Even the hottest markets eventually cool

As of May 5, mortgage rates were up 69% in 2022, and the scale and speed of the increase make it difficult to predict precise effects; inflation is at a 40-year high; the S&P 500 is down 14% and the Nasdaq, 22%.  Escalating interest rates initially fueled demand in early 2022 as buyers rushed to avoid further rises, but at a certain point, big increases, especially if coupled with peak prices, batter affordability. And all buyers – even all-cash buyers – can be affected financially and psychologically by stock market declines and economic uncertainty.  The combination of swift home price growth and the fastest mortgage rate increase in over forty years is finally affecting what Buyers can and will pay The housing market is beginning to show preliminary, but not universal reactions: Fewer buyers at open houses. Fewer agents on tour. Fewer offers in general. Some buyers are dropping out or becoming more selective; some sellers are moving listing dates forward. Even the hottest markets eventually cool  This does not necessarily imply a large “bubble and crash” (terms much overused). Over the past 4 decades, a cooling shift has typically meant a gradual decline in sales activity, then either a leveling off in appreciation or price declines of 5% to 10%: More like a slow leak in an over-pressurized tire than a blowout at high speed. In SF, it appears the condo market might be seeing the first shifts in softening demand.  When hot markets shift cooler, effects are typically first reflected in reductions in multiple offers, overbidding and the number of homes going into contract; gradual increases in active listings and time-on- market; and gradual declines in year-over-year appreciation rates.  Historically, after a down cycle runs its course, the market moves into the next upcycle and home prices climb (often relatively quickly) above previous peaks. Over the longer term, past appreciation trends – magnified by tax breaks & financing options – have typically made Bay Area real estate an excellent, and often spectacular investment. Complete Market Report Is someone you know, ready to move? Let me know - I can help. Keep well, Maggie Maggie Visser Top 4% SF Realtor DRE: 01925742 M: 415.793.3470 maggie@maggievisser.com marketingcenter-sfbayarea-sfcityproper