Home Truths is one in a sequence, delivered to you by Red Oak Realty.
2021 was a record-breaker of a yr for East Bay actual property: Berkeley properties reached an all-time excessive median value of $1,607,500, 14% greater than the yr prior. Oakland properties broke their value report by reaching $1,050,000, 16% greater than the earlier yr.
Though the market calmed within the second half of 2021, at first of 2022 we’re already seeing indicators of the identical intensely aggressive market. The pandemic will not be as a lot of a driving pressure because it was; as a substitute, we imagine there are three most important elements resulting in what might be a extremely energetic 2022. Folks seeking to purchase or promote this yr ought to pay attention to these forces and use them to their benefit.
Purchaser demand is extremely sturdy
Over the previous 4 weeks, Purple Oak properties obtained a median of six gives every, the best we’ve seen in over a yr. Gives got here in at a median of 27% over checklist value, the best we’ve ever recorded. And 21% of properties obtained gives of not less than $500K over asking, 15 proportion factors greater than the identical time final yr.
Demand is being pushed by the Bay Space’s low unemployment charge of three% and report wage progress, which was monitoring at an all-time excessive of 12% in December. These forces maintain consumers in search of properties regardless of record-high costs within the Inside East Bay.
The Inside East Bay — from West Contra Costa via San Leandro on the western facet of the Caldecott — stays one of the vital enticing locations for folks seeking to depart San Francisco. Along with the entire way of life and cultural points of interest, it’s nonetheless comparatively cheap to purchase right here. The median value of a 3-bedroom Berkeley single-family residence could appear excessive at $1,600,000, nevertheless it’s comparatively low in comparison with $1,775,000 in San Francisco or $2,315,000 in San Carlos.
Demand normally spikes within the first quarter of every yr: that’s as a result of consumers are prepared to purchase however there’s a minimal provide as sellers are nonetheless making ready their properties for the spring market. If consumers can accomplish that, they need to stay affected person and know that extra stock is coming within the subsequent few months.
Final yr’s provide bump is gone
In 2021, for the primary time in a few years, the variety of properties on the market truly elevated 8%. This was pushed by the pandemic and its “great reshuffling”: consumers moved out of San Francisco, and Alameda County became their No. 1 destination. On the identical time, most sellers moved out of the East Bay: we discovered that solely 44% of Purple Oak sellers stayed within the East Bay, with the bulk shifting elsewhere in Northern California or to a different western state.
However provide is as soon as once more low, and there’s merely not sufficient stock to satisfy demand. However, for folks planning on promoting this yr, restricted provide isn’t any assure of success. As costs enhance, consumers’ expectations are on the rise, too: they need move-in-ready, lovely properties which are well worth the excessive value that they’re able to pay. For this reason Purple Oak launched Enhance, a service that permits house owners to enhance a property on the market with out paying earlier than shut of escrow. All the enchancment and staging work is finished by licensed professionals. Properties have thrived below this program, promoting additional over asking than the market, with extra gives and fewer time available on the market. Click here when you’ve got questions.
Mortgage charges are rising
Though there’s numerous speak about all-cash offers, Purple Oak has discovered that greater than 85% of transactions use a mortgage. Because of this, most consumers are affected by adjustments in mortgage charges. For this reason it’s vital to notice that the Federal Reserve has implied it’s going to increase interest rates two-to-three times this year, and because of this, mortgage charges have already began to rise, leaping to 4% in mid-February and exceeding some pundits’ expectations for all the yr. Mixed with excessive inflation charges, which reached 7.5% in January, these elements have already begun to drive down consumers’ buying energy.
For consumers counting on low rates of interest to afford the excessive price of an East Bay residence, these will increase may push them out of the market. That’s why many are dashing to purchase now, earlier than charges rise even additional. This may be a key issue to the excessive stage of competitors that the market is at present experiencing.
Mortgage charges are nonetheless relatively low, but when they rise considerably over the course of the yr, this might have a dampening impact on gross sales and costs.
Taking all of those elements into consideration, consumers and sellers ought to attempt to keep away from making selections which are pushed by emotion or short-term targets. By maintaining long-term targets as the main target, the excessive value that consumers pay in the present day will probably pay out over time: Inside East Bay costs have risen yearly (besides three) over the previous 24 years. Barring main unexpected forces, they’re more likely to proceed to rise.
Home Truths is written and sponsored by Red Oak Realty, the most important impartial actual property dealer within the East Bay, serving the neighborhood since 1976. Learn more in this series. In case you are keen on studying extra concerning the native actual property market or are contemplating shopping for or promoting a house, contact Purple Oak at [email protected], 510-250 8780.
