Are dropping home sales and prices around the nation cause for concern?

A:

The U.S. housing market may be beginning to show signs of a slow down, but overall, it still remains an active market.

In many areas, particularly in the Bay Area, sellers are still receiving multiple offers and buyers are continuing to pay above the list price. In some cases where homes were receiving five or more offers, we are now seeing homes receiving two or three offers.

Even though we are experiencing some home price corrections and homes are staying on the market a little longer, inventory is still very constrained and demand continues to be strong. Typically, after the Labor Day holiday we will begin to see more homes come on the market, and then a slow down right before the holidays.

We have experienced a long run of housing price appreciation that we have not seen before, and, at some point, this is not sustainable. This certainly does not indicate prices are going to decline significantly. Most economists agree we are not in a housing bubble; however, we will see a plateauing of housing prices.

The Bay Area real estate market is so unique that it is hard to compare it to the rest of the nation. We do not see a dramatic shift in demand or pricing; however, we are experiencing a transition in the marketplace.

A:

Conflicting news reports about the real estate “market” are concerning because they gloss over the fact that the housing market is very nuanced, as each property is unique. Folks can lose sight that buying a home not only serves the very basic purpose of shelter, but is also the main way folks can build wealth.

Some may sit on the sidelines thinking prices may decline more (which isn’t a given, especially in the Bay Area), only to miss out on a perfectly great home that won’t be back on the market for 10 years. They may be unaware that monthly mortgage payments are the same now as they would have been when rates were lower, because prices have equalized somewhat to meet changed mortgage affordability.

We will often remind our buyers that there are mortgages that allow you to buy a property now and, when rates moderate again, offer the option of refinancing later. But you won’t ever have that option (and the deductions you can take) if you don’t own the property in the first place.