Buying Power

No doubt the Real Estate Market is low on

inventory and high on Buyer demand.

“Our Real Estate market is like our weather,” said long-time Realtor, Steve. “In a drought and on fire.”

True, the North State market has been in a housing inventory drought for years. And it’s been a hot market, to the point of being on fire. The result is a lot of price increase and a lot of frustrated Buyers. When an attractive property

comes on the market, whether because of its location, condition, amenities, price, or the fact that a new listing even exists, it almost always sells above the asking price. For the Buyers competing in a multiple-offer bidding war, the only question is ”How high do we have to jump this time?” Somebody jumps high enough, and the rest are left frustrated. “We were already low on inventory before the Camp Fire,” said Steve. “Then, overnight our population went up by 20,000 because Paradise was obliterated. 14,000 houses burned down, and all those people buying houses here means a lot of inventory gone. Fast.” You hear people talking about a coming slow-down in the market. One of our Realtors sent out a group email to his colleagues in the Real Estate company:

“Hey fellow Realtors, I’ve had clients recently who have decided against purchasing now because they’ve been told by ‘Realtors and other professionals’ that prices will drop or adjust in their favor. Is there any tangible information out there that you’d share to dispute or confirm this?” “Wishful thinking,” says Steve. “We have a long way to go before we have enough houses to sell the flood of Buyers out there.”

Another Agent, A.B., sent back an email response with a few articles attached, that said nationwide, inventory has increased slightly, and prices aren’t going up as fast as they have been over the last couple of years.

“Well, sure,” said Steve, “but that’s like going from 110 miles per hour to 90 miles per hour.

That’s not exactly a drop in Buyers’ favor.”

Big Jim, our local Finance expert, addressed the question at our meeting on Tuesday.

“Real Estate markets are local,” said Jim. “Every local market is unique. Ours is still feeling the effects of the Camp Fire and the Bear Fire that caused a huge housing shortage, for both sales and rentals.”

Somebody else brought up the inland migration of people from the coast who are moving into the North State for quality of life and lower Real

Estate prices.

“Our prices keep going up, making our local Buyers crazy,” they said, “but our prices are tiny compared to the places the migratory Buyers are leaving.”

Jim said there are other factors at work that assure a strong Buyer-demand market.

“For one thing,” he said, “The Personal Savings Rate in the U.S. is the highest in our history. People have money saved, and they can afford to buy more expensive homes.” “Another thing is that our interest rates are the lowest in our history,” said Jim. “That gives people buying power.” In other words, a lower monthly mortgage payment gives a Buyer the power to buy in a higher price range.

“Here’s the thing,” said Jim. “If interest rates go up just 1%, a Buyer’s price range goes down 12%.”

So, if a Buyer decides to wait for prices to go down, it’s very possible that interest rates would also go up, leaving them with the same or higher monthly mortgage payment.

“All indications are that housing prices in our local market aren’t coming down any time soon,

anyway,” said Jim.

Like Steve says, for a Buyer to count on a price drop in housing in the North State, may be wishful thinking.

Doug Love is Sales Manager at Century 21 in Chico and would love to hear from you. Call or text 530-680-0817. Email dougwlove@gmail.com.

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