The market is softening with more sellers willing to offer concessions, the real estate prices are declining all over Southern California, and mortgage interest rates have taken a dive since the collapse of Silicon Valley Bank.
Sellers Are Offering More Concessions
The market has been softening nationwide as home sellers are more willing to offer concessions to buyers. Compared to last years extensive bidding wars and no-contingency free for all, the first part of this year has shown that almost half of all home sellers have offered concessions, or a price cut.
The three months preceding February 28th shows that 45.5% of home sellers offered to cover repairs, closing costs, and/or mortgage rate buy-downs alongside other concessions. That’s a 14.4% increase from last year and the highest concession rate since June 2020.
So if you’re a buyer looking to purchase, these days you can be a bit more demanding and selective with your future home. Don’t be afraid to ask for concessions, or repairs of significant items within the home. And if sellers are uncooperative, don’t be afraid to walk.
If you’re a seller, don’t fear. It’s still a very strong sellers’ market. We just aren’t seeing the craziness that we did last year. However, the days are gone of the take it or leave it attitude many sellers had with buyers. You need to be more willing to work with them in order to get your home sold quickly. And this year, pricing is more important than ever. The homes that are priced well from the start are having a much easier time than those who are still trying to push that upper limit of value.
Home Prices Are Coming Down
Speaking of value. Home prices are coming down in many cities throughout the US, and most especially in California. In July of 2022, there were 210 cities where the typical home value was $1 million or more. As of January of this year, the number of cities has drop to 190. That’s 20 cities, or almost 10% of cities that lost their million dollar status. And the greater number of those cities were located right here in the Los Angeles area.
But it’s not all doom and gloom for you sellers out there. Really, the only people that declining prices will affect are those with an extra house to sell or possibly those moving out of state. Look at it this way. If you are selling a house, then you will probably be buying another house, whether you are moving up, or downsizing. If prices are dropping across the board, sure, you’ll sell your current home for less money, but your new home is also going to cost less as well.
This is also a big boon for buyers who have been priced out of the market due to ever increasing prices and mortgage interest rates that are much higher than they were even a year ago. And speaking of mortgage interest rates.
The Fall of Silicon Valley Bank
With a decrease in investor confidence following the failure of Silicon Valley Bank, many are looking to long-term treasury bonds as a safer investment. Due to the influx of new money, the 10-year treasury bonds, which have historically been a leading indicator of where mortgage rates are headed, decreased substantially back to the levels we were seeing in January of this year.
The 10 year T-Notes which were above 4% on Thursday, dipped as low as 3.42% on Monday before gaining back some ground. Which is good news for those looking to purchase a new home this year. Rates were looking to be headed North of 7% last week before Fed Chairman Jerome Powell delivered a pessimistic inflation report to congress, giving a greater confidence that rates will likely not continue to rise.
This could be a boon for the real estate market going forward as more buyers will be able to qualify for loans, which will hopefully give the market a much needed kick in the butt.