Chic vs. Geek: Summertime Silver Linings

Amidst news of rising interest rates and supply shortages, there are opportunities to find silver linings in the housing market. Let’s take a look at a few examples:

CHIC (PEARL)

One piece of good news for potential buyers is that banks should get faster and more efficient at processing loan applications, especially with a sharp drop-off in re-financing due to rising federal interest rates.

Another positive is the job market. Prior to the pandemic, we were already experiencing high unemployment — and under-employment — and the COVID shutdown took it to record levels. Today, there are two jobs available for every unemployed American. That means more people with the potential to buy, especially first-time buyers.

And while supply chain breakdowns have left some store shelves empty, many retailers are overstocked in some goods, leading to sales and discounts for savvy buyers.

GEEK (KEVIN)

If the Fed's goal was to bring down prices, it’s working. Following spikes of 20% or more in the past 12 months, the volume of price adjustments off super-high prices is now up 69% compared to May 2021.

In a cooling market, buyers also have more choices and opportunities. Over the past year, we’ve seen as many as 10 bidders on a single property, making it hard to score the home you want. Now, inventory is up an average of 8% over last year in many parts of the country — including the Bay Area — which means prices could continue to drop.

And if you’d rather build your dream home — and who wouldn’t? — lumber prices have fallen roughly 56% off this year's highs, and copper is down 18.3%.

Geek's Number Talk: Where’s all the housing?

A lot of Bay Area cities are blaming each other for the housing shortage we’re all experiencing, but the truth is we aren’t building enough new housing anywhere, and we haven’t for a while.

Permits were issued for 119,636 new homes statewide in 2021 – just two thirds of the projected need – and this year it’s expected to be even less, with only a fraction in Santa Clara County. If this comes to pass, it will be the 30th year out of the past 35 that California has failed to meet housing production goals. And even permitted projects face false starts and stall outs due to shortages of labor and materials, as well as ever-present community pushback.

Bottom line: Unless hundreds of thousands of new homes are built this year and for many years thereafter, Bay Area home prices will continue to rise, and this will continue to be a seller’s market.

Chic vs. Geek: Buying or Building?

We often meet buyers who are debating between buying an existing home and building a new one. Some buyers start out looking for a fixer-upper and end up building their dream home because they couldn’t find the right fit with their budget. What are the pros of each approach?

CHIC (PEARL)

Buying an existing home has obvious advantages like a short turnaround from closing to move in. It also gives you a chance to settle into a new home and a new lifestyle if you don’t want to make remodel decisions right away – or if you don’t have the money for renovations right now. You also have the chance to walk through the actual home instead of picturing it from blueprints, and you’re generally moving to an existing neighborhood with established services and local schools.

GEEK (KEVIN)

It may be faster to move in and get settled in a resale home, but if you truly want to live in your dream home, there’s nothing better than designing your own living space from scratch. You can personalize each and every nook and cranny and take advantage of all the latest features to maximize energy efficiency and save money over the life of the house. And plus, you get that “new car” smell and the satisfaction of knowing that you won’t need to replace any major appliances for a long, long time.