McKae Properties Real Estate Market Commentary

  Chaos, Opportunity, and the Real Estate Market in Transition Change Brings Chaos—And Opportunity A change in management always creates chaos. New managers, new teams, and new management styles disrupt existing systems, affecting staff, clients, and customers. The same holds true for political administrations. The Trump administration is not just another management change—it has the backing of the electorate. This shift brings both uncertainty and opportunities across various economic sectors. Stock Market Reflects the Chaos The stock market, a mirror of economic confidence, is responding with heightened volatility . When uncertainty looms, investors reevaluate their portfolios, leading to market fluctuations. Among major asset classes, real estate remains a cornerstone of the American portfolio , from residential homes to commercial investments. However, current market conditions highlight the uncertainty in valuations, demand, and financing. The Federal Reserve: Leaders ...

Bifurcation in Real Estate: A Market at a Crossroads Bifurcation : A point at which something divides into two branches or parts. Real estate is an asset class , and like all asset classes, it has distinct relationships and subdivisions. Each asset class is bifurcated based on type and composition. In real estate, the two primary bifurcated classes are Commercial and Residential . Historically, the key factor linking these two asset types has been interest rates —which dictate both the cost of housing and the return on housing investments . The Pre-Pandemic Relationship: Interest Rates as the Link Prior to 2020, the residential real estate market followed a predictable formula: The cost of housing was largely determined by the yield curve , a benchmark created by investment banks to measure risk vs. maturity. The risk-free rate of return was set by the Federal Reserve System , influencing mortgage rates. Residential home values followed the classic “3L” principle : Location, Loca...

It will remain to be seen in the upcoming months if the Trump Administration will help the residential housing industry by increasing inventory and improving affordability issues.  The Commercial Real Estate industry appears to rebonding from the depressed levels and excess inventory. Returning back to the work place will put additional pressure on residential housing.  The potential from higher interest rates for a longer period could put pressure on price and more inventory could accumulate.  That would create some respite in prices and help affordability. There may be one pressure point for increased sales of the  Retired  Baby Boomer residentials. INSURANCE, the increases in California insurance is nothing when compared to other states.  The San Jose Mercury News recently had an article on insurance increases in all 50 States.  California has lower percentage increase than Florida and Texas, and lower than most other states, except a few.  Wil...

 HAPPY NEW YEAR! The year starts out with the California Legislature passing additional laws in the Rental Marketplace.   AB 2493 – Tightens Rules for Application Fee Screening This new law authorizes a landlord or their agent to charge an application screening fee only if the landlord or their agent, at the time the application screening fee is collected, offers an application screening process, as specified. This bill would also prohibit a landlord or their agent from charging an applicant an application screening fee when they know or should have known that no rental unit is available at that time or will be available within a reasonable period of time. AB 2347 – Alters Rules for Eviction This law extends the time in which a defendant, in a summary proceeding for obtaining possession of real property, must file a response from 5 to 10 days, excluding specified days, after the complaint is served on the defendant. AB 2801 – Changes in Security Deposit Rules This law lim...

The FED target for interest rates in two years is 3-3.25%.  There was some upset investors after the last FED meeting that took the Stock Averages down precipitously.  The expectations were there would be a series of interest rates cuts in 2025, that the FED determined would not occur.  Well, what does it matter?  Think about you are traveling  from your home to Lake Tahoe, or from Sacramento to Menlo Park or Menlo Park to Sacramento.  The trip from the Bay Area or visa versa will take 3 hours, give or take 15 minutes.  You can go on via Hwy 5, or 80, or 680, or 580 or some combination of all of them.  But when it comes to arrival you will be there at about the same time.  So why is there the big hullabaloo over how many rate cuts we get in 2025.  You could start out from Sacramento get onto 5 and then there is an accident.  Or you could do the same on 80, another tie up.  Take the cut off onto 680 from 80 and another tie up....

 Shortly after Trump's election the Census came out with one of their Employment Reports.  My wife, Cindy, once worked for the U.S. Census as a field worker for the reports on employment.  She thought it would be interesting to see how Silicon Valley worked.  The report I am referring to did not deal with the Silicon Valley employees. It dealt with labor force calculations in the best way to describe it, immigrant population employment.   Generally recognised out of the report were laborers in the service industry and agricultural industry.  It was a well known acknowledgement in the footnote, I recall, as that many were most likely non-citizens here on temporary status.  Back in time when I graduated from Wisconsin I did volunteer work for the TB Association searching for positive skin tests for TB on non-citizens who crossed at Brownsville Texas to work in the fields in the harvesting and canning industries.  The Census is stuck on the poli...