Spring homebuying season kicks off with tight inventory, tech layoffs and economic uncertainties
Midpeninsula Realtors are navigating the spring real estate season with no shortage of challenges, but those who we spoke to said they are retaining optimism in a historically strong and resilient market.
This season’s housing outlook is accompanied by higher interest rates, economic uncertainties, large-scale tech industry layoffs and very tight housing inventories. Local real estate agents report a healthy dose of interest from prospective buyers, but continued reticence from some homeowners to put their property on the market.
“Sellers are still uncertain, generally,” said Lucy Berman, a Palo Alto Realtor at Sotheby’s International Realty. “Some, however, do have a real motivation to put their houses on the market. That is the key to improved inventory.”
Berman said she anticipates that most activity this spring will be in the entry-level, single-family home segment of the market priced $3 million and under.
The condominium market has not recovered locally, she said, even though she anticipated its revival once mortgage interest rates started rising north of 6%, pushing those with less buying power out of the single-family market.
Higher interest rates, however, typically have not been as big of a factor in the pricey Midpeninsula market compared to less-expensive locales.
“Well-priced, well-presented properties are selling,” said Brian Chancellor, a Palo Alto Realtor at Christie’s International Real Estate Sereno. “This market was so strong for so long, some agents have not seen some of the conditions we have now. I do think more and more sellers are accepting the realities of the current market … and it’s an up and down market.”
Chancellor observed that for many buyers and agents who became accustomed to historically low mortgage interest rates of around 3 to 3.5%, today’s rates at double that amount are disorienting and a bit daunting.
“I see (interest rates) eventually settling out at 4.5 to 5%, which is still very good,” he said. “I do not see us returning to 3% interest rates any time soon.”
Whether because of higher interest rates or other factors, local agents said
the spring market was slow to launch this year.
Elyse Barca, a Los Altos Realtor at Compass Real Estate, said the spring buying season typically gets underway the weekend following the Super Bowl, which is held in early February. A broker tour she attended in mid-February had only a handful of available homes, she said. “The weekend after the Super Bowl, we saw eight or nine properties,” Barca said. “We would have had twice that number a few years ago. I can’t remember when inventory was this tight.”
She agreed with Berman, however, that there is strong interest among buyers in single-family homes on the Midpeninsula that have made their way onto the market. “Single-family homes in Palo Alto and Menlo Park are in the sweet spot this spring,” she said.
Among homes in the more robust entry-level and medium-priced markets ($5 million and below), Barca said she sees small price increases of about 1 to 2% this spring.
Denise Welsh, a Los Altos Realtor at Compass Real Estate, foresees a “sweet
spot” in Mountain View for homes in the $2.5 to $3.5 million price range.
Welsh echoed her colleagues’ concern for an overall lack of inventory, as well as a still very expensive local housing market.
Early in the season, Welsh said of 706 single-family homes on the market in Santa Clara County at the time, 20 were priced over $10 million, 44 over $5 million, 43 over $4 million and 75 over $3 million.
“A lot of people have been priced out of the market,” she said.
Despite higher interest rates, tech lay-offs and other economic challenges,
Welsh predicts a “good market overall” this spring.
“But, no one should expect it to be like 2021” said Welsh, noting that year’s pandemic-fueled frenetic housing market. “That was an anomaly.”
While several of the Realtors predicted a slower spring for houses priced above $5 million at the higher end of the market, Chancellor noted sales earlier this year in Atherton in the $14 million to $16 million range. While he predicted single-digit price decreases this spring in some local market segments, Chancellor remains optimistic about buying activity as the season progresses.
“It will be busy,” he said. “I’m getting plenty of calls from prospective buyers.”