The current housing market in California — and throughout the country — can only be described as a feeding frenzy, with houses on the market selling faster than they can be listed.
Is it the right time to buy? Is it a good time to sell? One local real estate agent says it’s a good time to do both — as long as you’re smart with your investment. With interest rates at an all-time low and housing prices at an all-time high, Michael Rocha of Atlantic Realty said those looking to do either should keep their family’s long-term interests in mind.
“It’s the Wild, Wild West out there right now when it comes to the housing market,” Rocha said. “There is so much demand and there’s not enough supply.”
Historically low interest rates brought on by the coronavirus pandemic have home buyers circling properties like sharks in the water. Prior to COVID, interest rates were nearing 4%, Rocha said, and now buyers can get approved at rates as low as 2.5%. Those who would have been able to afford a $300,000 home last March can now afford $350,000 this year, causing home prices to increase and leading to bidding wars where the buyer with the deepest pockets wins.
“Last year, when you’d make an offer on a house you would go $5,000 or maybe $10,000 above the asking price if you really wanted it. That would put you in a good position to get the house,” Rocha said. “Now, people are writing up offers that are $35,000 and $40,000 above the asking price and still aren’t seeing their offers accepted because there’s someone who is offering even more.”
Rocha has five years of experience in the real estate industry, but has spoken to agents with decades of wisdom under their belts who say they’ve never seen anything like the housing market’s current state. When he first started, Rocha could sell a starter home in Hilmar for around $230,000. Today, those same homes are selling at $400,000.
The end result is that first-time home buyers are being pushed out of the equation, he said, with many qualifying buyers paying tens of thousands more than what a home is appraised at.
“A lot of these first-time homebuyers can’t keep up,” Rocha said. “They’re putting their life savings into the down payment and closing costs of a home, then they have no rainy day funds left over.”
In a normal market, a seller would receive two or three offers on their home during its first few days listed. Houses that hit the market now are bombarded with nine or 10 offers in the first week, Rocha said. Even though homes are selling at prices much higher than they’re actually worth, low interest rates can make a purchase worthwhile as long as a buyer doesn’t intend on selling anytime soon — because at some point, the market will correct and the value will drop back down.
It’s simply a question of “when?”
The housing market was heading toward a crash before the pandemic according to Rocha, and when rates were slashed over the last 12 months it allowed the bubble to grow.
“I don’t feel like we’re going to see a big market crash, but more like some sort of correction. Sooner or later, people aren’t going to be able to move forward on homes here in the Valley. They’re going to become way too expensive, and we don’t have the jobs here to justify the values that are going to be coming,” he said.
Rocha said he and other agents have noticed a lot of people moving inland to the Valley from the Bay Area, with some paying $50,000 above the asking price of a home and in cash — adding fuel to the already chaotic fire. Whether it’s a dip in the stock market or something else, Rocha believes a correction is coming and is made evident by high-profile figures like Elon Musk and others offloading the real estate properties they currently own and selling them at high prices while they can.
The market is a seller’s dream right now, he added, with those who are selling their homes at high prices able to then go on and put down a considerable chunk of cash on a home with a low interest rate.
“Then with the money they have left over, they’re able to live debt-free aside from their mortgage,” Rocha said.
It’s a great spot for sellers to be in, but a tough time to be a buyer. Most looking for homes are currently seeing their offers declined on house after house. But, Rocha added, if you can find a home you love and will be settled in for years to come, interest rates at the moment may make the purchase worth it as housing prices plateau over the next year.
Rocha bought a house himself during this crazy market period, and had some advice for those looking to do the same.
“Don’t buy anything you want to rent out or sell in the next two or three years, because if the market does correct itself you want to be stuck in a home you’re happy to be stuck in. If you’re a seller and you’ve always wanted to get that bigger home, now is the time to do that,” he said.
“Be smart with what you invest in. I bought within the past six months and wouldn’t have done it if it wasn’t the right home. It fits me now and in the future, and if a house fits you now and fits your family’s future goals then go for it.”