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Mortgage rates rose in February, closing the month at 6.94%. However, the Fed will almost certainly cut rates at some point this year, so potential homebuyers would only need to service the current rate level for a short period of time before refinancing.
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Sales increased 3% month over month, which, although still low, is a sizable increase. More homes are coming to the market and quickly translating to more sales. Inventory increased 2%, as new listings rose by 25%. More supply and growing demand are good for the market, especially this time of year — right before the busier spring and summer seasons.
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Months of Supply Inventory (MSI), which expresses the supply & demand dynamic, fell over the past three months, indicating the market is getting more competitive for buyers.
Near-term refinancing could relieve current rate woes
Federal Reserve Chair Jerome Powell indicated in remarks before the House Financial Services Committee on March 6, 2024, that rate cuts are imminent but not immediate. The Fed is waiting for more positive inflation data before cutting rates, which are expected sometime this year, likely after the June or July meetings. With solid employment numbers and a focus on stable prices, the Fed's decision-making hinges on inflation in the first half of 2024. For the housing market, this means buyers and sellers have a clearer outlook on rates for the next 12 months. While rates may not decrease significantly until after the traditional peak housing season (March to August), the likelihood of mortgage rates declining this year could prompt buyers to act now and refinance later. Despite a slower market due to higher rates, potential buyers have had more time to save for down payments, and both buyers and sellers are adapting to higher rates. We anticipate a more active housing market compared to last year, especially with high buyer demand relative to supply. Regional variations exist, with higher-priced regions experiencing more significant impacts from rate hikes.
BIG STORY DATA
THE LOCAL LOWDOWN
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Year over year, the median single-family home and condo prices rose across most Bay Area counties in February. Low inventory and high mortgage rates have been the market’s driving factors, but with rate cut expectations in the near future, we expect more buyers and sellers to come to the market in the spring as mortgage rates decline further.
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Active listings, sales, and new listings rose in the Bay Area month over month, which are all beneficial for the housing market, with the exception of San Francisco inventory, which hit a record low level. We expect inventory to increase in the first half of the year and possibly return to a more normal market after the slowdown experienced over the past year and a half.
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Months of Supply Inventory fell in February 2024, as sales increased and homes sold at a faster pace. Currently, MSI indicates a sellers’ market in most of the Bay Area.