As we near the end of the third quarter I thought I might provide you with some insights as to where our market is going. To understand where we are going, let’s look at where we’ve been this year.
A Tale of Three Quarters: (note all statistics taken from our local MLS and do not include any off market sales. Also note that I’m writing about closed sales, so the actual offer and ratification dates occurred on average 25-30 days prior)
Q1 (property closing between (1/1/22 – 3/31/22) was one of the strongest seller’s markets we’ve ever seen in Los Altos. 43 single family homes sold, ranging in prices from $1,350,00 to $11,500,000 with an average days on the market of 9 days. The average list price was a hefty $4,079,926. and the average sales price was a whopping $4,654,736. The list price to sales price ratio was just slightly over 14%. Low inventory and huge buyer demand created a market where almost all properties sold for a premium with multiple offers.
Q2 (property closing between 4/1/22 – 6/31/22) began with strong buyer demand but when the fears of inflation hit and the fed began a series of rate hikes to slow inflationary pressure on the economy, buyers took a step back and took a wait and see approach. As the quarter progressed, the buyers pulled back. 78 single family homes closed in this quarter ranging from $2,860,000 to $9,500,000. The average list price rose to $4,375,855 and the average sales price rose to $4,830,795. The list price to sales ratio was still strong at 10.4% however, the strength of the market was due to closings in April and early May. As we got further into the quarter, the market activity dropped off substantially to when we got into the summer months, it was significantly slow.
Q3 (property closing between 7/1/22- 8/28/22). I’ll call this market, “The Perfect Storm” for sellers. The near doubling of interest rates dramatically affected buyer affordability. Inflation fears tempered buyer enthusiasm. Stock market volatility has led to buyer anxiety and reduction of down payment funds. Lastly, the “post covid” seasonal summer slow down was amplified with more families (ie. buyers) taking vacations than in years past. The lack of activity panicked Sellers and less experience agents alike. Here are the numbers. Homes stayed on the market longer (22 days on average). 55 single family homes closed ranging from $1,876,543 to $7,500,000. The average list price dropped to $4,188,943 and the average sales price dropped to $4,177,449.. Although the sample size is small, that’s a 14% drop in prices from the prior quarter.
Where is our local real estate market going?
Inflation, interest rate increases, and stock market volatility continue to affect buyer confidence. Buyers are scared. If they submit offers, they are conservative both in price and terms. Buyers are focusing on homes that are in move-in condition. However, we are seeing signs that the seasonal summer slow down is being followed by a early (slight) fall pick up. For example, last week we had a situation where a Los Altos home received 8 offers, however 5 of them were below the asking price. The home sold for about 13% above asking.
Sellers should really examine their motivations for moving. The market hit its peak earlier this year and sellers should recognize that they won’t be able to get the price that their neighbor did in February or March. In fact, Sellers may have to invest more money into preparing the home in order to get it to sell. Generally prices in Los Altos neighborhoods are off approximately 8%-12% from their highs earlier in the year. Other cities are seeing prices off as much as 20%.
If you are interested in selling or buying this year, the best advice I can give is not to try to time the market. Let’s determine the perfect time for you based on why you are moving and when you need to move. Give me a call and we can create a strategy that makes sense given your personal situation while accounting for our current market conditions.