By Joedy Michael
Special to the Express
This week let’s talk a bit about home values. First, the past few weeks have shown more evidence of an economy that continues to slow. We’ve added more jobs but experienced the slowest pace of growth in the past two years. Construction jobs remained relatively flat and single-family construction continued trending down.
The 30-year Fixed Rate Mortgage dropped by the largest amount (negative .5 percent) in the past 14 years, yet mortgage applications remain depressed and continue to decline. Lastly, the Federal Open Market Committee approved its fourth 75 basis-point rate hike as it continues its battle with inflation but did indicate it might be slowing the pace of the rate hikes by their next meeting.
November is typically a slow month in real estate as people have either settled into their homes for the holidays or have put their house hunting/selling project on the back burner so they can focus on the holidays.
This year is no exception, but what’s alarming is the pace of our inventory decline. In Winters, in the last three years, our “for sale” inventory went down 68 percent, from 50 listings in October 2019, to 16 in October 2022. Winters isn’t known for its high turnover of housing, but this inventory, coupled with historically low-interest rates up until the middle of 2022, put a lot of upward pressure on home values. The average price per square foot between 2019 and 2022 went up 22 percent and the median price sold went up 31 percent during that period.
Now, while higher interest rates may diminish purchase power, interest rates alone will not impact home values. After all, it only takes one buyer to sell a house.
It is the combination of slowing demand —which higher interest rates can affect — and increasing inventory that will influence the trajectory of home values. In its 2023 California Housing Market Forecast report, the California Association of Realtors predicts a 7.2 percent drop in existing single-family home sales in 2023. Fewer homes may hit the market and until we have a surge of inventory, supply will remain low, putting pressure on values.
There are some forecasts for California that appear to show the median home price may have a slight decline next year. I predict with such low inventory in Winters and Yolo County in general, we are more likely to see a plateau than a significant drop in home values.
My advice is to take advantage of the settling prices and lower competition that we see right now. Get into homeownership when you can, trade up for that house if it’s a better fit for your family, invest in that rental opportunity, put your real estate agent to work for you, and don’t wait for some major market shift. As of right now, there isn’t one in sight.
— Reach Realtor Joedy Michael at Joedy.Michael@norcalgold.com, or 530-545-3698.