For those thinking of buying or selling property in the Inner East Bay in 2023, there is great uncertainty: high inflation, rising interest rates and tech layoffs have led to a sudden shift in the market.
After a red-hot market fueled by the pandemic, the number of sales fell 29% in July-November, compared to the previous year in the Inner East Bay (defined as the cities between Pinole and San Leandro west of the Caldecott Tunnel). In addition, prices stopped climbing and fell 4% to a median of $1 million, but homes still sold an average of 9% over asking in an average of 24 days.
Many buyers and sellers feel unsure if they should move forward. And if they do, what are the best strategies? We asked the agents at Red Oak Realty how they predict next year’s housing market will unfold.
Many agents believe that while the market will be less manic than it’s been in recent years, activity will remain stable. Similar to previous downturns, Linda Elkin said, “Properties that are the most desirable in all ways (location, condition, well-designed upgrades and move-in ready) will sell faster and for more than others.”
But agent Ehsan Habib said that not all homes will perform well. “Some neighborhoods will see their values fall from the highs of 2021 and early 2022,” Habib said. “However, most of those who purchased in 2020 or before will experience at least some price appreciation.”
Negar Souza said she believes inventory will surge come spring. “Sellers were holding tight watching and planning in the fall, but those who must sell eventually will likely do so in the spring,” she said.
Sellers
With uncertainty in buyer demand, sellers need to find ways to make their home stand out from the competition.
“Sellers should be strategic in their timing,” Souza said. “Don’t wait until everyone else puts their homes on the market. You should be the first in line because hungry buyers are waiting for quality inventory.”
Don’t pursue the same strategies that may have worked a year ago. “The $150,000 remodel for sale will phase out,” said Elkin. Instead, sellers should “make their house stand out by doing strategic fixes, touch-ups and excellent staging,” said Erik Dreher.
Stephen Bloom agrees: “Sellers should make the home cosmetically ‘perfect,’ get professional inspections before they go on the market, then fix any health-and-safety issues. They’ll get better offers and they will avoid a lot of headaches and negotiation.”
Pricing expectations are key and should match with the current market. “Price it right,” said Ana Forest. “Don’t look at the top-of-the-market comps — remember, it is the buyer, not the seller, who makes the price.”
“If a seller bought 10 or more years ago,” said Judy Richardson, “They are likely going to see a large gain and be able to leverage that into a new property or save it for retirement. Housing is still a great investment — primary residences can shield appreciation with the $250K/$500K tax exclusion, and income properties can help mitigate capital gain.”
Buyers
While buyers have more control than they have had in years, higher mortgage rates mean that their purchasing power is diminished. These contrasting forces make the market uncertain, especially in the first half of 2023.
“It’s likely we’ll see lower interest rates in 2023 compared to the second half of 2022, at least for part of the year,” said Bloom. “For the Inner East Bay, housing prices are unlikely to go down (too much demand, not enough supply), so buyers should feel comfortable buying their home now. If rates do fall in 2023, they can refinance into the lower rate; if rates instead go up, they will feel like geniuses for locking in the lower cost of money.”
Sari Cooper also recommends looking into a “2-1 buydown,” which is used to reduce an interest rate by 2% the first year, 1% the second year, and then continues for the rest of the mortgage as a fixed rate. The buydown can be purchased by buyers or by sellers looking to encourage a contract on their property.
“Sweat equity is back!” said Tracy Davis. “Buyers may want to keep their loan amount as low as possible and purchase a home that can be updated over time.”
“Buyers should look for opportunities in areas they may not have considered in the past,” said Souza. “And most importantly, TRY! Sellers who may have been less flexible in the past may be more willing to negotiate.”
“If buyers are interested in buying, start looking soon,” said Elkin. “Houses are one-of-a-kind in the East Bay; if buyers see something they really love, they need to act quickly.”
Forest added, “Buyers should keep their pre-approval active and keep reading disclosure packets so that they are educated on the market. Knowledge is power. They should ask lots of questions, then pounce!”
In summary
Because of the uncertainties in the market, it is more important than ever to work with — and listen to the advice of — a local agent.
“Stay motivated, and don’t be too shy to put your agent to work,” said Habib. “Market conditions change week by week. Persistence and the ability to negotiate creatively will play key roles towards reaching goals.”
To learn more about the market and the strategies that work best for you, look for Red Oak’s market updates posted to our blog and reach out to an agent for help.
