OAKLAND, Calif. (KTVU) - Some of the nation's housing markets that are cooling off fast are in California — Oakland, San Jose, Sacramento and Stockton. That said, there are new challenges confronting both buyers and sellers in just the last four months.
Just since last March, 30-year fixed market rates went from 3.2 percent to today's high of 6.8 percent — more than double.
"It scares them. Sometimes it prices them out of the market," said Rob O'Malley, a five-star rated mortgage originator throughout California.
O'Malley says that has effectively slowed down and stalled the housing market in many ways. First, fewer potential buyers are applying for mortgages.
"If they're financing $500,000, $900,000 or even more than a million, that can be a dramatic payment swing of $300, $600, sometimes even more on a monthly payment," said O’Malley.
If they do qualify, higher income requirements for more expensive loans often mean buyers get fewer houses. Sellers right now have to ask for less than they wanted, while buyers have to pay more to get a house than they would have paid for four months ago.
"That meeting of the minds in the middle; that's our biggest barrier right now," said O’Malley.
For sellers, they must recognize today's reality.
"We are seeing more price reductions than we did 120 days ago. A lot of the price reductions is when a seller started too high," said veteran East Bay real estate agent Sam Benson.
Multiple bidding wars have mostly given way to one or two offers. The Federal Reserve says, since January, California's home listing have gone from about 24,000 units to 51,000: more than double.
More homes for sale means sellers have more competition. Houses are spending more time on the market.
"It's been a real hard time for real estate agents to manage the expectations of sellers," said Benson.
When actual sales happen, sellers are generally giving money back to buyers, often ten to twenty thousand dollars, so buyers can buy down the interest rate.
"It's a good strategy and smart seller's agents are certainly proposing that to their clients," said Benson.
One option is to take the more expensive loan now, then refinance when the rate comes down.
"I follow some of the industry's leading economists, and they're telling us, by 2024, we could be in another refi boom," said O’Malley.
Even though existing U.S. home sales fell 3.4% in May, the median sales price now surpasses $400,000 for the first time.