The two major trends impacting real estate continue. First, the 30-year fixed mortgage rate ticked down last week to 2.88 percent, again at historic lows. Mortgage rates that have stayed under 3 percent since July have given the housing market a strong upward trajectory during these uncertain times. Although Freddie Mac cautions that several factors “could disrupt” this activity including high home prices, low inventory and lender capacity.
The other major trend affecting the housing market is the exodus from cities. Perhaps working at home because of the pandemic and having children going to school at home, there is a desire for more liveable space and the allure of cities is not what is used to be. This is evident in the September rental report for San Francisco released a few days ago. For the seventh straight month rental prices in San Francisco have decreased. Consider that the median price of a one bedroom was month was $2,830. This is almost of 21 percent decrease from September 2019, according to Zumper. And this is among the largest deceases Zumper has recorded since tracking rental prices in 2014.
And home buying continues to be on the increase. The pending home sales index reached a record high as sales rose nearly nine percent in August, according to the National Association of Realtors. And year-over-year contract signings were up just over 24 percent. However, the association’s economist that home prices are heating up and many may find it harder to make the required downpayment. In the western region, the index rose 13 percent in August which is up 23.6 percent from a year ago.
In our area, the summer trends are continuing into the fall. The most recent local market update from our Multiple Listing Service shows that in Concord, for instance, the average price of a home sold in August was $737,547. This is 10 percent higher than the average home sold a year ago. And the number of homes on the market decreased more than 50 percent! In Orinda we see much the same thing. The average sale price in August was a bit over $1.9 million and this represents nearly a 27 percent increase over August of last year. Also, inventory here was down nearly 34 percent.
While it is expected that the mortgage rates will remain low for a while, it is not reasonable to think home prices will continue their surge. At some point demand will slow down. But that time isn’t now.