Happy New Year!
At the beginning of each year, I wonder how much it will resemble past years, and how much will change. I suspect many of you, like me, with a new calendar in front of us, and with fresh eyes wonder how much can I help make positive changes for myself, my community and for you, my clients? It’s more than just a rhetorical question; if there are ways I can help you, please let me know!
In our East Bay real estate market, we are expecting a mix of old patterns and new conditions. Like most years, we start January with the closest thing we will experience to winter weather, with some welcome rain. Sometimes that slows both buyers and sellers. But as usual, the buyers can get ready relatively easily. Either they arrange for a loan, or they make sure their cash assets are liquid and ready to access. I have already had calls from multiple sets of buyers who are ready to buy in 2024, and are just waiting for inventory to appear. But sellers usually have much more to do. Right now, I’m working on preparing two North Berkeley homes for sale, and in each case there is much work ahead! The sellers and I are ready, but how quickly will the engineers, contractors, painters and landscapers (let alone permits) be available? The answer is usually something on the theme of “later than you’d like, and taking much longer than you’d hoped!”
There’s always the speculation, especially in an election year, about how the economy will impact our local market. What are we expecting in trends for interest rates, and prices? I go into some detail about that topic for our East Bay market in the next article. For those who want a broader picture, one good source of data on nationwide home price forecasts is the Home Price Expectations Survey from Fannie Mae (follow link here) – a survey of over one hundred economists, real estate experts, and investment and market strategists. These experts are projecting home prices will continue to rise moderately, at least through 2028. They, like many, are also predicting that interest rates will continue to drop over the course of this year, likely ending somewhere in the upper 5% range.
For buyers this means that by buying now, your home will likely grow in value, and you should gain home equity in the years ahead. For sellers it may take off some of the pressure to sell immediately, especially as I’m guessing that some buyers will hold off making their home purchases until the second half of this year, once they’ve seen further interest rate improvements. But as you’ve heard me say before, the best time to make a move is always when it makes sense in your life, not when there is external motivation or pressure!
One of the most significant changes that we are expecting in 2024 are contingent offers, at least with a contingency for obtaining insurance. As I’ve been discussing in recent months, the challenge of obtaining new policies in California has never been so extreme. And existing policy holders are also facing challenges of their own: from premiums increasing up to four-fold, to requirements for structural upgrades, to policies being canceled outright. California homeowners can no longer take homeowners’ insurance for granted! And do let me know if you would like a referral to a good insurance broker, someone who can reach out to multiple carriers on your behalf, and who is already well-versed in the challenges in this arena.
I’ve mentioned that carriers are especially looking for upgrades in four systems. Most critically, electric systems need to be updated not only to circuit breakers, but also devoid of ALL knob and tube wiring. Carriers may also be requiring plumbing systems to have galvanized pipes replaced with copper, and roofs can no longer be shake. They may further require that foundations have earthquake retrofitting installed.
For those of you who have not yet installed retrofitting, or for whom their retrofitting was installed many years ago, there is currently a program that may be available to help provide financial support. The EBB: Earthquake Brace + Bolt Program, has a short window when the registration is open, and now is the time! Homeowners can apply through February 21st. EBB offers a grant of up to $3,000 toward a seismic retrofit for qualifying older houses. Qualifying homeowners are selected through a random drawing, and are then notified if they have been selected or have been placed on the waiting list.
New this year: there is an additional supplemental grant for income-eligible homeowners that may pay up to 100% of the cost of retrofitting. Here is the LINK where you can go to see whether your home qualifies. I’ve had several clients benefit from this program over the years, and urge you to consider it if this is one of the home projects you are considering for 2024. And if you’d like recommendations for contractors to do the work, I’m happy to help with that as well.
Joy, Health, Love and Peace.
Those are the first words of a favorite song (The Wren, which you can listen to here), and my sincere wishes for you for 2024!
Arlene
Was there a downturn, and has it bottomed out?
I am proud to say that 2023 was the strongest year ever for me, and especially for my sellers. All of my buyers were successful as well, but almost all of them were in competition, and in some cases very aggressive competition. My sellers all received offers well over their list prices, and in several instances the strength of the buyer population surprised even me. That was especially true in Berkeley, where my last two listings sold 52% and 67% over list, starting from list prices that were not unrealistically low. Those are not just statistics. For the sellers involved, all of whom either were already, or became friends through the process, those extra amounts made significant differences in their lives. One of the greatest rewards of this career is to hear my sellers say that the outcome I produced meant they could upgrade their new kitchen, help out a child, or retire earlier.
However, the 2023 real estate market in the Inner East Bay was not necessarily a pretty one for all sellers and agents, even within Red Oak. The number of sales fell to their lowest level since the MLS went online in 1996. Median price for the year as a whole fell 9% (and now stands above 2020 levels).
But the market may have turned the tide and could be headed in a new direction. Looking at key metrics in Q4 2023:
- Median price increased 4% in Q4 2023 compared to one year prior.
- Homes sold 8% over list price, 3 percentage points higher than one year prior. And homes that sold in the $2M-$3M range did so at 20% over list price, 7 percentage points higher than a year ago. Again, I’m proud to say that my average was much higher than that.
- And the Inner East Bay is not the only segment of the Bay Area seeing a resurgence. Prices increased in the Peninsula/South Bay (+8%), Outer East Bay (+4%) and Napa and Sonoma Counties (+3%).
These improvements may be driven by greater confidence in the economy: Inflation is down, mortgage rates are at their lowest levels since April 2023, and the Fed may cut interest rates more than once this year.
These factors may unlock inventory, which is what is really needed to get the market back on track. And this shift may already be underway: Through the second week of January, new listings are up 55% compared to the previous year.
As consistent with the latter half of 2023, buyers should expect elevated levels of competition, particularly among the properties that are move-in ready, priced well and are in an attractive location. Sellers may find that improvements to the market vary from week to week, neighborhood to neighborhood, so they should be prepared to make their listing as attractive as possible.
To learn more about the market, consider attending Red Oak’s State of the Market Webinar, which is mentioned below. In the meantime, please reach out to me if you would like to discuss your real estate goals in 2024.
