It looks like the soft real estate market in Santa Clara County is poised to start gearing up again. At least that’s the way I see it playing out in the next few months. Driving my opinion is a mix of statistical and anecdotal data that reveals good inventory, matched with good demand, in a favorable pricing environment.
Buyers are ready to buy
February sales data shows an increase in sales activity. For Santa Clara County, unit sales, pending sales, inventory and average price are all up. Days on the market is shorter, which indicates buyers are more active. Anecdotally, several agents in my office who’ve represented buyers since last year say their clients have recently made offers to take advantage of more favorable pricing. This is evidence that buyers haven’t gone away. Many have just waited and are active now.
Buyers are more able to buy
Last year, mortgage interest rates steadily rose from April to November. In that time, the real estate market steadily declined since its peak levels in March. Going into 2019, it was widely presumed that more rate hikes were planned, and that real estate activity would be challenged as a result. This caused some industry observers to opine that there might be a widespread slowdown in the economy and perhaps even a recession as early as the end of the year.
More recently, there has been a change in interest rate predictions. The bias to raise rates has tapered significantly. Many economists have changed their prediction of 4 rate hikes in 2019 to 2. Recent remarks and language used by Jerome Powell, Chairman of the FMOC, indicate they are less likely to raise interest rates. These remarks have led some observers to go so far as to predict 0 rate hikes in 2019.
Buyers have reasons to buy
Mortgage interest rates are back to where they were last year when the market was at its peak. Average home prices are 12% less than a year ago and plenty of inventory should protect against runaway prices. I believe these factors, along with normal seasonal forces, will get buyers back out in stronger numbers. If this happens, it will be good for sellers who look to shorten the time their house stays on the market. This soft market needed some stabilizing elements and I think they’re now in place.