Dear friends and clients,
2015 has seen consistently strong home sales statistics throughout the Bay Area real estate market.
However, since we’ve entered October, the market has practically frozen! Take a look at the chart (for Menlo Park) below showing how many months of inventory we have based on the current sales pace. As you can see, we now have an unusual imbalance between buyers and sellers – inventories are not any higher, the buyer’s just aren’t buying!
So what’s going on here? Why aren’t homes selling well like they typically do in the fall? Here are a few answers and theories based on some research and discussions with other area agents:
- It is a well-known fact that home sales drop off in the fall. February to June are traditionally the strongest months, with September to November being the second strongest period. However, this fall has not rebounded from the summer doldrums which is highly unusual. The current slowdown cannot be attributed to seasonality, something else must be influencing the housing market…
- The Fed didn’t raise rates (as they were expected to), so now buyers don’t feel the same urgency to BUY NOW than they might have if the fed had raised rates. Ok, this might have pulled some buyers out of the fall market but still doesn’t totally account for the current slowdown.
- Market uncertainly – sure, the stock market has been a little volatile/worrisome lately. Understandably, this will cause some individuals to decide that this may not be the best time to purchase a home. Furthermore, tech stocks have been pretty bumpy as well, with some pretty big names taking dives. The phrase “tech bubble about to burst” has been thrown around more and more frequently these days. However, the tech industry job market is still very strong. Without any actual evidence of a burst bubble, it’s unlikely that tech investors or workers would be pulling out of the housing market in such force as to affect home sales to this extent.
- Finally, there’s China – China has experienced a lot of economic turbulence recently. Over the past decade, the percentage of homes being sold to Chinese nationals has increased dramatically. Chinese nationals investing in real estate aside, many Bay area residents still have strong ties to China and may be financially or emotionally affected by the Chinese economic downturn. According to a recent study, 25 percent of homebuyers in Palo Alto had a connection to China. That’s a pretty big percentage of buyers who might be thinking twice about spending large amounts of cash right now.
So, in conclusion…
there isn’t really one clear answer to why homebuyers have disappeared this month. Seasonal trends, public policy, and economic uncertainty all seem to be playing a part, converging in such a way that we are now seeing the slowest October in many years. However, October is just one month- and it’s only half over! Time and time again we see that these patterns are cyclical, and that periods of stagnation are often followed by periods of strong activity. So, to the sellers out there – take heart! Better times are coming. And to the buyers – you have a great opportunity to buy a home without having to fight a multiple offer battle. Now is a great time to act! Get out there and find that perfect house that’s been eluding you for so long! Don’t wait too long, there is always a strong breeze which blows sometime between labor day and thanksgiving and I fully expect it to blow again very soon.