Following months of sluggish growth and expected interest rate hikes on the horizon, local real estate professionals believe the new year may bring a calmer home sales market to the Peninsula.
The most recent data available from the San Mateo County Association of Realtors shows the median home sale value for the county was $1.21 million in November, only about $2,000 more than it was a year prior.
Such incremental growth is apart from the massive annual gains shown beginning in 2011 when the median home sales amount jumped by more than roughly $110,000 annually until reaching $1.19 million in November 2015.
Realtor Chuck Gillooley said he believes the slow growth trend will extend into 2017, as the exorbitant listing prices and ultra-competitive buying market will fade away.
“I think we’ll return to a more back-to-basics approach to selling and sellers will be more realistic so these far-fetched prices will come back to Earth a bit,” said Gillooley, who specializes in selling San Carlos and Redwood City properties for Dwell Realtors.
Peter Aiello, a broker associate with Coldwell Banker in Burlingame, shared a similar perspective.
“I think that level of appreciation we have experienced, while it will still be good, won’t be the rampant numbers that we have seen before,” he said.
Aiello pointed to Federal Reserve Chair Janet Yellen declaring recently the intent to hike interest rates a few times over the coming year as a primary source of his skepticism regarding the sustainability of the historically hot local real estate market.
“Money will be more expensive and that will affect the purchasing power of some people and their ability to get financing,” he said.
Gillooley agreed that the ability of some prospective buyers will likely be reduced.
“Interest rates are going up, taking the punch out of buyers’ pockets,” he said.
The result of a market losing momentum is some properties potentially languishing longer on the sales block, presenting those purchasing a chance to seek lower prices.
“The more days on a market, that means more opportunity for negotiation,” said Aiello.
To that end, Aiello said he believes it will become increasingly important for sellers to list properties at a price closer to the neighborhood median value should they hope to find a buyer in short order.
“For people that want to sell properties, pricing is really critical,” he said.
Aiello said the diminished purchasing power of those who rely on loans could make it harder for cheaper homes to sell and noted a reduction in the amount of all-cash purchases and foreign investment as a counterforce pushing down the top of the market.
Both Aiello and Gillooley said though property sales may not continue appreciating at the astronomical rates previously enjoyed by sellers, neither expected the bottom to fall from the market, primarily due to the dearth of available homes comparable to the global demand to live near the wealth of desirable jobs along the Peninsula.
“We are in a free market economy and values are influenced by supply and demand and supply has been low but demand has been high,” said Aiello.
Supply in San Carlos is especially low currently, said Gillooley, as only one home is listed for sale. He said some of the scarcity could be attributable to a seasonal decline in listings, but noted there has been only a limited amount of homes on the market over the previous few years.
The limited home availability locally is consistent with trends across the United States, as the National Association of Realtors expects inventory to be tighter in 2017 following a 9 percent dip in November property listings from the year prior.
Gillooley expects the home sales market to loosen gradually in coming months, as more owners could tend to seek buyers following the holidays. But some of the listings could come from those who see the slowing value appreciation as the sign of a market hitting its ceiling and wishing to capitalize before a potential turn, he said.
Under the anticipation sales could be harder to come by, Gillooley said it is reasonable to project an uptick in home improvements as owners look to make their properties seem more attractive than the competition.
“Any time you have a market that settles down a bit, you have to do a bit more to get a house to sell,” he said.
Should the housing market begin to take a more significant slide though, Aiello said he does not anticipate property owners acting erratically to sell their homes because the local real estate market will likely regain its value in short order.
“If the market declines, they’ll just wait for the real estate cycle,” he said. “If you hold on long enough, look how quickly property values rebounded last time. They’ll just leave it there and wait until the economy turns.”
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