You know, when I'm talking with my clients about what's happening in the housing market right now, I have to be honest about both the short-term pain and the longer-term gain. According to Zillow Research, the Federal Reserve's rate hikes are actually what the housing market needs in order to set itself up for real recovery down the road. The idea here is that by getting inflation under control, we're building the confidence necessary to bring mortgage rates down eventually, probably sometime in 2027.
But here's the thing: that recovery is still a ways off. Zillow is warning that we're probably looking at a challenging finish to this year for home sales. The recent increases in mortgage rates are landing on a housing market that was already moving slowly to begin with. What we're seeing is that sales volume is actually dropping compared to where it was a year ago, and that baseline was already pretty soft.
What I am seeing locally in the Bay Area and across the East Bay is exactly what Zillow is describing. We're in that tough transition period right now where higher rates are creating headwinds for anyone looking to buy. The good news is that acknowledging the medicine now means believing in better conditions ahead, but we all need to be realistic about what the rest of this year and into early next year is probably going to look like for transaction volume.
