Perched above the Peninsula, this is not a home that whispers—it unfolds. Light, air, and horizon become part of the architecture, with sweeping views from the San Francisco Bay to Mt. Diablo, shifting from crisp morning clarity to a warm evening glow.
An inviting front patio entry creates a sense of arrival before the home reveals itself in a series of thoughtfully designed spaces. A gracious reception room offers a moment to pause, then opens to a grand living room where walls of glass frame cinematic views and draw the outdoors in.
The multi-level perimeter decking doesn’t simply wrap the home—it enhances the living experience. Each vantage point extenuates with views that evolve throughout the day, offering distinct settings for morning coffee, afternoon gatherings, and evenings under an open sky. A level rear yard with mature rose bushes offers a softer, more relaxed outdoor retreat.
Five generously proportioned bedrooms and three updated full baths, two private ensuites—one on the main level—provides flexibility for guests, extended living, or changing needs. The galley-style kitchen and dining area balance efficiency with warmth and features a KitchenAid® five-burner glass cooktop, Broan® Rangemaster stainless hood, GE® TrueTemp self-cleaning oven, LG® dishwasher, and GE®stainless French door refrigerator—all designed for reliable everyday performance.
Interior features include recessed lighting and real wood parquet flooring, adding texture and continuity. Additional amenities include a distinctive slate-style roof, a two-car attached garage and included washer/dryer. ADU potential on the lower level.
Moments from downtown San Carlos and Belmont, the location offers easy access to a vibrant mix of dining, shopping, commute routes and daily conveniences. With approximately 3,148 sq. ft. of living space on a 7,000 sq. ft. lot, it is also within the boundaries of Carlmont High, a California Distinguished School.
This home balances presence with practicality.
Stunning views of the San Francisco Bay and Mt. Diablo
Generous five bedrooms, including two ensuites
Three updated full baths
Multi-level perimeter decking with breathtaking views
Enticing patio entrance
Gracious reception room
Grand living room with stunning views
Galley-style kitchen adjacent dining room
KitchenAid® Five-Burner glass stovetop
GE® True Temp self-cleaning oven
LG® Dishwasher
GE® stainless French door refrigerator
BROAN® Rangemaster stainless hood
Recessed lighting
Parquet hardwood flooring
Large level rear yard area studded with mature rose bushes.
Recently, we were contacted by two families who had inherited their parents’ homes after the passing of the surviving parent. Unfortunately, in both situations, they had not spoken with a real estate professional beforehand, and it appears their attorney may not have been fully up to date on the newer rules.
Both families intended to move into the homes they inherited. However, because certain steps required under California’s Proposition 19 were not completed in time, the properties were reassessed to the current market value for property tax purposes.
As a result, these families—who otherwise would have been able to move into their parents’ homes and retain a much lower tax base—are now facing significantly higher property taxes. In some cases, increases like this can be financially overwhelming, leaving heirs with the difficult choice of either paying the new, higher property tax or selling the property despite wishing to reside in the home.
We felt this was important enough to bring to people’s attention, as these rules can have a major impact on families inheriting property in California. Understanding the requirements ahead of time can help prevent costly surprises and ensure that the available benefits are preserved.
How Proposition 19 Affects Children Inheriting Their Parents’ Property
California’s Proposition 19 significantly changed how property taxes are handled when children inherit real estate from their parents.
For decades under Proposition 58, children could inherit property and keep the parent’s low property tax base—even if the home became a rental or second home. Proposition 19 narrowed those rules considerably.
If a child inherits a parent’s home, the property tax base can only be preserved if three conditions are met:
1. The home must become the child’s primary residence. The child must move into the property and claim the Homeowners’ Exemption. If the home is kept as a rental, second home, or investment property, it will generally be reassessed to current market value.
2. The tax base transfer now has a limit. The inherited property can keep the parent’s tax base only up to $1,000,000 above the parent’s assessed value. If the home’s market value exceeds that threshold, the amount above the limit is added to the property’s taxable value.
3. The claim must be filed within one year. The heir must file the parent-child exclusion claim with the county assessor within one year of the transfer (usually the date of death). If this deadline is missed, the property may be reassessed to the current market value, which can significantly increase the property taxes.
➡︎ This is where many people make costly mistakes. Some heirs never file the claim at all, others miss the one-year deadline, and many confuse it with the two-year window that applies when homeowners transfer their own tax base to a replacement home(see that rule below), under Proposition 19. Understanding the difference is critical to preserving the lower property tax base.
Why This Matters
Many California homeowners purchased their homes decades ago, meaning their taxable value may be far below current market prices. Under Proposition 19, heirs must now decide whether to move into the property, sell it, or accept a potentially large increase in property taxes.
For families planning estates—or for heirs inheriting property—understanding these rules is critical to avoiding unexpected tax consequences.
Another important provision of Proposition 19 allows certain homeowners to transfer their existing property tax base to a new home when they sell their current one.
Homeowners who are 55 or older, severely disabled, or victims of a natural disaster may transfer the taxable value of their current residence to a replacement home anywhere in California. This can significantly reduce property taxes when downsizing or relocating.
To qualify, the replacement home must be purchased or newly constructed within two years of selling the original property.
After purchasing the replacement property, the homeowner should file the Base Year Value Transfer Claim with the county assessor. While the claim can typically be filed up to three years after purchasing the replacement home, filing sooner ensures the tax benefit is applied from the beginning of ownership.
Understanding these timing rules can help homeowners preserve substantial property tax savings when moving to a new home.
Proposition 19 has introduced rules that many families are still learning about—often after the fact. As we’ve seen recently, missing a deadline or not understanding the requirements can lead to property tax increases that could have been avoided with a little planning.
If you or someone in your family may be inheriting a property, or if you are considering selling and transferring your tax base to another home, taking a few minutes to understand the rules ahead of time can make a meaningful difference. If we can ever be a resource to help clarify how these changes may affect you, we are always happy to help.
Drew and Christine Morgan are the founders of MorganHomes, their independent brokerage based in Belmont. They also maintain a strategic affiliation with RE/MAX GOLD, combining the flexibility of an independent firm with the resources of one of the largest real estate networks.
As longtime Belmont residents and real estate professionals with more than 30 years of experience, they have helped generations of local families buy, sell, and make smart real estate decisions. Drew is also a Notary Public, providing additional convenience and support for clients when it matters most.
Their consistent performance has earned them RE/MAX’s prestigious Diamond Award, placing them among the top agents nationwide and among the top performers in Northern California.
If you have questions about the Belmont market or would like to discuss your situation, you can reach them at (650) 508-1441 or info@morganhomes.com.
For ongoing insights about Belmont real estate, local market trends, and community updates, you can subscribe to this blog or follow MorganHomes on Facebook and X.
Disclaimer
This article is provided for educational and informational purposes only. It is not intended as real estate, legal, tax, or insurance advice. Because every situation is unique, we recommend consulting with a qualified professional, like us, to understand your specific circumstances.
A trend is emerging wherein sellers opt to exclusively remunerate their own agent, leaving the buyer’s agent compensation subject to negotiation by buyers.
Back in November 2022, we wrote an article titled “The Big Risk in Gambling on Bay Area Home Values” where we predicted that this day would come. We expected that Q1 in 2023 would see a significant decrease when compared to 2022 but are we comparing apples to apples? We suspect that by Fall, the year-over-year changes will be more accurate since the first three months of 2022 were an anomaly due to a surge in home prices (not values).
Last year in April, the Bay Area housing market reached its highest point, driven by the fear of impending interest rate hikes. However, since May 2022, there has been a decline in the market. The decline can be attributed to the interest rate increases, which ironically is what led to an increase in housing values in the first quarter of 2021.
This unsustainable and rather sudden ramp-up in bidding wars, and consequently home values, ended rather abruptly in mid-April.
Currently, in San Mateo County, home values have reverted to levels seen in August of 2022.
Comparing the months of April YOY for San Mateo County, the dramatic shift is seen across the board in almost every category.
Fewer sellers are willing to sell in today’s market because as most have locked into fixed-rate loans in the 3% (or even less) range.
With fewer sellers willing to move, the number of new listings is down 38%. In any other market, this alone would create a shortage of inventory of homes for sale which in turn would drive up prices. However, the higher interest rates that are keeping sellers in their homes longer, are also eroding the purchasing power of buyers. This is helping to keep our market near equilibrium—a state which historically is rarely seen, and if so, never for very long.
We notice a similar trend in the city of Belmont, but it’s more pronounced because the sample size is small, which makes fluctuations more noticeable.
Opposite the Law of Large Numbers, a foundational concept in statistics that if a sample is large enough, the sample average should be close to the mean, the law of small numbers provides us with a “Belief in the Law of Small Numbers.” In their paper, Kahneman and Tversky—who famously explored human heuristics, define the Law of Small Numbers as the mistaken belief that a small sample accurately reflects the probabilities of a population. In small data sets, you can find patterns where none exist!
Such is often true when isolating the numbers for home sales in Belmont.
Here we note the magnified effect of the market as compared to San Mateo County as a whole.
That said, there’s no doubt about the YOY change. In 2023 the size homes that sold were 22.5% larger, yet sold for 7.7% less, indicating the true YOY value shift to be close to a 30% drop.
The average time it takes to sell a house has increased by 200%, which shows that buyers are becoming pickier. However, it’s also happening because many sellers are still setting their prices based on past market conditions and pricing their homes too high.
It’s unfortunate that some agents prioritize making a sale over being honest with the sellers. They may tell the sellers what they want to hear, instead of what they need to know. Additionally, sellers often choose agents based solely on the price estimate the agent gives them for their home, which perpetuates this behavior.
At present, the inventory of homes available for sale is only enough to last for about a month. This is a notable decrease from the 9.5 months of inventory during the 2008 economic crisis.
As we move past April, the monthly figures will gradually approach and eventually exceed the year-over-year numbers of 2023. However, we do not anticipate this to occur until the year 2024.
It is imperative that you price your home correctly if you are considering selling it. This holds especially true in the current market. Do not hesitate to contact us for an honest evaluation.
Drew and Christine Morgan are experienced REALTORS and NOTARY PUBLIC located in Belmont, CA. They have been assisting 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.
or 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.
It seems like forever since the housing market has been in balance. The downturn in 2007-2009 was followed in 2012 by an 11-year run up in Bay Area home values. Are we finally reaching equilibrium?
The first quarter of 2023 is in the books, and the housing numbers are in. If you’ve been listening to local news, one might believe the housing market is on a slippery slope and headed towards a trough.
The numbers sure make it look that way too, but is there more to report? The short answer is, there always is.
Looking at San Mateo County as a whole, here are the YOY (Year over Year) numbers comparing 2022 to 2023:
In every category the numbers appear to indicate that we’re in a declining or buyer’s market, but we’re not. Why?
Half of the homes are still selling for over asking, while the other half are selling for less, which is strongly indicative of a market in balance. Take a look at these graphs we prepare–they show the market is beginning to level out.
NEW LISTINGS
This number is down because sellers with 3% interest rates are reticent to sell their current home only to find their new mortgage on a replacement property closer to 6%. This decline was amplified by the historically inclement weather.
INVENTORY
This is a measurement of how many homes remained for sale at the end of the measured period. This is showing us there were fewer homes left over at the end of the quarter, which didn’t sell.
SOLD HOMES
The number of sold homes is actually very close to the number of fewer homes that were listed for sale. It’s like a car lot—if they have fewer cars on their lot to sell, they’ll sell fewer cars. In 2023, note that there were ~36% fewer homes available for sale, but only 31% fewer sales, which is consistent with the inventory of remaining homes being lower in 2023.
AVERAGE DOM
Homes are taking longer to sell. While there are fewer homes to choose from, there are also fewer buyers that are willing to purchase a home—creating for the first time in a long time, a balance in supply and demand.
A side note on why homes are taking longer to sell is twofold—sellers who are in denial that they missed the peak price point from 2022, and agents who have never worked in a more regular market, and will take any listing at any price also in denial that the market has changed.
The days of an on average six-day period of marketing are gone for the foreseeable future. In fact, six days on the market was also an anomaly. Last year at this time six days was all that was needed to sell a home with the incredible amount of urgency to beat rate hikes. In 2021 for example, the days on market during this period was 25. This year it’s at 32—higher, but again not astoundingly.
MEDIAN SALE PRICE
The median sale price is for the entire county, so what may be happening in your city or even neighborhood is probably different.
The YOY drop of 11.8% from 2022 and the Price per Square Foot drop of 11.4% are fairly close to each other indicting that this can be considered to be a reliable measurement of the drop in home values between these two periods. If these two categories were off by a substantial amount, it would indicate a shift to smaller or larger homes selling in the two periods. We frequently run into this type of shift when measuring small market samples in smaller cities and when looking at only one month of sales for example.
THE INSIDE SCOOP
Here’s where it gets interesting. While the media may be accurately reporting these numbers, they do not put them into perspective, which in some cases such as this, a whole new story emerges.
In fact, the median homes prices are lower, and they should be, because they are being compared to Q1 in 2022 which saw the fastest run up in home values in the history of the Bay Area (see next paragraph for a deeper dive). We did an article on why this happened last year and predicted that this year would pale in comparison and exacerbate the apparent decline in values—which is exactly what happened.
We also went on to forecast that once we get past the May numbers in 2022—when the April sales of 2022 peaked and were reported—we may see an actual YOY increase in 2023 over 2022 as the summer and fall approaches, as that’s when in 2022 home prices began to decline.
LIST PRICE TO SALE PRICE RATIO—Making Sense of it All
The decrease in multiple offers has clearly has an impact on homes selling for over their asking price, as seen in recent, previous years.
While homes sold on average for 114% of asking in Q1 of 2022—that wasn’t normal—it was an anomaly.
It was due to the sudden demand in housing in 2022 fueled by the fear of looming interest rate hikes. Looking at the same period in 2022—January through April—homes sold for on average 106% of asking in 2021. In 2023 the percentage over asking was 101%—so eliminating the frenzied run up in 2022, the percent over asking is still lower than average, but by only 5 points instead of 11.
MONTHS OF INVENTORY—What does that mean?
The Months of Inventory statistic shows us, at the current rate of homes sales, how long it would take to sell the current inventory of homes.
A normal Months of Inventory, if we average San Mateo County’s inventory levels dating back to 1998, is 2.6 months. Nationwide wide they hover around six months of inventory.
During the financial crises of 2007-2009—from peak to trough the inventory levels of homes for sale in San Mateo County stood at 5.2 months.
In Q1 of 2022 they were only 1.3=2 months of inventory and that has bumped up to 1.7—still far below historical averages.
Locally, the story is much the same in our two of Belmont, but, since the sample size is so much smaller, the swings in statistical categories can appear skewed, and over or underrepresent the overall housing pattern in the Bay Area.
The Take-Away
In San Mateo County, the housing market has slowed from its Q1 2022 peak.
If the economy stays the way it is now, in Q2 the YOY numbers will be more similar.
We imagine that in Q3 the median home value may be similar to 2002.
The historical inclement weather has kept a lid on new listings—we expect this to increase as weather improves. More homes for sale will keep a ceiling on home appreciation as the market shift deeper into buyer territory.
The stats show the market shift in the buyer’s favor has created a more balanced housing market.
There is no metric that compares to the financial crisis housing depreciation in 2007-2009
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 onFacebookand onTwitter.
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.
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.
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.
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.
The news may be that the interest rate increases and hits to the stock market have not had the extreme consequences for our local Belmont market as many have predicted.
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.
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.
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.
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.
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.
