Parents step back on selling now in the Bay Area; is that a smart move?
Oct 24, 2023By Pat Kapowich | Marketwise column for the Bay Area News Group and its flagships The Mercury News and East Bay Times
Published: October 21, 2022
Question: My parents planned to sell their Bay Area home. Their plans have changed. Their friends and neighbors told them to wait. Their seller’s agent agrees. They blame high interest rates. The advice is to wait until spring. “The interest rates will come down” is what they hear. It is shocking. My parents bought an out-of-state condominium near me. They need to relocate. I cannot help them long distance. Your column indicates a robust Bay Area seller’s market. You also claim a housing shortage. Is it necessary to sit out the home-selling market until spring?
Answer: No, it is not. The San Francisco Bay Area counties have enjoyed a seller’s market despite rising interest rates. Today, on a Realtor video call, the regional sales manager for a national bank claimed the interest rates are the highest of his career, yet “buyer demand remains high.” Robust home sales are proof.
On Tuesday, on a Realtor video call, a manager at the National Association of Realtors showed a slide titled “Housing Supply — Availability and Affordability,” with the first bullet of “Estimate underbuilt between 5.5-6.8 million units over the last 20 years.” Underbuilding is a familiar concept. Since 2020, two California Association of Realtors presidents and their chief economist have repeatedly claimed we have been underbuilding in California for decades. As a result, Bay Area home sales remain strong. See statistics from the California Association of Realtors for September 2023:
Alameda County:
17 days on the market before a sale
74% of homebuyers paid over the list price
Contra Costa County:
18 days on the market before a sale
59% of homebuyers paid over the list price
Marin County:
33 days on the market before a sale
51% of homebuyers paid over the list price
Napa County:
73 days on the market before a sale
43% of homebuyers paid over the list price
San Francisco County:
50 days on the market before a sale
69% of homebuyers paid over the list price
Santa Clara County:
24 days on the market before a sale
70% of homebuyers paid over the list price
San Mateo County:
25 days on the market before a sale
58% of homebuyers paid over the list price
Solano County:
33 days on the market before a sale
45% of homebuyers paid over the list price
Sonoma County:
45 days on the market before a sale
40% of homebuyers paid over the list price
I no longer must travel to hear industry leaders speak. Since April 2020, video calls and podcasts have exploded exponentially— industry leaders share current statistics daily. Real estate economists claim cash sales account for more than one-fifth of home sales. A national home loan expert recently claimed the interest rate buydowns — aka buyer credit, seller concession, prepaid discount points (see examples) — represent over 20% of home sales.
Here is an example of how home sellers help homebuyers buy down the interest rate:
3-2-1 Buydown:
1. This buydown option spans three years.
2. In the first year, the interest rate is reduced by 3% from the standard rate.
3. In the second year, the rate is reduced by 2%.
4. In the third year, the rate is reduced by 1%.
5. After the third year, the rate remains at the standard rate for the remaining loan term.
2-1 Buydown:
1. This option covers two years.
2. In the first year, the interest rate is reduced by 2%.
3. In the second year, the rate is reduced by 1%.
4. After the second year, the rate remains at the standard rate for the remaining loan term.
1-0 Buydown:
1. The 1-0 buydown lasts for only the first year.
2. In the first year, the interest rate is reduced by 1%.
3. After the first year, the rate remains at the standard rate for the remaining loan term.
Tell your parents it is time to sell and move. In today’s Bay Area home-seller environment, waiting for spring is for gardening.
Questions? Or are you or someone you know navigating life’s transitions? Let lauded negotiator Pat Kapowich make your next move easy. Visit Kapowich’s website for free area housing data, insights and trends. Or put his artful blend of specialized credentials, decades of experience and endorsed skill set to work for you. Kapowich instills confidence when buying, selling, relocating or resizing homes. Do not just make a move — make the best move. Contact him today, Realtor Pat Kapowich, a career-long consumer-protection advocate.
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