There are encouraging signs that the Bay Area’s housing market is finally awakening from its long winter slumber. Spring is traditionally when sales perk up as homeowners try to sell in time for a summer move, and buyers get serious about finding that perfect home. But this year we’re seeing strong indications of an early spring selling season, which could bode well for a housing market recovery.
Many of our markets are seeing increasing sales activity compared to a year ago, with open escrows that will turn into closed sales one to two months down the road. Open houses, in many cases, are attracting armies of buyers, many willing to pay cash for homes if necessary. One third of the offers in Menlo Park have been all cash, for example. Multiple offers are becoming the rule, rather than the exception. There have been 14 to 23 offers on Palo Alto properties priced from $1 million to $1.5 million. There are still more buyers than sellers in most areas, which has created a seller’s market in a number of cities. That’s something you just won’t see in the media.
What’s causing the renewed interest in the local market?
One impetus undoubtedly is the upcoming deadline for the attractive federal tax credit for first-time and repeat buyers. Buyers must be in escrow by April 30 and close by June 30 to earn the credit, which ranges from $6,500 to $8,000.
Another reason is the fear that as the Fed begins pulling out of the mortgage backed securities market, mortgage rates will begin to rise from their historically low levels. It’s highly unlikely we’ll see 5 percent fixed-rate mortgages for much longer.
The stock market plays a huge role in our Bay Area housing market, especially in Silicon Valley and in our luxury Previews market. The NASDAQ is nearly double what it was exactly a year ago when the financial markets appeared to be in freefall, creating tremendous wealth for our Previews buyers.
Finally, with money earning just a fraction of a percent in one-year CDs and bonds at historically low yields, more investors are once again looking at real estate as a good investment vehicle to diversify their asset mix and take advantage of an under-valued investment class.
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