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By David Goll
Despite the upcoming U.S. presidential election in November — which has been known to put a chill on the fall home buying season every four years — industry insiders in the Midpeninsula residential real estate market foresee a hotter autumn this year than last thanks in large part to the Federal Reserve’s recent interest rate cuts coupled with strong pent-up demand for housing.
Just about the only thing holding back the market is the region’s ongoing lack of housing inventory. The Midpeninsula’s shortage of houses on the market remains among the biggest challenges for prospective buyers and agents alike.
“There are all kinds of reasons for not selling your house,” said Michael Dreyfus, a Menlo Park agent and the Silicon Valley president of Golden Gate Sotheby’s International Realty. He referred to a lack of tax incentives and many long-time homeowners’ reluctance to give up mortgages with low interest rates. Not to mention the possibility of having to pay higher property taxes on new property.
“Taxes have a huge impact on the market,” Dreyfus said.
Along the Midpeninsula, many longtime homeowners are opting to remodel instead of sell, even though that process takes longer these days, Dreyfus said. Getting access to construction materials, which became a big issue during the pandemic, continues to be a challenge, he added.
And yet, Midpeninsula houses are still being sold. In fact, properties that are reasonably priced, well-located and in turnkey condition are much in demand.
“The entry-level market (generally under $3 million) throughout the area is very strong,” Dreyfus said. “It’s driven by people living their lives — getting married, having kids, needing more space.”
High-end properties see ‘brisk sales’
Dreyfus said high-end properties, those ranging from $7 million to $10 million, and luxury homes with substantially higher price tags of up to $20 million, are “selling very briskly” to wealthy buyers and investors.
“There is a big pent-up demand and lots of well-qualified buyers out there,” said Elyse Barca, a Menlo Park-based agent specializing in luxury properties for Compass Real Estate. “We had a strong spring season, a busy summer, and I anticipate a more active fall season than last year.”
The lack of inventory is the problem. It’s down substantially from what it was even four years ago.”
Multiple offers are not uncommon and desirable properties often are selling over list price, Barca said.
Condos make a rebound
Barca said interest in condominiums has rebounded from the depths of the pandemic-related downturn. Well-located single-family homes are being quickly snapped up throughout the area.
Condos and town houses are now worth more in Santa Clara County than the typically more expensive San Mateo County market. Jasmine Lee, a Menlo Park-based sales associate for Coldwell Banker Realty, said the median sales price for such housing units in Santa Clara County for the year to date is $1 million compared to $937,000 in San Mateo County. Last year at this time, condos and town houses in both counties had an identical year-to-date median sales price of $950,000.
Nick Granoski, Barca’s fellow Compass agent for six years, said he has several listings this season, though the autumn buying period typically offers fewer properties on the market compared to the busy spring months.
He predicts a relatively active fall market, following busy spring and summer seasons this year.
Stable prices amid election season
Like other local real estate agents, Granoski expressed doubts that the Nov. 5 election would have much impact on the market.
“Uncertainty is what holds people back, and I don’t see that in this election,” he said.
Home prices should remain relatively stable this fall, though Granoski foresees the possibility of higher prices next spring.
Another agent who projects a robust fall market is Denise Welsh, associate sales manager in the Los Altos office of Compass Real Estate. Significant numbers of multiple offers on homes have been common in recent months, she said.
Entry-level housing is, as usual, a hot price category, she said.
Noting the area’s low housing inventory, Welsh echoed Dreyfus’ sentiments, saying revising the state’s tax burden on home sellers is about the only action that could persuade a larger number of longtime homeowners to put their properties on the market.
“As it is today, there are people reluctant to give their kids’ inheritance to the government,” she said. “There are a lot of people who feel rather trapped in their homes because of the tax situation.”
Commission rule changes
Home sellers who do choose to jump into the market, however, have new incentives in the form of lower commission payouts for the sale of their home.
This Fall is the first full buying season since the roll out of new rules that put an end to the decades-old practice of requiring home sellers to pay 5% to 6% of a home’s purchase price to cover the commission for both the listing agent and the buyer’s agent.
The changes are part of a $418 million court settlement agreement between the National Association of Realtors trade group and 260,000 home-seller plaintiffs in the Midwest who filed a class-action lawsuit over how Realtors are paid commissions.
The agreement, which took effect on Aug. 17 and protects more than one million agents nationwide from further liability, paved the way for the new regulations that change how Realtors are paid.
The new rules require written agreements between agents and prospective homebuyers before a property can be shown, sets the amount of agents’ compensation and forbids any discussion of commissions on the Multiple Listings Service website. These changes are intended to make the homebuying and selling process more transparent.
Lee said, as a result, she expects to see more agents offering discounted commissions to clients this fall. How the new commission structure will affect home prices remains to be seen, she said.
Lee said she anticipates a small uptick in inventory in the fall market, citing more than 1,000 single-family homes listed in Santa Clara County in early September.
Activity in the fourth quarter of this year should exceed 2023’s slow final quarter, according to Lee, who agrees with other agents that buyer interest is high across the board, from one-bedroom condos to luxury homes.
While some local homeowners may hold off putting property on the market because of the upcoming election, Lee agreed with other local real estate agents that it’s unlikely to have a significant impact.
“There are always sellers putting property on the market because they have to, given their circumstances,” she said.
Freelance writer David Goll is a regular contributor to Embarcadero Media’s real estate section.
