The Big Risk in Gambling on Bay Area Home Values

The latest Case-Shiller housing report for the Bay Area is out, and as suspected, the downward trend is inching us closer each month to a YOY loss in home values in the nine Bay Area Counties.

Home values shows they have returned to essentially where they were a year ago. The Case-Shiller data lags the market by three months, so these numbers are as of September.

We suspect they have continued to go down in October and November meaning that by the end of the year, home values may be lower than they were a year ago—before the historic run up in Q1 of 2022 which has all but been eliminated.

Meanwhile, 30 year mortgage rates have for at least the time being, settled down from their recent peak.

It will be a blood bath when we look at Q1 in 2023 as compared to 2022, and then we suspect by Fall those number will better reflect the YOY changes since the first three months in 2022 were an anomaly of a run up in home prices, (note we did not say values). 

What will happen in 2023?

It’s too early to begin to even risk speculating, but the driving factors—the variables—will be the stock market performance, mortgage rates and of course, Bay Area job stability.

One thing is for certain, this impasse we’re experiencing—buyers waiting for prices to drop further, and sellers clinging onto the day when they return—is about to end. Someone is going to blink, and it carries a huge risk being on the losing side. 😉

To understand why timing the Bay Area housing market is a Fool’s Game, we need only look to this past year. Sellers waited for prices to peak before cashing out, only to find that after a ten-year run up, the bottom fell out of the market in April, and prices have been reverting back to 2021 values ever since.

Buyers on the other hand fall into a similar trap. They wait far too long to take advantage of a drop in home values—wanting to time the market and hit the absolute bottom. While that’s an admirable goal, it rarely works out in the real world. One only knows the market is at its bottom when they see it beginning to go up. This rear-view mirror approach inevitably means they’ve already have missed the bottom.

This cycle was the first one we experiences first-hand, the market downturn in 1990. The market declined for two years, remained more-or-less flat for another five, and went full throttle upward beginning in 1996. If one bought a home between 2009-2011, the would have enjoyed a 16% increase in 2012 alone. Put another way, buyers had to pay 16% more because they waited to see the market bottom in 2011.

During the Great Recession, between 2007-2009, home values dropped 57% across the Bay Area. Values only experienced minor seasonal fluctuations until January of 2012 when the market entered its sustained ten-year growth cycle. The best time to buy a home during that downturn, were the three years between 2009 and 2011. Those who waited until 2012, when everyone decided it was once again a good time to buy, found themselves in multiple offers and rising prices until 2022.

[Gray bars indicate U.S. recessions. Source, FRED.]

As we’ve admonished buyers in other articles, don’t follow the pack—lead. You’ll be in a far better position when the market rebounds.

For sellers our advice is to evaluate your goals. If you’re considering retirement, waiting for a market rebound may take precious years away from your plans. If you’re a seller wishing to purchase a more expensive home, that home probably took a hit in real dollars more than your current home. And finally, if your downsizing, don’t miss out on the tax benefits of proposition 19 before it’s repealed.

Drew & Christine Morgan are REALTORS/NOTARY PUBLIC in Belmont, CA. with more than 30 years of experience in helping sellers and buyers in their community. As Diamond recipients, Drew and Christine ranked in the top 50 RE/MAX agents nationwide and the top 3 in Northern California.  They may be reached at (650) 508.1441 or emailed at info@morganhomes.com.

For all you need to know about Belmont, subscribe to this blog right here. You can also follow us on Facebook at https://www.facebook.com/Morganhomes and on Twitter @ https://twitter.com/morganhomes

The information contained in this article is educational and intended for informational purposes only. It does not constitute real estate, tax, insurance or legal advice, nor does it substitute for advice specific to your situation. Always consult an appropriate professional familiar with your scenario.

Murky Real Estate Future Causes Housing Slowdown

Is the sky falling when it comes to real estate in 2022, or have we seen this before?

Bay Area real estate has always been buoyed by strong consumer sentiment that the inflated prices will remain a good investment. But once there’s a chink in the armor, all bets are off.

First there was the real impact of rising interest rates, that began the first of the year in 2022 and have continued to date.

Freddie Mac, 30-Year Fixed Rate Mortgage Average in the United States [MORTGAGE30US], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/MORTGAGE30US, November 9, 2022.

That coincided with the stock market downturn which affected the down payment resources of many potential buyers.

S&P Dow Jones Indices LLC, S&P 500 [SP500], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/SP500, November 9, 2022.

Inflation per se, is actually a good hedge against inflation, but inflation scares people and people who are unsure of the future tend to hunker down.

Finally, and hopefully the last issue in 2022, has been the recent job layoffs in the Bay Area.

These events affected the Bay Area housing sector in the following ways:

On a macro scale, the Case-Shiller[1] report for the nine Bay Area counties, also known as the San Francisco Metropolitan Area—SFMSA, reported a steady YOY decline in home values after the peak in May—beginning in June of 2022.

S&P Dow Jones Indices LLC, S&P/Case-Shiller CA-San Francisco Home Price Index [SFXRSA], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/SFXRSA, November 9, 2022.

Notice the skyrocketing home prices in the first quarter of 2021—up almost 25% YOY.

The markets technically peaked in April, and the May closings with the typical 30 day close of escrow figures support that.

Since then, we can see home values, while still higher than they were a year ago at the same time, are quickly back peddling—only 5% higher than a year ago—down from 24% higher in March 2022.

COMPARE AND CONTRASTING DOWNTURNS

Looking at the high in March of 2006, we saw closings strong, with 21 sales, only one price reduction, and sellers netting 103% of their asking prices.

Fast forward to October in 2006, and what sellers received of their asking price dropped to 102%, sales remained the same at 21, but four homes needed price reductions.

In March of 2022, there were zero price reductions, 31 sales, and homes sold for 113% of asking with no price reductions.

In October of 2022, only seven homes sold for 102% of asking with one home needing a price reduction. 

As of this article printing, there are still 21 homes available to choose from, four with price reductions and the average days on market at 40.

THE TAKEAWAY

The future of Bay Area real estate is murky at best. Real estate is highly speculative, and there are many talking heads ready to proffer their opinion of what will come next. The media plays a large roll in affecting the mindset of unsure buyers. The media’s angle is to get a reader or viewer’s attention since more eyeballs equals sponsorship and income for their business, so they tend to be overly dramatic in their headlines and analysis and look for ways to support their sometimes sensational, preconceived views rather than report the facts without spin.

We’re in the trenches and we’ll be the first to tell you there’s no way for us to predict what the market will look like next month let alone in 2023. The future of real estate is always in the buyer’s hands. Until they feel comfortable their jobs are secure, that they can afford the home and cash out needed funds from their stock portfolios, that the market won’t collapse out from under them, they’ll stand down and wait it out.

Market swings in the Bay Area are more akin to a light switch, than a dimmer. Ironically, once the above negative obstacles are overcome, it will hold true for many buyers at the same time and the proverbial light will come on as buyers jump back into the market all at once, and multiple offers will raise their ugly head again.

Drew & Christine Morgan are REALTORS/NOTARY PUBLIC in Belmont, CA. with more than 30 years of experience in helping sellers and buyers in their community. As Diamond recipients, Drew and Christine ranked in the top 50 RE/MAX agents nationwide and the top 3 in Northern California.  They may be reached at (650) 508.1441 or emailed at info@morganhomes.com.

For all you need to know about Belmont, subscribe to this blog right here. You can also follow us on Facebook at https://www.facebook.com/Morganhomes and on Twitter @ https://twitter.com/morganhomes

The information contained in this article is educational and intended for informational purposes only. It does not constitute real estate, tax, insurance or legal advice, nor does it substitute for advice specific to your situation. Always consult an appropriate professional familiar with your scenario.

[1] Case Shiller reporting has a three-month lag

How the Pandemic Saved a Housing Crash

Now that the third quarter of 2022 is in the books, we take a look at how our current market stacks up to historical markets when interest rates were as high (or higher) than they are today, and how these rates have impacted not the price of homes, (we did that in another post), but rather the quantity of available homes for sale and how many are actually selling—as well as how long that process takes.

First, we examined the 3rd quarter of 2016 when interest rates were at a low of 3.42. We the contrasted that to 2022 for the same periods.

Rate during these periods averaged were as follows:

2016   3.42

2022   6.70

Source Fred of St. Louis

Interest rates between 2016 and 2022 went up in real numbers 3.28%—a 96% increase over 2016.

Here’s how that affected sales:

In San Mateo County the number of new listings dropped 7.8%.

Fewer new listings had an impact on inventory of homes available. That dropped by 11.6%. Inventory is measured as how many homes are remain on the market on the last day of the period measured—in this case September 30TH. 

Sales in 2022 dropped faster than the number of new listings in 2016—9.5%

What a seller could expect to receive of their asking price averaged 105% in 2016 and 102% in 2022. 

If we look at the last time interest rates were as high as today’s (av. 6.98)—in 2001—the time it took to sell a home stood at 53 days and sellers were receiving on average 95% of their asking price. We attribute the greater change between 2001 to 2022 to in Q3 because in 2001 we were in the post internet bubble burst throes of a recession.

One would expect with the higher interest rates we have seen in 2022, they would have a greater impact on sales than is demonstrated here. Our take is that the remaining post pandemic pent-up needs has had a hangover effect on the robust home sale activity in 2020-2021.

Drew & Christine Morgan are REALTORS/NOTARY PUBLIC in Belmont, CA. with more than 30 years of experience in helping sellers and buyers in their community. As Diamond recipients, Drew and Christine are ranked in the top 50 RE/MAX agents nationwide and the top 3 in Northern California.  They may be reached at (650) 508.1441 or emailed at info@morganhomes.com.

For all you need to know about Belmont, subscribe to this blog right here. You can also follow us on Facebook at https://www.facebook.com/Morganhomes and on Twitter @ https://twitter.com/morganhomes

The information contained in this article is educational and intended for informational purposes only. It does not constitute real estate, tax, insurance or legal advice, nor does it substitute for advice specific to your situation. Always consult an appropriate professional familiar with your scenario.

Housing Market in Crises as a Stand-Off is Looming

Following our local real estate market is a lot more interesting when it’s in a state of flux. Coming out of the Great Recession in 2012, when home selling activity began to pick up dramatically after a five-year hiatus, we finally had some interesting news to report.

Since then the meteoric rise in home values and bidding wars have been the story for the past 10 years, with only minor seasonal fluctuations.

But in April of 2022 that all changed. With a recession looming, and stock portfolios dropping as fast as interest rates are rising, there’s been a sizable shift in real estate activity.

But exactly how have these forces altered the home selling landscape?

The answer is it depends on who you ask. For buyers they are in the arms of a welcome change in the level of competition, but the throes of an unwanted increase in their mortgage payments.

Many sellers on the other hand are suffering from the seven stages of grief, but can’t seem to get past the first stage—denial. No one wants to admit they may have timed the market wrong and missed the home selling peak, instead they’re hanging onto rosier days—ignoring the changing landscape around them. This manifests itself in sellers hiring agents who will tell them their home is worth a price that it used to be, in order to secure a listing, only to have their home languish on the market for months and suffer multiple price reductions to no avail.

To help put the market shift into perspective, in 2021 only two homes were pulled off the market between May and October 1st. During the same period this year, that number rose to 13—a 550% increase in homes which did not sell.

In a recent blog we discussed how buyers who are clinging to the notion that higher interest rates will bring down home values further, could well be making a dangerous miscalculation. The smart move is to jump in with the low competition and purchase a home before rates rise further. As we mentioned in this post, the decrease in home values cannot begin to help buyers when interest rates are rising at a faster pace.

Looking at homes sales for August 2021 as compared to august this year, the forces that have changed the market have had less of an impact than would be expected.

Simply looking at the median home price for all of San Mateo County—and even drilling down to the local level in Belmont—the lack of change seems at odds with what is occurring. This can likely be explained that homes which are priced well are still receiving the attention they deserve. 

Note though that the median price per square foot dropped in both markets, while the size of homes selling rose—meaning that in 2022 you can get a home 8% larger in San Mateo County for the same price as one paid a year ago, and 17% larger in Belmont for essentially the same price.

The lack of new listings—down 27% in San Mateo County and 107% in Belmont, can be attributed for helping to keep the supply and demand levels more in equilibrium—given the diminished demand. We had anticipated this might be the case in a post we did back in April.

… Homeowners who refinanced or buyers who purchased a home when rates were at historic lows—in the 2-3% range, aren’t going to be selling their home and moving anytime soon. Sure, in California they can now carry their low property tax base, but they can’t carry their low interest rate—so many are going to stay put and there will be even less inventory than there has been, and which will once again put upward pressure on housing prices”.

Also, worth taking note of is that while the level of new listings has dropped considerably, the months of inventory—the amount of time it would take to sell the current inventory of homes at the current pace of sales—has also risen.

A real standout in the statistics, that may tell us more than any other single stat, is the percent a seller received of their asking price—down 8% in San Mateo County and 14% in Belmont YOY—indicating that there is far less competition for the fewer number of listings.

For sellers, which way should you turn? Find an agent experienced in uncertain markets will keep you from the dreaded downward spiral of price reductions and delays on the market. Our best advice is don’t be another statistic, get out ahead of the pack and price your home reasonably and in accordance with the actual current market conditions—not what you want them to be.

Drew & Christine Morgan are REALTORS/NOTARY PUBLIC in Belmont, CA. with more than 25 years of experience in helping sellers and buyers in their community. As Diamond recipients, Drew and Christine are ranked in the top 50 RE/MAX agents nationwide and the top 3 in Northern California.  They may be reached at (650) 508.1441 or emailed at info@morganhomes.com.

For all you need to know about Belmont, subscribe to this blog right here. You can also follow us on Facebook at https://www.facebook.com/Morganhomes and on Twitter @ https://twitter.com/morganhomes

The information contained in this article is educational and intended for informational purposes only. It does not constitute real estate, tax, insurance or legal advice, nor does it substitute for advice specific to your situation. Always consult an appropriate professional familiar with your scenario.

Possible Higher Home Values and Interest Rates

How to put historical interest rates vs home values into perspective.

It’s hard to predict where internet rates will take home values, but as history has shown, it can be a Fool’s Game to try and play the market. Akin to the depiction in this post, the consequences can be painful.

Take for example Interest rates in August of 1993—they stood at 6.97%. By November of 1994—just 15 months later they were up 2.28% ↑ to 9.25%. How did home prices react to the sharp increase in interest rates? The went up .52% points during the same period—no dramatic dip that made it worthwhile to try and wait out the effects of higher rates.

Here’s a real-world example. Let’s say one bought a $2,000,000 home today with a 4.5% interest rate. A monthly interest payment would be ~$1,000 less each month than if the rates go up to 5.5%. Here’s an on-line calculator to run scenarios.

What does $1,000 a month translate into purchasing power? In the above example, $200,000. Which means that if the rates go up to 5.5%, home values would have to drop in step with that increase 10% for one to just breakeven vs buying now at 4.5%. Why wait for a higher 5.5% rate to put downward pressure on home prices—which as history as shown, there’s no guarantee will happen.

In our observations, being in the sector of tech heavily weighted jobs, wherein many are reliant on stock options for their downpayment, any hit to the financial markets makes it unlikely that buyers will liquidate stocks to buy a home. In our world, that and job security (e.g. Consumer Confidence—which is up recently), has a greater impact on buying activity than interest rates.

______________________________________________________________________________

Drew & Christine Morgan are REALTORS/NOTARY PUBLIC in Belmont, CA. with more than 30 years of experience in helping sellers and buyers in their community. As Diamond recipients, Drew and Christine are ranked in the top 50 RE/MAX agents nationwide and the top 3 in Northern California.  They may be reached at (650) 508.1441 or emailed at info@morganhomes.com.

For all you need to know about Belmont, subscribe to this blog right here. You can also follow us on Facebook at https://www.facebook.com/Morganhomesand on Twitter @ https://twitter.com/morganhomes

The information contained in this article is educational and intended for informational purposes only. It does not constitute real estate, tax, insurance or legal advice, nor does it substitute for advice specific to your situation. Always consult an appropriate professional familiar with your scenario.

Shift in Housing Market Scares Young Buyers Away

The Interest Rate Hike Effect

In Belmont, the sales statistics for May 2022 show that the inventory of homes has grown to one month of inventory, while this past January it stood at .3 months. To help put that into perspective, during the downturn in 2009, the months of available inventory in Belmont sat at 10.

While some homes are still selling over the asking price, they are on average receiving 10% less over asking than in Q1.

Some of these anomalies are seasonal, and as such, with May being a month that is affected by seasonality in home sales, some of what the market is experiencing is seasonal and normal.

The most recent sales in Belmont are for far less than the sales in January-April. That is of course when the February interest rate hikes really kicked in, coinciding with the stock market taking a hit.

Since many Bay Area buyers are tech workers, whose compensation is augmented to a high degree with stock options, when the stocks are high, buyers are more bullish and can compete in the home bidding process by liquidating more stocks. Conversely, when the stock market takes a hit, buyers not only have less capital to work with, but they also tend to sit back and wait for the market to stabilize before liquidating their holdings.

Where We Stand Today

This graph illustrates the rapid rise in the 30-year mortgage rate this year. We suspect that much of the overzealous bidding that occurred in the first quarter of 2022 was due to buyers’ knowledge that rates were scheduled to rise, and their desire to take advantage of lower rates while they could—even if that meant overpaying in a bidding war for a home.

The S&P 500 and home values seem inextricably connected. One can see in this graph the rise and decline during that same Q1 period that buoyed purchasing power and is now waning.

As seen in this graph for all sales in San Mateo County, Condominium values take a hit first. We attribute this to two factors. The first being that condominiums tend to be akin to a commodity. Many are similar if not nearly identical. There are of course varying degrees of upgrades, whether one has an end or upper floor unit, the location within the complex, but overall, the differentiating factor in a market with growing inventory, comes down to price.

The secondary factor is that as prices and competition for single family homes fall, condominium owners have an opportunity to make a move into a stand-alone home, while buyers who were just shy of being able to purchase a home, and would have bought a condo, now turn to owning a home with a yard.

What is Different Now

What has changed is that with fewer buyers in the market, and less competition, they can be choosier. While it’s still too early to call it a buyer’s market across the board, certain sectors such as the condominium market and cities, and even neighborhood within cities that are less desirable, are most affected.

This means that not every home will sell—at least like they did in the past. Homes will have to be spruced up, staged, show well, and most likely be vacant to garner the level of excitement necessary to captivate the dwindling pool of buyers, so as not to take an inordinate hit on the sale price.

For the typical three-bedroom home, looking at the sales in Belmont, between March and April the seller’s enjoyed a list to sales price ratio of 119%. Since April that has dropped 11% to 108%. With the median home price still hovering around $2,400,000, that represents a $250,000 decrease in overbidding per home.

Is this a Correction?

We don’t see it so much as a correction, but rather the market simply returning to pre hysteria bidding. Interest rate increases along with poor stock portfolio performance has dampened the buying environment—for now. We wrote a previous piece on the monetary effect of rising interest rates and home purchasing power.

Gaining Some Perspective

Buyers are in shock because for the past 20 years, 30-year mortgage rates averaged 3.035%. They never knew rates prior to that 20-year period when between 1980 and 2000 they averaged 10.3%. And the average 30 mortgage rate since 1971 when interest rates were tracked, is 7.7%. Buyers who have never even heard of an interest rate over 4% will acclimate and become accustomed to the new norm, and life will go on. Longer term homeowners who have lived through the interest rate roller coaster ride, will be less effected emotionally, and probably move forward with life’s plans accordingly.

Drew & Christine Morgan are REALTORS/NOTARY PUBLIC in Belmont, CA. with more than 25 years of experience in helping sellers and buyers in their community. As Diamond recipients, Drew and Christine ranked in the top 50 RE/MAX agents nationwide and the top 3 in Northern California.  They may be reached at (650) 508.1441 or emailed at info@morganhomes.com.

For all you need to know about Belmont, subscribe to this blog right here. You can also follow us on Facebook at https://www.facebook.com/Morganhomes and on Twitter @ https://twitter.com/morganhomes

The information contained in this article is educational and intended for informational purposes only. It does not constitute real estate, tax, insurance or legal advice, nor does it substitute for advice specific to your situation. Always consult an appropriate professional familiar with your scenario.

Bay Area Housing Market on Precipice of Unpredictable Change

One would think that predicting the seasonal course in our local housing market wouldn’t be that hard, right? What makes people decide whether now is the time to buy or wait on the sidelines? We’re not sure exactly what one thing it is, or if it even is one thing at all. More likely it’s a mix of factors that plays into their emotions, but one thing is in common—when buyers pull back, they almost all do it in sync—almost like the young, amateur traders transforming markets.

The Pandemic Changed the Norms

Prior to the Pandemic we took great pride in prognosticating seasonal real estate cycles by examining past performance of the market at various times of the year and during various cyclical events. Take for example election years. Whether it’s a presidential election year that stands to be decisive, such as Trump v. Biden, or even a less momentous mid-term election, we were pretty much guaranteed to realize a buyer pull-back from late September through mid-November. That was just one of the expectations that we had to throw out the window in 2020.

Of course, the stock market swinging wildly sets people off, and any hint of tech companies laying people off sends the pool of buyers into hibernation.

We had a lot of variables stacking up signaling buyers may take a siesta from house hunting during the Pandemic while jobs, the economy, really the entire future was in unchartered waters, but instead buyers came out in droves snapping up everything and anything so long as it had a yard—go figure. While in hindsight we can see the motivations for many of these first-time buyers jumping into the market—working from home while home-schooling two children in a 900 square foot apartment with not even a yard for sustenance is enough to get any procrastinator off the fence, though we certainly wouldn’t have bet on it.

We started this year with unemployment moderating, but inflation gathering steam, the “R” word entering economists’ vocabulary again, and threats of war in Ukraine which stood to further impact prices. Yet in Q1 we saw one of the biggest bull runs in the housing market we’ve seen in years.

While the median home price in San Mateo County went up 7% between Q1 of 2021 and Q1 of 2022, in Belmont the increase in those two periods was 28%.

So, what’s in store for Q2? Where is the market headed now as the landscape changes?

Even the mention of possible interest rate hikes tends to knock a lot of buyers off of the fence as they finally realize that the luxury they had to purchase a home “whenever”, knowing the rates would always be low, may be coming to a close. It’s odd too, as rates were nearly as high in 2019 and nobody seemed to care.

But this is different. Rate hikes are scheduled for this year and even though the Federal Reserve rate doesn’t automatically correlate to a hike in Mortgage rates, the markets take advantage of it to raise mortgage rates, and profits.

We didn’t so much as predict what would happen when the government artificially kept mortgage rates low after the Great Recession housing debacle in 2007, it was more akin to watching a plane crash from the sky. You don’t have to see it hit the ground to know what will happen.  So, what IS happening that we knew would be inescapable? Homeowners who refinanced or buyers who purchased a home when rates were at historic lows—in the 2-3% range, aren’t going to be selling their home and moving anytime soon. Sure, in California they can now carry their low property tax base, but they can’t carry their low interest rate—so many are going to stay put and there will be even less inventory than there has been, and which will once again put upward pressure on housing prices. 

However, the current rise in interest rates will have a mitigating effect on any upward pressure on home prices. 

The current rates for mortgages that went from 2.5% to 5.2% now makes the monthly mortgage payment on a median price home in Belmont go up more than $4,000 a month, which is a 33% increase. Effectively, that means a buyer’s purchasing power just dropped by 

~ $650,000.

What we cannot predict is the outcome of how the collision of these two contrasting forces will end.

The short of it is we don’t know what buyers will do going forward. Will they wait for a while to see if rates come back down, or jump in before they go higher? Or, will they jump in anyway while others are sidelined and refinance later? Will it put a cap on over bidding? Will higher interest rates dissuade homeowners from selling even if it’s to downsize, to keep a lower payment/interest rate? Will that be enough to throttle back inventory further to mitigate the impact of fewer buyers in the market?

On a micro scale, we have seen a recent slowdown in heightened level of enthusiastic home buying activity in the last few weeks, but then again we see that every year near tax time, Easter and Spring breaks—stay tuned.

Drew & Christine Morgan are REALTORS/NOTARY PUBLIC in Belmont, CA. with more than 25 years of experience in helping sellers and buyers in their community. As Diamond recipients, Drew and Christine are ranked in the top 50 RE/MAX agents nationwide and the top 3 in Northern California.  They may be reached at (650) 508.1441 or emailed at info@morganhomes.com.

For all you need to know about Belmont, subscribe to this blog right here. You can also follow us on Facebook at https://www.facebook.com/Morganhomes and on Twitter @ https://twitter.com/morganhomes

The information contained in this article is educational and intended for informational purposes only. It does not constitute real estate, tax, insurance or legal advice, nor does it substitute for advice specific to your situation. Always consult an appropriate professional familiar with your scenario.

BELMONT HOME VALUES CONTINUE THEIR ASCENT AS SALES DECLINED

It wasn’t just Sir Richard Branson and Jeff Bezos that have shepherded in a new era. Belmont single family homes values have continued their pandemic born steep ascent.

First, the numbers:

Belmont home values continued their astronomical ascent as sales declined in September of 2021. Belmont sales of single family homes fell 9.6% from September of 2020 to the same period in 2021. Compared to September of 2019, pre-pandemic, sales were up this year more than 53% in 2021.

The average time it took to sell a home went down from 19 days to 12.

The Months of Inventory—the time it would take to sell all the homes on the market at the current rate of sales—went from .8 months down to .5, and the available inventory of homes to choose from went from 21 in 2020, to only 11 in 2021. To put this into perspective, the U.S. housing inventory sits at 6.1 months.

The median home price rose from $1,925,000 to $2,235,000, close to a 12% increase YOY. It’s important to note that the size of homes selling in these two periods went down, from 2,150 ft² to 1,737 ft², a 19% decrease, which serves to only magnify the cost to the consumer. 

The price per ft² in 2020 was $979 and increased to $1,299 in 2021. It’s typical for the price per square foot to go up when smaller homes are selling, since it does not take into consideration the lot which the homes sit upon.

What is noteworthy is while the size of homes selling in these two periods went down 19%, prices went up 12%—illustrating that for 12% more in 2021, one could only get a 19% smaller home.

The percentage sellers received also went up from 101% of the asking price in 2020 to 112% in 2021, underscoring the strong demand.

Due to the increase in home values, the cost of home ownership, while borrowing money at 3% interest, went up $1,000 per month in just the last year. If interest rates were to rise to just 4%, the median price home in Belmont would cost ~ additional $1,000 per month.  

According to Mike Farrell of Wells Fargo, a person wishing to buy the median priced Belmont home with 20% down in 2020 needed to earn ~$225,0000 a year, while in 2021 that rose to $300,000 per year. That’s assuming the borrower has no other debt, such as credit card, car payments or school loans.

For buyers with stock options, puting a larger down payment may be an option to increase their buying power without worrying about needing more income to qualify for a mortgage. But for buyers with traditional salaries—essential workers from Teachers, Police, Firefighters, and hospital workers to grocery store employees, and restaurant workers who, without help from outside wealthy family members, will have little hope of ever buying into the dream of home ownership in the Bay Area.

Unfortunately, we see the same story playing out in San Mateo County as a whole.

The most important take-aways from these numbers are the median home price, which jumped 6% YOY, while the size of homes selling were 2% smaller, and the percentage the seller received of their asking price jumped 6 percentage points from 102% of asking to 108%.

As a direct result of the pandemic, many apartment renters, and condominium owners, found to work from home—and in many cases home school children, they needed more space. Since public gatherings were off the table—they wanted a yard as well as no common areas such as elevators. This created a glut of condominiums on the market.

It goes without saying, that we are in unchartered waters in terms of housing demand. Looking at this data from Case-Shiller®️, as compiled by FRED®, which covers the San Francisco MSA (Metropolitan Statistical Area) comprised of five of the nine Bay Area Counties, one can see the dramatic spike in home values beginning in 2020.

If you have considered selling your home and would like to maximize the proceeds from your sale, please contact us for a no obligation assessment.

Drew & Christine Morgan are REALTORS/NOTARY PUBLIC in Belmont, CA. with more than 25 years of experience in helping sellers and buyers in their community. As Diamond recipients, Drew and Christine are ranked in the top 50 RE/MAX agents nationwide and the top 3 in Northern California.  They may be reached at (650) 508.1441 or emailed at info@morganhomes.com.

For all you need to know about Belmont, subscribe to this blog right here. You can also follow us on Facebook at https://www.facebook.com/Morganhomes and on Twitter @ https://twitter.com/morganhomes

The information contained in this article is educational and intended for informational purposes only. It does not constitute real estate, tax, insurance, or legal advice, nor does it substitute for advice specific to your situation. Always consult an appropriate professional familiar with your scenario.

Housing Market’s Unbearable Heat

The Bay Area housing market is as hot as it’s ever been for sellers, but the real heat is on buyers to get a home as throngs enter the market. It’s no longer race to get a home, it’s a marathon.

Frustrated buyers are using low interest rates which have empowered them to bid higher in multiple offer situations. The result, prices are rapidly rising.

Take San Mateo County for example. We compared May of 2020 to this year and across the board, the numbers show high demand and higher prices.

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Reports of low inventory creating the feverish market are simply misreported. Low inventory implies there are no homes for sale, but looking at the numbers, one can easily see that the number of New Listings are up 14.2% over last year, while inventory of available homes to purchase is down 36%. There are scant homes to choose between, because more homes are selling and faster than before, not because fewer homes are coming to market.

The Months of Inventory in the last column says it all. Months of inventory represents the time it would take to sell the current inventory of homes at the current sales pace. That’s down from 2.4 months of inventory last year to less than one month of inventory in 2021 (the national average is typically six months of inventory).

The YOY median home sale price increase of a staggering 26% YOY illustrates the effect of demand outstripping supply, as buyers outbid one another to secure a home before interest rates rise, and their buying power is reduced, or their mortgage payment goes up.

In our town of Belmont, we see a similar pattern, but since it’s a smaller sample size, some of the numbers are more pronounced. 

Take the number of new listings for sale—up 53% over 2020, yet the available homes to sell are down 35%. This is clearly due to the 122% increase in closed sales.

It’s understandable to question why then did the median home prices rise half of what they did in the overall San Mateo County stats? Simply put, Belmont started with a higher median home price, and has less elasticity in the price threshold to increase at the same rate as less expensive areas included in the San Mateo County Statistics.

What could cool this superheated housing climate? Any number of things, but higher interest rates could be the first to show on the horizon.

Drew & Christine Morgan are REALTORS/NOTARY PUBLIC in Belmont, CA. with more than 25 years of experience in helping sellers and buyers in their community. As Diamond recipients, Drew and Christine are ranked in the top 50 RE/MAX agents nationwide and the top 3 in Northern California.  They may be reached at (650) 508.1441 or emailed at info@morganhomes.com.

For all you need to know about Belmont, subscribe to this blog right here. You can also follow us on Facebook at https://www.facebook.com/Morganhomes and on Twitter @ https://twitter.com/morganhomes

The information contained in this article is educational and intended for informational purposes only. It does not constitute real estate, tax, insurance or legal advice, nor does it substitute for advice specific to your situation. Always consult an appropriate professional familiar with your scenario.