The housing market, with all its complexities and nuances, continues to be a vibrant part of our economy. As we find ourselves in the heart of what is typically a robust spring market, buyer demand remains strikingly high. This resilience is a testament to the enduring appeal of home ownership and the solid financial investment it represents. The desire for personal space, upgrading to larger homes and the appeal of new locations are all factors contributing to this sustained demand.
Properties that are well-priced and possess a certain charm are not lingering long on the market. They are moving rapidly, often receiving multiple offers in a short span of time. This is a clear indicator that potential homebuyers are willing to compete for homes that truly stand out in terms of value and appeal. According to the California Association of Realtors, in March 2023, the median time on market for single family homes is 15 and 19 days in San Francisco and Los Angeles, respectively. That is down from 34 and 31 days just 2 months ago, their highest in three years. Homes are expected to move quickly in the upcoming busier spring and summer months.
On the flip side, many potential sellers remain on the sidelines, largely due to being locked into low interest rates on their existing mortgages. According to Bloomberg, about 65% of existing home mortgages were financed with a rate before 4%, whereas the current 30-year fixed-rate conventional mortgage averages 6.35%. There’s a reluctance to disrupt the status quo, given their lower purchasing power and a continued rise in home prices.
The general consensus among industry experts is that after the most recent Fed announcement, interest rates will continue to fall. Tightening credit at the regional bank level may be a larger deflationary factor than originally expected. This is promising news for both residential buyers and sellers. Lower rates will potentially encourage more sellers to enter the market, and buyers will find their purchasing power increased. As we move into the summer months, the market is expected to open up even more. We anticipate an increase in listings and an expansion of opportunities for buyers which will generate a wider array of choices and more room for negotiations, which can be beneficial for all parties involved.