After years of low inventory and battling against multiple offers going way over list price, Silicon Valley homebuyers are getting frustrated. Known as “buyer fatigue”, this phenomenon occurs when disillusioned potential purchasers are unable to afford what they want in a home thanks to fierce competition and skyrocketing sale prices. Some also are concerned about rising mortgage interest rates while others have taken a home buying hiatus in hopes there will be a correction.
Buyer’s fatigue could be yet another indicator that residential real estate is entering a turn lane. After years of a robust sellers market, there has been anticipation that the housing market is headed for a shift in favor of buyers. Some say this occurrence is simply the typical summer doldrums but others believe this is indeed a move toward a more neutral market, specifically in the most affordable housing segment. But, as CoreLogic analyst Andrew LePage reminds us, “One month doesn’t make a trend; so we’ll just have to see how things play out over the next few months.”
Buyer fatigue has particularly impacted the housing market in the $1 million and under price range. Sales at this price point were down 28% in May, falling at the fastest rate in two years. Sales of homes at this value have declined 50% declined in Santa Clara and San Mateo Counties since this same time last year, while properties above $1 million and high-end homes are holding their value but are taking longer to sell.
The number of Bay Area homes sold in June 2018 were down 13% from June 2017. Home prices are forecasted to increase 2.2% this month, a drop from the 5% to 7% price increase we’ve experienced since January 2015.
Many unsuccessful homebuyers are taking a breather from the market to regroup. Now much more sensitive to price, this group of potential buyers are continuing to attend open houses yet are less inclined to make an offer and if they do, it tends to be on lower valued properties.
It is not only local would-be homebuyers who’ve taken a step back. The strength of the US dollar has resulted in less international competition, deterring some buyers from Europe, China, and Canada.
All of this could create an opportunity for buyers who’ve been sitting on the sidelines in anticipation of a shift or for those who can push through their frustration and fatigue. Get more insights on the Bay Area housing market from Pacific Union Chief Economist, Selma Hepp. We also invite you to reach out to Dawn and the Team to discuss how you might be able to take advantage of this Silicon Valley slump.