Tag Archive for: interest rates

How to Win a Bay Area Bidding War in 2026

/by
Bay Area bidding war strategy for 2026 homebuyers

Bay Area bidding war strategy for 2026 homebuyers

How to Win a Bay Area Bidding War in 2026

Winning a Bay Area bidding war in 2026 comes down to five things: knowing a home’s real value, deciding how far over it to bid, structuring an offer a seller trusts, getting fully preapproved, and being able to close on time. Here’s each, fast.

The market. San Francisco’s median hit a record $1.7M in March 2026, up 14%+ year-over-year. Typical homes sell ~15% over asking; the hottest go 30% over. Santa Clara draws ~5 offers per home and closes in ~9 days. In San Mateo County, ~75% of single-family homes sell above asking.

Quick read by area:

  • San Francisco — ~$1.7M median; ~15% over asking typical, ~30% at the top; ~14 days on market.
  • Santa Clara — ~5 offers per home; ~9 days; single-family near 107% of list.
  • San Mateo County — ~3 of 4 single-family homes over asking; ~107% sale-to-list.
  • Palo Alto / Menlo Park / Los Altos — ~8 days to contract; under 2 months of supply.
  • Condos & outer areas — softer, more inventory, room to negotiate.

List price is bait. Bay Area agents routinely price below expected value to draw a crowd and trigger offers — common enough in the East Bay to be nicknamed “egregious underpricing.” Offering 10% over a price set 15% low can still be a deal. “Over asking” tells you nothing about whether you overpaid.

Comps tell the truth. Value = what similar nearby homes recently sold for in the last few months. A good comp is recent (closed within 90 days, and a great one sold in the last 30), close by, similar in size and condition, and — critically — fed by the same school. School assignment moves Bay Area prices 3–4% per step up in quality, which on the Peninsula or South Bay can mean six figures. Note: comps lag the market by a month or two, so in a rising market assume true value sits slightly above the latest comp.

How much to bid in a Bay Area bidding war

Common guidance is 1–3% over list, or staying within 7% of fair value, or adding ~1% per expected competing offer. Treat these as rough guides, not formulas — none is well-validated. The real rule: your number rises with competition (offers made) and is measured against comps, never the list price.

Escalation clauses. These auto-bump your bid to beat rivals by a set increment up to a cap. They work but reveal your ceiling, and many sellers reject them for plain “highest and best.” If you use one, avoid round numbers ($5,500 beats $5,000) and require proof of the competing offer.

Terms win close races. When offers are near each other on price, certainty decides it. A financed offer that closes in 2–3 weeks, from an obviously ready buyer, can beat a higher price from a client who isn’t preapproved and can’t close in 2 to 3 weeks.

Contingencies. A contingency lets you exit and keep your deposit if the inspection, appraisal, or loan goes wrong. Waiving strengthens an offer — ~1 in 5 buyers nationally waived appraisal or inspection late last year, more here — but trades away protection. Waive the appraisal and a low appraisal comes out of your pocket; an appraisal gap clause caps that exposure. Waive inspection only after reading the seller’s pre-sale reports. In California, backing out after removing contingencies can cost your deposit, capped at 3% of price. Do your homework, then waive — never the reverse.

The cash myth. Cash dominates above ~$3M but is rarer below it than people think — ~1 in 5 purchases in Oakland and San Jose late last year, under the national rate. SF financed buyers almost all use conventional loans. You don’t need cash. You need to look as certain as cash.

Getting preapproved is how you win a Bay Area bidding war

Three tiers: prequalification (a guess, near-worthless in a war), preapproval (application + credit pull + docs), and fully underwritten / “TBD” approval (an underwriter clears your full file before you pick a house). The 2nd and 3rd options let you credibly promise a fast close and shorten or waive the loan contingency. Valid ~90 days, works on any property. Get fully underwritten before you shop — highest-leverage move available, and most buyers skip it.

Cost of waiting. Every over-asking sale becomes a comp that lifts the next home’s value, so prices you skip today are usually lower than what you’ll face later. And the math is gentler than it feels: at current rates, +$10,000 in price is ~$63/month. With rates expected to ease toward 6% in 2026, you can refinance the rate later — but the price is locked for good.

The buyers who win a Bay Area bidding war aren’t the richest. They’re the ones who knew the home’s value, sized up their competition, and showed up ready. That’s preparation, and it’s in your control.

Get fully preapproved by us today. If you need the name of a great realtor in your area, let me know as well — I work with the best ones.

Rob McCarthy — Senior Mortgage Advisor 650-465-8957 · rob@101loan.com CA DRE #01165697 · NMLS #121019

The Federal Reserve Cuts Commercial Lending Rates…Why did Consumer Lending Rates Go up Then?

/by

In the September Federal Reserve meeting that finished yesterday, the Federal Reserve cut its benchmark interest rate by 0.50 percentage points vs .25 as originally planned.  This makes the first rate cut in 4 years.  This shift is expected to eventually lower borrowing costs across various consumer loans, including mortgages, auto loans, and credit cards but first lowers commercial lending rates.

With the federal funds rate now between 4.75% and 5.00%, consumers might see gradual reductions in loan rates, although the pace will depend on broader economic conditions like inflation and employment trend.

Why Did Rates Go Up Yesterday?

The Fed’s rate cut sent signals out to the market, that the central bank is focused on stimulating economic growth by making borrowing cheaper.  When the Federal Reserve lowered rate by .5 instead of .25, it forced the 10-year Treasury yield to increase from a low of 3.60% to 3.74% causing consumer rates to go up to levels we saw several weeks ago due to following reasons:

  1. Inflation Expectations: Lower rates can lead to higher inflation over time, which reduces the value of long-term bonds like the 10-year Treasury. As investors anticipate rising inflation, they demand higher yields to compensate for the potential decrease in purchasing power over time.
  2. Economic Growth Optimism: A rate cut can also signal confidence in future economic recovery. If investors expect stronger growth, they might shift from safe assets like Treasuries to riskier investments (stocks, corporate bonds). This sell-off in Treasuries pushes yields higher.
  3. Bond Supply and Demand: The bond market is influenced by supply and demand dynamics. If there is a significant selling of longer-term bonds, yields will rise. This can happen if the market believes that the Federal Reserve’s policy will eventually lead to inflationary pressures or more aggressive borrowing from the government.

Clients we had locked on purchases and refinances are happy we locked as we’ve seen this before in other markets over the last 30 years.  Remember, a Fed Drop does not always lower real estate rates.  Often it increases them in the short term like it did yesterday and takes a while for them to trickle down.

For a rate quote or loan comparison on either a purchase or refinance, please contact us.  In addition, if you’d like us to track rates for you, please let us know.  Thanks.

Big Day For The Federal Reserve, the Stock Market and Interest Rates…

/by

The Big Question…Will They or Wont They?  What will the Federal Reserve do or say at the conclusion of today’s big fed meeting?  Were waiting on Pins and Needles!

 
Its been almost 2 years where the Federal Reserve has aggressively increased rates to control inflation which is finally at 2.5% from 6.5% to 7% several years ago.
The Fed Meeting which starts tomorrow, is predicted and already built into the consumer rate market, that rates will be decreased by .25.  If the Federal Reserve does more, rates will drop even further compared to where they are now.  If the Fed only drops rates by .25, rates will most likely stay flat or possibly climb, but if the Fed doesn’t lower rates, then we will see rates climb.
There is lots of talk on the street about what my occur but with inflation now at 2.5%, the Federal Reserve is now worried about going into a recession and the easiest way to prevent this, is to lower the cost of money by lowering the federal funding rate which then lowers consumer lending rates.
 
This is what we are hearing right now…
 
We will update you once we hear from Jerome Powell, the Federal Reserve Chairman.
BTW…Here is Today’s Residential Rates…

6.125% at 0 Points – 30yr Fixed Jumbo loan at $1.150M & above at 75% ltv (APR – 6.319%)
5.990% at 0 Points – 30yr Fixed Conforming loan at $766.1k > $1,149M at 75%ltv (APR – 6.184%)
5.750% at 0 Points – 30yr Fixed Conforming loan at $300k > $766k at 75% ltv (APR – 5.944%)

Rate Notes: 15 year fixed rates are approximately .75 lower in rate than the rates above, depending on loan amount, fico and if purchase or refinance.

Additional Notes: Interest rates and loan programs quoted are subject to change without notice or until locked and approved by lender.  Above rates are for owner occupied property on purchases assuming an 800 mid fico within the Bay Area.

BTW2...Conforming Loan Amounts may be Going Up from $766,550 to $802,650. That would be a nice increase of $36,100.  In addition, most likely the high balance conforming loan limit will be increased as well to $1,203,975 from $1,149,825.

For a customized quote or for anything financing related, please contact me.

Best Regards,

101 Loan

Senior Mortgage Advisor

www.101Loan.com

650-465-8957 c  hello@101loan.com 

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.

So What Does a Interest Rate Cut Mean to You?

/by
We now know now due the recent report released by Fed Chairman Powell, the Federal Reserve intends to drop the Federal Fund rate which will lower commercial lending rates (ie: the prime rate) in September if the economy continues to slow.
 
This will stimulate the economy by lowering the cost of commercial lending that businesses use to acquire property and pay for good and services.
 
This rate drop will take some time to trickle down to consumer rates that consist of mortgage and auto loans but knowing the Federal Reserve is pretty committed to doing a rate cut, is great news for consumers!

Consumers that will Benefit from the Rate Cut include:

1) Anyone Purchasing a Home.
2) Anyone looking to Refi property to Lower Payments & Consolidate Debt.
3) Anyone purchasing an Investment Property.
4) Anyone in need of Reverse Mortgage Financing.
5) Anyone in need of Construction Financing (Owner or Spec)

Some clients are not waiting to refi (if they can save money now) as they realize, the Federal Reserve Rate cut, could take several months to eventually affect consumer rates.

Currently Residential Rates are as Follows:

  • 6.375% at 0 Points – 30yr Fixed Jumbo loan at $1.150M & above at 75% ltv (APR – 6.560%)
  • 6.125% at 0 Points – 30yr Fixed Conforming loan at $766.1k > $1,149M at 75%ltv (APR – 6.319%)
  • 6.000% at 0 Points – 30yr Fixed Conforming loan at $300k > $766k at 75% ltv (APR – 6.194%)

Note: Interest rates and loan programs quoted are subject to change without notice or until locked and approved by lender.  Above rates are for owner occupied property within the Bay Area.

For a customized quote or for anything financing related, please contact me.

Best Regards,

101 Loan

Senior Mortgage Advisor

www.101Loan.com

650-465-8957 c  hello@101loan.com 

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.

Rates Finally Go Lower!

/by

It’s been over 20 months since interest rates started climbing as the Federal Reserve did everything to control inflation. This resulted in one of the worst lending climates for residential and commercial lending and real estate in the the last 30 years aside from the 2008 recession.

In January of 2023 we had over 200,000 licensed loan officers in the United States and in just 12 months, we lost almost half of that number due to rising interest rates and the lack of real estate and loan closings.

As a mortgage professional that provides Residential, Commercial, Reverse, Construction and Hard Money lending, I individually went from  10+ closings per month, to just a little over 2 closings per month which was dismal when compared to my past performance.

Per Barry Habib, an expert in the lending community, 2 closed loans or more was considered in the 99 percentile of loan officers in 2023.  Most loan officers closed 1 per month or less in 2023 and some haven’t closed any loans in 2024.

Unfortunately this year hasn’t been much different or better. I know so many loan officers and realtors, that were forced to sell their homes or change careers. Thank god for savings and keeping your eye on the ball or I would have been in the same boat as so many others.

Now let’s talk Interest Rates…
Our business (lending and real estate) can fuel the market if we are going strong.  While jobless claims went from an expected 14,000 to over 249,000 this month, (which is tough for those recently laid off), its great for the bond yield that has significantly dropped since October of 2023 which was at 5.0% and now at 3.8% putting pressure on the Federal Reserve to lower rates especially with inflation flattening and cooling off.
Will the Federal Reserve Drop Rates?
No one really knows, but the Federal Reserve also knows, if they don’t lower rates, it will stall the economy and put a negative impact on the Dow Jones and Nasdaq and worse yet, further increase the cost of living which is out of control and why gas prices, food prices, and utilities are the highest we have ever seen.  Again, no one is certain what the Federal Reserve will do nor the impact the elections will have on interest rates, but this I know, rates are much lower than just 6 months ago.  See below…
Current Rates on Purchase or Refi:
 
Jumbo Rates… ($1,149,830 or More in Loan Amount)
  • 30 Year 6.125% at 1 Point (with an APR of 6.291)
  • 30 Year 6.375% at 0 Points (with and APR of 6.569)
  • 30 Year 6.625% at 0 Points/0 Fees (with and APR of 6.819)

Note: Above based on a 75% ltv or less with a mid fico score 780 or higher.

Conforming Rates…($1,149,825 or Less in Loan Amount)

  • 30 Year 5.875% at 0 Points (with an APR of 6.069)
  • 30 Year 6.125% at 0 Points / 0 Fees (with and APR of 6.394)

Note: Above based on a 75% ltv or less with a mid fico score 780 or higher.

If your like a customized quote, go here.  Any questions, please contact me.

Best Regards,

101 Loan
Senior Mortgage Advisor
www.101Loan.com
650-465-8957 c  hello@101loan.com
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.

The Housing Market is on the Move…

/by

Back in March of this year, we provided a report that shows where housing inventory was on the Peninsula, South Bay and Santa Cruz area. This month we have updated this report for your review.

As you may know housing inventory locally or abroad considers several factors that include:

  • Interest rates…(See below for current rates)*
  • Lending Guidelines (Ability to Qualify for Financing)
  • The Economy (Locally and Nationally)
  • Cost of Living (Up in the last 3 to 4 years)
  • Infrastructure of the Area**
  • The Stock Market with Dow pushing over 40k
  • Job Growth
  • Inflation down to 2.97

*Interest Rates are finally dropping.  If you were to purchase a property to occupy and put 25% down and had a 740 mid fico or higher, you may qualify for the following:

  • 30 yar fixed at 6.875% at 0 Points
  • 10 year ARM at 6.625% at 0 Points
Note: APR on 30 year is 7.03 and 6.72 on 10 year Arm. Rates subject to change.
**Infrastructure for these purposes is defined as the abundance of land and buildable space, population in the area, number of large, mid and small cap sized companies local to one area and support services (schools, hospitals)

Housing Inventory is as Follows…

Santa Clara County as of July 12, 2024:

Active Listings – 1028 Houses – priced from $32,800,000 (same property as in March) to $444,000.   614 Condo/Townhome – priced from $2,849,000 to $290,000 (Listings are up by 429)

Contingent Properties – 84 Houses – priced from $16,000,000 (same as in March–these Buyers are waiting for entitlements for the land) to $799,950
65 Condo/Townhome – priced from $1,988,888 to $399,000

Pending Properties – 644 Houses – priced from $11,555,000 to $520,000 and 253 Condo/Townhome – priced from $3,388,000 to $429,000

DAYS ON MARKET – AVERAGES House – 29 and Condo/Townhomes – 38

Summary: Inventory up by 429 properties

In March of 2024, Santa Clara County was at 1213 listings (801 homes, 282 condos and 130 townhomes) and pending sales of 900 (603 in homes and 297 in condos and townhomes.

Provided by:
Dawn Thomas – Broker Associate and Founder
The Dawn Thomas Team
650-215-5990 c   Dawn@siliconvalleyandbeyond.com
DRE# 01460529

San Mateo County as of July 12, 2024:

Houses –

518 Active, 35 Contingent, 255 Pending, 12 transactions fell through, 110 price reductions, 88 Average Days on Market (ADOM)

Condos –

215 Active, 20 Contingent, 34 Pending, 8 TFT, 69 price reductions, 99 ADOM

Townhouses –

61 Active, 6 Contingent, 25 Pending, 1 TFT, 12 price reductions, 36 ADOM

Summary: Inventory up by 429 properties

In March of 2024, San Mateo County, there were 579 listings (91 of which are off market and only available to Realtors) and pending sales of 332 (51 contingent, 287 pending.

Provided by:

KIERSTEN LIGETI
Broker-Associate
THEAGENCY
#01298631
c: 650-766-8319
KPLuxuryHomes.com

Santa Cruz County as of July 12, 2024:

For Single Family Homes…

The median sales price for Single family homes in June 2024 throughout the County of Santa Cruz is up slightly from $1,362,500 in May to $1,413,000 in June.

The average days on market is up from 27 days on market in May to 28 days on the market in June. The number of active listings in June is up to 345 in June up from 344 in May. The number of new listings for June came in at 202, down from 232 in May.  And the number of closed sales came in at 112 in June which was a one property increase in sales volume from the 111 homes that sold in May. The sales price to list price ratio for single family homes came in at 99.0% in June. which is down just barely from 99.3% sales price to list price ratio in May. As for months of inventory, this number is tracking at 3.1 months of inventory, meaning if no other properties came on the market, our Santa Cruz housing inventory based on buyer demand would be sold out in 3.1 months. A neutral market, meaning equality between buyers and sellers is 6 months of inventory and we are not there yet.

For Condos and Townhomes…

The median sales price for June 2024 came in at $830,000 which is up almost $100,000 from the median sales price in May 2024 which came in at $735,000. The average days on market came in at 20 days on market, down from 27 days on the market in May.  The number of active listings in June 2024 for condos and townhomes was 89 in June up from 78, the month prior. And the number of sold condos/townhomes was down from 39 in May 2024 to 27 in June 2024. The number of new listings for condos and townhomes right here in Santa Cruz was up from 47 in May, to 60 in June. The sales price to list price ratio came in at 98.4%, in June, which is down from 99.2% sales price to list price ratio in May. And… our months of inventory for June 2024 came in at 3.3 months, up slightly from 2.2 months of inventory in May.

Summary: Inventory up by 151 properties

In March of 2024 in Santa Cruz County – There were 283 listings.

Provided by:

Shemeika Fox
Fox Realty Group, Inc.
(831) 588-2334
Sfox@YourSantaCruzRealEstate.com
YourSantaCruzRealEstate.com
DRE: 01479629

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 standstill due to rising interest rates from January of 2023 at 3% to 7%+ (+or- .5%.)

Conclusion…

It appears housing inventory is increasing in some areas but still not to a place, where supply equals demand.  Currently its still a sellers markets where sellers have the power but that could be changing if inventory continues to rise and if demand from buyers also increases, prices will continue there way up.  More inventory also means, buyers have more to choose from and if inflation stabilizes and the federal reserve starts easing rates, buyers will pay less in rates and payments and buyer confidence will increase fueling the housing market.

In the lending industry, we all feel we won’t see rates in the 2% and 3% range but should see them in the mid 5’s.  This would be most welcomed  by sellers (that need to buy after) and buyers and lenders and any business that has been negatively affected by high interest rates in the last 12 to 18 months.

Expect to start seeing rates drop in q3 and q4 of this year (per my crystal ball) especially if the Dow and Nasdaq have recurring corrections.  Currently the 10 year treasury is at 4.22 a decent drop since July 1st when the yield was at 4.48% and even lower when compared to 4.63 back on 5/28/24 which means rates should be dropping which they have a tad, but nothing to write home about.

In Closing…if you’re…

Selling...and would like to understand your options, please reach out to us here, by completing the following inquiry.

Trading Up or Down…please go here.  In addition, I have a great presentation (Age in Place or Right Size) on the topic which I would be more than happy to share with you.

Buying for the First Time…please go here to learn about your options and purchase power.

 

Any Questions, please contact me at 650-465-8957 or at Rob@101loan.com.

Best Regards,

101 Loan
Senior Mortgage Advisor
www.101Loan.com
650-465-8957 c  hello@101loan.com
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.

 

Make Better Real Estate Decisions…

/by

I recently finished a four-part series on the following topics, as it relates to Real Estate locally and abroad, helping you make better decisions in buying, selling or exploring the world of real estate. 

Click below for more info…

In addition, if you are looking to buy, sell and trade-up or trade-down real estate, please see the following:

Lastly and Important…

Did you know that the CalHFA loan (Zero Down Loan) is only available until the end of the month.  If you have a client, colleague, friend or family member that wants to buy in California and has no down payment the CalHFA program may help.  To learn more, go here or follow the instructions below and then contact me.

Do This First: For the CalHFA program, you first need to complete a registration application for a Voucher thru the CalHFA website.  CalHFA will then have a random drawing for a Voucher for the program.  Please be sure to register asap as the registration window closes April 29th.

Any questions, 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:

  • Residential Financing for Purchases and Refinances on 1 to 4 unit properties.
  • Reverse Mortgage Financing to include Conforming, Jumbo, HELOC Jumbo’s.
  • Commercial & SBA Financing to include Multifamily, Office, Retail and Light Industrial.
  • Access to over 60 banks with over 300 “Five Star” Reviews on Yelp, Google and Linkedin.
  • 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 2 (Interest Rates)

/by

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)

/by

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.

 

 

 

Commercial Lending…What Not to Do!

/by

I have been practicing residential financing for over 30 years and commercial financing for over 20 years and have provided commercial financing on Multifamily (Apartments), Office, Retail, Medical (Dental and Doctor Offices) and Light Industrial properties (data storage units and auto dealerships).

During that time, I have witnessed that residential interest rates were always lower than commercial rates until the Federal Reserve started raising rates in January of 2022.  In looking at the current interest rate market, residential rates are varying between 6.5% to 7.5% depending on the loan amount, ltv, fico’s, property type and points paid, etc.  Commercial lending on the other hand has ranged recently from 5.5% to 6.5% depending on loan term, property types and points paid.

Most Important…

Commercial loans all have prepayment penalties (where residential loans do not) and they usually follow the term of the loan so they tend to not only be costly (if one breaks them) but they also tend to be very long in duration!

For Example…

  • 5 Year Fixed Loan (on a commercial loans) have a 5 year prepayment penalty that works like this with a 5-4-3-2-1 Prepay.  Year 1 of loan, the loan has a prepayment of 5% of the loan amount if the loan is paid down or paid off.  Year 2 is 4%.  Year 3 is 3%.  Year 4 is 2% and year 5 is 1%.  After the 5th year of 61 months out, the prepayment penalty drops off.
  • 7 year fixed with 7-6-5-4-3-2-1 Prepay…Year 1 of loan, the loan has a prepayment of 7% of the loan amount if the loan is paid down or paid off.  Year 2 is 6%.  Year 3 is 5% and so on like the 5 year fixed.  There’s also 10 and 15 year fixed loans.

So…Here’s the Million Dollar Question…Why is it so Important in This Market to Not Have a Prepayment Penalty on a Commercial Loan?

Answer…If you have a prepayment penalty on your commercial loan and rates drop, then how is one able to refi without breaking the terms of the loan and paying the prepayment penalty?  There Isn’t.  All you can do is a get a loan with a shorter prepay if one exists.

“Voila”…We have that option and banks like Chase, First Republic, Heritage to name of few don’t!

Last week we had a client with $2m dollar commercial loan that was comparing us to another lender and our rate was .5% higher in rate than the other lender or $650 per month more, but our prepayment on 5 year fixed was a 2-1 and theirs was a 5-4-3-2-1.  On $2 million in loan amount, year 2 (let’s say 18 months out after closing, rates drop) and the client wants to refi.  The client then pays $80k for the prepayment penalty with the other lender.  Our lender charges $20k plus the spread of the monthly payment equal to $650 or $11,700 at the 18th month or $31,700 in total.  The other lender charges the client $80k.  Hmm…$31,700 from our lender or $80,000 from the other lender with the lower rate.  Our option would save the client $48,300.  Again, which option is better?  Which lender should the client use??  Us or them???

See the logic of going with a lesser prepayment even if the rate is higher by a tad?  Having the lesser term or prepay is the logical way to go.  Unfortunately, this client was fixed on one thing…the rate where I was focused on the long term solution…Flexibility and the probability of lower rates and payments in the future, per this report from Morning Star, a publication that definitely is the closest to a crystal ball!

In Closing…

In the world of commercial lending just like residential lending there is more to just making a decision solely on the rate as illustrated above.  If you want our help and sage experience in making the best decision when it comes to choosing a loan product or making a financial decision, please contact us.

Below is a List of What we Do:

BTW...if you’d like to review my current market report, please go here.

All the Best,

101 Loan

Senior Mortgage Advisor

www.101Loan.com

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

CA DRE #01205444  NMLS #326829

101 Loan – 6090 Hellyer Ave #100, San Jose, CA 95138

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