Comparing real estate metrics from one year to another can be a challenge in a normal housing market. Factors like market variability and unpredictable events can make such comparisons less meaningful or accurate. In recent years, we witnessed unprecedented changes in the real estate landscape, primarily driven by the pandemic. The demand for homes skyrocketed as people sought a place of their own, complete with a home office and a spacious backyard. First-time and second-home buyers flooded the market, aided by historically low mortgage rates and the forbearance plan, which greatly reduced foreclosures. Home values soared to unprecedented levels, creating a market that was akin to a rare and elusive creature—a 'unicorn' year. However, as the market gradually returns to normal, it's crucial to reevaluate our comparisons and expectations.
The Shift from 'Unicorn' Years:
Comparing the current market to the 'unicorn' years is no longer a relevant yardstick. Let's explore three key factors that highlight this shift and the need for a new perspective.
1. Buyer Demand:
Despite the prevalent notion that buyers are scarce, the reality is quite different. In the United States alone, we continue to sell over 10,000 houses every day. While buyer demand has declined from the heights of the 'unicorn' years, it remains robust when compared to the more typical years of 2017-2019. Here in Marin County, we are seeing multiple offers on about half of the listings out there and buyer demand certainly exceeds our limited supply. According to ShowingTime data (see graph below), buyer activity has sustained strength:
2. Home Prices:
It is essential to avoid comparing today's home price increases with the extraordinary growth witnessed in the previous couple of years. Freddie Mac reports that both 2020 and 2021 experienced historic appreciation numbers. To provide a more accurate context, let's consider the more normal home value increases observed during 2017-2019 (refer to the graph below). As we examine the data, it becomes evident that we are returning to a more typical trajectory. While there were some months of minimal depreciation in the latter half of 2022, Fannie Mae's data indicates a return to normal appreciation in the first quarter of this year on a national scale. Based on our last Marin and Bay Area market report, Marin County experienced a 34% price decline from its peak last April, and year to date in 2023 has already increased by 21% and continues to climb back to historic highs. Keep in mind that real estate is hyper-local, which is why we're here to shed light on our local trends here in the Bay Area.
Reports of increasing foreclosure filings have made headlines, leading to concerns about the market's stability. However, it is important to consider these figures in context. The percentage increases in foreclosure filings are based on historically low foreclosure rates. With the end of the foreclosure moratorium, we can expect a rise in foreclosure numbers compared to the last three years. Although it is undoubtedly distressing for families affected by foreclosure, we must recognize that these figures align with the normal filings observed during 2017-2019. ATTOM, a property data provider, provides a graph (shown below) that puts the current situation into perspective. When it comes to foreclosures, don't fall for the clickbate that compares recent numbers to when foreclosures were non-existent.
This year, the housing market will undoubtedly generate unsettling headlines, fueled by inappropriate comparisons to the 'unicorn' years. To gain a comprehensive and accurate understanding of the current landscape, it is crucial to have an expert on your side. By consulting with a knowledgeable professional, you can navigate the shifting market trends and ensure your perspective remains well-grounded. Connect with us today to receive expert guidance and support for all your real estate needs in Marin County, CA and the surrounding Bay Area.
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