[00:00:01] Speaker A: The Michael Hatfield re Max team presents real estate and more.
[00:00:06] Speaker B: Bay Area real estate is different than in all of America. And why? What's up with homebuyers? What's on sellers minds? How is the market and much, much more.
[00:00:17] Speaker A: Now here's your host, Michael Hatfield.
[00:00:20] Speaker C: Welcome to the real estate and more show, and thank you for listening. You know, we talk about many things on the show, including important topics and interesting people. A home buyer's decision questions like should he or she buy? Now, the reasons to buy, where to buy, how to buy, and how much he or she should pay are all important questions on the show today. We unpack today's thoughts, elements and reasons integral to a home buy to help those buyers who are on the fence. Then take a close look at where we are likely to go in housing market this year to help us to provide today's thoughts for homebuyers. Welcome to the show, Nancy.
[00:01:03] Speaker D: Thanks, Michael.
[00:01:04] Speaker C: Oh, it's great. It's great to always see my wife. You know, I always have to do things like that. So anyway, the Fed is now signaling that they're going to be three more interest. Yeah. Meaning that it's going to be a half of a point or one point decrease in what the Federal Reserve charges the best banks and customers for a loan. Well, how does that interpret into mortgage rates? It does through some type of correlated magic, and it always comes out as being correlated to that. So you would think that one point decrease in your mortgage interest rate would translate to one point decrease in the Fed rate. So anyway, they're saying three cuts remaining this year. They've stayed pat for a few so far.
I think before that they had eleven interest rate increases, and now they're saying, okay, well, things are a little bit better now for what we're going to see going into later part of 2024. So with that said, what do you think? What do you think is going to happen when that happens, that those rates decreases? What will that actually do?
[00:02:23] Speaker D: What will it do? Yeah. So you mean what's the bottom line?
[00:02:28] Speaker C: Yes, absolutely.
[00:02:30] Speaker D: So the inventory increased 5.9% from January of this year. And the National association of Realtors, Economist, chief economist, was saying that additional housing supply is helping to satisfy the market demand and rising inventory is a great step in the right direction to move the persistent tight housing supply that we've been seeing across the country. The 1.07 million homes available for sale at the end of February of this year is still below healthy levels at just, at just 2.9% or 2.9 months supply of homes at the current sales price. So anyways, more supply is clearly needed to stabilize the home prices.
[00:03:23] Speaker C: Yeah. And it would also move some people out of rental housing into owning their own home, which is important. So more supply clearly needed from National association of Realtors, chief economist, and he's so correct. You know, we see it out here with boots on the ground constantly, that the housing supply is so short, so short. And there is without even an increase in buyers, we're still seeing it as being short. So I think it was important that we come out with this show and we say, hey, guys, if you're interested in buying in the next year or two, you should do it now, because we do not see a lot of inventory coming down the pike to supplement the inventory of homes available for sale, would you not say?
[00:04:13] Speaker D: I would say, and we know what happens when there is a shortage of something. What does it do to the price?
[00:04:18] Speaker C: Absolutely. Well, what about the home builders? Aren't they a part of the percentage of what's going on with the overall homes available for sale?
[00:04:29] Speaker D: They're a large part of that, Michael. And so the home builders broke above the key threshold of 50 recently, and that's into a positive territory for the first time since July of 2023.
[00:04:44] Speaker C: So they have their own index, so.
[00:04:46] Speaker D: To speak, to the National association of Home Builders. And the housing market index climbed three points to the number of 51 in March, which is good. And any score over 50 on this index, which runs from zero to 100, signals that more builders are viewing building conditions as good rather than not. So that's great. And then the three indexes posted gains this month with current and future sales expectations, both well into expansion area at 52 and 62 respectively. So that's good news.
[00:05:26] Speaker C: Yeah. Yeah. So I'm thinking that, wow. Anything above 50 on the home Builders association, when they actually come out with their indexes, anything above 50 is positive. And it's saying that there's optimism among the home builders. In a moment or so, we'll actually talk about what percentage of home builders there are to the overall existing homes available for sale. Okay. So as a component, you know, the percentage is such for the new home builders and the percentage of homes available for sale is a percentage, a much larger percentage for existing home sale.
[00:06:08] Speaker D: Yep.
[00:06:09] Speaker C: So the persistent lack of continuously or previously owned homes for sale, strong buyer demand and rates fall below last fall's peak. They've pushed higher in confidence for the new home builders. But one thing that we do to keep an eye on things is we look at what the permits are saying, the new permits, and we see that they've pushed higher, higher in the permits as of recently. So favorable home February for housing starts. Hmm. Big rebound in February, they say, but it was only 5.9% over January, and February is starting to get into more of a selling season than what you had before. So single family starts were up. What? Well, multiple family starts were.
Tell us about that.
[00:07:01] Speaker D: Single family starts were up 35.2% while the multifamily starts were down 35.9%. And that shift that we're seeing from multifamily to single family homes is wonderful because this is where the supply is actually needed right now. And, you know, we're excited about that happening, obviously.
[00:07:23] Speaker C: Absolutely. And the single family building permits, they reached their highest level in a year, up 29.5% compared to February of 2023. It signals that the numbers for future supply are favorable. However, you know, when I read these things, I think favorable is one thing, but what's happening out there on the field? In the field with the boots on the ground, we're seeing all kinds of things. So you want to synopsize about the permits, Nance?
[00:07:55] Speaker D: So one of the things for the new homes being built, the National association of Home Builders, assisted VP for forecasting, was stating that single family housing is poised for a good year in 2024, which we're into, you know, the first quarter and starts. So it's a good year in 2024 with starts and permits in an upward direction, which we like to hear.
[00:08:23] Speaker C: Now, we're talking about this starts for new home construction only. We're not talking about existing, you know, for remodels and things like that. We're not talking about that. We're talking about the new home permits. And national association home builders is saying, okay, forecasting wise, we're looking better, and it's an upward trend. But what does it mean in the overall mix of home homes available for sale? What does it mean? Well, we got to talk about and answer that in a moment or two.
[00:08:54] Speaker D: Okay.
[00:08:55] Speaker C: Okay. One other thing. CNBC came out with a report just recently that said the average monthly mortgage payments in the state of California are at $2,576 per month.
[00:09:10] Speaker D: That's just the mortgage payment.
[00:09:11] Speaker C: Mortgage payment. And that is $1,174 more than the US national average.
[00:09:19] Speaker D: Significant.
[00:09:20] Speaker C: Yeah, but that's. We're in California housing costs 97% higher than the national average. And you know what? We've got the most expensive state to live in, California.
[00:09:36] Speaker D: And it sure is one of the most beautiful states to live in.
[00:09:39] Speaker C: There is a good part there.
[00:09:40] Speaker D: Enjoyable.
[00:09:41] Speaker C: Yeah. Now, if I were to say, Nance, what would you think about where is the most expensive place in the US to live?
The CNBC report said, I feel like the guy on television, right?
[00:09:54] Speaker D: Tell me.
[00:09:55] Speaker C: He said, soCal, most expensive place, place in the United States to live is southern California.
[00:10:02] Speaker D: Interesting.
[00:10:03] Speaker C: But then I say, well, what about the most expensive cities to live in? Do you know the answer?
[00:10:10] Speaker D: I don't. La Jolla? I don't know. I don't know.
[00:10:13] Speaker C: Sunnyvale, San Jose and San Francisco. And that has been justified by the big tech three giants of Google, intel and Oracle and LinkedIn as being a big, big employer down in that area of the South Bay. So here we are in San Francisco. You know, we expect to pay more, actually, 67% higher cost of living than the entire state and 125% higher than the national average. That's Sunnyvale, San Jose. In San Francisco, that's 125% higher than the national average in cost of living. But really, that's no surprise. We've always known that we live in a microclimate of housing industry here in the San Francisco Bay Area. We've always known that. There's no surprise there. So back to the monthly average mortgage payments being $2,576 per month in the state of California. Do you know which one is the lowest average monthly mortgage in the US? What state?
[00:11:30] Speaker D: No. Exactly. But I would guess it's likely a southern state.
[00:11:35] Speaker C: Why? Uh oh.
[00:11:37] Speaker D: Cost of living, maybe.
[00:11:39] Speaker C: So, West Virginia. They say, according to this report, that West Virginia has the lowest cost of living. I'm correction, lowest monthly mortgage payment of dollar, 961 per month. And just above that would be Arkansas at 1022 average per month.
[00:11:58] Speaker D: Makes sense.
[00:11:58] Speaker C: So it kind of reminds me what some of the old boys in the airline industry used to say is, why do divorces cost so much? Well, why do housing payments cost so much in California?
It's worth it.
[00:12:11] Speaker D: It's nice to live in California.
[00:12:13] Speaker C: It's nice to live in California. There's a lot of really great things, but one of them right now is the problem that we have, the challenge that we have with how do we get inventory into the system? We need to have homes to sell in order for homes to sell themselves. I mean, if you don't have it, you can't sell it. Right?
[00:12:33] Speaker D: Right, exactly right.
[00:12:35] Speaker C: So we're talking what generation is likely to downsize? That comes to mind.
[00:12:42] Speaker D: Well, let me think about that recent.
[00:12:45] Speaker C: Report came out and it said that the boomers, which is generation Jones. That's boomers number two. That's people that are born between 19 and 46 and 19 and 54. That's people generally between 60 to 69 years of age. And they are the ones that are most likely to find themselves downsizing. So maybe they will put some homes on the market, maybe not. And, you know, these certain traits with this particular group is there not?
[00:13:19] Speaker D: I think you're right on that. I mean, we work with an assortment of ages, right, from younger and first time home buyers to, of course, the boomers. And so there are, I think there is a kind of a trend of, you see some, you know, characteristics. So one of the things when you're working with the boomers or the seniors, that they tend to appreciate and value communication. Number one, it's a big deal. Customer service, they value. And just, you know, those would be some of the key elements that boomers tend to like.
And so since they are a large part of the population right now, I don't know what the numbers are, but I'd say that that definitely matters to them.
[00:14:13] Speaker C: One person went so far as to say they're the fastest growing population of potential clients. For real estate agents with actual buying power in this challenging market, they have considerably more buying power than the new millennials because they've been in their homes for a long time. And the number one important thing in the Bay Area is to get that home.
Let that equity build for you. Let the home appreciate in value. Let it happen. And that's what I think is it's great to have them as a potential downsizer, to put their home on the market, for us to come in and sell it to people that need to buy. But I don't think this is actually going to solve the problem. It's just an interesting statistic to have, you know, it's just an interesting statistic to have.
[00:15:05] Speaker D: It is.
[00:15:06] Speaker C: We're going to take a short break. We'll be right back.
[00:15:12] Speaker E: Michael, what traits should we look for in selecting an agent?
[00:15:15] Speaker A: Look for a deal maker with a positive attitude who will work tirelessly for you. An agent who is adept in multiple offer situations, drafting contracts, marketing and advertising. A client's home is familiar with multiple cultures, experienced in mortgage financing, inspections and escrow is a huge asset to his client.
[00:15:36] Speaker E: What can you do as a plus for clients?
[00:15:38] Speaker A: Your agent is your eyes and your ears. One who works behind the scenes on your behalf. A great attitude, working well with others and keeping clients priorities. Number one is a given for us.
[00:15:49] Speaker E: Call 9253-2276 now to schedule an appointment or complimentary home analysis. For excellence in real estate, call the Michael Hatfield re Max team at 925-32-2775 or go to Michael hatfieldhomes.com dot.
[00:16:10] Speaker F: With low housing inventory and constantly changing mortgage rates, buying or selling home is challenging. Choose an experienced team. Who cares? Here's Michael Hatfield in a quiet cul.
[00:16:20] Speaker A: De sac near the quaint town of Clayton. Revel in the wonderfully tall ceilings and open and spacious elegance of this immaculate 3320 1 bedroom, three bath masterpiece. 22 Wordsworth Court in Concord boasts outdoor living at its best, with sparkling pool and newly built gazebo, plenty of room for an rv or a possible adu, highly ranked schools and a warm sense of neighborhood here. Don't miss this dream home.
[00:16:50] Speaker F: Get help with buying or selling a home by calling the Michael Hatfield re Max team at 925-32-2775 that's 925-32-2775 or go to michael hatfieldhomes.com dot.
[00:17:04] Speaker C: That's michaelhatfieldhomes.com now, welcome back to our show.
It is, yeah. So original boomers, you know, what year were they? Like?
[00:17:16] Speaker D: 70, 70 to 78. That group. 70 to 70. And they, they're the ones that are having to figure out what they want to do right now, I think, how to age in place. And there's been some research groups that have looked at it and said that that group is kind of the group that's in a quandary because they're trying to figure out what to do, stay in their homes and age in place or, you know, if they haven't made long term plans for healthcare and housing, they might be, you know, unfortunately, unpleasantly surprised about the challenges of the cost of creating a plan just quickly. So, you know, it's good to have a plan in place. And this group has the finances to make moves. Obviously, they're established in their houses and such, but they're more cautious. They're absolutely more cautious. Although interestingly, they're motivated to spend their dollar bills on things that they enjoy and things that they kind of view as luxurious, which is kind of interesting. So, and then boomers don't really want to be considered the older group or the older population, but they are anyway. They are. They are. And what they also age waits for no one is respect and independence. So, you know, it's kind of those characteristics of the boomer gang.
[00:18:46] Speaker C: Yeah, I had Pat Butucci on here, one of our early shows, and we talked about retire here, retire there, and retire everywhere. But one of the important elements, critical elements, is what type of healthcare is available, and you should retire around it. Because we get older, we start getting a few more flat tires, and this happens. That happens.
You know, it's always good to be close to a very good medical facility to help us with those flat tires or whatever the problem may be.
[00:19:19] Speaker D: And Michael, we were just talking to some previous clients who we've helped, and that was a large consideration. What should they do? Where should they move to for their current healthcare needs? And it's like, do they move somewhere else in California closer to a metropolitan area, or do they perhaps move out of state? So they're having to deal with that in real time. And it is kind of nice if you can look at that long term plan and have something in mind before it's absolutely necessary.
[00:19:52] Speaker C: Yeah. Speaking of which, we're back to the boomers. Number one boomers, not the generation Jones, but the original boomers, aged 70 to 78. And if they've not already made long term plans for healthcare and housing, it may be unpleasant for them as they move forward and trying to deal with the costs of creating a care plan on the fly. So, you know, biggers are a complicated, big generation. So we have a lot to think about as we get older, yourself, yours truly included. And you know what we're going to do as we move forward. But one thing now, let's get back to the Bay Area and the housing. We've talked enough about the people here that live here, that love it in the Bay Area, and we talked about seniors a bit. We've talked about interest rates. One thing is for certain, in my view, is that when interest rates do decline, do decrease, you're going to find more buyers in the market for that same number of loaves of bread on the shelves. And that's kind of. Not kind of. That is concerning, because right now we are finding everywhere we go, if a home is for sale, then we're getting multiple offers. And this is now I'm talking about in areas of higher density in the San Francisco Bay Area. If you live out a ways, it's going to be less activity. But we still are, are having a very, very short inventory of homes that are in the market. Don't you agree?
[00:21:29] Speaker D: We are. It's real and present for us, actually, for sure.
[00:21:35] Speaker C: So I'm thinking, you know, seniors don't like to wait. I don't like to wait. You don't like to wait. And we like certain things. We like to talk on the phone as necessary. We like to be face to face with clients, our millennials don't necessarily like it that way. But one thing is, for most certain is that everybody has a heartbeat. We've talked about it before on the show, you know, how soon do you want to move? How soon do you want to list your home? How soon do you want to be into your new property? Everyone has their own heartbeat, and that heartbeat changes sometimes during the process. It's kind of incredible how we've observed that working in our society.
[00:22:16] Speaker D: We have, yeah.
[00:22:18] Speaker C: So we've had a continue run up in home prices last year, a massive one. And I'm talking about Moody's had a chief economist come out and make some statements. What did he say, Nance?
[00:22:33] Speaker D: Right. So the Moody's analytics were saying that the run up in prices, it's been a huge increase in creating wealth for homeowners. But then on the flip side, it's been a massive problem because for the first time, home buyers, and so there's just simply not adequate inventory if you're ready to buy a house. And, you know, that's been a challenge. Yeah, it's been a big challenge.
[00:23:01] Speaker C: I noticed home prices overall, nationally, we're up 5.5 in December of 2023 as a. Compared to December of 2022. And that's despite stubbornly high mortgage rates and low housing affordability. So in the Bay Area, probably much more than that in actuality, as far as appreciation.
Keep going.
The head of Moody's also said that the all time highs in and around Texas and Pacific Northwest fell off their highest in the month of February, but only modestly, while they continue to push higher in northeast, industrial, Midwest and Southeast. We're not talking about the Bay Area because we know home prices have went higher. So for the two thirds of Americans who own their home, repeating the higher prices mean a massive increase in their wealth. I'm going to say that again. Hey, folks, own your home, because that can create a massive increase in your wealth. But of course, as you said earlier, Nance, what happens to the home buyer the first time home buyer trying to get in? It's a big problem.
[00:24:25] Speaker D: It's a big challenge.
[00:24:26] Speaker C: What can be done, what can we do, or what can we do as a nation to bring in new homes available for sale?
[00:24:35] Speaker D: Get those boomers, move them on.
[00:24:37] Speaker C: Well, you know what? I've been a real proponent of finding tax incentives for people that will move. If you have older folks that, that are concerned about selling, and they have more than their $500,000 capital gains on the sale of their home, make that a million dollars in a temporary period. Make it more to where they don't pay taxes on the sale, which removes some of the reasons for not selling. So, you know, that could be done, and I would like to see that actually happen.
[00:25:11] Speaker D: I think that's a great idea, Michael.
[00:25:12] Speaker C: Tax incentives for sellers. It might be just a great idea to loosen up the inventory.
[00:25:18] Speaker D: I think that's something that should be definitely considered.
[00:25:23] Speaker C: Early on in the episode, we were talking about existing home sales and existing home sales. One predictor was saying in 2024 that home sales should be nationally, 4397.
That's 4390, 7000. And new home sales projected to be 754,000. So 754,000 is only 17% of the existing home sales. So you add those all together and you see that while existing home sales are absolutely critical to the robust nature of any housing market, also that they had forecast the interest rates in 2024 to be approximately 6.1. My crystal ball is saying that I'm thinking that we're going to be down around 5.7%.
Yeah. So 30 year Bay Area alone should run about 6.5% right now. So I'm thinking you might see 5.75.6 in 2024, perhaps even a little better in 2025. But I'm thinking that's where it's going to be right now. Can you talk about heartbeat of the client for me?
[00:26:43] Speaker D: The heartbeat? You mean the momentum in a deal?
[00:26:46] Speaker C: There you go.
[00:26:47] Speaker D: Yep. The heartbeat of a client. We've talked about this on a number of occasions, that every client relationship with a purchase or sale has a. Has a heartbeat. And we, as agents, need to assess that and be cognizant of our clients, our clients heartbeat or heart rate. But, for instance, we had a client, a couple, an adorable couple, and they had some time left on their lease. And we were looking at homes with them for a few months, and then all of a sudden it seemed like the momentum just got going. They were ready to find that home. And so anyways, working with them, you know, it can change. That was an example, but it can change and it can start. Boom, boom. And then all of a sudden, it's like, quick heartbeat. But anyways, they. This cute couple, we. We just adored them and. And anyways, so we went out to dinner with them one night and the adorable ladies took off her jacket and we looked and we thought, oh, my goodness, this is the reason their heartbeat got moving quickly. So they were, they were going to have a child, which was very exciting.
[00:28:07] Speaker C: That was one of those aha. Moments, was it not? It was so cute and so cool. And then to, just to make a little bit more of a backstory, their second child was born on your birthday. My birthday.
[00:28:23] Speaker D: And just recently we had a first time home buyer and her lease. Okay. She was getting ready to, you know, get rid of her lease with her roommate, and, and she just finally, like, kicked in. I need to buy a place. I want to buy a place. And so she, she got one. That was exciting. That was this year.
[00:28:43] Speaker C: So, yeah, sounds good. That's fun. People's momentum does do change their heartbeat, as I call it. So, in summary, Nance, in summary, yes, yes.
[00:28:54] Speaker D: So while housing inventory remains scarce, we've talked about the Federal Reserve's words indicating for us to expect three interest rate reductions this year. Yes, three interest rate reductions this year. Existing home sales have increased, some in February and new home builders buying a few more homes. That's all good, except for a much needed increase in homes available for sale. So we still have a few loaves of bread on the shelf for buyers.
[00:29:28] Speaker C: Interesting times that we live in. All good information, Nancy. I hope these thoughts are helpful to homebuyers who hesitate, as my crystal ball says. Hmm. Home prices are going to go up in the San Francisco Bay Area. Thank you for being on the show.
[00:29:44] Speaker D: You're welcome. Thank you.
[00:29:46] Speaker C: You've been listening to the real estate and more show. You can listen to archived real estate and more
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[00:31:28] Speaker B: 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 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.
