My May market update is the blog post from Tom Tognoli, who is the co-founder and former CEO of Intero. Tom has gracefully consented to post his blog on mine and it aptly fits into my bi-monthly RE market update. A link is provided at the end of the article to Tom’s own blog. Happy Reading. As always call me, text me or email me if you or anyone you know are in the market to buy or sell a property. Thank You!
Don’t Freak: San Francisco Bay Area home prices fall for the first time in 7 years
|May 16, 2019
First, don’t freak out…it’s old news. In Q1 of last year (2018) the Bay Area housing market went a bit crazy. Depending on where you live, it’s like the real estate market got a jolt of adrenaline at the end of Q1 last year. Property values literally shot up 10% to 15% in 90 days. It was stupid and unsustainable.
In Q2 of 2018, reality set in and property values gave most of that 90-day gain back in what seemed like a week. It needed to happen. It literally all happened in weeks, not months or years. It happened so quickly most people didn’t even notice.
Over the last year, property values have slowly ground their way up. Just not to those stupid prices of Q1 last year…yet. It was unhealthy.
I will warn you now, you may see property values are down year over year again this month and maybe even again next month as well. Next, I predict we will see values flatten out year over year going into the summer. Then, we will see property values climb slowly in the second half of 2019. Again…don’t freak…it’s all normal. Well…Bay Area normal:)
This is part of the reason I think last year was slower than some had hoped. We needed to get owners/sellers to come back to reality and that does not happen overnight. They held on to what their property was worth for a week or two in Q1 of 2018. That was not reality and if you were lucky enough to sell them, good for you.
On the other hand, if you bought in that week, don’t freak out. Real estate is all about the long game, not the short game. You will be fine and happy you purchased and own a home. Just think about that ridiculously low-interest rate you got! Better than the 12% I had to pay on my first loan back in ’89.
So, now what everyone wants to know…where do we go from here?
I am blessed to be able to spend time with some pretty smart and amazing people. I use that opportunity to pick their brains and then mix it with what I know. Most people feel solid about the economy and the prospects for Bay Area real estate. I’m putting my money where my mouth is and have been putting my money to work in real estate with my business partners.
It’s hard to wrap your head around, but with all of the IPO’s, the tech boom, low-interest rates, housing shortage, stock market grinding to new highs, commute traffic and more, I am still a buyer of Bay Area real estate. I don’t see any significant changes in our market anytime soon. Ping me if you or anyone you know needs help, I know people 🙂
And don’t freak out!
– Tom Tognoli
Original Post: http://bit.ly/30mHZAm
Bay Area RE Market Update – March 2019
The Bay Area RE Market has continued to be tepid though two factors have helped the increase in sales during the January-February period compared two end of 2018, which are,
1. Buyers coming back after the holidays
2. Interest rates dipping in February to the levels seen in early last year
While watching the RE market two important numbers to pay attention to are Inventory (Supply) and Demand (no surprises here). Inventory is based on the active number of houses for sale in the market and the number of houses sold in a given period. The demand is driven by seasonal factors, underlying job market situation and to a degree certain macroeconomic such as interest rates, and geopolitical factors.
Here is what has happened to some of the numbers discussed above in the last two months,
Inventory in the Bay Area peaked in late October 2018, inventory reduced during the holidays and started to pick up since the beginning of the year. The relative rise in Inventory with not much change in demand will see houses sitting on the market longer, lower prices and more options for buyers. However, inventory is still hovering around 2 months supply which is much less than the normal inventory of 6 months, this is still considered a Seller’s market. So, buyers should not expect any drastic changes to housing prices in the near term, especially with interest rate still very low there will be continued demand.
As noted earlier there is no fundamental change in the driver of demand for houses, the Bay Area job market, with unemployment low and companies thriving. The only variations in demand will be based on seasonal factors and with some buyers waiting for an anticipated “crash” in the housing market. The buyers are still facing an inventory crunch and there are pockets of areas where multiple offers have been noticed.
Two forward-looking news that we should pay attention to,
1. Tesla showing signs of struggle with a 7% layoff and making some drastic changes to it’s sales channel. If Tesla continues to struggle and cannot bring the low-cost model quickly into the market, expect trouble in the Fremont and surrounding area housing price with more layoffs.
2. Toll Brothers, the largest national builder announced that there has been a 24.3% quarterly dip in new orders, this is big news. The permits for new housing charts have been showing a downward trend pointing to weakening demand. Both pointing to continued “softening”, from my perspective this is much-needed breathing space for buyers, I would like to see inventory stabilizing at a reasonable number of 4-5 months.
To put the Bay Area supply-demand into one easily recognizable chart, I have created the weekly Pending/Active chart for the entire Bay Area (contact me @ 408.420.0646 or firstname.lastname@example.org if you need the chart for your specific area). On this chart, a number 100 means that weekly pending = active, which means houses are gobbled up as they come, a number greater than 100 means the houses are sold even quicker and a number below 100 means it is taking longer to sell. Use this graph to understand the trend and nothing more. As you can see the trend since the beginning of 2018 has been downward, meaning the housing market is getting slower, though there has been an uptick in Jan-Feb 2019 due to buyers coming back after the holidays as well as a dip in interest rates. I expect to see a continued uptick during Spring and summer 2019 as long as the current economic situations prevail. I appreciate your questions or comments, please do send me in your feedbacks.
Bay Area Monthly RE Market Update
In the last 6 months homes have sat on the market longer (compared to the first half of 2018) and prices have been slashed.
The Following factors have driven buyers away,
1. High Prices Home prices grew at a higher rate than the rate of inflation and incomes in the last few years.
2. Mortgage rates >25% increase in mortgage rates resulted in some buyers being put out of market
3. Wall Street Effect The noise about another recession and a dip in stock prices has left many buyers who were planning to use their stock options for down payment with less money and tempered their purchase. Besides, the psychological fear such events causes.
4. Migration Bay Area is the top region in the nation for outward migration. Though many pockets in Bay Area have also seen net positive migration.
On the Supply Side inventory has increased for the following reason,
1. Chinese investment down According to reports Chinese investment in RE decreased by 50% from 2017 levels. Slowing the home prices.
2. Sellers want to dip into the equity Sellers thinking that the home prices may continue to go down are bringing their property to the market to cash in on the equity, resulting in doubling of inventory compared to 2017
1. The inventory is still lower than normal and keeping the market on the seller’s side
2. Demand, though slowed compared to first part of 2018, is still hot
It’s a good time for both buyers and sellers.prices have declined 5-10% and with minimal or no bidding war. Sellers still benefit from low inventory and relatively hot demand.