While current 7.05% 30 year / 6.4% 15-year rates are bad, the math for sellers not to sell gets stronger and stronger.
The difference in interest on a 500k loan locked at 3% is now about $20,000 per year, which has a present value of roughly $300,000. In other words, paying off a 500k 3% mortgage creates a windfall loss for the seller of about 300k.
Let’s say this same house was purchased for 600k and is now 1.2m. That’s a savings of about $6,600 per year, or about $99,000 is present value.
The seemingly permanant increase in inflation expectations, in particular rent inflation, increases the value of a home to both buyers and sellers. Further, that same high inflation will hit construction costs, including both new construction and full renovations.
More and more I think people are becoming accepting of inflation, resigned to paying higher and higher prices with a sigh, and in many cases eager to lock in prices now before further inflation.
In short, while I acknowledge prices are objectively high, I think they will continue to increase.
The third paragraph above is my calculation of the present value of the prop 13 valuation compared to buying the same house and having it taxed at market value. 1.1% of the 600k cap between assessed and actual times 15 to get a rough PV of 99k. Lots of assumptions here to simplify the calculation, but I think they’re all pretty reasonable and not biased in one direction.
The real estate industry has pretty much been sliced in half locally and I see no change anytime soon. There’s been some exodus and I expect a lot more. Many agents are in denial but can only be for so long before reality slaps. There will always be some that do well but we are all playing on field that’s been halved. Happily I have always planned for all this in case it arrived. Not going anywhere and looking forward to continuing to watch how this all plays out and reporting on it