BHAUS EIGHT June 2022 Newsletter

Hello community,

Summer solstice is around the corner, happening on June 21st. It will be the longest day of the year, marking the start of summer 2022 (astronomically speaking)! Graduations are happening all around us, and temperatures are heating up.

This month we have great information below regarding the SouthBay real estate market, economy and mortgage news, and what the shifts in the market mean for buyers and sellers.

SouthBay Real Estate.

Overall the Southbay market continued with strong May selling. Across all cities, average home prices saw an 8% increase vs last month and 15% increase vs last year. Homes are staying a little longer on the market, as we saw an increase in DOM vs last month, and a reduction in SOLD homes vs last year and last month.

New listings did get another slight 3% lift vs last month, continuing a trend of a better supply/demand dynamic we have been experiencing in the last couple of months, which will continue giving buyers more options and negotiation power relative to just a few months ago.

Home Stats by City.

Below are the snapshots of average home prices, # Sold listings, DOM, # New listings by city, inclusive of all types of properties (ie: Single Family Residences, condos, townhomes) compared to April of last year.

Economy & Mortgage News.

According to C.A.R. research, the housing market is continuing to shift as mortgage rates near decades-high. While home prices are still breaking records and more inventory is coming into the market (the Southbay had a 3% increase in new listings vs last month), the closed sales are slowing down. The good news is that analysts see signs that the mortgage rates have seen their highest and should be leveling off soon.

While April saw 30-year mortgage rates surpass 5%, they have slightly decreased now 2 weeks in a row. In the last weeks of May, rates for a 30-year conforming loan hovered around 5.33%, dropping from 5.49% a couple of weeks prior. The higher rates have caused the applications for a mortgage to purchase a home decrease by 16% vs a year ago, and down 66% for refinances (according to a CNBC).

The increase in mortgage rates is definitely holding some buyers off, however, the rates are not the only ones. We believe buyers are not only being held off by the higher rates, but also with anticipation that home prices may see a drop as the new rates level off.

Investor Corner.

As interest rates increase, affordability remains a big concern for buyers in the last few weeks. Still, there are many sellers who are looking to sell and move up into a larger home, or possibly relocate due to the flexibility of remote work.

In other words, transactions are and will still occur because we still see a high demand in the residential real estate market with relatively low supply, however, what’s going to make a difference is the type of home being sold - whether it’s an entry-level home, as well as whether it’s an updated property vs. a fixer.

Affordability will hit the first-time buyers more abruptly, as these buyers are more sensitive to the rises in rates. According to CNBC, affordability won’t be as detrimental to those borrowers looking in the higher end of the market, or those trading their home for a slightly more expensive/bigger home (the would be seller/buyer has built a lot of equity in the last few years, even with a slight drop in prices, this segment will be cashing in at the sale of their current home). While many buyers are now looking for a fixer-upper to update themselves, those homes that are turn-key with smart details and use of space will be the ones selling faster.

Also, for our investor/developer community, it is noteworthy to say that development of medium density housing has been low in the past couple of years, according to C.A.R. research. This area may be a good gap to fill, especially given California’s housing shortage. With this shortage, government organizations have many programs that investors can take advantage of for borrowing funds, if these funds are to be used for multi-family and low-income housing. These medium density housing (such as 2-4 unit construction) also offer a market for those who want home ownership but are kept at bay due to the single-family home prices.

For details or references regarding organizations that can help with funds for development of multi-family housing/low-income housing, please don’t hesitate to reach out to the BHAUS team so we can get you in contact with someone who is able to assist.

Contact your BHAUS EIGHT team with any comments or questions!

To subscribe to our weekly emails of investor opportunities and our digital newsletter, please email Sonia directly at Sonia@bhauseight.com

From BHAUS to yours.