[00:00:02] Speaker A: Well, welcome back to the real estate and more show. I'm Michael Hatfield, and thanks for listening this morning. I've asked my partner Nancy on the show, and we are going to talk about this and that, real estate bits and various housing items, a few things that may be of importance to you. This and that bits are just that. Welcome to the show, Nancy.
[00:00:24] Speaker B: Thanks, Michael. It's great to be back here again.
[00:00:27] Speaker A: You were talking just the other day about a report that came out regarding residential construction. What was your discovery there?
[00:00:36] Speaker B: Right. I was.
So one of the things that I found out was spending on residential construction in November of 2023 grew a solid 1.1% above October and 3.7% ahead of last year. Best of all, though, the emphasis was on single family homes, which we help a lot of people with purchasing and selling single family homes. And that's where spending was up 5.5% in the past year.
[00:01:08] Speaker A: So in essence, the report is saying that year over year, residential construction on a national level is up 3.7% over last year. That's kind of interesting, being that we do definitely need inventory to come into our housing market. We've had this seller market that's been going strong for roughly three years now, and the only reason it's semi pausing is because the interest rates had went up close to 8% before they retreated in mid December, back down to just above six.
There was something else you said about that report.
[00:01:53] Speaker B: You're right. 10,000 people a day are turning 65 years of age, which is an interesting term in the housing market. And AARP is estimating that among people over 50 years of age, approximately 74% of them being homeowners, 51% of them will have downsized their homes. So that's people over 50 years of age, 51% of them will have downsized their homes.
[00:02:23] Speaker A: And this is on a national level, of course, in the San Francisco Bay area. We have a little bit different scenario here. We have an interesting set of buyers that you've heard me call them the black ants, and then the sellers, we call them the red ants. We'll get to that here in a moment or so. There was another item on that report that you were interested in.
[00:02:46] Speaker B: Right. Just referring back to what you were saying. It's actually good news for homebuyers, new homebuyers, with some of these homes turning over. But anyways, in 2023, new homes accounted for about 30% of the total housing inventory and sales. And that actually is more than twice the normal annual amount.
So that's interesting.
[00:03:09] Speaker A: Yeah. Some feel that new home sales are near their peak as a share of the total housing market. Are homes available for sale? They probably are, but there's not that much building going on.
[00:03:23] Speaker C: We had Aaron Merritt, my colleague from.
[00:03:26] Speaker A: Up in the area of Reno, Nevada and such, she was talking about how they're having difficulty getting new home operations to come in, new home developments to come in to offer homes for people. So 3.6% year over year increase maybe affecting the national market a bit, but not so much here in the Bay Area. We're not growing a whole lot on the number of homes available for sale to affect that inventory.
So, know, Nance, the other day I was just thinking on the Fed rate, and I mentioned just a few moments ago, know, mid December, the Federal Reserve held Pat on their Fed rate. And again, the Fed rate is the rate that the Federal Reserve charges banks and favored customers, big customers, to lend them money. It's not the actual mortgage rate. And here in the housing industry, we know there's some association with the mortgage rates and the Fed rate. So we see the Fed rate was pushing mortgage rates up to almost 8%. Then the Fed decided just a whole, Pat, they didn't make a change in December, but yet the mortgage interest rates came down to just above 6%. Just boom, just like that. It was, I guess, the largest drop in over two decades in mortgage interest rates.
[00:04:55] Speaker B: That's significant.
[00:04:56] Speaker A: That's definitely significant. So now I found that very interesting. The Fed rate is not the mortgage interest rate. So what that told me is that the mortgage interest rates have a lot of anticipation, a lot of anxiety built into them, and they are associated with the fed rate. And we have to kind of take the two as kind of correlated. So to.
[00:05:25] Speaker B: Right, right. Most Fed watchers still are thinking that the central bank will hold that rate into January. So what do you have to say about that? Michael?
[00:05:37] Speaker A: Well, no one has the perfect crystal ball, but I felt we're in an election year here. And every time that we've been in an election year, I happen to look at the historical, what has happened. And during that period of time, we've always seen that, pretty much always seen the mortgage rates to come down a bit. So my thought is, even if the Federal Reserve in their meeting holds Pat, again in January, you're still likely to see a slight decrease or maybe a significant decrease in mortgage interest rates. I am with my ball looking at somewhere in the fives. And so that would be really nice for people that were smart enough to buy their homes towards the end of 2023, paying 7.75%. Now they're looking at coming back, refinance that property and get a lower interest rate and thus a lower payment.
[00:06:41] Speaker B: It is wonderful that some of the buyers that we know were able to get into homes in the latter part of the year even. It took some bravery and they did it. And now they'll have a little opportunity to reconsider some of their financing and all of that. So it worked out for them, which we're really happy about.
[00:07:00] Speaker A: Yeah. Anyway, come back and refinance it three, four months later and they're in their home. This is somewhat of the, not the influence, but the persuasion that we have held close to our hearts and we advise our valued clients of that. It's just get into the house, especially when you have a selling market, come back later, refinance it, because as my.
[00:07:27] Speaker C: Good colleague, friend, wife here tends to.
[00:07:31] Speaker A: Say, she says rates will be rates. They're always going to move up, they're always going to move down.
Interesting.
[00:07:38] Speaker B: They're not stuck. So, Michael, there's another topic that we've been discussing recently. Generating retirement income with real estate investing. So you can generate resources for yourself, even if you're not of retirement age with that idea.
[00:07:57] Speaker A: Yeah. So there's a report that came out nationwide. It was just within the last week or two, it was called generating the retirement income. With real estate investing. You don't have to be of retirement age to generate income through real estate investing. And what it was talking about primarily was rental properties.
[00:08:19] Speaker B: Right. With interest rates low and uncertainties surrounding the stock market, retirees are turning to real estate to generate income. And it's estimated that one in ten retirees supplement their income with rental properties. And recently, I know you and I were chatting with a fellow colleague, and he was saying that it had benefited him greatly to have rental properties in his retirement and was very smiley about that, actually.
[00:08:50] Speaker C: Yes, of course, when you talk about.
[00:08:52] Speaker A: Rental properties, we strongly, whether or not you use us or any other brokerage to move ahead to make up your purchase, you need to have somebody that's a real estate professional helping you, number one, to make the purchase. And then after you've made the purchase, you have to be very careful that the tenants that you have will actually pay their bills and thus allow you to pay your bills, because it's not a good relationship. If you buy a rental property and put in your cousin who doesn't pay the bill, that can make it pretty tough there. But you might want to consider adding that rental income as a possible source of funding in future years as well as in golden years, don't you think?
[00:09:39] Speaker B: I think it makes a lot of sense.
Another consideration is, are there renters out? Say you want to buy a property for an investment, you have to consider, are there renters out there who would really want to rent your property? And the answer is, absolutely.
[00:09:55] Speaker A: The San Francisco Bay area. We've seen constant increases in demand for rental properties. And the reason is some people either do not want to buy a home, they cannot afford to buy a home.
Whatever the reason, temporary residence could be one. They have not wanted to move ahead and to buy a home.
[00:10:22] Speaker B: And rental vacancy rates have been on a steady decline since the recession of 2009.
As we've talked about in the past.
[00:10:33] Speaker A: Yes, Nancy, the San Francisco Bay Area is definitely special when it comes to rental properties. It's hard to find a rental property. And after you think a little bit about it, you're saying, well, why would I want to pay all that money to rent a property in lieu of buying? Well, buying is a little more expensive. It takes qualification for the loan. There's a bit to be involved there. However, as we talk a little bit later on, there is quite a bit of value in buying as opposed to renting.
[00:11:09] Speaker B: Right. The rental market, Michael, is soaring today, where, like, single family rentals have risen by approximately 30% in the last three years, and now they make up 35% of all the rental units in the US. Michael, let's talk a little bit more about that report. And in the area of benefits of owning rental property. And income yield from investment properties can be anywhere from six to maybe 20%.
[00:11:41] Speaker A: Yeah, in the Bay Area, for sure. In the Bay Area, the returns can be much greater in the San Francisco Bay area as opposed to the national markets.
[00:11:52] Speaker B: Yes, we're very fortunate here, living here. If you're just starting out in real estate investing, though, the positive cash flow won't begin in year one, typically. And if you have to take a mortgage out on each property over time, you gain equity in the home as the rental income pays your mortgage taxes and fees over the years, you add to your portfolio by gradually buying more properties, repeating that process. And with proper planning, you'll probably be able to have several properties, if that's what you want it to do, generating income for you.
[00:12:31] Speaker A: Yeah, I think that's great. And the one important caveat is you have to be aware that it may take you a year, two years, three years, four years in order to have a positive cash flow on a rental property.
[00:12:48] Speaker C: It takes a little while for you.
[00:12:51] Speaker A: To get to that point. And then you could be stymied a little bit with rent control in a specific area or having someone not pay for you. And that's always a good idea to have a good buffer of funds available should you have to make the rent payments on your own property for a few months. But anyway, the important thing is to remember the positive cash flow in the Bay Area is not likely to begin in year one. Nationally, yes, but nationally you may not get that home appreciation that you get in the San Francisco Bay Area.
[00:13:30] Speaker B: It's interesting, I recall my business law professor talking about this years ago and I thought, oh my goodness, what a fabulous idea. It was very enlightening back then. But anyways, getting back to this, it's not crazy to earn $200 to $1,000 per month in positive cash flow after you're up and running. And that's a strong reason for consideration of this idea.
[00:13:54] Speaker A: Certainly in the San Francisco Bay Area. That is true.
Good report. It was a good report from investing, and I'm glad you're picking out some of those points from that so that we can talk about them and hopefully in our this and that, bits and pieces be able to help somebody that might be interested in doing this. Remember that. Also, rental income. What about that?
[00:14:18] Speaker B: Yes, rental incomes continue to rise and have steadily risen over the years. When you look back on the history of that.
[00:14:26] Speaker A: Yeah, I think the report said something about make sure that you have savings reserve before you buy.
[00:14:34] Speaker B: Always an excellent idea. Good rule of thumb might be to set aside six months of monthly expenses so you've got what you need should it come to fruition that you're in one of those situations and just being prepared. That's always good.
[00:14:50] Speaker A: Yeah. And you always want to purchase great properties and get help from an export when you go in. You don't want to pay too much for a rental investment property. You want to make sure that you're buying a property that's really worthwhile and that you have a game plan to rent it to great qualified tenants before you pull the trigger on doing something that, like that. So I would say get your real estate professional to help you find the property. Have them advise you as it goes along. Don't worry so much about commissions that you may have to pay your realtor. It's like a great lawyer. If you pay a good fee for a lawyer, it's usually because they're worth it. Actually, I heard that regarding divorces. Why are divorces worth so much? They're worth it. I'm just being funny here.
Let me loose on that one.
[00:15:42] Speaker B: Also, rentals will likely be in demand for years to come, Michael, so that's a good way to look at it. And I know that we've helped several clients buy investment properties, and that's kind of a fun area to help clients with.
[00:15:59] Speaker C: Oh, yes, it certainly is.
[00:16:01] Speaker A: We're going to take a short break. We'll be right back.
[00:16:07] Speaker D: When you're buying or selling a home, look no further than the Michael Hatfield remax Accord team to tell us more.
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[00:16:54] Speaker A: Call us now.
[00:16:55] Speaker D: Get help with buying or selling a home by calling the Michael Hatfield remax accord team at 1800 857 63. That's 1800 857 63.
[00:17:06] Speaker A: Remax Calbree 0149-3761 now back to our show.
Now, good news, a really good news. I've talked about this in a few, couple of our other shows just recently, but I just want to bring it up one more time. There is great news on Adus auxiliary dwelling units. AB 100:33 has passed. It passed, I believe, back at the end of October or thereabouts, and most people didn't know about it. But this law allows homeowners to sell adus or condos, sell them like condos, boosting the homeownership. And that was the intent apparently, of AB 100:33 nance, you want to talk to us a little bit about that, right?
[00:17:58] Speaker B: So Adus are also known as granny flats sometimes.
[00:18:01] Speaker A: Absolutely.
[00:18:02] Speaker B: And ab one zero thirty three, of course, is assembly bill. But Adus come in all shapes and sizes. For example, some people we know have converted a garage, a small home in their backyard, as is often seen in our San Francisco Bay area, possibly an unused portion of a main been. I think it's opened up some real possibilities for rental investment as well as selling.
[00:18:31] Speaker A: Like you said before, you could only rent these, but now you can sell them as if they were a condo, the county or the city that it's located in, has to opt in to AB 100:33. When they've done that, then you got to follow the same rules that apply to the sale of condominiums form your own hoa. Really, it sounds daunting, but it's not that huge of a project.
[00:18:59] Speaker B: The homeowners associations. Right.
[00:19:02] Speaker A: So anyway, it's a good thing. So once you have made this ADU or you have converted something to this ADu, you'll be able to, if your area has opted in, you'll be able to actually put together your HOA rules, a few other requirements and then be able to sell it as if it's a condo.
[00:19:24] Speaker B: And those HOA assessments are due.
They're to cover the cost of caring for the properties, exterior and shared spaces and things such as that. Possibly a driveway, a pool or a roof. Right. That's in common.
[00:19:41] Speaker A: Fabulous bill. Not always do I agree with what comes out of Sacramento, but when we see that we can make some value here, that's really, really helpful.
[00:19:52] Speaker B: One of the other points of interest on this report for me personally was that each ADU and home will have two different property taxes. So that is a point of distinction as well.
[00:20:05] Speaker A: Yes, I agree. Well, it's a great bill. I'm sure glad to see it come out of Sacramento. There was another report that we wanted to talk about. It was the wave consulting group that came out in the real estate in the news just recently. It talked about a survey of 340 homeowners who purchased in the past three years. They talked about their agents a lot. What did they say? Nance, what did this report say?
[00:20:35] Speaker B: They did talk about their agents a lot. And they said that approximately 20% of their buyers said that their agents spent a certain amount of hours getting them to closing. And they estimated like ten to 15 hours. And then homeowners remained unsure of what value an agent really brings to a transaction, but they have little awareness. Actually, it's hard to know somebody else's job unless you're the one doing it. And people, clients had little awareness of what the home buying process. What's involved in the home buying process?
[00:21:11] Speaker A: Yeah, the 2024 survey, I believe.
How do buyers feel about working with agents? It gleaned its results from 340 homeowners who purchased within the last three years. It asked a lot of questions, one beyond how much time they believe the representative spent on their purchase.
[00:21:38] Speaker B: Right. And that's a sampling, of course, but it kind of gives you an idea of what clients view their agents as having done on their behalf. And sometimes clients and homebuyers thought that maybe the most time their agent could have spent is 30 hours on their deal. And I don't know about others, but sometimes a deal can take quite a few more hours than 30 hours, that's for sure.
[00:22:08] Speaker A: It was interesting to see that they really didn't have a lot of awareness of what the actual realtor does.
[00:22:15] Speaker B: Realtor.
[00:22:16] Speaker A: Realtor.
I retract that it's realtor does for them. And this is one of the things that we do. We can't control every other agent, but we sit down, we go over the listing agreement. If it's a home seller that we have in front of us, we go down. Also over the residential purchase contract. We talk about the various disclosures, advisories, addendums that are part of the real estate transaction. We go over those in detail. We spend quite a bit of time working on those with the clients. So I feel that when I read these things about other realtors, I said it right this time.
[00:23:00] Speaker B: You did.
[00:23:00] Speaker C: Then I feel that this is a.
[00:23:04] Speaker A: Wake up call for us. We want to do a really great job with our clients and we do.
[00:23:09] Speaker C: So it's good to know that what.
[00:23:12] Speaker A: The actual normal homebuyer or seller is actually thinking in their mind about their other realtors. One of the interesting part of that consulting group report is that they felt, pretty much most people felt that the big importance was on how well they were represented in front of the seller. That was, to me, the key point in that entire consulting report.
[00:23:40] Speaker B: That was a large percentage of clients. Yes.
One final point, Michael, is that often clients and people we assist with home buying or purchasing, they don't quite realize the legalities of buying a home. And so that's what I know. You bring to the table and you offer them team.
[00:24:03] Speaker A: Yes, absolutely. There's a lot to know there. We continue to have a seller's market. Yes. Even though we've had a housing shortage of single family units, buyers have until now been reluctant to buy due to interest rates being just below the 8% annual rate. Now the rates have dropped significantly to just above 6% and may go lower. Buyers or our black ants are nosing around to buy what is still limited number of homes available for sale. The shortage of housing inventory is, in the longer term, a larger, bigger factor than today's interest rates, as my wife loves to say. She says, interest rates go up, interest rates go down. That's just the way it is. Refi, if you don't like your purchase rate, but you must be a homeowner if you expect to create wealth through ownership and this housing inventory is not expected to increase much anytime soon. So quick review become a red ant. Own your own home. The benefit of where to dwell have neighbors tinker in your garage, swim in your pool grill for the 49 er games. Enjoy the fruits of your labor with your own home.
Only the red ants are going to get home appreciation. In the Bay Area, you have a unique opportunity to create personal wealth through home ownership. Over time, your home historically will increase in value, especially when there is a shortage of homes for sale. Buy today. Enjoy your home. Refinance your rate when the mortgage rates receipt. Hope for historical home price appreciation as it has shown it does over the last 80 years. Well, Nas, thanks for being on the show. I don't know about you, but I've had a great time talking about this and that real estate bits thank you for the time you've spent with us.
[00:26:07] Speaker F: Thanks Michael.
[00:26:09] Speaker B: It's always a pleasure.
[00:26:13] Speaker A: Okay, it's my turn to take out the trash. I understand you've been listening to real estate and more interesting people, important topics and of course, real estate. Listen to on demand real estate and more
[email protected]. Slash Radio the real estate and more shows are podcast on Spotify, Amazon, Apple, iHeart, Pandora and most major podcast platforms as well. Tune in next week and until then, have a blessed week.
[00:26:44] Speaker G: The views and opinions expressed are based on current economic and market conditions and are subject to change. Information on the show provided for illustrator purposes only and does not constitute professional or legal advice. Information from sources deemed reliable but accuracy and completeness not guaranteed. Michael Hatfield and the Michael Hatfield remax team have no liability for information discussed on the show. Consult with qualified professionals prior to taking action.
[00:27:14] Speaker F: We at the Michael Hatfield Remax team enjoy representing our valued clients. If you or someone you know is interested in buying or selling and wishes to schedule a complimentary appointment with the Michael Hatfield remax team, call us at 925-32-2775 that's 925-32-2775 or go to our website, michaelhatfieldhomes.com.
[00:27:37] Speaker A: I'm Michael Hatfield. Thank you for listening today.
[00:27:41] Speaker E: Join us next Saturday for the next.
[00:27:43] Speaker A: Real estate and more when we again.
[00:27:45] Speaker E: Sharpen our focus on house the market.
[00:27:48] Speaker F: Join us next Saturday and have a wonderful week. Best wishes and blessings to you. CRe 1437.
