One very interesting phenomenon that we’ve seen play out over the past few months is that interest rates have largely returned to the levels that we saw prior to the Fed’s first rate cut in September. Unfortunately, this is not what the market at large was expecting to see. However, this suggests that the lending market is expecting the Fed to begin increasing rates again within the coming years. This could be due to a variety of reasons, but inflation is the most likely culprit for rate hikes, as it has remained rather stubborn since it first became an issue in 2022.
As we all know, inventory levels have been an issue post-COVID, across the entire country, with many areas not having nearly enough inventory to support buying demand. This, in turn, helped to push up the values of homes nationwide. However, we’re beginning to see inventory growth outstrip existing home sale growth, as in December, inventory grew by 16.16% on a year-over-year basis, whereas existing home sales grew by 9.28% year-over-year. We could see affordability begin to increase over the coming months.
Despite many buyers sitting on the sidelines, and waiting for lower rates, we’re still seeing the median sale price of homes increase. In both the months of November and December, the median sale price of a home in the United States was $404,400. This represents an increase in value of 6.03%, when compared to December 2023.
As many of us know, in addition to the Federal Funds Rate, the Fed also has control over its own balance sheet. Throughout the COVID crisis, the Fed ramped up its purchase of mortgage backed securities at a rate we haven’t seen since the Great Financial Crisis. However, the Fed has since been unwinding its holdings of MBS’s at a steady rate, since late 2022, which it continues to this day.
The Local Lowdown
Given the explosive growth in median sales prices that we saw during the beginning of 2024, one might expect that the market would give up some of these gains throughout the holiday months. However, the East Bay remains incredibly strong, with Alameda and Contra Costa Counties experiencing 2.27% and 1.95% year-over-year increases in single-family home median sales prices in January.
Inventories are one of the most important leading indicators of price trends, and we’re seeing quite the increase in inventories in the East Bay. In January, there was a 21.59% increase in the number of new single family home listings, and a 26.39% in active single family homes.
Although there is typically a slight divergence in the number of days on market between Alameda and Contra Costa Counties this time a year, the difference is seemingly more pronounced this year. Single family homes are sitting on the market for roughly 26% more days in Contra Costa County than Alameda County. However, the single family home market remains a very strong sellers’ market in both Alameda and Contra Costa Counties, with there being 1.3 and 1.5 months worth of supply on the market, respectively, far below the 3 months of supply needed for a balanced market.
As always, Arrive Real Estate Group remains committed to helping our clients achieve their current and future real estate goals. Our team of experienced professionals are happy to discuss the information we’ve shared in this newsletter. We welcome you to contact us with any questions about the current market or to request an evaluation of your home.
