As the year winds down, East Bay home prices are entering a seasonally favorable period for buyers. Historically, home prices in this region tend to be at their lowest toward the end and beginning of each year. The data shows that real estate transactions closing in January are typically at the year’s lowest prices, creating a unique window of opportunity for potential homebuyers. Although the East Bay market saw a bump in activity in October due to the Federal Reserve’s announcement of lower rates, home prices are expected to decline once more as rising mortgage rates and the slow holiday season temper the market.
Rising Mortgage Interest Rates
While the Federal Reserve’s rate cuts initially boosted buyer enthusiasm, recent shifts suggest mortgage rates are starting to climb once again. It’s essential to note that the Fed’s policies do not directly control mortgage rates. Instead, mortgage interest is shaped by factors like demand, the costs for lenders, and competition among lenders. When the Fed signaled lower rates, it spurred a surge of buyers in the East Bay, which, in turn, increased demand for mortgages and slightly elevated rates again (Figure #1). This higher demand and subsequent rate increases usually ease as the market adjusts, but for now, these conditions are likely to slow the East Bay real estate market, leading to softer home prices.
The rise in rates impacts buying power, potentially slowing demand, which typically translates into downward pressure on home prices. For buyers, this can be an ideal time to make a purchase, even with slightly elevated interest rates. A home bought at a lower price now can be refinanced later, giving homeowners the chance to capitalize on both lower initial prices and potential future rate reductions.
East Bay Home Prices Expected to Drop Over the Next 3 Months
Looking ahead, East Bay home prices typically follow an annual cyclical trend. As shown in Figure #2, prices tend to reach their lowest points in October, November, and December. For buyers, this means the next three months could offer some of the best deals of the year. Given that the average closing period for a home is about 25 days, homes closing in January likely entered contract in December. Therefore, December is an ideal time for prospective buyers to search for properties and secure favorable prices before the spring market heats up.
The combination of higher interest rates and the holiday season slowdown suggests that East Bay home prices may see further declines through the end of the year. Buyers seeking to enter the market may find this is one of the best times to purchase, with the potential to refinance their mortgage in the future should interest rates decrease. If you’re considering buying a home, this season could be your window to find a great deal. Want to learn more about the market? Read this: https://www.ronmelvin.com/isitagoodideatobuyahouseinthebayareanow
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