North San Francisco Bay Area Residential Real Estate Markets Respond to Soaring Interest Rates

U.S. economic conditions are shutting the door on North Bay’s hot residential real estate market, with rising interest rates contributing to the region’s double-digit percentage decline in home sales in May, according to the California Association of Realtors.

And that may just be the start of a changing real estate market, thanks in part to interest rates that have doubled since the start of the year.

“The industry was caught off guard by this, as the entire mortgage industry and most economists expected mortgage rates to remain in the 3% range throughout this year,” he said. said Nevin Miller, president and CEO of San Rafael-based Pinnacle Loans, which serves Marin, Sonoma, Napa and Solano counties, as well as Southern California. “For them to go from 3% to 6% is a shock to the market.”

The current market still favors sellers, he noted, but that doesn’t mean they aren’t reacting, even with historically low stocks.

“Sellers who now have a ton of equity because homes have appreciated so much are rushing to put their homes on the market before the market changes, which they are doing now,” Miller said.

In North Bay, year-over-year property sales in May were down in several counties, according to the agents’ association. Sonoma County home sales fell 22.8% to 385 homes sold; Napa County 12.1% for 102 households; and Marin County, 10.1% in 178 homes, CAR reported. Sales in Solano County, however, rose 5.8% to 328 homes sold in May.

This came as no surprise to CAR Deputy Chief Economist Oscar Wei, who noted that Solano is the most affordable county in the Bay Area and North Bay.

Insights and Cash

In the Sonoma Valley, while major bidding on homes hasn’t been unusual, with three-quarters of cash bids, the buying spree has reached traditionally more affordable areas of the county, Duane Margreiter said. , Sales Director of Century 21 NorthBay. Alliance in Sonoma. One of his properties was a $1 million house in Windsor, where bidding had already reached $25,000 more than asking, and that property sold for $75,000 more.

“We are seeing a shift in the market,” Margreiter said. “Buyers have a different perspective. They realize they don’t need to bid on the first thing they see.

While rising interest rates should initially depress prices for first-time home buyers, overall it will likely lead to a shift to a more balanced market, rather than a crash like from 2005 to 2012, when the Great Recession had a wave of foreclosures. , said Margreiter.

Patricia Oxman, a 30-year real estate veteran and top producer for Golden Gate Sotheby’s International Realty, said Marin County market data she tracks suggests entry-level local buyers have already pulled back this year, but higher priced homes continue to sell.

Sales of single-family homes in Marin County are down 17%, with 1,120 changes of hands so far this year, compared to 1,346 at the same time last year. Sales of homes under $1 million fell to 72 from 145 a year ago. Sales of mid-range homes ($2 million to $4 million) rose to 48% of all sales from 54% last year, while high-end homes (more than $4 million dollars) now represent 46% of sales, compared to 34% per year. one year ago.

“The luxury market is still strong as buyers have withdrawn cash in anticipation of the purchase, and 28% of our sales are all cash,” Oxman said.

Gerrett Snedaker, broker and partner at Better Homes and Gardens Real Estate-Wine Country Group, said he’s seen “a decrease in multiple offers and home sales exceeding asking prices.” The company has multiple offices in Napa, Sonoma and Mendocino counties.

In May, 16% of homes in the three counties sold at a discount, and by the end of June, that proportion was 19%, in line with the previous year’s level, according to Snedaker. And the share of homes selling above asking price was 55% in May, 44% through the end of June and 52% a year earlier.

Market influences

Changing market conditions have already started to reduce listing prices.

Just over 9% of listings in Sonoma County saw a price drop in May, compared to 6.9% in April and 4.9% in March, Zillow reported. About the same percentage of sellers lowered their prices in neighboring Napa County, unlike April’s reductions of 7.1% and 6.3% in March. To the west, in Marin County, 6.8% of listings were lowered, down from 5.1% in April and 4.9% in March.

Much of this trend is due to “the rise in interest rates following the incredible price appreciation of the past few years,” Zillow spokesman Matt Kreamer said, adding, “People are overpriced”.

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