The cooling of Lafayette CA real estate and the more affluent sectors of the larger Bay Area market is palpable. Real estate is always a trailing economic indicator, and the jittery start to the year with the stock market, and more so with technology shares, has reared its head in the present real estate market.
As one would expect, the most impacted homes are those at the upper range of normal affordability. Within Lafayette, homes priced between $2M to $3M have really felt the pain as inventories have soared and sales velocity has been anemic. This sector represents Lafayette homes that have historically been purchased in abundance by successful tech professionals, as well as executives transferred to the area by their companies.
The old adage that a picture tells a thousand words certainly applies here. The chart depicts the Lafayette CA real estate market between $2M – $3M. The sales challenges that we face today can be quickly summed up by seeing that there was 260% more inventory in April 2016 vs. April 2015, and pending sales were off 34% from 2015. The differential between inventory and sales is profound when compared to last year. The problems for this segment have actually gotten worse in the early days of May where we now sit just one week into the month with 15 homes active with only 3 pending. There is 5 months of inventory available in the segment compared to complete absorption of 100% of the month’s inventory at the same time last year.
What does it mean for the Lafayette CA real estate market?
- Prices will need to soften to move the existing inventory.
- There will be a trickle down affect as the value proposition increases for the $2M-$3M segment, homes price under that level will also see softening prices.
- Buyers will see better values than in 2015 as soon as Sellers realize that the market has changed. This is always very challenging for Sellers who will want to continue to look in the rear view mirror of the market.
- Sellers should try to get ahead of further softening by getting their homes to the right price sooner vs. later. Accumulated “Days on Market” causes Buyers to discount their offer price, anyway.
- Areas outside of Lafayette and Orinda will see even more softening of the luxury segment since demand traditionally is not as high.