high-end market with a medium to low-end market to tell you guys what the rates are really doing and how that is playing out in two different markets. So, let’s start with Fremont right now. In Fremont, so what I’m doing is I’m comparing last month’s numbers, September, 2022 to September ’21 last year. And this is a detached report. Does not include condos and townhouses It includes single-family homes only. So as you can see here, which we just talked about, the active listings right now last month were 109. The same time last year there were 75, significantly lower. And the main reason for that this year is a lot of people not trying to buy, buyer pool’s depleted. Because they’re either priced out of the market or are just holding back from buying. So, that’s why you’re seeing more inventory sit on the market longer. And we’ll talk about days in the market in a bit, but that’s why you see more active homes, because the demand last year at this time was just higher. Sold. You have 96 sold only this year in this month, and last year 152 homes sold the same month. That is almost a 37% decrease in the homes sold in the month of September. Then you have an average sales price. This is an interesting metric here. With all this happening in this market, average sales price is 1.625 million compared to 1.576 million last year. Still a 3% increase here. And I’ll talk about that in a little bit, but increase here even despite the fact that market has slowed down a bit. Days on market. Another interesting thing to look at here. Significantly higher than last year. Almost double, more than double this year. Homes are just outright sitting on the market longer because there’s less demand. There’s not that many offers coming in per home. Homes are still turning and selling, but just not enough offers coming in in the market, so homes are sitting on the market longer. Now let’s move over to our medium to lower-end market, which is Hayward. And the same kind of trend here when it comes to active. More active listings last year, less active listings this year. Sold. 104 sold last year, 87 sold this year. Almost a 16% decline, which is directly correlated with the lower demand out there and not enough. And a lot of sellers holding back out from selling as well, ’cause they don’t know where they’re gonna go moving forward. They’re just holding back on listing their home. Then you have average sales price. This is gonna be interesting how we’re gonna compare these two. Here you see that the average sales price last year was 1,000,014. This year the average sales price is 953,000. Almost a 6% decline compared to a 3% increase on this side. That’s what usually happens, guys, when markets are shifting, demand goes down. Usually the markets that are higher-end markets and more desirable due to community and schooling factors are still gonna have a high demand, and it takes a lot for those markets to come down. Whereas lower to medium-size markets, you’re gonna start to see more price negotiations. And in some cases you’re starting to see the prices of average sales, like we see here, be a little lower than last year. Days on market. Very similar to what we saw on the Fremont side. It’s more. It’s almost doubled here. Just homes sitting on the market longer. Not enough buyers out there. Depending on where you are in this country, the data on the board may translate in your market where I looked at both a high-end market and a low-end market. But each market is very different and may not exactly translate, but these trends are happening all over the country. So, do I think there is a market crash imminent coming right now around the corner? The answer to that is no. That is because the data that we’re looking at is not indicating that there is a crash coming. And I’ll tell you why. The last time the crash happened, the unemployment rate was almost double. It was at 7%, and right now we’re sitting at around 3.5%. Second very important pointer why I believe there’s not a crash coming right now is because inventory is moving. For a crash to happen, you need the market to completely shut down where you have excess inventory in the market and you have distressed sales. That is not the case right now. If we looked at the the Hayward market, we saw that, yes, the average sales price is about 6% lower, but that does not mean there’s distressed sales. That just means that homes are not selling 15, 20, 30% higher than asking price. Do I have all the answers? Absolutely not. I don’t have a glass ball to predict what’s gonna happen in the future. But like I mentioned before, real estate is a lagging indicator. What happens now, you will start to see the results in a few months from now. It’s not as a volatile market as a stock market where it changes daily on some paces, and sometimes in hours. Real estate takes a little while. It is scary with all the things that are happening in the market, and everyone is on the edge when it comes to what to expect in the future. But looking at the current data, there are no indications of a crash coming upon us. Now, if you are an interested buyer still looking to buy, you want to make sure that your pocket is secure. What I mean by that is look at what your monthly mortgage payment’s gonna be. Look at your income and make sure the house that you’re trying to buy, it’s not depleting all of your monthly income, that you have some reserves left for a rainy day. And if you’re gonna put a down payment down, try to utilize some first-time buyer programs and don’t go invest cash heavy in this. You want to have savings in this market where inflation is at a record high. Now, real estate is a lifestyle, guys. You don’t wanna look at this from only one angle and think, “Oh, I’m paying this much and now I have to pay this much.” You also have to look at it from an equity standpoint. It’s a seven to 10-year game. You will build equity on the long run. But if your pockets are stretched right now and you know buying this home is really gonna put you under the water, then do not buy. You’ve heard it here first. I will never ever advise you to buy something and push you to do something that you cannot afford. But let me tell you this, it’s still a great time to buy right now. And here’s why. If your pocket allows and you have ran your numbers and done your homework, you’re able to get a lot of seller negotiations right now and get a lot of seller concessions from the seller that’s really, really motivated to sell because there are a lack of buyers out there. So, you can price negotiate, in some cases even get a seller concession that will buy down your rate, and that rate will be lower. And if the rate market comes down, which a lot of experts are saying it may come down in a few years, you can always refinance. So, when there are less buyers out there, it increases your chances of finding a property that you absolutely love and you’re able to make a deal on that. Like always, this is Karan Singh with Optimal Homes. Until next time.

About the Author
Karan Singh
My brand thrives on building meaningful relationships with clients, colleagues, and co-workers. Consider me your passionate ally in helping you and your family craft a future as solid as the foundation of your dream home.

For the past 8 incredible years, I’ve been on a mission to turn the elusive “”American Dream”” into a tangible reality for home buyers. Think of me as your guide, relentlessly searching for that perfect home at the perfect price. And for sellers, I’m the secret weapon to ensuring your property gets snatched up for top dollar, faster than you can say “”sold!””

But here’s the real kicker: I’m not just a lone wolf in this wild real estate jungle. I’m part of a dynamic team that knows no bounds when it comes to innovative and proactive marketing strategies. We’re not just top ranked in the market—we’re the ones setting the bar!

So, let’s cut to the chase. If you’re itching to unlock the door to your real estate goals, give me a call today. Trust me, you won’t be disappointed. It’s time to make moves, my friend!