While interest rates have risen, resulting in demand taking a hit, the housing market has remained resilient. The key has been low inventories. We’ve weathered the COVID storm two years running, and now the stock market is flirting with bear territory. Inflation is shockingly high, yet the housing market has stayed surprisingly strong. As long as inventories stay low there should be enough demand to keep our housing market stable.
One of the bellwethers in the housing market is the strength of the condominiums and townhouses. This spring, we have seen these housing units in record territory throughout Marin County. Some HOAs that were in the low $500’s, are currently around $600,000. What used to be $600,000 is now around $700,000. It’s safe to say we’ve seen a $100,000+ price jump throughout this market segment. Some condo owners may be asking themselves, “How long prices will stay up at this level?” It all depends on inventory. As long as we don’t see many sellers cannibalizing prices to attract a limited buyer pool, we are in good shape. We have been seeing the opposite of those conditions this spring: few available homes that abundant buyers are fighting over.
I’m working with a motivated buyer who’s looking for a condo or townhome up to $700,000 and we recently got beat out in two multiple-offer situations with 4+ offers, in Novato on Sommerset Place. It’s a really nice, small HOA tucked into the San Marin hills. Last fall, I sold a very cute Somerset townhouse for $550,000. The latest comparable sale in Somerset this spring was $700,000! The other two that we lost out on went around that price as well. They are still pending so the final pricing isn’t available yet.
Well presented condos and townhouses in financially sound HOAs have been very attractive this spring. I think it’s a safe bet to assume that the same homes around $700,000 now won’t be jumping another $100,000 - $150,000 in the next year. However, it does seem like the market can support these prices with room for modest growth, as long as interest rates don’t get too crazy and inventories stay low.
Don’t be surprised if we see things slow down a bit as we head into summer. That was a fairly typical pre-COVID pattern and I see it returning this year. Buyers will appreciate not having to massively overbid to get their next homes. Sellers should adjust their expectations accordingly and keep an eye on inventories as we move towards the fall where activity often picks up again.