Consultant Kitty Cole has some interesting thoughts on the slowing market that got me thinking: what exactly happens in a slowing market? I’ve re-purposed parts of her blog below and added my own thoughts on the market at this pace, as well as interest rates in terms of what somebody can buy.
So, is this market change normal or is the slowing a correction? Here are a few thoughts from Kitty’s blog to help you figure it out:
The market has begun to change, albeit slowly. A small segment of the market has slowed down in several Bay Area counties, including San Francisco. The indicators of a slowing market are that the number of active listings rise, the “Days on Market” increases and price reductions occur. You may also see more contingent offers (but fewer with no contingencies at all). My two cents: In Contra Costa County, we are in line with these indicators. The outer-lying areas such as Concord is where I am really seeing the price reductions and increased time on market. However, if the property is remodeled and priced right, there are still multiple offers, just not as many.
The buyer pool for your property has decreased in the last year because the interest rates have risen more than a full point. For every full percentage point they rise, the buyer’s purchasing power goes down by almost 10%. Buyers who could afford a home worth $1 million last year, can now afford $905,000. That alone will significantly impact the buyer pool.