11/03/2022
There’s an old real estate cliché - “When is the best time to buy a house? 10 years ago. When is the second best time to buy? Right now.” In reality, the best time to buy in San Francisco was 11 years ago, during the last big dip in the market. But the second best time is still right now.
This is a historic buying opportunity in the SF Bay Area - here are 8 reasons to jump in on this now.
#1 - PRICES. Prices are down 10% or more. This is a lot for the real estate market in San Francisco - it is extremely rare for things to drop this much. We haven’t seen price reductions of this magnitude since 2009. That was a "the world's financial systems may be ending" scenario - quite a bit more extreme than what we are facing today.
#2 - COMPETITION. There is not a lot of competition. A lot of people are nervous and sitting on their hands to see how things shake out. In many cases, active buyers can write offers with contingencies, below asking price, with 10% down, etc. and still get their offers accepted. Buyers have a lot more flexibility and power right now.
#3 - INVENTORY. There is a lot of inventory. The fall season is typically when we have the most homes on the market, giving you more selection and opportunity to find your perfect home. This year is no exception. And because many buyers have stayed on the sidelines, a lot of homes are staying on the market longer, leading to a huge increase in inventory.
#4 - HOLIDAYS. The inventory glut may not last long. Some sellers who would be listing their homes right now are holding off in hopes of a market shift. Many of the homes on the market now are sellers that need to sell right away. Those who don't have to sell will likely remove their homes from the market before the end of the year. January 1st is typically the lowest inventory point of the year.
#5 - INTEREST RATES. Interest rates have been rising. The Fed raised rates today and the expectation is that they will raise rates at their next meeting on December 14th and then wait to see how the markets settle. Rates may be much higher by the end of the year. The longer you wait, the more it will cost you. Even with higher interest rates though, the alternative is paying rent which is 100% interest. Do you want to lock in now when you can still get a 30 year fixed below 6%, or wait until we are at 8%?
#6 - STOCK MARKET. When the stock market turns, so will the housing market. We already saw that once this year. Demand for housing dropped this spring when the stock market fell, and surged again in the summer when the market rebounded. Our sense is that we are now near the bottom in the stock market with the S&P down over 20% year to date and the NASDAQ down over 30%. The stock market is forward looking as investors are buying on future performance, not current performance. Once it turns, it turns quickly.
#7 - HISTORY. History tells us that these pullbacks are short-lived. Of the sixteen times we've had drops in the stock market like this since 1940, twelve of those times the market fully recovered within six months and fifteen times within twelve months - both with an average of double digit gains. Past performance does not guarantee future results, but it can serve as a great guide to how these things typically play out.
#8 - TIMING. Nobody knows exactly when the bottom of a real estate market will happen, but prices are reduced more than typical downturns. So, if we aren't at the bottom, we are likely very close. But once the market turns, chances are you already will have missed this moment of opportunity.
So if you're considering buying a home this year, now is a great time! 🏡🍂
www.SomselTeam.com
Francis Somsel, DRE #01966357
Geneva Bumb, DRE #02048902
