The Fed just raised rates once again with a promise of more to come. Even safe assets are being hit hard. Michael Murphy, the author of The New World Investor blog, says, "The 10-year US Treasury bond is on pace for its worst year in history with a loss of 19.5%....This is THE risk-off asset. Never in history, in an extreme draw down for stocks, have Treasurys, THE risk-off asset, gone down more than stocks-until now." Stocks, bonds and Cryptocurrencies are all down. I may not have a crystal ball when it comes to the housing market, but, to paraphrase the incomparable Betty Davis, fasten your seat belts, it's going to be a bumpy ride.
Elk Grove Market Statistics for October
Our Elk Grove market does not look too bad when you compare year over year numbers. I will point out that this is the first time that the median price has gone negative in a very long time. I think it is more appropriate to measure the market from earlier this year when the Fed started raising rates.
Our average price hit $703,000 in April. In October, we are $71,857 down. Housing prices have fallen, on average, 1.7% per month over that period. I do not see the trend changing any time soon with our inventory of homes up substantially to a 2.77 month supply and days on market up 122%. Homes that are available now have been on the market much longer at 53 days. I imagine the trend could reverse itself, but I would not bet on it.
"The incoming data since our last meeting suggest the terminal rate of Fed Funds will be higher than previously expected, and we will stay the course until the job is done...It is very premature to be thinking about a pause in our interest rate hiking cycle."
There are a lot more choices on the market right now and you can afford to be more patient looking for your perfect home. You also have the ability to negotiate more than you have in the past. You can negotiate on the price of the home, maybe request a few more things for the seller to repair prior to close or ask for seller concessions. Seller concessions are just some of the buyer's costs that the seller agrees to pay at the close of escrow. It can be for many items, but generally I have seen buyers ask for the seller to pay some of the lender costs. It was a very prevalent request during the Great Recession. I have started to see buyers ask sellers for a mortgage buy-down. It is used to get a better interest rate on their loan.
It is a good time for buyers in a lot of ways, but there is always competition so do your best to be fair. If the seller has priced the home correctly, there is sure to be others that you will be competing with and to get your offer accepted, creativity could help. If you have to ask for a large credit, maybe bump the fair asking price up some. Your savings from a well used seller credit will be worth the small bump in price and the seller will be much more likely to accept your offer.
The Elk Grove market has shifted decisively. I do share your pain. I have just put one of my properties on the market and know first hand what the market is like. Make sure the home presents itself well, maybe hire a Stager to help. Many Stagers will come to your house for a modest fee and tell you what needs to be done using what you already have.
Also make sure you price the home appropriately. Look as recent sales in your neighborhood. Are they a few months old? Maybe you will have to discount a bit from those recent sales to account for our 1.7% per month gradual decline in home prices. Remember, if you price your home too high, you may even have to discount further next month.
More than likely, you will have to negotiate some too. Be prepared. We had a pest inspection for the property I just listed and did all of the work prior to listing it. Potential buyers would have most likely asked for those repairs to be done anyway and I was able to get the work done on my schedule with the contractors I wanted to use.
The housing market has changed drastically in the Elk Grove area and it will continue to change. I am not 100% sure where our market is headed, but I think the indicators do show that we are in for a bumpy ride. Every market has challenges and every market offers opportunity. Keep your eyes open and participate when the time is right for you. If you have any questions about this market, give me a call. I would be happy to help.