The Spring season has started
out with a roar. Inventory levels have been at extremely low levels and Buyer
demand has been high. One component is certainly the usual Spring seasonality,
but we also believe that the rising interest rates are an even more critical
driver. The all powerful cash offer has now resurfaced with investors also
heavily active in the market place as well. Thus far the new administration
hasn’t dampened the Silicon Valley Buyers’ home buying spirit. Demand is especially high in the Single
Family Home category. Single Family Homes in the million-dollar mark have seen competition
levels from 15 to 20 offers. Buyers are
realizing that they cannot be picky and settling for smaller homes less than
1,000 square feet and even settling for 1 bathroom. Competition is fierce; if
you are a Buyer we suggest that you go with your most aggressive strategy and
do not underestimate the competition. Home prices are pushing up with every
sale on a weekly basis and many Buyers eventually find themselves priced out of
the market. The next category are homes in
the $1M to $2M bracket. Homes in this range have also been very aggressive
though with offers in the single digits typically occasionally breaking double
digits. Homes in the $2M and up price
points will vary by location, but typically with multiple offers as well. Week by week more inventory is coming onto
the market, so if you are a Seller get out soon before everyone else catches
on.
Rise in Move Up Sellers
We have seen a trend of
Sellers who are selling to purchase their next property as well. As with many
Sellers, their equity is in their homes, which requires a deeper dive into each
Sellers’ unique financial situations to derive a property strategy.
Macroeconomy
The Federal Reserve raised
interest rates by .25% and signaling another .5% increase this year. This will ultimately affect the interest
rates on mortgages in the long run. Interest rates are still at all time lows
and we are still seeing great interest rates still from our preferred lenders.
There will come an inflection point where higher interest rates will affect
affordability and ultimately home prices. This inflection point will not likely
be attained in 2017.
Technology Sector
Snapchat, Okta and Mulesoft led the way
this year with their Initial Public Offering (IPO). This will pave
the way for more IPO’s this year and next. The stock market has performed well
in 2017, helping technology workers procure their downpayments to buy homes. Some
Silicon Valley companies to watch for are Cloudera (Palo Alto) and Dropbox (San
Francisco) are possible candidates as well.
Looking Ahead
We expect inventory to peak
in the June/July timeframe. This year is unique in that it is possible that the
market may continue to be good for Sellers as the number of Buyers that are in
the market may still go unsatisfied through the summer months. It goes to be
seen how the inventory levels are for properties on the market.
In Summary
As a Buyer if your mindset is
anything other than aggressive, you may continue to lose multiple homes until
the market forces your hand, or you simply decide to put a hold on your home
search. By then prices have increased on
a weekly basis and often Buyers find themselves priced out. For Sellers, keep
in mind that you are not the only Seller monitoring the market. Many Sellers are gearing up to hit the market
so take advantage while you can.
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