In January, the economic news was all about the “immaculate disinflation” – lower inflation
without a recession. Mortgage rates had trended lower in anticipation of the Federal Reserve
cutting interest rates as many as four times in 2024. Since March/April, the chatter on Wall Street
is no longer about a soft landing but instead how “sticky inflation” is and how we are probably
looking at a “higher-for-longer” interest rate environment to tamp down demand and wrestle
inflation back to the Federal Reserve’s 2% target.
The economy is still humming along by most metrics, and the stock market has recently reached
new highs (S&P500 was 4742.82 on Jan 2, 2024; today, May 22, it’s at 5303.88, up 560 points on
the year!). Consumers are buoyed by an ever-strong labor market. All this positive economic
news supports the “higher for longer” theme.
It’s a HOT & cold market out there! While it’s true that many homes are seeing very strong activity
[a few recent anecdotes: 87 Paseo Way, Greenbrae listed at $1,795,000, received 3 offers
and closed with financing at $2,150,000 (119% of list); and 89 Locust Ave in Mill Valley listed at
$1,795,000, received 8 offers and closed with an all cash offer at $2,395,000 (133% of list)], others
are struggling with foot traffic and having price reductions.
In general data terms: home prices, sales volume, luxury sales, new listings, and overbidding
have all increased as we move further into the Spring selling season, but price reductions also
increased in April and May.
As an example, we are seeing higher net-worth clients make significant home purchases (well
above $10MM), and the lower end of the market (under $3MM) remains very competitive despite
the recent uptick in mortgage rates. The middle section is seeing some ups and downs.
However, overall, there are a lot of buyers with cash and ready to put it to work.
When demand is segmented like this, understanding the nuances of our dynamic
market becomes paramount. We believe this scenario highlights how crucial it is to
get the pricing correct if and when you decide to sell your home.
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