Tag Archive for: economy

Interesting Times in Real Estate…Part 2 (Interest Rates)

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As mentioned in part 1, Housing Inventory is influenced by many factors and one factor that has a large influence on real estate (whether it’s a good market or a bad one) is Interest Rates (the price you pay to borrow money over time).

When Interest rates are high, this usually slows down anything that’s is reliant on lending whether commercial, residential or consumer related.  When interest rates drop, businesses and consumers start spending again as their ability to leverage improves and their costs drops.

Interest Rates in the last 20 months – Once Very Low, Then Very High and Hopefully Going Lower…

In June/July of 2022, interest rates started climbing from all-time lows and continued their way up from 2.75% in rate in the residential markets to a whopping 8% as the Federal Reserve was trying to control inflation.

In August/Sept of 2023, the Federal Reserve started using language that they might slow down or stop increasing rates, as inflation showed signs that it was getting inflation under control and that they might ease rates in Q1 of 2024, great news for us loan originators, as we just had the worst year ever in 30 years of lending and why over 200,000 loan officers and support staff exited the industry similar to what was seen in 2008/2009 with the recession of the stock market and housing collapse.

At that time (still in Sept of 2023), the Federal Reserve shared their intention and plan on how they were going to lower rates in 2024, 2025 and 2026 getting us back to rates in the mid 4’s to mid 5’s.  In q1 of 2024 after seeing Decembers numbers for inflation, those plans were squashed as inflation started to rear its ugly head again even though the stock market was on fire which would normally fuel the real estate market but rates went from the mid 6’s to the low 7’s in less than 1 month and stayed that way until March when rates finally started to drop as the Federal Reserve stated in an FOMC Meeting that “the Committee decided to maintain the target range for the federal funds rate at 5-1/4 to 5-1/2 percent” which is in line with the same update in September of 2023 which was great news.

We hope the Fed’s continue to lower rates to fuel the economy and help the real estate market which should bring more buyers and sellers to the market.

What Do Interest Rates Really Do?

Interest rates directly affect the cost of borrowing for consumers and businesses alike. In the context of real estate, mortgage interest rates significantly influence the affordability of homes. Lower interest rates make mortgages more accessible and reduce monthly payments, stimulating housing demand. Conversely, higher interest rates increase borrowing costs, potentially dampening demand and slowing down the pace of home purchases. In the Bay Area’s high-priced real estate market, even slight changes in interest rates can have a substantial impact on affordability, housing activity and can increase or impede consumer confidence.

Interest Rates Affect Consumer Confidence?

Consumer confidence, a crucial driver of economic activity, is closely tied to interest rates. When rates are low, consumers are more likely to feel confident about making major purchases, such as homes and durable goods. This increased spending contributes to economic growth. Conversely, rising interest rates may cause consumers to postpone discretionary spending and investments, leading to a decline in consumer confidence and overall economic activity.

The Federal Reserve plays a central role in influencing interest rates through monetary policy decisions. By adjusting the federal funds rate, the Fed aims to achieve its dual mandate of price stability and maximum employment. Changes in the federal funds rate ripple through the financial system, impacting borrowing costs and, consequently, economic activity and real estate markets.

Summary…

In summary, interest rates in the Bay Area have far-reaching implications, affecting housing affordability, economic growth, and consumer sentiment. Monitoring interest rate trends is essential for stakeholders in the real estate industry, policymakers, and consumers alike, as they navigate the complexities of the market and plan for the future.

Any questions, please contact me.

Best Regards,

101 Loan
Senior Mortgage Advisor
www.101Loan.com
650-465-8957 c  408-377-4123 o
CA DRE #01205444  NMLS #326829
101 Loan – 14435 C Big Basin Way, Saratoga, CA 95070

Products/Services/Accolades:

  1. Residential Financing for Purchases and Refinances on 1 to 4 unit properties.
  2. Reverse Mortgage Financing to include Conforming, Jumbo, HELOC Jumbo’s.
  3. Commercial & SBA Financing to include Multifamily, Office, Retail and Light Industrial.
  4. Access to over 60 banks with over 300 “Five Star” Reviews on Yelp, Google and Linkedin.
  5. Over 30 years of lending experience with over $2b in closed loan volume.

Note: Interest rates and loan programs quoted are subject to change without notice or until locked and approved by lender.

Interesting Times in Real Estate…Part 1 (Housing Inventory)

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2024 has been “interesting” to say the least in the world of real estate due to the following:

  • Housing Inventory
  • Interest Rates
  • Recent Changes in Residential Real Estate – NAR Developments, Market Impact and Trends
  • Changes in Commercial and Construction Financing

Over the next 4 weeks I’ll send an article on each topic (above) as it relates to Real Estate in the Residential and Commercial Space.  Please see below.

Housing Inventory and How its Affecting Buyers and Sellers

Before we get started, housing inventory, specifically residential housing, is defined as the total number of active listings plus pending sales in any given month and usually includes homes, town homes and condominiums.  To see this article in html, click here.

Factors that Influence Housing Inventory:

  • Cost of Money (Interest Rates)
  • Accessibility to Money (Lending)
  • The Economy (Locally and Nationally)
  • Consumer Confidence
  • Infrastructure of the Area*
  • The Stock Market
  • Job Growth
  • Inflation

*Infrastructure for these purposes is defined as the abundance or lack of land and buildable space, population in the area, number of large, mid and small cap sized companies local to one area, support services that include the number of schools (k-12), junior colleges, colleges and universities, hospitals, medical support, multiple sport teams, safety in an area, etc.  Example: Strong Areas typically include the Bay Area, LA, San Diego, Phoenix, Denver, Dallas, Miami, Boston, New York to name of few.

What’s a Perfect Real Estate Model?

One of the most perfect real estate models is considered the Bay Area.  This is due to its high infrastructure (see above for definition) compared to most areas in the country, but also has some of the most expensive real estate.  Where infrastructure is high and the above factors are positive, residential housing inventory is this area tends to be low just as its been since 2014 after the recovery from the 2008/2009 real estate crash that affected the country.

From 2014 and forward, inventory hasn’t gone back to “normal” levels, where there’s a balance of housing supply and consumer demand.  For the last decade (with the exception of 2023 when interest rates soared), residential housing inventory locally has been low and demand has been great exceeding supply.

Currently, inventory is as follows…

  • Santa Clara County – There are 1213 listings (801 homes, 282 condos and 130 townhomes) and pending sales of 900 (603 in homes and 297 in condos and townhomes as provided by Jen Beehler with Elevate Group  650-714-8216
  • San Mateo County – There are 579 listings (91 of which are off market and only available to Realtors) and pending sales of 332 (51 contingent, 287 pending) as provided by Kiersten Ligeti with the Agency  650-766-8319
  • Santa Cruz County – There are 283 listings and 52 pending sales and 77 contingent as provided by Dawn Thomas & Chuck Holcomb at the The Dawn Thomas Team at  650-7010-7822

Important Note: Housing Inventory does fluctuate but historically over the last 10 years, supply has not kept up pace with demand causing overbidding on many homes sold with the exception was 2023 where residential real estate came to a stand still due to rising interest rates from January of 2023 at 3% to 7% (+or- .5%.)


The Bidding War…Recent Stories

As inventory remains low in the Bay Area, if a property comes on the market where 1 or more buyers like it, when they offer, a bidding war occurs especially when the listing agent accepts offers on a certain day and time.  Result, this is pushing values higher.  See some recent stories that I personally experienced…

Story 1…Last month we had a client that bid on a property where there were 11 offers on a property listed for $1.595m.  Our bid was the winner at 1.8m due to a short closing and no contingencies.  We were worried that the appraised value would come in low but low and behold the appraised value came in and we closed with no issue.  This then becomes the new comp/closing for the area pushing values higher.

Story 2…Dawn Thomas (that provided info for Santa Cruz County) has a client that presented an offer at $2.1m bringing in a significant down payment and the home sold at $2.8m with the client knowing full well they may need to make of the difference if the appraised value comes in short (while we are waiting for the appraisal).  What’s crazy, with all this over bidding, when the property closes, that property becomes the new comp for their neighborhood pushing prices up further.  Just look at the recent Housing Price Index for San Jose, Sunnyvale and Santa Clara as it correlates to supply and demand of the local real estate market and the increase of home prices over time.

Summary

Low Housing Inventory with High Demand equals Overbidding and Higher Values in the Near Future.  If you’re a seller trading up or trading down or selling for profit, you can still sell for top dollar.  If you’re a buyer, if you buy now, your locking in the price as its expected to go higher due to housing inventory and lower rates as expected by the Fed Reserve in q3 and q4 of this year.  Next week, I will cover Interest rates and how they correlate with Real Estate and the over all economy and of course consumer confidence which also drives real estate prices up.

If you have any questions and would like to get preapproved or determine your purchase power or financing options, please contact me.  Thanks.


Best Regards,

101 Loan
Senior Mortgage Advisor
www.101Loan.com
650-465-8957 c 408-377-4123 o
CA DRE #01205444 NMLS #326829
101 Loan – 14435 C Big Basin Way, Saratoga, CA 95070

Products/Services/Accolades:

  1. Residential Financing for Purchases and Refinances on 1 to 4 unit properties.
  2. Reverse Mortgage Financing to include Conforming, Jumbo, HELOC Jumbo’s.
  3. Commercial & SBA Financing to include Multifamily, Office, Retail and Light Industrial.
  4. Access to over 60 banks with over 300 “Five Star” Reviews on Yelp, Google and Linkedin.
  5. Over 30 years of lending experience with over$2b in closed loan volume.

Note: Interest rates and loan programs quoted are subject to change without notice or until locked and approved by lender.

 

 

 

Market Update – New Opportunities

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Good Afternoon,

Last week, Mark Jamison, Senior Wealth Director of BNY Mellon in Menlo Park invited me to his office to listen to ACG present on the economy and what they believe will occur over the next 12 months. (To view the actual presentation, click here.)

In the panel, consisting of Senior Analyst from BNY, a VC, a partner from Fenwick and West and an M&A expert spoke. The consensus of the panel and most of the audience (myself included) agreed that q1 thru q3 of this year will most likely show us a recession and the cooling of the market where spending will decrease, stocks could go lower putting pressure on the fed to reduce tightening and start lowering rates. They also believed that the q4 and q1 of next year will be a soft landing with the economy improving as labor stays strong even with the recent layoffs from tech companies.

What Does this Mean to You?

Somewhere between now and next few quarters, values should go lower making it a great time to purchase. If you know someone thinking of selling, they should consider selling now rather than waiting. If you know someone buying, they should get preapproved and start actively looking as no one can time the market and know really when the bottom is. They all agreed that we would not see a repeat of 2008.

We just know that from last year in q3 (ish) to current, home values have been dropping and now were seeing some good opportunities for buyers. This is the main reason, our 2 to 1 Buy Down product makes sense for so many buyers and it provides a much lower payment for the next few years and helps sellers provide buyers an incentive to buy their property over other properties that don’t offer this perk. For more info on this new jumbo program, see my article published Friday.

If you have a client looking to buy, sell and trade down or trade up or look into refi options to pull cashout to buy or invest in the real estate or stock market, please refer them to me. Our rates now are phenomenal and we offer programs many other lenders don’t.

BTW…if you’d like to read my current weekly report, go “Rob’s Corner” on my home page at www.101Loan.com.

Have a great weekend!

Best Regards,

101 Loan

Senior Mortgage Advisor

650-465-8957 c 408-377-4123 o 408-608-1921 f

101 Loan – 14435 C Big Basin Way, Saratoga, CA 95070

101 Loan LLC – CA DRE #01205444  NMLS #326829

101 Loan is an Associate of General Mortgage Capital Corporation

Products/Services/Accolades:

  1. Residential Financing for Purchases and Refinances on 1 to 4 unit properties.
  2. Reverse Mortgage Financing to include Conforming, Jumbo, HELOC Jumbo’s.
  3. Commercial & SBA Financing to include Multifamily, Office, Retail and Light Industrial.
  4. Access to over 50 banks with over 300 “Five Star” Reviews on Yelp, Google, Facebook and Linkedin.

Note: Interest rates and loan programs quoted are subject to change without notice or until locked and approved by lender.