The San Francisco area was hot. It was Evening News hot. In June, it turned cold. Sales dried up. Between May and June, sales in San Francisco fell 7.5% — in one month. What about year over year? Sales were down 9.4%.
Real estate markets never turn cold in June. In June, the markets heat up. Not in the Bay Area. Not in Northern California as a whole.
Mark Hanson is a specialist in California real estate. He has been predicting this for months. Now it’s here. Even more alarming is this: mortgage rates had not yet risen in April. Buyers had locked in low rates.
What’s most alarming about this is that “June” existing sales are actually from “contracts and price decisions” made in April and May when rates were at HISTORIC LOWS.
This market had suffered from an artificially reduced supply. Then, with no warning — other than from Hanson — the bottom dropped out.
Low rates had pulled purchasers forward. Buyers wanted to lock in those rates. Now they are gone. Buyers today face rates that are 50% higher than in early May.
Now that there is no distressed supply due to 6.5 million mortgage mods, a record long foreclosure timeline, banks protecting legacy HELOCs, and new laws outright outlawing foreclosures — and investors are out of the game so quickly — prices will have to come in to reflect real sales,,,more organic in nature by those using mortgage loans that need residential real estate appraisals.
Because the Case-Shiller index on urban housing prices is a 3-month average, what happens in June/July will not be fully factored in until October, which will be released in December. Merry Christmas!