Pleasanton Real Estate Market Update - New Year, New Market

2024 is here, and the first question everyone asks me is “What is the market going to be like this year?”  First a disclaimer – My crystal ball is in the shop for repairs, as it has been wrong a lot lately.  My second disclaimer – That is a better question for a bond trader than for a real estate agent. 

Interest rates continue to be the key.  We saw a long steep rise in mortgage rates in 2023.  This impacts the real estate market two ways.  It makes it more expensive for home buyers, and discourages new inventory since many homeowners have existing mortgage rates well below current market.  Add the inflation concerns, general economic uncertainty, and geo-political unrest, and you have a recipe for a very sluggish real estate market. The good news is average mortgage rates have eased from their high in late October of 7.8% to a current average of 6.6%.  And the bond market showed improvement as well, indicating that investors feel optimistic that interest rates will be going lower. 

IF interest rates continue to ease, and that is a big IF since inflation can be very stubborn, my sense is we will experience the following:

Supply/Inventory:  Inventory was highly constrained in 2023, with record low levels of homes for sale.  This kept the downward pressure on home prices somewhat manageable.  This is partially due to the fact that many homeowners are sitting on very low interest rate loans as compared to current rates, so there is a built-in incentive to avoid moving.  Other sellers are simply kicking themselves for not selling at the peak.  Some of these potential sellers want to see if the market will recover in the near term.  If interest rates move lower and market conditions improve, I expect we will see more sellers take the plunge and put their homes on the market. 

Demand:  2023 saw some volatility in demand.  The lower (more affordable) end of the market demonstrated surprising strength, with multiple offers occurring on many well priced homes. As you move up in price range, however, the overall demand weakened.  At times it seemed like there was no rhyme or reason to the market, with some homes selling quickly with multiple offers, and other homes struggling to attract offers.  In short, it was a volatile market in a volatile economic environment. 

If mortgage rates improve, we should see more buyers enter the market, which will be a boost to home prices.  This in turn could prompt many sellers to jump in as well.  The one thing I know is the sidelines have become very crowded with buyers and sellers.  Here’s hoping some of those folks will get off the sidelines and into the market.

So how does this all shake out?  I will let you know for sure when I get my crystal ball back from the repair shop.