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APRIL 2022
IN THIS ISSUE Interest Rates Soar Quarterly Market Trends March Market Activity Report Current Mortgage Rates Mortgage Interest Rates are Soaring Rates have suddenly risen much more rapidly than expected. But, relief in in sight. The blue line represents the actual National average interest rate for a 30-year fixed mortgage from Q1 2016 to Q2 2022. The orange line represents Freddie Mac's predictions for rates through Q4 2023. They predicted that rates in the current quarter would reach 3.6%, and that by Q4 2023, they would rise to 3.9%. As of April 12, the National average has already hit 4.88%! Why such a rapid increase? Inflation. This chart shows the Consumer Price Index from 1960 to now. You can see that inflation was much higher in the 1970s and early 1980s than it is today . That is when the federal reserve began taking steps to keep inflation low. And it worked. Since 2010, the Fed has kept inflation below 3 - until 2020. From pre-pandemic to now, inflation has risen from 1.5 to the number just released for March which is 8.5 - a new 40-year high. The question on everyone's mind is: when will it get better? Major drivers of the current high rates are oil, food and used car prices. Oil prices were the lowest in history during the early stages of the pandemic because people were not driving and not flying. So, the global supply was dramatically reduced to avoid the high cost of storage. Now that air travel is up by 71% and people are driving more, the lack of supply of crude oil has driven the price up. The price of crude has actually come down recently, but I'm sorry to say that there is a delay before we will see decreases in the price at the pump - perhaps late April or early May. Food prices have increased in part because Russia and Ukraine account for approximately 29% of global wheat exports and a lot of sunflower oil which is used in the production of many food products. Used car prices (up by around 40%) are so high because of supply chain disruption. With a low supply of semi-conductors, new car production is way down causing high demand for used cars. All of these prices - oil, food and used cars - are on their way down. Most economists agree that the CPI will be a bit better in April and May as many of these issues improve. As we return to normal spending trends, prices will come down and the Federal Reserve will allow interest rates to continue to rise but at a much slower pace. QUARTERLY MARKET TRENDS FIRST QUARTER SUMMARY The major takeaways from these Year-over-Year statistics are that Sales in the county were down 26% while New Listings were down by 36%. So, while both sales and listings were down, listings dropped more rapidly, which continued the trend of decreased inventory. Demand, however was still high as buyers scramble to get a home into escrow and lock down an interest rate before they go any higher. Because of this persistent supply/demand imbalance, the average number of days it took from listing to contract with all contingencies removed was 24, down from 39 days Q1 2021 and, on average they sold for 107% of the list price, compared with 103% Q1 2021. The supply/demand disparity also continued to put pressure on sales prices which were up, on average, from $1,519,000 Q1 2021 to $1,696,000 Q1 2022 - an increase of 12%. MARKET ACTIVITY REPORT Property Sales (Sold) There were 163 closed sales in March, 49.5% higher than the 109 sales in the previous month. Current Inventory (For Sale) The total number of homes available in March was 101. The current inventory is up 77.2% compared to the previous month. Property Under Contract (Pending) There was an increase of 25% in pended properties in March, with 180 properties versus 144 in the previous month. The Days on Market Shows a Downward Trend The average Days on Market (DOM) shows how many days the average property is on the market before in goes into escrow with all contingencies removed. The DOM for March 2022 was 19, down 17.4% from 23 days in the previous month. The Sold Price/Original List Price Ratio is Rising The Sold Price/Original List Price reveals the average amount that sellers are agreeing to come down from their original list price. The lower the ratio is below 100% the more a Buyer's market exists, while a ratio at or above 100% indicates more of a Seller's market. In March, the Sold Price/List Price ratio of 111% was up by 4.7% over the previous month. A comparatively lower Month's Supply of Inventory is more beneficial to Sellers while a higher supply is better for Buyers. Months Supply of Inventory based on Closed Sales The March 2022 Months Supply of Inventory based on Closed Sales was 0.6. This was up 19.1% compared to the previous month. March 2022 was clearly a Seller's market. The Absorption Rate measures the inverse of Month's Supply of Inventory and represents how much of the current active listings (as a percentage) are being absorbed each month. Absorption Rate based on Closed Sales The March 2022 Absorption Rate based on Closed Sales was 161.4%. This was down 15.6% compared to the previous month. The Average For Sale Price Shows a Downward Trend The Average For Sale Price in March was $4,226,000, down 24.2% from $5,576,000 in February. The Average Sold Price Shows a Slight Upward Trend The Average Sold Price in March was $2,115,000, up by 0.9% from $2,097,000 in February. The Average Sold Price per Square Foot is Showing an Upward Trend Since Median Sold Price and Average Sold Price can be impacted by the 'mix' of high or low end sales, the Average Sold Price per Square Foot is a more normalized indicator of the direction property values are headed. The March 2022 Average Sold Price per Square Foot of $1,002 was up 0.1% from $1,001 in February. CURRENT MORTGAGE INTEREST RATES as of April 11 SUMMARY The housing market continues to be at the effect of numerous global issues, chief of which are the pandemic, the war between Russia and Ukraine, disruption in the supply chain, and the cost of crude oil. These factors are in a constant state of flux which makes it difficult to predict the future. What we do know is that we continue to have a shortage of available homes for sale. Nationally, this is largely due to a dramatic decrease in new construction. The good news is that building permits and starts are both up. Unfortunately, that has not yet translated into more completed projects due to supply chain issues - many of the materials needed to complete construction are in short supply. The other primary reason for low inventory is the strength of buyer demand since the Federal Reserve lowered interest rates to fuel the economic recovery. And, even though rates are on the rise now, they are still extremely low. Despite all of the challenges, locally and globally, many industry experts are still bullish about the 2022 real estate market. The following are some very hopeful quotes. As always, I will continue to keep my fingers on the pulse of the real estate market and report back to you next month. In the meantime, enjoy the warmer weather and all of the many outdoor recreational opportunities the Bay Area and north have to offer. I welcome you to get in touch me with any of your real estate questions. And, if you know of anyone who is thinking of buying or selling a home, I would be happy to meet with them and give them the same caring, professional service I offer to all of my past clients. Want to change how you receive these emails? 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