Buyers May Have Window of Opportunity with Decline in Mortgage Rates

There’s been much doom and gloom written about the housing market, but Realtors are questioning whether its future is really that grim. Last week, Dave Walsh,

2021 president of the California Association of Realtors and vice president and manager of the Compass Los Altos and San Jose offices, told members of the Silicon Valley Association of Realtors that he was all set to talk about a negative market, then over the weekend he learned from agents that open houses were jam packed with potential buyers, even in the midst of the torrential downpour that hit the area. Not just that Walsh also learned that many homes are receiving multiple offers.

“So all bets are off,” said Walsh. “We still could see a frenzy around these interest rates. They’re not 3%, but they aren’t 7% either.”

In fact, mortgage rates fell further last week to the lowest level since September 2022, according to Freddie Mac. The latter’s primary mortgage market survey found the average rate for a 30-year fixed-rate mortgage fell to 6.15% for the week ending Jan. 19. This was a decrease from the previous week when it averaged 6.33%, and well below the peak of 7%.

Walsh described 2022 as a “hangover from the overexcitement of 2021.” He said home sales fell 47% from January to November when mortgage interest rates began rising. Compared to fourth-quarter 2021, the median sales price in Santa Clara County fell 6% in the fourth quarter of 2022, the quarter’s sales volume dropped 45%, and area listings were down

96%. Sales of homes in the $3 million price point dropped 55%.

Recent stories from the trenches of multiple offers and $45,000 to as high as $150,000 over asking for singlefamily homes and even some condominiums/ townhouses, could signal a boost in buyer sentiment. With monthly mortgage payments now down from their peak, Walsh surmised buyers may be realizing this could be a window of opportunity.

Sellers could be deciding it might be a good time to sell, too. Walsh indicated in Santa Clara County the new year has started with higher inventory. In the first two weeks of 2023, the county had 930 active listings, up 124 from two weeks before. New sales are slowly trending upward. The county had 105 new sales this week, up from 60 two weeks ago. The rise in sales could be rate driven.

Buyers waiting in the sidelines need to make a mental decision, said Walsh. “The truth is purchasing a home is a wealth creation. Homes purchased 10 years ago have experienced significant price appreciation.

To Realtors, Walsh said, “We need to lead this train. Think positive. These are conversations you need to have with your favorite affiliate lender. Work on open houses. There are so many opportunities. There are buyers everywhere.”

The declining rates will create more opportunities for homebuyers, but the limited supply of homes remains a big concern.”it appears we’re heading in the right direction,” said Walsh.”the question is, are we going to have enough inventory? If inventory is below 1,000 homes for sale, it will tell us the direction of the marketplace. I have yet to see a lot of inventory.”

Walsh said home building is down for many reasons. There’s the drought. Builders cannot build housing with no water. There are NIMBY (Not In My Back Yard) issues and lots of market uncertainty. Walsh urged Realtors to actively support housing by attending city council and planning commission meetings.

“The decisions about housing are made at these meetings. Without your voice, the only people there are those who don’t want it,” Walsh told members.