The decision to buy a home should never be taken lightly. It’s one of the largest transactions most people will see in their lifetimes. Beyond the practical and financial ramifications, it’s an emotional, almost spiritual process, finding a new place for you and your family to spend your lives.
It doesn’t help that we’re currently living through perhaps the most confusing time to be a homebuyer in recent history. The COVID-19 pandemic created significant social and economic instability, which led to significant changes in how and why people bought homes- including here in the South Bay.
At the start of the pandemic, people stopped buying. Fear and doubt ruled the day. As we eased into lockdowns, store closures, restricted outdoor events, and other pandemic-era measures, Americans started buying like crazy. The rise of remote work and the need for more interior space took the luxury market into the stratosphere, both here in the Bay Area and in markets across the US, from Tallahassee to Temecula.
South Bay Home Loan Interest Rates in 2023
Here in the South Bay and elsewhere, we eventually saw demand soar, which caused prices to rise dramatically, buoyed by cheap credit from a rock-bottom interest rate environment and low inventory- which saw San Jose home prices rise from a median sales price of 1,209,500 to 1,500,000 from April 2021 to April 2022- a healthy 24% year-over-year rise.
We saw similar growth in cities across the South Bay, including Los Gatos (15%), Campbell (18%), and Willow Glenn (28%). However, since the meteoric rise we saw in 2020-2022, the Fed is pumping the brakes on the money printer and putting serious upward pressure on mortgage rates.
For most of October, the average rate on a 30-year mortgage sat above 7%. As of the writing of this article in November 2022, the average rate stands at 7.32%. That’s more than double what the average rate went for just a year ago. The MBA, or Mortgage Bankers Association, recently reported that mortgage demand is a full 86% lower than in October 2022. Beyond that, they also anticipate slowing demand for homes in 2023. However, there is light at the end of the tunnel, with the October inflation report showing signs of cooling inflationary pressures, potentially halting future interest rate rises by the Fed.
Additionally, cooling prices in many markets may make up for the difference in mortgage rates for many homebuyers, so buying might not be a horrible idea if you’re able to find a deal.
Are South Bay home prices going up in 2023?
It’s unlikely that we’ll see any kind of significant decline in Bay Area home prices in 2023. This goes double for the South Bay, which has all the underpinnings of a great housing market- robust employment, great schools, a growing population, and a diverse array of industries that make the region much more resistant to slowdowns.
Put another way, people are always gonna live in the Bay- and not just for the weather. As of the writing of this article, November, home prices are up 4.2% year-over-year in San Jose, with similar growth in cities across the South Bay. While this is a far cry from the tremendous growth we saw during the pandemic, it’s also far from anything resembling a housing crash.
How to Decide if Buying a Home is Right for You
As we mentioned earlier, buying a home is a deeply personal decision. Your individual financial picture, employment situation, and family needs should come first- regardless of underlying market conditions.
Ready to settle?
Purchasing a house represents a significant cash and time commitment. You’ve generally got to stay in the home for some period of time to break even on closing and moving costs, agent commissions, and other home and move-related costs. Once you’re in, you’re in, and it takes about 5 years on average to get those costs back- so buy wisely.
What’s Your Budget?
While the South Bay is not “cheap” by any standard, you can still find excellent deals if you’re willing to look for them- especially if you have a little help.
Call in an Expert
Home transactions can be incredibly complex. Market conditions change day by day, and dealing with contracts, contingencies, mortgage loans, and everything else you need to find your perfect home can be challenging- even if this is not your first rodeo. An expert can help you navigate the choppy waters of the Bay Area housing market to ensure you get your dream home under budget and with minimal hassle.
Where I See the Bay Area Housing Market in 2023 and Beyond
As someone on the ground, I’m privileged to have access to a much clearer picture of local markets. Right now, I’m seeing longer days on market, the re-emergence of contingencies as the norm, and sellers are once again offering credits to offset higher interest rates.
What this means, in layman’s terms, is that I think it’s a great time to buy! Buyers are likely to have a much better experience right now compared to the crazy days during and after the pandemic.
I would love to help you find some of the best home deals in the South Bay.
Reach out here to get started today.
Real Estate Specialist at Christie’s International Real Estate Sereno