Unveiling Housing Trends: The New, New Market—Understanding San Mateo County and Belmont Markets – and a 2023 Wrap Up…

Get ready to be captivated by the unveiling of the New, New housing market – a realm that has never been encountered.

Whether you’re already a homeowner or dreaming of becoming one, this end-of-year recap is your golden ticket to exploring the mesmerizing future of Peninsula Real Estate.

Brace yourself for a paradigm shift that might just redefine the real estate game for years to come.

In order to put our New, New market into perspective, a little retrospection is in order. We’re about to unravel the mystery into the feverish ride of the government’s bond-buying bonanza that kicked off in 2008, akin to a superhero swooping in to rescue the struggling housing market and economy from their doldrums but with consequences more obscured by time…

Imagine people in 2013 dancing a jig as they refinance their homes at historically low mortgage rates, hitting new lows every year. Homeowners, practically giddy, were high-fiving each other at snagging a sub 3% rate, watching their mortgage payments take a nosedive, and then going on a shopping spree for new toys like they just won the lottery. 

Ah, the ironic nostalgia hits like a blast from the 1998 dot-com past. It’s like reminiscing about the Internet boom and bust, where Silicon Valley was popping champagne bottles, celebrating a new millionaire being minted every day. It was all glitz and glamour until someone finally shouted, “Hold up, is there even a ‘there’ there?

Now, we’re not claiming to be fortune-tellers, but more than a decade ago, we threw out a warning in this article. We were like, “Hey, if these rates stay low forever, everyone and their grandma will refinance or buy a home at these crazy low rates, and they might never want to move again!” It turns out we might have been onto something.

We did a fast rewind of how our housing market got here in this post back in August of 2023. Fast forward to where we are today…

The 2023 housing market results are now clear. Let’s compare the years and quarters to understand what happened:

San Mateo County (SMC) Overview:

Comparing 2019 to 2023:

  • Home sales went down by 17%.
  • New listing inventory decreased by 16%.
  • Days on the Market decreased by 11% to 25 days.
  • The Median home price went up by 16%.
  • Sellers received slightly less of the asking price, down 1% to 103% of asking.

Comparing 2022 to 2023:1

  • Home sales decreased by 17%.
  • New listing inventory dropped by 20%.
  • Days on the Market increased by 25% to 25 days.
  • The Median home price went down by 5.5%.
  • Sellers received less of the asking price, down 3.7% to 103% of asking.

1The decline in 2023 is emphasized by the unusual increase in home activity during the first quarter of 2022. The market in San Mateo County remained rather flat from Q4 2022 to Q4 2023.

Comparing Q4 2022 to Q4 2023:

  • Home sales were down by 6%.
  • New listing inventory increased by 9%.
  • Days on the Market increased by 15% to 30 days.
  • Median home prices remained unchanged year over year.
  • Sellers received less of the asking price, down 3.9% to 99% of asking.

For Belmont:

Comparing 2019 to 2023:

  • Home sales went down by 23%.
  • New listing inventory decreased by 24%.
  • Days on the Market decreased by 9% to 20 days.
  • The Median home price went up by 25%.
  • Sellers received the same percentage of the asking price.

Comparing 2022 to 2023:

  • Home sales decreased by 13%.
  • New listing inventory dropped by 22%.
  • Days on the Market increased by 33% to 20 days.
  • The Median home price went down by 10%.
  • Sellers received less of the asking price, down 7% to 104% of asking.

Comparing Q4 2022 to Q4 2023:

  • Home sales went up by 9%.
  • New listing inventory decreased by 4%.2
  • Days on the Market decreased by 24% to 22 days.
  • Median home price increased by 2%.2
  • Sellers received more of the asking price, up 5% to 105% of asking.

2What is helping to keep home values steady is the short supply of homes for sale, maintaining the months of housing inventory to approximately a one-month supply.

As We See It

When the government bought bonds to drive down interest rates in 2008, it was a welcome jolt to jump-start a beleaguered housing market and economy.

People could refinance to historically low mortgage rates, which seemed to reach a new low each year. Homeowners were giddy at landing a sub 3% rate, watching their mortgage payments fall by half, and snapping up new toys with their excess pocket money like drunken sailors.

Not that we’re not claiming to be prophets. Still, we were first concerned about this more than ten years ago, correctly calculating that if these low rates remained low long enough, nearly everyone would have refinanced or purchased a home with a historically low rate, which, in all likelihood, would not be seen again in our lifetime.

It didn’t take much prognosticating in our 2013 article to realize that sellers would be reticent to kiss goodbye at their sub 3% rate to get another bedroom when rates returned to historical norms.

The New, New Market

Enter the Pillars of Movement – the mystical forces that shape the real estate universe. In our 2013 article, we saw it coming: When interest rates decide to do a head-snapping reversion to historical norms, sellers won’t be willing to bid adieu to their sub 3% rate just for an extra bedroom. And guess what’s next – the pool of potential inventory shrinks, thanks to one pillar of the housing inventory.

Pillars of Movement

Yet another pillar emerges – one insulated from rate ramifications—the sellers cashing out and saying so long to the Bay Area with pockets full of cash, ready to conquer the world and buy their forever home mortgage-free.

And sure, there’s always the ebb and flow of people coming and going due to job transfers, but only some people leaving want to throw in the housing towel. Because let’s face it, once you’ve left the Bay Area, rejoining the housing game is like trying to win the lottery twice – expensive and seemingly impossible.

Now, behold the last pillar – the legacy homes. Those sacred abodes where families were raised, but now, faced with the ultimate decision for sustainability or the inevitable march of time, these homes hit the market.

As we peer into the future of 2024, a foreseen vision emerges:

  • Anticipate the descent of mortgage interest rates in Q2, beckoning buyers back into the market.
  • This shift is poised to elevate home values, with a forecast of modest increases in housing prices.
  • In this unfolding scenario, both buyers and sellers are likely to acclimate to market interest rates, proceeding with life’s plans.
  • While inventory is projected to see a slight uptick, it is not expected to significantly diminish home values or disrupt the delicate interplay of low supply and high demand.

Drew and Christine Morgan are experienced REALTORS and NOTARY PUBLIC in Belmont, CA. They have assisted buyers and sellers in their community for over 30 years. Drew and Christine have received the coveted Diamond award and ranked among the top 50 agents nationwide and top 3 in Northern California by RE/MAX. To contact them, please call (650) 508.1441 or email info@morganhomes.com.

For all you need to know about Belmont, subscribe to this blog right here. You can also follow us on Facebook and on Twitter.

This article provides educational information and is intended for informational purposes only. It should not be considered as real estate, tax, insurance, or legal advice, and it cannot replace advice tailored to your specific situation. It’s always best to seek guidance from a professional who is familiar with your scenario.

BROKER | MANAGER | NOTARY

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.

How to Stop Agents from Behaving Badly at Your Expense

If you’re considering selling your home, you’ve probably also been thinking about how to go about finding the right real estate agent to help.

Choosing precisely the right real estate representation makes a bigger difference than you might ever imagine. So where does one begin?

DEFINING A TOP AGENT

REALTORS banter around the term “Top Agent” quite loosely—Top 1%, Top 10%, etc. They earn that title for dollar volume in sales—not any independent measurement of the quality of their work or survey from past clients. In the Bay Area, most agents surpass any threshold for earning the Top award distinction due to the median sales prices—not the they are any better than their colleagues in Kansas who need to sell 10 times the number of homes to garner that distinction.

Discard any idea of using on-line companies that recommend agents or say they will “find” you a perfect match. These are nothing more than companies extorting money from agents to be in their directory. They are not recommending the best agents, but rather the ones willing to pay to be recommended.

YELP tends to do the same thing. Although the reviews are organic in nature, agents must pay to be listed at the top of the search, even though they are often far from top agents.

Agents with the most listings or yard signs in a neighborhood are also not necessarily the agent doing the best job, they’re just getting the most attention.

Doing a native on-line search is more time consuming, but it will yield you the best results. Search for local agents that have been in the business long enough to have learned the ropes at someone else’s expense. Any real training of agents happens in the field, not the classroom. Look for examples of their work product on their own web sites—video tours, photos, and descriptive informational pieces.

THE MEET

Once you’ve found an agent you’d like to meet with, reach out and set up an initial meeting. Don’t call three of four agents all at once. It takes hours to prepare for a meeting and you’re wasting agents’ valuable time.

If you’re not happy with the first agent you meet, by all means contact another.

No two REALTORS are the same and each one acts essentially as their own independent contractor. They develop a business plan on their own and so you’re really hiring the agent, not the company they work for.

Are their differences in the companies’ agents work for? Sure, but far less important than the agents you’re hiring.  Most agents will focus on how big (or small) their company is—how much “market share” and how much “technology” they have but how does that really benefit you?

The fact is most agents are capable of selling your home in this seller’s market, but the service they offer and the attention to detail and marketing varies greatly.

With that invariably comes differing degrees of success and results.

SELECTING AN AGENT—WHAT QUESTIONS TO ASK

These are the questions most sellers are prepared to ask:

  • How much do you charge?
  • What do you think my home is worth?

More detailed sellers might throw in a few more:

  • How long have you been in business?
  • In what cities do you specialize?
  • Do you work with mostly sellers, or buyers?
  • Do you have referrals with whom we may speak?

And that’s pretty much the extent of most sellers’ questions. The two which paradoxically seem to carry the most weight are two sellers always ask—how much is my home worth and what do you charge. These are two very important questions, but they should have little to do with choosing an agent. You can always find a discount agent to sell your home and you will most certainly get cut rate service and results as well.

The price the agent tells you your home is worth should also have little to do with whether you hire them. You get to pick the asking price for your home and if you’ve watched sales in your neighborhood, you probably have a pretty good idea at what price homes are selling.

Be careful not to decide on your agent based solely on the highest estimated sale price you hear, since that agent may not know your market or could be trying to “buy” your listing—meaning they are trying to get you to list with them under the pretense that they can magically get more for your home just by asking for it. Unfortunately, it just doesn’t work that way.

Buyers choose the price they are willing to pay for your home—not you as a seller or your agent!

We’ve heard sellers say, “We’re going to hire the REALTOR that sold our friends house—they said that they liked him and felt that he did a good job.”

And perhaps they did do a good job, but then again maybe the seller just thought because they received multiple offers well over the asking price that they must have done a good job. But could they have done better? 

THE MOST IMPORTANT QUESTION

Results. Before you’d consider having any important surgery done, wouldn’t you like to know what your Doctor’s survival rate is for his patients? How many operations has she performed? How much they charge would probably be the least of your concerns, so long as you survive to pay the bill.

Wouldn’t it be nice before booking a flight to know how long the pilot has been flying and how many hours they’ve logged?

Any agent can proclaim to be the best, or sell their listings for more in a shorter period of time, but you need to ask for proof. 

IT DOESN’T GET UGLIER THAN THIS

These sellers probably thought their agent did a good job as well. After all, they received $126,000 over asking!

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When the sellers hired these agents, they no doubt never expected this shoddy work product would be what they received—and we can all but guarantee that it’s not what was promised.

This is what is referred to as a Moral Hazard—wherein under the contractual protection of a listing agreement an agent takes advantage of their client—promising one thing and doing another.

But as bad as the photo of the home on its side may be, the agents went on to boast in the private comments (in red) to all agents, that had they waited to hear offers, they would have received three more—and one back-up offer was for $25,000 more than the early offer they may have steered their seller into accepting. To add insult to injury, when they went back into the listing to amend the comments with self-aggrandized accolades once it closed, they still never took the time to fix the photo. So great job Dino!

This may be a gross example of agents taking advantage of a seller, but many agents are guilty of taking the path of least resistance, (e.g. work), to get paid.

We can’t count how many times we’ve represented a buyer, delivered an offer only to receive a call late at night that the seller accepted a different offer. Many times, if the agent had reached out to us, our buyers would have stepped up in price and the seller would have received even more for their home.

We often download disclosures for our buyers which is an indication that we have a very interested party. An offer date is set and we rarely if ever receive a call from the listing agents asking if our buyers are interested in making an offer, and if not, why.

BROKER TOUR, OPEN HOUSES & ADVERSE SELECTION

Agents will probably tell you that they will hold open your home for all agents to view on a special day referred to as “Broker Tour Day”. They may even tell you that they will serve food to attract the masses. And unless you ask if they will be present—they usually won’t. Agent Teams that have someone different for every aspect of the job are especially guilty of this. Many times, they don’t even go that far—they have a vendor such as a mortgage company hold open the home so they don’t have to bother being present. Other times we’ve seen the “Catered Broker Tour Lunch” promised to the seller relegated to a tray of stale sandwiches on a counter with the agent nowhere to be found. Being present at an open house is critical to answer other agents’ questions about the home. 

Unfortunately, these breaches in moral behavior are more common than not.

YOU CAN DO BETTER

Do your homework. Research agents organically on-line to see what work product they are capable of and delivering. Then, be armed with the best questions most agents are ill prepared to answer.

If you’re interested in receiving a list of questions every seller should be asking, we’d be glad to deliver 35 of the best questions when we meet in-person for our initial visit.

Here’s a preview…

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.

Fed Interest Rate Hikes and Your Mortgage

By now you’ve probably heard that interest rates will soon be rising. The media reports simple sound bites such as, “Interest Rates Rise” which is of little help in understanding to which interest rates they are referring—credit card debt, student loan, small business loans or home loans?

Why are the Feds Raising Rates and What will it Mean?

The Federal Reserve rate making the news is set by the Federal Open Market Committee, which is part of the Federal Reserve. It is used as part of a monetary policy to attempt to help smooth the inevitable business cycles that the economy experiences. 

When we hear “The Feds are going to raise rates”, it’s important to note that specific change to the Federal Reserve overnight rate affects adjustable-rate mortgages. One must also watch Treasury Notes and Bonds for volatility in fixed rate mortgages.

The Federal Reserve keeping interest rates low helped us all through the 2007-2009 recession and again was employed during the Pandemic to help keep the economy from wild market force swings.

After the housing bubble burst in 2007, conforming loans actually had higher interest rates due to their greater propensity for default, while Jumbo loans enjoyed smaller rates of default as they were often tired to a properties with more equity.

But the Fed needs room to maneuver and raising the rate to more normal levels gives them some ammo in their arsenal in the event they need to employ their interest rate weapon again.

Since the attack on Ukraine, the feds have already signaled that they will slow any rate hikes this year for fear of stalling the economy. Once they begin raising rates it will serve to slow down the current high inflation by dampening spending.

This is a good illustration of how the Feds use this tool during recessions to stimulate or suppress the economy.

What Effect Interest Rate Hikes will have on Home Loans?

As we discussed in an earlier blog,  the Federal Reserve rate—does not necessarily mean home loans will follow suit—though some often do. 

  • The 10 year Note (typically affects 15 year fixed rate mortgages)
  • The 30 year Bond (typically affects 30 year fixed rates)
  • The Federal Funds Rate (affects Adjustable Mortgage rates)

As interest rates on Treasury notes rise, banks can raise the interest rates on new fixed rate mortgages. That means home buyers will have to pay more each month for a loan which in turn takes away purchasing power. Typically, when interest rates rise, home prices fall. When housing prices fall, the economy slows.

One of the rates most often discussed is the 10-year note. This frequently serves as a benchmark for setting long-term rates like commercial and residential mortgages. This rate is not directly set by the government. It is determined by market forces, often as simple as supply and demand.

Although today’s rates aren’t crazy by historical standards, they are higher than they have been in years, and that’s likely to have a small effect in the housing market — though we don’t see housing prices to declining significantly.

“More than a decade of chronic underbuilding and millions of millennials moving into the homebuying stage of life has created a significant imbalance between housing supply and demand,” McBride from Bank Rate said.“While rapidly rising mortgage rates may temper the demand somewhat, don’t expect home price appreciation to come to a halt. A more modest pace of appreciation is the likelier outcome.

More About Mortgages

Conventional mortgages fall into two main categories: “conforming” and “nonconforming” loans.

Conforming loans are home loans that are purchased by government entities such as Fanny Mae and Freddie Mac and must meet their guidelines such as the amount of down payment. These organizations make the access to more mortgage loans available. These tend to be smaller loans.

The Federal Housing Finance Agency (FHFA) raised the 2022 Conforming loan limits in California. This allows some mortgage loans that were previously labeled “Jumbo” to now be placed in the Conforming loan limit category. Conforming loans in California generally come with better mortgage rates and easier underwriting requirements.

A ”Jumbo” loan is considered a non-conforming loan, when it is in excess of the loan limits allowed for a conforming loan. 

What Are The 2022 Conforming Loan Limits in the Bay Area?

San Francisco, San Mateo & Santa Clara all have the highest limits available—$970,800 for a conforming loan.

What Does this Mean for You?

If you’re a homeowner thinking of selling, higher rates could impact the amount buyers can overbid for your home, as higher rates impact purchasing power.

If you’re a buyer, it means money will cost you more going forward so finding a home sooner rather than later could save you thousands of dollars. Every time there’s a tick up in interest rates buyers get more anxious about completing a purchase—so expect more short-term competition.

Our belief is that a modest rise in the fed rate will have a nominal effect on interest rates, but since lenders can react in any way they choose, all bets are off to definitively say how the upcoming rate hikes will impact our local housing market.

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.

$8,000 Tax Credit Extended to September 30, 2010

Missed out on the $8,000 first-time homebuyer tax credit?

 You'll be glad to know you can still receive $8,000 when you buy your first home through us.

 How do we do it? Simple. If you buy a home through us between now and September 30th, 2010 we will credit you 1% of the purchase price up to $8,000 in escrow for your closing costs.

 What's the difference between our credit and the government tax credit?

Well for starters you won't have to wait until next year's tax filing to get the refund-we credit it to you at closing so you can really put it to work.*

 Call us for details.

 

 Drew & Christine Morgan

"Helping People Make Good Decisions"sm

 

Carlmont Associates

1940 Ralston Ave.

Belmont, CA 94002

01124318 & 01174047

Office: 650-508-1441

Fax:    650-591-4329

 

*Some restrictions apply.