Gina Piper December 8, 2023
As we enter the historically slow holiday real estate season, I don’t expect the market to be too different from what we have been experiencing for the last several months. Inventory levels remain extremely low, as most homeowners are unwilling to sell and give up their ultra-low interest rates and replace them with a much higher rate. The vast majority of calls I receive from sellers fall within two categories: those moving out of state or Trustees selling family homes. A very small percentage stay in California and relocate to a less expensive area. Most East Bay buyers are relocating from Fremont or elsewhere in the Silicon Valley to take advantage of the great schools and because they get more house for their money in the East Bay compared to the areas they are leaving. Buyer demand is still surprisingly strong despite the high rates. I heard about a fixer-upper home in Pleasanton that received 84 offers this week. There appears to be some light at the end of the tunnel for rates, but it’s not necessarily good news for the overall economy. While the Fed insists we will have a “soft landing” and avoid a deep recession, some signs point towards the latter. The yield on the 10-year Treasury, a bellwether for interest rates, has dropped significantly in recent weeks after breaking the 5% barrier in mid-October, a level we hadn’t seen since early 2007. As of this morning, the yield is 4.24%, with some predicting that it will dip below 4% soon. Mortgage rates have improved by about 1% in the last few weeks and are now in the high 6% range after peaking at 8% in October. Oil prices have dropped from $93/barrel in Sept to under $70 this week. Falling oil prices reflect future demand and are a good indicator of an upcoming recession. Many are expecting much lower rates as early as the spring of 2024. Barring any unforeseen catastrophic event, I doubt we’ll ever see rates back in the high 2% to low 3% range, but if they get back under 5%, it should go a long way in helping our low inventory issue.
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