In the 11-county, greater Bay Area, accepted-offer
activity in December 2022 and closed sales volume in January 2023 generally hit their lowest
monthly points in 15 years.
Typically, after the long holiday slowdown, the market
just begins to wake up in mid-January before accelerating into spring. That being said, inflation
has dropped substantially since June and interest rates since November, home prices are well
down from last spring, stock markets are up 8% (S&P) to 15% (Nasdaq) YTD as of 2/3/23
(albeit with continuing volatility), and despite escalating layoffs in high tech, early indications in
2023 point to rebounding buyer demand. Open house traffic has jumped, more buyers are
requesting listing disclosure packages, and there have been increasing reports of multiple offers
and (often unexpected) overbidding of asking price. Based on this preliminary data (much of it
still anecdotal*), it appears that buyer demand severely repressed by economic conditions in the
2nd half of 2022 has begun to bounce back.
A similar rebound began in
mid-late summer 2022 for similar reasons – a significant drop in mortgage rates and a large rise
in stock markets – which then quickly faded when positive economic developments went into
reverse. Market activity then slowed further through the rest of 2022. There are currently
considerable hopes for a more lasting economic recovery in 2023.
During the long
high-tech and pandemic housing boom – which peaked in April/May 2022 – as each year
began, the classic dynamic was for buyers to jump back into the market much more quickly than
sellers, creating an immediate imbalance between supply and demand. Too few new listings
compared to the quantity of motivated buyers sparked often ferocious bidding wars, leading to
considerable home price gains virtually every spring. It is too early to conclude, after the general
price declines and steep drops in market activity seen in the 2nd half of 2022, that a sustained
recovery in market conditions is now underway, and if it is, how quickly it will develop and its
impact on prices in 2023. Many economic conditions remain challenging – with critical indicators
still much weaker on a year-over-year basis – and forecasts by economists and analysts vary
widely. Hopefully, economic conditions will continue to improve, providing the foundation for the
recovery in real estate. In the meantime, preliminary indicators are surprisingly positive.
February and March listing and sales data will begin to better reflect early 2023
conditions.
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