From Boom to Balance

During the pandemic, we saw an unprecedented spending boom fueled by near 0% interest rates, making borrowing incredibly cheap. This easy access to money drove spending across all sectors—including real estate—into overdrive. In affluent areas like Lamorinda, where buyers typically have strong credit and healthy financials, this low-rate environment sent home prices soaring.

But that economic surge couldn’t last forever. When inflation spiraled out of control, the Fed stepped in aggressively, introducing its first 75bps rate hike in nearly 30 years. Fast forward to today, and 30-year mortgage rates sit close to 7%—a big jump from the sub-2% rates seen during the pandemic. While this may seem high by recent standards, historically, 7% is actually closer to the norm—it was the ultra-low pandemic rates that were the real outlier.

What does this mean for buyers and sellers?

In markets like Lamorinda, we don’t expect dramatic shifts in turnover. Many homeowners locked in historically low mortgage rates during the pandemic, creating a kind of "golden handcuffs" situation. Selling now would mean trading a 2% mortgage for a 7% one, which isn’t exactly appealing. This could keep housing inventory tight, as fewer homeowners will be eager to list.

On the flip side, buyers face their own challenges. Higher interest rates mean higher mortgage payments, and since lenders rely on debt-to-income ratios, borrowing power is more limited. This puts pressure on affordability and demand, particularly for higher-priced homes.

For now, we anticipate the market will remain steady, with fewer homes hitting the market. Those who do sell will likely be downsizing, relocating for affordability, or moving out of state. Until we see a major shift in interest rates, this "wait and see" dynamic will likely continue.

Have questions about what this means for you? Let’s chat!

Market Perspectives with William Tang: Nin Tang Homes’ (Unofficial) Chief Investment Advisor*