Inventory tends to increase in the fall as the buyer pool shrinks after the start of the school
year. This year there will be an additional drop in the number of buyers due to hesitancy
caused by higher interest rates and the lack of clarity on where real estate values will be
going in the near future. Here are a few things you should know:

  1. While mortgage rates are significantly higher than their recent historic lows, they
    are still below their 40 year AVERAGE.
  2. While it is not clear where rates will be in the short term, few are predicting that
    rates will not fall sometime in the next 5 years. Thus, if you purchase now, you will
    be buying the house, but only renting the loan.
  3. Fewer buyers means less competition- which means the negotiation power
    pendulum has temporarily swung back toward the buyer.
  4. While the reluctance of existing homeowners to give up their current low interest
    rate mortgages is contributing to low inventory, the primary cause is a nationwide
    housing shortage that is particularly acute in California.
  5. This shortage took 40 years to make and could take that long to eliminate. So, a
    buyer today will have the confidence of knowing that their house will be a
    commodity that is in short supply for decades to come.

The same scenario played out last year. Rates rose dramatically in the spring, and in the
late summer and fall of 2022 buyers pulled back and sales slowed. While prices did begin
to drop, the drop, ended up being less than 5%, never dropped below the same month the
previous year and was short-lived And immediately after the first of the year, buyers piled
back-in and prices took off again. Many who bought last fall and winter had less
competition, found that sellers will more likely willing to negotiate and experienced
significant home value appreciation within months of their purchase.

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