Dear Friends and Colleagues,

As we move into the second half of the year, we look back on what has been a turbulent and unprecedented ride – Russia’s invasion of Ukraine, geopolitical and national unrest, inflation not seen in decades, an equities market on steroids dipping quickly into bear market territory, and finally, the strongest real estate market in human history experiencing slowing demand with rapidity and all at once.

What’s happening? Well, first off, the FED saw runaway inflation on the horizon and aimed to tamper that by raising the prime rate to 4.75%, effectively pushing rates on conforming 30-year mortgages from under 3% to today’s rate of about 5.875%. Some buyers immediately stepped to the side. For context, in our more niche local market, buyers under $1M and $2M have dropped off the most, whereas those over $2M seem to be more cautiously active, and those over $3M or $4M are mainly continuing to buy with cash and are beginning to adopt a more “take your time” attitude as more inventory enters the market. more so waiting for the right house to come along, without too much pressure of an upward market, albeit a decent portion of those buyers pull cash to close from the equities market….  Here’s the kicker- demand in every price point is still stronger than it was in 2019, pre-Covid, but is at it’s lowest level in 2 years, according to Forbes, and continuing to trend downward.

It is clear that things are significantly calming, and today’s vibration in the market is much different than the first month of the year, however, the median home price, nationally, hit $416,000 in June, breaking a record high. So the sales dollar data is still showing firm numbers, while sales volume is down 14.2%  from a year ago. Here’s another one- first time home buyers went UP from 27 percent to 30 percent in June, month over month. So demand continues to far outpace even a much larger supply than we had several months ago.

On the ground, I am still seeing slipping demand, but not necessarily a “falling knife” effect. Many local Carmel and Pebble Beach sellers are beginning to fetch under appraised value for their homes, whereas in prior months, appraisals were accounting for the upward thrust a property was sure to have by the time it made it to market.  Those committed to buying are mostly hanging in there, but I am seeing sellers having to come off their asking prices more and more, so we are at least normalizing for now and certainly returning more towards a buyer’s market, in still an historically high value home environment, for now…. And those buyers that bought when there was more competition and rates were lower, are still winning if they used financing.

If we can be of service to you or your family and friends, in any way, please reach out. Also, please click below for attached statistics by local area.

Cheers,
Ryan