What is driving Bay Area real estate prices UP?
Which quarter of the year has the highest sold home prices?
Why are mortgage interest rates still at record lows?
The first quarter of 2013 has brand new challenges for Bay Area real estate home buyers and sellers. My predictions for what is going to happen this year with real estate in the Bay Area is already unfolding. In the past 35 years I have not seen the inventory of homes for sale so low, and the number of potential home buyers so large. These two dynamics, plus a few others are driving up Bay Area home prices in ways not seen since 2006. There are six critical reasons to either buy or sell Bay Area real estate today. And, included in this list are some economic “wild cards” that need to be watched.
Home Sellers: Never in the past seven years has it been a better time to sell Bay Area real estate. And, in spite of this economic ‘good news’ for sellers, it still is a very challenging experience. Here are the three critical reasons why;
- As much as a potential home seller would like to take advantage of this seller’s market and rising home values, they may not have enough equity in their home to make their next home purchase. Today’s lending requirements are such that a minimum of 20% down is required. That means if a home seller wants their next home to be in the $1 million range, they will need at least $200,000 as a down payment. Home values may not have raised enough for this type of result.
- In order to get the highest possible price for a home, a seller will need to have their home close escrow sometime in the second quarter of 2013. Why? Because, for the past 40 years the homes that have closed in the second quarter of the year have had the highest per square foot price of homes sold in that year – closing in April, May, or June. To close escrow in the second quarter a home will need to be on the market by at least the middle of February or the first week of March. This result is because of typically low inventory of homes for sale in the first quarter of the year.
- There are some “wild cards” that may impact today’s seller’s market as 2013 unfolds; the increases in State and Federal income taxes in 2013 which will cause potential buyers to have less cash; and, potentially rising mortgage rates because of the uncertainty of the newest “fiscal cliff” coming in March and the uncertainty of Europe’s economic health.
Home Buyers: If you are a potential home buyer today in the Bay Area you are not having a fun experience with today’s seller’s market. And, you need to figure out how to overcome these challenges and get your purchase offers accepted. Here are three critical reasons why;
- Securing the lowest mortgage interest rates in history. Here is the challenge. As the stock market improves, the bond market goes down and mortgage interest rates start to inch back up. This past week we have seen mortgage interest rates rise by 5%, moving up to 3.75%.
- Bay Area home prices are expected to rise by 12% this year. The longer a buyer is unable to purchase a home, the more the home will cost them.
- A home buyers “wild card” for 2013 is still the unstable world economy that may impact mortgage interest rates either causing them to go up or down. That is why it is called a “wild card”.
If you are either a home seller or a home buyer, contact us today. For sellers we will provide you with a free price opinion of your home. For buyers, we will outline the strategies we implement that allow you to “win” when in ‘multiple offer’ situations. Let us know your what you are experiencing today as home sellers and buyers – just leave a comment. Until next time…Jim Walberg