With the recent spike in the 10 year treasury note, average 30 year fixed mortgage rates are now over 7%. For home buyers with less than stellar credit they are realistically looking at rates well into the 7's. Earlier this year rates were as low as 6.25% and the market was projecting continued declines that failed to materialize. The 2024 rise in interest rates will relegate many buyers either to the sidelines or it will keep them in the market but force them down to lower price points. There is however a silver lining for Marin County real estate this spring.
In our Coldwell Banker office meeting this week it was pointed out that 40% of all transactions in Marin this year were done with all-cash. Normally that number is more like 20-30%, and it’s no coincidence that these all-cash buyers are grabbing a greater market share while conventionally financed buyers are taking a seat on the sidelines. In my experience the prevalence of all-cash buyers is fairly unique to the most affluent areas like Marin, and the further away you get from San Francisco, the less money people are putting down when they purchase homes. As an example, last year one of the homes I sold in Sonoma County received multiple offers and most buyers had only 3-5% down payments. No buyer had more than 10% to put down.
I am primarily a listing agent, and in Marin County most of the offers I review have at least 20% down. All-cash offers with no financing are fairly common. As a lifelong resident of Marin County (with the exception of my 20’s spent surfing/working/studying in San Francisco and San Diego), it’s always amazed me how much money people have here and how property values have soared as a result. When people get their foot inside the door of the Marin County housing market, it’s inevitably a case of the rich getting richer as their equity increases exponentially over time. This is not unique to Marin though, as throughout history the surest path to increasing wealth and financial security has been through property ownership.
Where do people get the money for down payments in the first place? Being close to the City and driving distance to Silicon Valley, we see a lot of money coming in from technology and financial services. Home buyers cash in stock options, and they liquidate portions of stock portfolios to put together their funds. And then there is the B of M, and/or B of D, which is to say Bank of Mom and Dad. Parents naturally want their children to succeed, and around here they are often more than willing and able to help their children get into the housing market.
Every housing market is different, but none exist in a vacuum. Even with the high percentage of cash buyers in Marin, if interest rates stay in the 7’s or rise into the 8’s and stay higher for longer we may start seeing a negative effect on home prices. If I were a perspective home buyer though, I wouldn’t be holding my breath and hoping or planning on prices going down. While prices can and do go down every so often, they don’t stay down for long. If there is one lesson I’ve learned in my 20 years of real estate sales, the best time to buy property is when you can afford it. Perspective home buyers hoping to time the market, are more often than not left on the outside looking in.