In early 2022, rumors about new federal lending policies caused rates to begin climbing. After years of historically low rates, by the middle of 2022, homebuyers trying to secure purchase financing were confronted with rates that had virtually doubled compared with just a few months prior. Higher monthly payments put the cost of homeownership in Pleasanton out of reach for many potential buyers.
"Faced with significantly less purchasing power due to larger monthly payments, buyers backed off making aggressive offers," Medeiros said. "Starting in June 2022, homes began sitting on the market longer as buyers hit the brakes."
This was a major change compared with the summer and fall of 2021. During that period, a home was on the market, on average, for two weeks or less. Contrary to the seasonal nature of real estate activity, homes sold quicker during November and December compared with previous months.
The summer and fall of 2022 were different because as interest rates rose, homebuyer enthusiasm ebbed and homes in Pleasanton sat on the market for days and then for weeks. A home was on the market an average of 36 days during December 2022 compared with seven days during the previous December.
The higher rates impacted sellers, too. As buyers were driven out of the market by higher monthly payments and sellers began receiving fewer multiple offers from buyers, sellers responded by lowering prices -- another significant change from 2022 when sales prices rose consistently from month to month.
The median sales price for a single-family detached home in Pleasanton during March 2022 was more than $2 million. By December 2022, the median sales price had dropped to approximately $1.5 million.
A few months of cooling prices didn't necessarily help home buyers. "Prices were still out of reach for many buyers last year," Medeiros said. "Even after several consecutive months of falling prices, annual home prices last year were still at record-setting levels."
The median sales price during all of 2022 was more than $1.7 million compared with $1.6 million during 2021 and $1.2 million during 2020.
Those buyers who stayed in the market had more time to shop, less competition from other buyers and more choices.
Another major difference between real estate market conditions during 2021 compared with 2022 was the number of homes for sale. During 2021, inventory peaked in April with 39 homes on the market. In April 2022, there were 45 homes for sale and in the following months inventory increased consistently peaking at 86 homes on the market during July.
More homes for sale didn't result in more actual sales compared with previous years. There were 555 single-family detached homes sold in Pleasanton during 2022 compared with 867 sold during 2021 and 686 sold during 2020.
One reason for the drop in sales during 2022 is that real estate activity in Pleasanton during 2021 was driven by a combination of historically low interest rates, buyers tapping savings accumulated during the 2020 COVID-19 lockdown and, in some cases, stock options for large down payments. These factors helped buyers who had been waiting, in some cases for years, to enter the market and purchase a record number of homes during 2021.
"While real estate activity during 2022 was different than previous years, the market did not collapse, it was simply different and reflected changing economic conditions," Medeiros said.
Jordan Levine, chief economist for the California Association of Realtors agreed about the changes both buyers and sellers experienced during 2022, saying, "A big part of the recent slowdown in home sales is that the market is catching its breath and coming back down to earth after running so hot last year during 2021."
Medeiros said the home buying and selling experience promises to be different again during 2023. "Some mortgage interest rates, while still higher than during 2020 and 2021, are stabilizing or even dropping," Medeiros said.
Levine agreed, "Rates for 'jumbo' mortgages, which are the kinds of loans many Tri-Valley homebuyers will probably be using, are currently lower than conforming rates, so that will actually benefit markets like Pleasanton."
"Homes may be on the market longer, buyers will have more choices and more opportunities to negotiate which will bring more balance to the market," Medeiros said.
Levine says this balance will help cool, but not freeze, real estate market conditions: "Prices are expected to remain elevated as housing demand continues to outstrip supply, but appreciation will be more moderate than in previous years."
This story contains 742 words.
Stories older than 90 days are available only to subscribing members. Please help sustain quality local journalism by becoming a subscribing member today.
If you are already a member, please log in so you can continue to enjoy unlimited access to stories and archives. Membership starts at $12 per month and may be cancelled at any time.