While buyers are faced with fewer choices and higher interest rates, they still want to call Pleasanton home.
"Most homebuyers still want to be homebuyers, and the mindset now is they are going to bite the bullet and make that payment," said Steve Medeiros, 2023 president of the Bay East Association of Realtors.
Medeiros was referring to the impact that higher mortgage interest rates and the lack of homes for sale are having on sales prices and buyer behavior.
Prices in Pleasanton peaked at more than $2 million during March 2022. During that same period, interest rates were beginning to increase from the mid-3% range to the high-4% range.
Over the following months, prices dropped as mortgage rates continued to climb. By January 2023, the median sales price was approximately $1.4 million while mortgage rates were in the mid-6% range.
The current interest rate for a 30-year fixed-rate mortgage is hovering in the 7% range. Rates were in the 5% range a year ago. Strong demand reversed the declining price trend. During August, the median sales price for a single-family detached home was approximately $1.8 million.
Mederios said higher mortgage interest rates kept buyers out of the market, "until they came to the conclusion that rates aren't going to go down anytime soon and they understand they have a new reality."
The buyers currently in the market are pushing prices up again. "There's still a lot of competition because there is less inventory. There are just more buyers than sellers," Medeiros said.
The seller's reaction to rising interest rates has resulted in fewer homes on the market. Sellers literally stayed home during the first two years of the COVID-19 crisis, which resulted in months of extremely restricted supply. Market conditions changed during 2022 as the world reopened and homeowners in Pleasanton began taking advantage of low interest rates and rising prices. By July 2022, with interest rates in the mid-5% range, there were 86 single family detached homes listed for sale in Pleasanton -- which was more than double the number of homes for sale during July 2021.
As rates increased, sellers realized moving could mean significantly higher mortgage payments. They opted to stay home and enjoy their existing monthly payment. As a result, there were only 32 homes listed for sale in Pleasanton during August 2023.
Those who do have their home on the market have had to be realistic. "It's not like it was a year ago; sellers now have to be mindful that there may be buyers priced out of the market," Medeiros said.
He added that the limited supply of homes for sale does not negate the need for sellers to do some prep work. "You can't just throw an as-is on the market now," Medeiros said. "Some people do but they're not going to get the price point they want. If you want to get that price point, you're going to have to put a good product out there."
Circling back to homebuyers, Medeiros referenced the basic concept of supply and demand. Even as rising rates make it challenging for some buyers to act on their demand for homeownership in Pleasanton, complicated by a limited supply, they are still making it happen.
Buyers continue to be drawn to Pleasanton and are willing to make larger mortgage payments because it is still an attractive community. "Pleasanton will always be a marquee market because it is considered to be the perfect small town," Medeiros said. "There will always be high demand for Pleasanton."