What's Going On, Housing Market?

[00:00:00] Speaker A: Welcome to the real estate and more show and thanks for listening. We have real estate and the Bay Area housing markets as our topic today, and I believe it is incredibly important for interested home sellers and buyers to be aware of what's going on housing market, especially when home prices are now expected to extend to new highs. Let's talk about this today. I have my partner Nancy to help me out and to interpret some of these questions, and she'll help me through the housing review of last year and then talk about how things are stacking up so far this year. Welcome to the show, Nancy. [00:00:38] Speaker B: Thanks, Michael. Glad to be here again. [00:00:40] Speaker A: Yes. Well, first a quick review. Let's do a rear view hindsight of 2023, if you don't mind. So let's go. [00:00:51] Speaker B: Okay, let's go. So, referring to our housing markets, we've identified potential home sellers in the past as red ants and potential homebuyers as black ants. We've talked about how each group has different interests and how both have been getting along in a somewhat state of equilibrium altogether in the same Mason jar is what we've been calling it to date. The mason jar has not been shaken up too much. [00:01:19] Speaker A: Let's talk about this. The primary characteristics of the red ant potential home sellers are people of retirement age, and they make up the largest portion of home. Sellers have typically been in their home for a long time, have a low 3% mortgage or it's paid off. They are thinking, if I sell, where am I going to go to buy a replacement home? Should I have to pay more for the mortgage? Today's interest rates and they belabor the challenge of moving. And if they finance well, the rate will be higher. So in 2023, home sellers, our red ants just hung out and did much of nothing. They must have used that pool in the backyard or whatever they needed to do to enjoy their home. So you can't blame them. But these potential sellers could move with a pot of cash from selling their home to another state and buy a lesser priced home. Of course, it's their call, their choice, though. You know, sellers have been liking Nevada and Arizona recently. Some up to Montana and Wyoming. Beautiful states, each with their own benefits, depending on what they like. [00:02:32] Speaker B: You're right about that, Michael. So anyways, this is interesting on the movement or the relocation. A recent study shows that movement of residents from one home to another in the US has been slowing now for four decades. That's 40 years. Back in 86, 20% of Americans moved annually and 12% of that was relocations. Interestingly, in their immediate county. The percent of homeowners who move annually is now down to an 8.5% amount. And movement from one home to another has declined progressively in percentage, from 20% to 8.5% over the past 40 years. [00:03:18] Speaker A: Wow. That's something. So people moving from one house to another, it's declined progressively in percentage from 20% down to just over 8.5% over the past 40 years. People are just not as moving, I. [00:03:35] Speaker B: Guess they like their home. [00:03:37] Speaker A: People are just moving as they used to, and the rate has been decreasing. Sellers are holding on to what they have more now than they used to. [00:03:47] Speaker B: So now our black ants, let's recall, the black ants are the largest percentage of our home buyers. They're a group consisting of those from 27 to 42 years of age. They're professionals, new families desiring great schools and a sense of neighborhood, which we all appreciate. And 8% interest rates have affected their enthusiasm some, yeah. [00:04:14] Speaker A: So you're also talking about the same group that has two teslas in the garage, right? Two teslas in the garage and a swimming pool. Big backyard back there. Yeah. We saw a lot of those people move from Silicon Valley during the virus times because they didn't have to go into the office. And that has populated some areas around the Bay Area that normally would not have had that type of demand driven of the prices up a little bit. But interest rates have kind of cooled down that sector a little bit. So in my view, with a little rear view mirror hindsight thinking, they have best served their own interest if they would have anyway, if they would have purchased their home in the latter part of 2023, as inventory of homes for sale has declined and home prices have inched even higher. Therefore, unless something changes, like inventory increasing or more buyers come to buy, what we have now as a market is likely to continue and remain the same. Not too many sellers putting homes on the market and not too many buyers coming to the plate to buy. I used the term before, equilibrium. Well, it's going to move from month to month because of seasonal buy sell type seasons. But the facts are the facts. We still do not have a lot of inventory in the system. So I call it equilibrium. Not quite, but it is. So people come up to me and they said, well, are we going to have another one of these crashes from like we did in 2008? The reason that it was different in 2008 as opposed to now is back then we had an abundance of inventory, lots and lots and lots of homes on the market. And now we do not have any homes on the market. So when that case happens, then you certainly will not have that type of a decline. So I think that it's noteworthy to again note that due to the limited homes available for sale, prices remain somewhat firm. They've not declined, in fact, inched upwards. Review of mortgage rates for a moment, I wanted to talk about mortgage rates about twelve, I guess it was December 13. We had the biggest decline in mortgage interest rates in a couple of decades. And what was amazing is that the Federal Reserve did not do anything other than just stay pat as far as interest rate increases or declines on that date. The anticipation was built in with mortgage banks and they dropped the rates like crazy there just after that. And we've seen that, and now it's gradually started inching back up and it's not as high as it was before that date. But I would say that in the Bay Area, a normal 30 year loan, better than most of the country, is running about 6.46.5%, which is really not that bad. But our buyers look at it like it's the end of the world, instead of looking at the other benefits of homeownership, like enjoying the home, seeing an equity appreciation, historically speaking, over a little period of time, and having the tax benefits from that. So from just under 8% now, I'd say more like 7%, we're enjoying some pretty good rates. [00:07:48] Speaker B: Right. This is interesting that the Federal Reserve did not drop the fed rate in December. They only stood pat. And then as a result of the rate decrease, we did have that and we saw it. The momentary flurry of homebuyers that came and homebuyers that we helped, they bought a few homes and now they've removed those from the inventory. [00:08:12] Speaker A: Yeah. Then since rates have popped back up, as I mentioned a few moments ago, but they're still about Bay Area, and it's slowing down our black ant buyers a little bit. So thinking ahead into 2024, which happens to be, and I'll stomp my foot a little bit, an election year, and historically, rates have dropped in an election year, by the way. So if mortgage rates do decrease, you're going to have a whole bunch more of buyers come to the plate to buy the same number of homes available for sale. Something has to be done in order to increase the number of homes available for sale or the housing inventory. For the market to be more vibrant, something would have to change that. And I don't see it happening. I see new home building is doing okay, but I don't see a big deal as far as sellers coming and putting their homes on the market. We're going to take a quick break. We'll be right back. Michael Hatfield remax team with low housing. [00:09:19] Speaker B: 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. [00:09:28] Speaker C: 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 in a warm, sensitive neighborhood here. Don't miss this dream home. [00:09:58] Speaker B: Get help with buying or selling a home by calling the Michael Hatfield remax team at 925-322-7775 that's 925-32-2775 or go to michaelhatfieldhomes.com. That's michaelhatfieldhomes.com, Winklehatfield real estate and more, right. It makes it more challenging and more competition and multiple offers, situations which we're familiar with. But anyway, so Michael, here's some recent industry data. Black Knight, a data analyst company, reported that home price indexes for November and December rose 0.1% in each of those months, prices had risen nationally, 5.6% year over year over December of 2022. [00:10:50] Speaker A: Wow. So Black Knight said to have went up 5.6% from December of 22 to December of 23. And another data, I think this article was coupled with CoreLogic's views also. That's another data company. They reported their latest home price index showing that national home values fell 0.1% from November to December of 2023. CoreLogic's 2023 level of appreciation was nearly equivalent from year to year, with home values up 5.5% between December of 2022 and December of 2023 nationally. And the big forecasters are pundits, which you happen to ask what does pundits mean? They forecast CoreLogic. Pundits forecast home prices will fall a little 0.2% in January, then rise 2.8% in the year going forward. I say their forecast is too conservative. That's my own thought, my own opinion. [00:11:57] Speaker B: Okay. [00:11:57] Speaker A: And using CoreLogic's forecast of 3% in 2023, we saw 5.5%. And going back to 2021, CoreLogic had forecasted 6.6% decline in home values, and we saw a 19% gain instead. So CoreLogic says home prices will continue to extend anyway to new highs entering the typically busy spring home buying season, which is about ready to start imminently. [00:12:29] Speaker B: It is, and many of us believe now remains a great opportunity for building wealth through real estate, particularly in the Bay Area, as my opinion is that I expect home prices to extend to new highs in this election year. And having all this history living in the Bay area my whole life, it proves true. [00:12:52] Speaker A: Okay, let's talk a little bit on existing home inventory. [00:12:56] Speaker B: Okay. [00:12:57] Speaker A: National association of Realtors. Now this is kind of interesting. They have recently reported that there were just 1 million homes available for sale nationally at the end of December 2023. And that was down 11.5% from November's 1.13 million available homes for sale. So that means down in one month. 11.5% from November of 2023 to December of 2023, down 11.5% in one month. That's kind of incredible. But really, when you look at those numbers, they're not really that accurate. And I'll tell you why. Because they counted homes that were not closed escrows or the pendings or the homes that were in contract, right? So their numbers don't tell the whole story. Many homes were counted in that existing inventory. They were under contract. So if you took those ones that were under contract, you'll find that the housing inventory really was only 666,000 homes nationally in the entire United States. And that is down a big, big number from what we've seen in the past. [00:14:16] Speaker B: That's a. [00:14:19] Speaker A: I don't know. I think it's less than half of what we would expect in a normal year to year. Homes available for sale. I'm not too sure that what the government has been doing to help things has helped much at all. [00:14:33] Speaker B: So what is the bottom line, Michael? [00:14:35] Speaker A: Tight supply, inventory, homes available for sale. It's going to remain the same for some time. That's my view, especially in the San Francisco Bay area, where we've got two teslas in the garage. Many homeowners with low rate mortgages are holding onto their home properties instead of listing them for sale. Plus, demand is only expected to rise, especially if rates move lower this year and more buyers decide to resume their home search. This ongoing difference between the red ants, our sellers, and the black ants, our homebuyers demand, is the key reason why home values continue to rise and will continue to rise. Also, why now provides great opportunities to take advantage of appreciation gains. I can't think of a better time, other than maybe last year, of how you would add wealth to your own household through investing in real estate. Other than now buyers, you have to buy a lottery ticket to win the lottery. You will not enjoy that equity appreciation. You will not have the benefits of tax advantages. You will not grow your wealth in the bank unless you buy a home. You won't get there by renting because you remember now, when you rent, there's no deduction on renting. But when you own a home and you have the mortgage interest deduction, you can use that to reduce your taxable income to a certain limit, of course. And that's not to even talk about the real big one, which is appreciation of the dwelling that sits on your know, it's non cash. It comes off against your taxable income. What else could you want? [00:16:21] Speaker B: Wonderful benefits, for sure. So, Michael, I like this quote by Irvin Ball, who wisely said, knowledge is power, but enthusiasm pulls the switch. [00:16:34] Speaker A: Yeah, that's when I met Nancy. I had a lot of enthusiasm. It's been only 40 years ago, but I had a lot of enthusiasm. And I think that it's really important in what we do. Knowledge is really power, but having the motivation, the enthusiasm, the drive is incredibly important. I think folks out there, if you can buy a home, especially in the San Francisco area, get with it. Get with it now. Don't wait. I'm actually using and coining Dave Ramsey's term. He said this last year. He says, don't wait, don't wait. Go. And I think he's right. If you can afford to do it, and most people can, then get at know, get about it. [00:17:19] Speaker B: Make it happen. [00:17:20] Speaker A: We're going to take a short break. We'll be right back. [00:17:26] Speaker D: Michael, what traits should we look for in selecting an agent? [00:17:29] Speaker E: 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. [00:17:50] Speaker D: What can you do as a plus for clients? [00:17:52] Speaker E: 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. [00:18:03] Speaker D: Call 925-32-2775 now to schedule an appointment or complimentary home analysis. For excellence in real estate, call the Michael Hatfield remax team at 925-322-7775 or go to michaelhatfieldhomes.com. [00:18:24] Speaker B: 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. [00:18:34] Speaker C: 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 in a warm, sensitive neighborhood here. Don't miss this dream home. [00:19:04] Speaker B: Get help with buying or selling a home by calling the Michael Hatfield remax team at 925-322-7775 that's 925-322-7775 or go to michaelhatfieldhomes.com. That's michaelhatfieldhomes.com. [00:19:21] Speaker A: You had some interesting thoughts as well. As one of our lenders that were on the program, they said saving for a big down payment. We have this one adorable first time home buyer couple, recently married. They're just wonderful people and they keep we're going to save for the 20% down and we say no, get in there, get your home. And you'll find that you're going to appreciate your value, that you have considerably. But to date, they have not bought. [00:19:57] Speaker B: That lottery ticket, unfortunately, because statistics indicate that on average it takes eight years, eight years for a person to save up a 20% down payment. That's some time. And over that eight year period, the purchase price could have increased by some percentage. Let's just say 30%, for example. That's significant. [00:20:22] Speaker A: It's very significant. You know, in the flying industry, if you're in the flight simulator, you say something and people don't hear you. You have to say it again and eventually they'll hear you. And I'm sorry, folks, but I have to repeat this. Let's just say 20% down of a million dollar purchase in the Bay area is $200,000. In eight years, if a purchase price has grown 30%, that amount for that buying that house would be a million three. You would have to have instead of $200,000. Now at that 20% down, you would have to have $260,000, $60,000 more to make the purchase. So I'm saying it again, kind of like when you reach down to pick up a football and it gets kicked on down the field, off one goes scurrying after it. And I'd really like the folks that really want to have their own home, have their own nest, have their own heartbeat, have their own tailgate parties at home, big screen tvs, grilling some steaks in the back, enjoying life. I'd like to see them do it. It's not because we're in the real estate business, which we are. But it's because I think that homeownership is very important to people. It's a place that you can nest, it's a place that you can take your time. It's a place that you can call your own. And I think it's really important in life. [00:21:50] Speaker B: It's rather awesome. And it doesn't look like, or maybe it's not really worth saving for eight years when you can buy something with a 5% down payment, I guess you have to weigh that. But in the Bay Area, it might be a better idea to buy when buying is good, and deal with refinancing issues down the road a bit. It's a way to get into a home, get in at today's purchase prices with a 5% down, instead of waiting and just trying to keep catching it later and catch up with that football that keeps going down the field. Enjoy the home, enjoy the homeowner tax benefits. And of course, you can make the payments with the private mortgage interest premium tacked on. And at some point, hopefully get rid of that, kick that down the field. [00:22:46] Speaker A: I've lamented to our listeners many times in the past. The first home that I bought, it was actually before I met my lovely bride here. I paid twelve and a half percent interest, and I had to bring in a partner to gift me some funds to help make that purchase. But I have to tell you, I was sure glad that I did. Interest rates move up. Interest rates move down, but they will have to come down, I think, at some point. And when they do, you go in and you refinance that rate, and now you're nice and happy, and you can pay off your partner that you had, and your payments go way down. But I mean, with this narrow inventory that we have, get in, buy that lottery ticket, get into your home, enjoy your home. Quit worrying about it every day. Well, I'm going to pay $100 more or $200 or more, or even $500 more per month. Get that home, get into it, enjoy it. And then keep an eye on those mortgage rates and bring them down if they ever get to 4% again. So, 3%? Well, yeah, I think this year that at some point that we possibly could see in the fives, pretty realistically, 5% is good, but I wouldn't wait for it. And I certainly wouldn't wait eight years to save up 20% down. I would actually use the 5% down that programs that are available conventional, use a great lender, and of course, use great agents. I know a couple of those. And then get into your home and really enjoy your home. That's what I've got to say about it. [00:24:30] Speaker B: Sounds good. [00:24:31] Speaker A: So in conclusion, I recommend the following home buyers or home sellers process. See your target clearly or what are you trying to do? Then step number two, plan your checklist of how you're going to get there, then do each and every item on your checklist. And number four, step evaluate your progress as you go along. And I like what Will Rogers wrote. As it is step number three of the aforementioned process. He says even if you are on the right track, you'll get run over if you just sit there. So most people tend to fall down when it comes to the third step of making an execution of what you've already planned to do. They fall down a little bit right there and you don't want to fall down in the process. You want to be able to keep moving forward. So I'm going to say that one again. I guess we're back in the flight simulator again. See your target clearly or your objective? See your objective clearly. Number two, plan a checklist of how you're going to get there. Number three, do each and every one of those steps on that checklist. And number four, evaluate your progress as you go along. So sellers, tell me about sellers now. [00:25:52] Speaker B: Home sellers. So if you do have a pot of gold and you're at retirement age, make a decision. Just step out and make a decision. If you'd like to go out and do some things you never really had a chance to do, working was your life. You took your time and your life. But maybe consider living someplace that you've dreamed about or seeing parts of the world that working didn't allow for and just go and explore what a fun thing to do with someone you enjoy spending time with. Enjoy your life. And perhaps it changes what the doctor orders. [00:26:29] Speaker A: I think that's great advice, Nancy, for home buyers. Buy your home. Live in it, enjoy it. Gan the tailgate parties, grill the steaks. If you got a pool, jump in the pool. Park your teslas in the garage. Over some amount of time in the Bay area historically, you can expect the home to appreciate in value. What do you got to say about that? [00:26:52] Speaker B: I agree. Makes sense to me. [00:26:54] Speaker A: You think so? [00:26:55] Speaker B: I do. [00:26:58] Speaker A: Well, I hope you've enjoyed our show today on what's going on housing market. It's a good time to jump in, and it's also a good time to sell. A special thank you to my partner Nancy for being on the show. With her always great insight. And it's time for a short break. You've been listening to real estate and more. Listen to archived real estate and more shows at Michael hatfieldhomes.com slash radio and the real estate and more show is now podcast on demand on Spotify, Amazon, I heart Apple, Pandora and most major podcast stations platforms as well. We'll be right back with our next special guest. Stay tuned.