The markets in general are volatile, but what are we seeing locally on the Central Coast?
A shift. The shift we have been discussing for the last few months has come to fruition in the last month or so.
How so? The short version is that a significant increase of new listings have entered the market and rates have continued to climb (although they have gone up and down in the few couple of weeks, an upward trend is still expected).
In the month of April 2022 there were 93 active listings in SLO County. In May 2022, this increased to 188 active. As far as interest rates, we have seen an approximate 2% increase since the start of the year.
What does all of this translate to? We may start to see some homes sitting longer on the market, more price reductions and offers being made with standard terms and contingencies. The data thus far does not suggest a real estate market crash, but rather a possible correction. As far as prices go, experts still predict an increase in prices this year, but a much more modest rate than we have seen the past two years. (Think more along the lines of 8-10% versus 25%). Yes, it is still possible to see price appreciation with a market correction. We should be looking at this as more of a shift than anything – it is still a Sellers Market, and still a strong and competitive market. The changes discussed are more in line with a balanced, healthy market, not the drastic market we have seen over the last two years. At the present and near future, price reductions will likely happen with homes that are at a higher price point (1 million +). There is such a pent up demand for homes in the $400,000-$600,000 range that a change in the direction of the market will likely take longer to impact those price points.
Tips for Buyers:
- Get Preapproved Stat- This step should always be first, but more so now. Not just to be ready to pull the trigger when the right home hits the market, but it is important to have a reputable lender in your corner educating you through rate changes and possibly looking into creative options if necessary. (If you need a recommendation, I am blessed to work with the best lenders in the business!)
- Work with a real estate professional that is active & knowledgeable in this market. Working with an agent that knows what’s happening locally and beyond is imperative to your success. The market is changing constantly and you need someone guiding you that has their finger on the pulse of the market.
- Do not wait for the “market to crash” or a huge drop in prices, otherwise you may be waiting a very long time. If you are able to secure something now, seriously consider it, especially since rates and prices are still expected to rise. (Refinancing can be an option to, when rates are more optimal)
- Save, save, save! Put as much down as you can, keep money in the bank for reserves and even save to buy down to a lower interest rate.
Tips for Sellers:
- Price your home correctly out of the gate. Particularly as inventory begins to increase, pricing your home too high is detrimental to your bottom line. Over-priced homes typically sit longer on the market and sell for less than they would if priced correctly. Plus, Buyers and Buyers Agents know what your home is worth, and listing too high may deter them from writing an offer or even looking at your home. Stick to the numbers and let your real estate professional market the heck out of it!
- Same as #2 above!
- Be prepared to see offers with contingencies, requesting concessions (such as seller paying a certain amount of buyer closing costs) and offer prices more in line with fair market value versus drastically over. Buyers can no longer afford what they could 3, 6, 12 months ago.
Key Takeaway: None of us have a crystal ball and there are a lot of external factors that determine the overall status of the market. Thus far, however, the state of the market is in line with recent predictions. I am keeping an eye on all of it, and am happy to discuss your concerns or any questions you may have. Education is key, so even if you decide to not buy or sell, it’s better to make that decision because of data and discussion based on your personal goals and situation with a trusted professional.
All the Best,