Time for some opportunity talk. I’m hearing a lot of talk from buyers right now about waiting: waiting for prices to come down and waiting for interest rates to come down. While these are perfectly reasonable things to wait for, both of those concepts will bring a return of the competitive frenzy that we saw last spring, so why not talk about some opportunities that are out there right now?

WAITING FOR THE MARKET TO TURN

Waiting for the market to turn around makes some sense on the surface because buyers are always concerned about overpaying. They would rather buy at the bottom of the market. Of course! Who wouldn’t? But that’s just the problem. When the market hits the bottom and turns back around, we are going to be absolutely FLOODED with buyers. Remember last spring when every house was getting 8-10 offers and homes were selling for $50k-$100k over list price? That situation isn’t happening right now. Homes are sitting for longer, and most homes are not receiving multiple offers. We’re also seeing nearly as many price reductions as new listings on a weekly basis. There is opportunity out there for a buyer to capitalize on a slowing market BEFORE things turn around. Plus, sellers are now having to offer incentives to get their homes sold, which was absolutely unheard of last spring.

WAITING FOR INTEREST RATES TO COME DOWN

I get it. 7% interest rates are tough, and list prices are still high after the spring frenzy. However, North Bay home prices have come down 9% since the spring (see graph below), and I expect that will continue at least through the holidays. The good thing is that there are ways to mitigate high interest rates. Most lenders believe this hike in interest rates is temporary, and that as soon as inflation is stabilized – sometime within the next 6-18 months – rates will come back down. So, the big talk right now in the lending world is about a 2/1 or 3/2/1 buy-down. What this means is that the interest rate is temporarily “bought down” for a period of 2 or 3 years. In the case of a 2/1 buy-down, the rates are 2% lower the first year and 1% lower the second year. With a 3/2/1 buy-down, the rate is 3% lower the first, 2% lower the second, and 1% lower the third. Of course, neither of these products are free. The reason they work right now, though, is that sellers are having a hard time selling their houses, so they are being encouraged to offer incentives to buyers: Credits toward closing costs or paying for a rate buy-down.

North Bay Median Home Price Graph

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Let’s talk about the state of the North Bay real estate market and what my crystal ball says is in store for us over the next 6 months.

CURRENT CONDITIONS
Below is a chart showing the Median Price of North Bay home sales since July 2021 (Marin, Napa, and Sonoma Counties combined). To nobody’s surprise, the peak of the market was in Spring of 2022, and since then we have seen about a 9% dip in median price through the end of September. I expect that when October’s numbers come out next week we will likely see that gap widen even further, and we should continue to see a decline in Median Prices for the time being.

North Bay Median Home Price Trends

WHAT’S TYPICAL
In a typical year, many buyers will disappear during the holidays. They have parties and vacations and holiday plans and shopping and everything else that life throws at them during that time of year, so only the most dedicated buyers tend to be actively shopping during the holidays. At the same time, sellers are aware of this (or at least their listing agents are), so typically only the sellers who are most urgently in need of selling will list during the holidays. If they can afford to, many sellers would rather wait until late winter/early spring. Because of all this, prices tend to stay pretty flat or decline a bit during a typical holiday season and tend to increase each spring, but this winter should weigh more heavily than normal on the decline side of that typical pattern.

WHAT’S NEXT
Obviously, what happens with the market next spring is going to depend a lot on what happens with the economy and interest rates over the next few months, but if I had to put an educated guess on it, I expect the North Bay real estate market will hit a low Median Price of about $850,000 this winter and then see a fairly flat pricing graph next spring (yes, I will revisit this post next spring and see if my crystal ball was correct), as the typical spring price increase is counterbalanced by high interest rates and lower-than-normal buyer activity.

OPPORTUNITIES
For what it’s worth, I also wanted to talk about an interesting perspective on opportunity for buyers to consider. Last April and May was when many buyers called me to say, “I’m done”. The market was too crazy. They were getting beat out by way-over-asking, all-cash offers, so what was the point? Now some of those same buyers are telling me, “I’ll wait until prices come down some more”. The problem is: when prices come down, competition will go up again. Timing the market can be extremely difficult, but the very best time for most buyers…assuming the right house comes along in a time of such limited new inventory…is going to be this winter. I wouldn’t count on prices going too much lower than we will see in December or January for the time being, or you may be waiting a long time and chasing the market again next year.

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