Market Report: Spiking Interest Rates and Falling Buyer Confidence

focus on interest rates for home mortgages

Nationwide, home sales are slowing dramatically as rising rates push out would-be buyers. According to a National Housing Survey by Fannie Mae, only 16% of consumers think it’s a good time to buy a home, blaming rates rather than high prices. Meanwhile, potential sellers also may be hesitating, in no rush to give up lower mortgage rates they previously locked down.

Locally, we expect our market will march on despite rates – maybe at a slower pace than we're used to. The Bay Area’s historically low housing inventory ensures buyer demand will keep this market moving.

Here’s what you could expect this fall and winter as a home seller:

Would-be buyers sitting on the fence and pickier
Move-in ready homes in high demand
Conservative pricing strategies to entice more buyers
Fewer bids. You’ll still get them, but they won’t come by the dozen like we saw during the pandemic years.
Homes sitting on the market a few days longer

Meanwhile, buyers can expect:

No significant drop in interest rates
Continued competition for limited inventory
Your offer probably won’t be the only one, so don’t be surprised if your agent recommends you bid over the asking price.
Homeowners insurance – your ability to get it – could figure prominently in your ability to close escrow. Read our blog post about the California insurance crisis and get tips on how to improve your chances of getting insured.

If a slowdown does hit the local market during the next few months, it will come after a busy September 2023.

Homes sold faster year-over-year in September

The most recent sales data shows that detached single-family homes sold faster year-over-year in nearly every city we track. For example, the average home in...

San Leandro sold in 12 days, 61% faster than September 2022.
Concord sold in 14 days, 52% faster.
Martinez sold in 13 days, 50% faster.
Alameda sold in 22 days, 37% faster.
Berkeley sold in 19 days, 5% faster.

Lafayette was one of the exceptions. Homes there sold in 33 days on average, compared to 17 days during the previous September.

Homes sold for over the asking price in September

List prices continued to be more of a conversation starter than a hard-fast rule. Homes sold for over asking in nearly every city we track, including Berkeley, where homes sold for 22% over asking on average.

Why? We see two reasons:

Teaser pricing. Sellers are setting prices low enough to attract attention and multiple bidders.
Counter offers and bidding wars. Yep, it’s still a thing and will remain so as long as the inventory shortage exists.