The Effects of Freezing
By Datta Khalsa, Broker
With the recent cold snaps, and Tahoe already opening its ski season people are speculating that we might see another White Christmas up at the Summit this year. And some have suggested we might even see snow at the beach for the first time in decades.
That said, this is a real estate column, so my focus is on a different type of freezing in our county—a freeze that is affecting the local housing market.
People who were considering a move have found themselves frozen in their current homes due to higher interest rates which in some cases have doubled. Instead they are deciding it makes more sense at least in the short run to keep their current property with the lower rates on their existing loans compared to the loan they would get today on a new property.
With tech stocks still hovering at close to annual lows, we are also seeing fewer Buyers willing to pay all cash until their portfolio balances regain some of their losses of the past several months. As a result of all this freezing, we are seeing a market which is constrained on both sides where, in spite of fewer sales, it’s not showing a drop in values.
On the contrary, values are up.
The telltale Unsold Inventory Index is running at under a 4-month supply which, while up from its historic lows, still indicates a Seller’s market. This is borne out by the current Median Price for the 91 homes which closed escrow in the past 30 days, which at $1,291,000 is $70,500 higher than it was in September, with the value ratio running at $833 per SF.
As a result, homes countywide are selling at a relatively robust Average of 35 Days on Market, up only by 4 days since September, with 18.7% of them selling at List Price and overbids occurring 34.1% of the time.
Another interesting byproduct of people holding off on selling is an increase in rental inventory, where we are seeing more available properties and slightly softening rents. And in the process of helping many of these former Sellers and Buyers enter the rental market, our property management division has recently crossed the milestone of managing over 200 doors.
With interest rates also starting to soften, and given the current constraints we are seeing, prices in our County could feasibly continue to stay around current levels or even continue their slight upward trend.
So bundle up and enjoy the holidays, because it would appear for the time being that the bubble that many were fearing may have turned out to be a snow globe. And perhaps by next Summer we may see a return to a market with a little more flow.