There's something unusual happening with California's home values right now

 

There's something unusual happening with California’s home values right now

    Interest rates have been in a holding pattern around the 7% range, and property values are not dropping.  In fact, they are increasing in some areas. Why, and more importantly, do we think this will continue to be the pattern into the second half of the year?  Let’s look at some of the data.

    Predicting that home values will drop due to soaring interest rates seems reasonable, but the opposite is happening in the Golden State. And they aren't just holding steady; they're going up. Why is California's market defying gravity when higher borrowing costs typically cool down home appreciation? There are some unique factors keeping the state’s property values up that we’ve never experienced as the cost of borrowing ticks up.

    Buyers expected increased housing costs to add pressure to home values, potentially bringing prices down. ‘If enough buyers can’t afford to borrow, homes won’t sell, forcing sellers to lower prices’.  Right?  Unfortunately, this hasn't been the case. There are still plenty of buyers.

    Higher interest rates haven’t decreased the pool of buyers in a state with, among other factors, decades of pent-up demand (people want to buy but don't have a home to buy) and an undersupply of homes. After 2009, new home construction stopped entirely in California.  During this time, homeowners were defaulting on mortgages. 40% of our homes on the market were in default, grinding new construction to a halt. Even before 2009, California hadn’t built enough homes to meet the housing demand for decades. This long-term undersupply of residential construction created a bottleneck that squeezed the housing market, resulting in supply issues.

    Add in the impact of 2020 when the state, the country, and the world was facing one unprecedented crisis after another. Each crisis negatively impacted residential construction in some way, further compounding the supply issue. Pandemic-related job losses made it tougher to build homes, while building material shortages made it more expensive to build what homes they could.  We’re just now starting to see builders coming back.

    An unexpected impact of the high rates on home prices comes from a simple reluctance to move. Homeowners who might have sold their homes to upgrade for a growing family or downsize as empty nesters are choosing to stay put, further limiting the supply of homes for sale.  Typically people sell every 7 to 10 years – but not anymore.  It’s an understandable reluctance as the financial burden of a new, more expensive mortgage doesn’t make sense. Even if you’re downsizing, because of the high cost of money, you may not be saving any money.  If a homeowner has the option, the decision to stay put, with their current low mortgage rate, is easy.

    It’s not as if no homes are being sold in our current market. I’m having one of my best years so far… No matter what the market conditions are, people will always need to move. Some need to sell and relocate for jobs or sell due to divorce, sickness, death or a change in their finances. This group of sellers are moving due to life circumstances, regardless of current home values or interest rates. When that happens, I’m here to help you.

    In our region, the relationship between interest rates, housing supply, and home values is complex and full of unexpected twists and turns. Despite high interest rates, home values are holding steady, if not increasing, thanks to low supply. Remember, the market is always evolving. External economic factors, policy changes, or shifts in consumer sentiment could all play a role in reshaping the current landscape. Staying informed is key to navigating the housing market for both buyers and sellers; especially if you’re planning to make a move in 2024.

If you have questions, I have answers. Let’s talk – call me anytime!

I appreciate YOU and the referrals you send my way

HAPPY SPRING

 

Happy Spring

As we wrap up the first three months of 2024, I’m reminded of how beautiful spring really is. The blooming flowers. The blue skies and warm sunshine. Such a wonderful time of year. Typically our spring real estate market begins to heat up during this time, too. Don’t get me wrong – it may heat up and take us into a fruitful year, but I’m hesitant to make any predictions yet.  The last few years have been a little wild. Let’s face it… when you go from 2.95% interest rates in January of 2021 to 7.95% interest rates in November of 2023, it’s bound to have an adverse effect on the buyer’s ability to purchase and the overall activity in the market. 

There are still plenty of people who are buying (thank goodness), but many are sitting on the sidelines waiting for things to settle down. I wouldn’t say that home sales are crashing – more like ‘stuck in the mud’ would be the analogy that I would use. 

The past few years have been an interesting time in real estate. Between the soaring insurance cost challenges, interest rate hikes and now a settlement with the Realtor association – let’s just call it a ‘crazy time to be a Realtor’ trifecta. I love my job too much to retire, but….. It’s pretty wild. 

The most important issue is this →  I’m very grateful for all of the referral business you’ve sent our way already this year.  That’s what keeps us going.  I love working with friends and family of our past clients!  

             

Thank you

Spring time means…. SPRING CLEANING!!

Here are some ideas to freshen up your space — pick one a week 

1. Declutter: Go through each room and remove items you no longer need or use.  Donate or recycle what you can

2. Deep clean: Scrub floors, walls, and surfaces.  Don’t forget overlooked areas like baseboards, light fixtures, and vents

3. Organize: Invest in storage solutions to keep belongings tidy.  Use bins, baskets, and shelves to maximize space

4. Rotate seasonal items: Pack away winter clothes and bring out spring and summer items

5. Freshen up fabrics: Wash curtains, bedding and upholstery.  Consider steam cleaning carpets and furniture

6. Tackle outdoor spaces: Clean up yard debris, power wash outdoor surfaces, and inspect and repair any damage

7. Clean appliances: Deep clean the oven, refrigerator, dishwasher and washing machine. Don’t forget to replace any filters

8. Refresh decor: Add a pop of color with fresh flowers, new throw pillows, or decorative accents

9. Review and update: Check expiration dates on pantry items, medications, and beauty products. Dispose of expired items

10. Maintain: Establish routines to keep your space organized and clean throughout the year

Anyone thinking of making a move this year?

Helpful hands make the load light.  I’d love to be those helpful hands.

Should I Stay, or Should I Go?

This is a question that some homeowners may ask themselves in 2024  

If that’s you, let’s talk about your options!

Did you know that 10,000 baby boomers are reaching age 65 every day!  This year marks a major demographic and retirement milestone for America. Four million are leaving the workforce every year. Boomers - those born between 1946 and 1964 are the wealthiest generation on the planet. Wealth gives you options. With 80% of this generation owning a home, they may hold the keys to our current lack of inventory issue. They own $19 trillion dollars worth of real estate in the United States. 

Understandably, many are planning to ‘age in place’. Let’s be honest - 65 isn’t what it used to be.  People are living much longer and some are still working.  For others who are opting to move into more suitable and many times more enjoyable retirement-style surroundings, it’s providing fun, entertainment, golf, and the benefit from someone else doing the cooking.  I’m not predicting the ‘Silver Tsunami’ that some economists are, but I do think that it’s important to weigh your options, and if not you - you probably know someone who is of retirement age considering what the future holds.

One positive is California’s Proposition 19.  This allows those over 55 to take their current property tax base to their new home.  You can take advantage of this up to three times and if you purchase a home that costs more than your existing home, you simply pay the difference.  Finally, a tax bill that has a huge benefit.  Just google CA Prop 19 for details.

Another option is saying goodbye to California … here are the most popular cities if you’re considering that – Las Vegas, Phoenix, Tampa, Orlando and Austin.

Remember, if you’re considering that option, as your Realtor, I can help you find a fabulous Realtor anywhere in the world.  Just give me a call.

Whether you’re planning to buy or sell a home this year or not, we appreciate YOU.  For 31 years, our business has been built on people like you who think of us when the topic of real estate comes up.  We love what we do and won’t be retiring anytime soon.  Quite the opposite… we’re looking forward to another great year of helping buyers and sellers achieve their goals in 2024.

So if you or someone you know is trying to navigate the current real estate market, give me a call.  I’m happy to update you on the market conditions, interest rates, potential opportunities to jump into the market and, of course, can always provide you with reliable resources you may need.

I’m here to help you and all of your referrals

And be sure to check out ‘Coffee with Carol’  on Facebook

CALLING ALL SELLERS

It’s not often that we see such significant buyer activity in January like we’re seeing right now.  We’re back to multiple offers and over asking sales when homes are priced right. Why?  In short – the recent reduction in interest rates.  

Buyers sitting on the sidelines watching the rates go up 11 times over the past 18 months has been a challenging experience for those who wanted to invest in our market.  Now that rates are on the decline, with speculation of them going down even further this year, this enables today’s buyers to purchase their home now and refinance into a lower mortgage later. Great News – they’re all in!

To say that last year’s sales were mediocre would be an understatement.  This graph shows sales between 1999 and 2023.  Last year was the lowest on record, with 2007 a close second (the mortgage meltdown years).  With rates approaching 8% in the late fall, we wondered how long it would be before we would return to a ‘normal’ market.  Then January came and we are now seeing rates in the mid-6% range.  It’s a new day.

There’s only one problem

Where are the sellers??  I get it that people most times want their yards to look pristine with flowers blooming and leaves on the trees but I’m here to tell you that your buyer is anxious now!  With very little to choose from, supply vs. demand would definitely play in your favor.  From time to time we see ‘windows of opportunity’ that don’t last long.  Depending on how quickly the spring market hits – that’s how long this opportunity will last.  If you know me, you know that I’m not a scare tactic Realtor. I know that there are life events such as death, divorce, job transfer that cause people to sell homes throughout the year, but I also know that people rely on these types of windows to make a move.  Can I just tell you that IF I were planning to sell my home this spring, I would seriously consider doing it now.  Less competition is always better for a seller.  This ends my public service announcement about the January market.

As we start the New Year, I want to be sure to remind you of a few things 

First, if you own a home, is it in a trust?  It’s so important that your assets and especially your home be held in your trust.  This prevents your loved ones from having to go through the arduous task of probate upon your death.  I’m not saying you’ll pass this year but seriously, it’s important.  If you need a trust attorney referral, call me.

Second, are you aware of Proposition 19?  This is the tax law that allows you to transfer your existing tax base to a new primary residence.  Since 2020, the law has changed regarding how this proposition can benefit you.  Here are the most significant changes:

• There’s no limit to the sales price of the replacement home
• You no longer have to stay in the existing county
• You can take advantage of this rule up to three times
• You have two years from the close of your sale to make your purchase so you can sell, travel then buy!

Here’s the website to find all of the specifics but this can be a huge savings for those over 55 who have lived in their existing primary residence for years and yet, perhaps the home no longer meets their needs. If you buy at a price that’s the same or less, taxes won’t increase!  If you do spend more, you simply pay the difference.  All good news!

https://www.boe.ca.gov/prop19/

For all of your real estate needs, don’t hesitate to call me!