I’m a Commercial Real Estate Advisor and Broker Associate with decades of experience guiding investors, property owners, and institutions through complex real estate decisions. My background spans investment banking, portfolio strategy, and high-value real estate transactions—including REO, TICs, foreclosures, and structured deals across California and beyond. I specialize in helping clients navigate market shifts with clarity and strategy.
Year End Greetings
When Saul of Tarsus set out on his journey to Damascus the whole known world lay in bondage. There was one state, and it was Rome. There was one master for it all, and he was Tiberius Caesar.
Everywhere there was civil order, for the arm of the Roman law was long. Everywhere there was stability, in government and in society, for the centurions saw that it was so.
But everywhere there was something else, too. There was oppression for those who were not friends of Tiberius Caesar. There was the tax gatherer to take the grain from the fields and the flax from the spindle to feed the legions or fill the hungry treasury from which divine Caesar gave largess to the people. There was the impressor to find recruits for the circuses. There were executioners to quiet those whom the Emperor proscribed. What was a man for but to serve Caesar?
There was persecution of men who dared think differently, who heard strange voices or read strange manuscripts. There was enslavement of men whose tribes came not from Rome, disdain for those who did not have the familiar visage. And most of all, there was everywhere a contempt for human life. What, to the strong, was one more man more or less in a crowded world?
Then, of a sudden, there was a light in the world, and a man from Galilee saying, Render unto Caesar the things which are Caesar's and unto God the things that are God's.
And the voice from Galilee, which would defy Caesar, offered a new Kingdom in which each man could walk upright and bow to none but his God. Inasmuch as ye have done it onto one of the least of my brethren, ye have done it unto me. And he sent this gospel to the Kingdom of Man into the uttermost ends of the earth.
So the light came into the world and the men who lived in darkness were afraid, and they tried to lower the curtain so that man would still believe salvation lay with the leaders.
But it came to pass for a while in divers places that the truth did set man free, although the men in darkness were offended and they tried to put out the light. The voice said, Haste ye. Walk while you have the light, less darkness come upon you, for he that walketh in darkness knoweth not whither he goeth.
Along the road to Damascus the light shone brightly. But afterward Paul of Tarsus too, was sore afraid. He feared that other Caesars, other prophets, might one day persuade men that man was nothing save a servant unto them, that men might yield up their birthright from God for pottage and walk no more in freedom.
Then might in come to pass that darkness would settle again over the lands and there would be burning of books and men would think only of what they should eat and what they should wear, and would give heed only to new Caesars and to false prophets. Then might it come to pass that men would not look upward to see winter's star in the East, and once more, there would be no light at all in, the darkness.
And so Paul , the apostle of the Son of Man, spoke unto his brethren, the Galatians, the words he would have us remember afterward in each of the years of his Lord:
Stand fast therefore in the liberty wherewith Christ has made us free and be not entangled again with the yoke of bondage.
Page 1-16 Friday December 24, 2021 Wall Street Journal Opinion , Review & Outlook, editorial written in 1949 by the late Vermont Royster and has been published annually since.
MERRY CHRISTMAS FROM THE MCKAE PROPERTIES TEAM
The Problems are The Path: Year End Opportunities
It has always been my contention that the end of the year is the best buying opportunities for assets; due to the fact, they are under pressure by year end selling. Whether it was stocks and bonds, when I was in the Securities Industry, or now in the Real Estate Industry.
Assets; such as, stocks and real estate are not like a pound of coffee with a set price per pound. They are open to negotiation. A set price, an offer price, will be given and a bid below the set offer could be accepted. Why, emotions, taxes, leverage or just tired of carrying a position.
Real Estate has gone through a Down Hill Slide this past year and a half. I saw the potential some time ago when rates went ridiculously low with over $9 trillion added to money supply. The speculation that occurred was in asset values; along with, the creation of new investments without any reason of fundamental value; other than, demand. ECON 101 Supply Demand Curve is always in play. Lack of supply and demand creates higher prices until supply is created. Now if the supply is from a computer formula the supply is unending and can be manipulated.
This is not the case in fundamental assets. There are only so many shares outstanding, bonds issued and real estate built, and vacant land is limited to the pure and simple fact that only a volcano can create land.
The Money Supply has shrunk since it hit over $9 Trillion to just below $9 Trillion. During that time of shrinking slightly, the cost of money, say Mortgage Rates as an example, has gone from under 3% in March to over 7% in November. Now consider that it has taken 22 years for mortgage rates to decline from over 8% to under 3%, this increase is traumatic!
I have reiterated Elon Musks comment that the FED is after Asset Inflation. The other inflation we incur is in the supply of goods and services. If the price of gas is high, then drill and create refiners to supply cheaper sources of fuel. If the price of meat or grain is high plow more fields and raise more cattle, poultry and meat product sources.
Now let's look at Real Estate, that is why you are reading this dispatch, blog or newsletter. Demand for real estate has not diminished! Yes, prices offered and prices of the end product sale have declined. Those that have bought in the past year may not be able to sell at the price they bought at. That has nothing to do with where you live, where you come home to at night and how you raise your family. The house you own is not a pound of coffee or shares in Sales Force or Meta.
Here is the recent market survey in our area.
| Housing Inventory Snapshot | November 30, 2022 | |||||||
| Average List Price | 30 Day Trend | Average Sold Price | 30 Day Trend | Average DOM: active/sold | 30 Day Trend | Number of Active Listings | 30 Day Trend | |
| Santa Clara County, CA | ||||||||
| Single Family | $1,662,607 | -0.03% | $1,604,598 | -0.52% | 64 / 25 | 14 / 0 | 545 | -96 |
| Luxury Single Family | $6,112,576 | +1.32% | $4,009,515 | -5.26% | 94 / 22 | 23 / -7 | 166 | -35 |
| Condo/Townhome | $833,336 | +4.03% | $836,513 | +4.17% | 64 / 36 | 15 / 10 | 243 | -70 |
| Luxury Condo/Townhome | $1,752,901 | +5.17% | $1,525,764 | -1.57% | 61 / 22 | 12 / -8 | 79 | -23 |
| San Mateo County, CA | ||||||||
| Single Family | $2,020,002 | +2.50% | $1,877,099 | -1.74% | 60 / 23 | 16 / 0 | 319 | -76 |
| Luxury Single Family | $9,460,324 | +12.87% | $7,888,042 | +13.79% | 116 / 30 | 25 / -5 | 103 | -28 |
| Condo/Townhome | $823,741 | -0.08% | $834,009 | -6.90% | 94 / 43 | 18 / 12 | 122 | -18 |
| Luxury Condo/Townhome | $1,764,565 | +0.40% | $1,739,770 | +7.84% | 69 / 57 | 19 / 26 | 37 | -9 |
| Santa Cruz County, CA | ||||||||
| Single Family | $1,248,956 | -0.80% | $1,200,800 | -3.48% | 80 / 35 | 16 / 5 | 157 | -35 |
| Luxury Single Family | $3,783,000 | -2.31% | $2,763,270 | -15.85% | 104 / 14 | 7 / -29 | 50 | -9 |
| Condo/Townhome | $695,946 | -4.02% | $828,675 | +11.44% | 123 / 15 | 21 / -27 | 21 | -9 |
| Monterey County, CA | ||||||||
| Single Family | $980,174 | +5.14% | $896,542 | -1.96% | 74 / 43 | 13 / 15 | 245 | -9 |
| Luxury Single Family | $7,114,145 | -1.42% | $8,841,111 | N/A | 128 / 105 | 9 / 43 | 75 | -5 |
| Condo/Townhome | $692,621 | +3.76% | $620,665 | +12.93% | 51 / 34 | 12 / 6 | 28 | -2 |
| Contra Costa County, CA | ||||||||
| Single Family | $779,621 | -2.46% | $788,829 | -0.64% | 58 / 35 | 8 / 1 | 722 | -158 |
| Luxury Single Family | $2,660,086 | +0.16% | $1,980,510 | -2.37% | 70 / 24 | 16 / -7 | 236 | -53 |
| Condo/Townhome | $529,713 | +1.20% | $490,914 | -6.58% | 53 / 32 | 8 / 6 | 189 | -34 |
| Luxury Condo/Townhome | $1,266,745 | +2.57% | $1,306,849 | +16.47% | 43 / 22 | -2 / -2 | 59 | -11 |
| Alameda County, CA | ||||||||
| Single Family | $960,625 | -3.76% | $1,032,679 | -1.68% | 57 / 30 | 15 / -1 | 588 | -253 |
| Luxury Single Family | $2,790,735 | +4.26% | $2,099,827 | -4.64% | 67 / 27 | 18 / 2 | 195 | -69 |
| Condo/Townhome | $635,130 | +2.94% | $624,694 | -0.66% | 62 / 38 | 10 / 3 | 262 | -68 |
| Luxury Condo/Townhome | $1,204,352 | +3.53% | $1,082,671 | -4.88% | 58 / 23 | 16 / -2 | 83 | -29 |
Nothing looks horrific, does it?
Fidelity Title gives me a regular analysis of our markets. Fidelity does have access to the county records and can provide a clear picture of our real estate market's health.
Atherton has a Slight Buyer's Market
Los Altos has a Strong Seller's Market
Menlo Park has a Strong Seller's Market
Palo Alto has a Slight Seller's Market
Portola Valley has a Slight Seller's Advantage
Redwood City is a Strong Sellers Market
Woodside has a Slight Buyer's Advantage
What is this telling you? It tells me that the price declines are giving opportunity to buyers to buy when price declines occur. It gives buyers an opportunity to buy without competing offers and the need to over bid. The Seller's Real Advantage is their property sells.
The Federal Reserve tells me that the almost $9 Trillion in Money Supply has not been taken away and buyers can afford to buy a home irrespective of interest rates. It tells me that the layoffs in the Technology Industry are on a wide spread basis over the United States and not localized in the Bay Area.
Could interest rates go higher? Probably, but I feel we have seen the severity of the increase. The only adjustments will be minor. Banks and mortgage companies will go back to the old form of lending. They will create mortgages that buyers can afford in monthly payments. The other side is those with cash can adjust their asset allocation from stocks, bonds and esoteric investments that express volatility and doubt of value for real estate which they can touch, feel and live in and off of. IT IS YOUR REAL ESTATE!
HAPPY HOLIDAYS TO ALL AND TO ALL A GOOD NIGHT!
the Problems are the Path II
OPENING COMMENTS
The end of the year has always been a period of clean up of inventory. This year is no different. We are faced with the same issues past markets have been faced with. Except, the present situation is in reverse. The increasing rates have supplanted the falling rates. which in turn has meant rising mortgage rates; rather than, falling rates that in some area of the world dipped to negative rates. The problems face in the past were economic and health, lower interest rates and increasing money supply helped save the world economy. Unfortunately, the excesses that occurred led to problems that are in todays economic environment. Those problems were over speculative tendencies that lead to over priced assets. Those assets created problems with housing and the lack of affordable housing. Other assets such as new business have created Poster Children of our time. You know them well, we may see others join the list as interest rates slowly creep up in the future.
Silicon valley is slowly seeing unemployment replacing full/excess employment and hiring binges. Employers have moved out of the State and new business have been slow to develop. People are laid off and recruiting staff terminated or diminished.
Supply and demand will always create prices. We are now in an environment in housing that is bordering on buyer's market to seller's market. Inventory remains light as present home owners find it difficult to give up low interest mortgages and low property taxes to the opposite; unless they are of the many who are seeking "greener pastures".
The recent issue of November Luxury Home Marketing newsletter has the right content to quote here:
"
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Challenging Times in a Market Full of Contradictions There is little doubt the luxury real estate market is facing some interesting challenges that even have experts contradicting each other in their predictions and assumptions. Statistics in many luxury markets still show that they are favorable to sellers – so why are homeowners remaining hesitant to list their homes? For the fourth straight month, the number of new listings entering the market has fallen, with increases in inventory levels mainly attributable to stale listings lingering on. Both sellers and buyers are sitting on the fence, with neither side wanting to jump into this unconventional market unless presented with the right opportunity. The average days on market have increased compared to last year, but relative to pre-pandemic averages, homes that have sold recently are still selling twice as fast. Outside influences, some of which are not typically identified as being impactful on affluent buyers and sellers, are also causing disruptions to their spending habits: such as concerns over a potential recession, interest rate increases, and a volatile stock market. Mortgage companies are offering creative alternatives, but even a slight dip in recent rates isn’t driving buyers to purchase despite statistics from the National Association of Realtors (NAR), the National Association of Home Builders (NAHB), and Realtor.com, showing demand still outweighs supply in many price points, property types, and locations. All indications are that those who need to buy and/or sell are continuing to do so, but for those whose criteria are more based on ‘wanting to buy,’ there is hesitancy as they hope inventory choice will improve and/or prices will become more favorable. |
Will Prices Fall?
This is a big question, and yet the jury remains cautious as to what extent prices will fall and which locations, property types, and sizes will be most affected.
Since July 2022, there has been a slight, but continued decline in the median sold price for single family homes dropping from $1,311,000 in July to $1,275,000 in September; however, in October, the median price climbed back up to $1,313,525.
In contrast, in the attached luxury property market, the median sold price increased from $832,375 in July 2022 to $890,500 in September, only to drop to $878,500 in October.
These are not dramatic swings, but they show there is some volatility in the luxury market.
Interestingly, a recent article by Nasdaq1 speaks to an increase in the ultra-wealthy currently investing in luxury real estate.
“As the value of the dollar remains volatile, we’ve seen more new clients looking to park their money in a low-risk, luxury asset whose likelihood of appreciation is higher, forged by historically beautiful surrounding neighborhoods, sprawling acreage and square footage, and newly renovated constructions.”
According to their article and The Trend Report 20222 by Coldwell Banker Global Luxury, they foresee the value of luxury properties will continue to appreciate. Both site the historic gains in this segment of the real estate market and explain that prices will oscillate by month or quarter, but how the appreciation is clearly recognized by investors and homeowners as being a long-term decision.
“Prone to behaving cautiously, the affluent have begun to signal that they are looking for more stable long-term investments to protect their wealth and give them peace of mind.”
|
Challenging Times in a Market Full of Contradictions There is little doubt the luxury real estate market is facing some interesting challenges that even have experts contradicting each other in their predictions and assumptions. Statistics in many luxury markets still show that they are favorable to sellers – so why are homeowners remaining hesitant to list their homes? For the fourth straight month, the number of new listings entering the market has fallen, with increases in inventory levels mainly attributable to stale listings lingering on. Both sellers and buyers are sitting on the fence, with neither side wanting to jump into this unconventional market unless presented with the right opportunity. The average days on market have increased compared to last year, but relative to pre-pandemic averages, homes that have sold recently are still selling twice as fast. Outside influences, some of which are not typically identified as being impactful on affluent buyers and sellers, are also causing disruptions to their spending habits: such as concerns over a potential recession, interest rate increases, and a volatile stock market. Mortgage companies are offering creative alternatives, but even a slight dip in recent rates isn’t driving buyers to purchase despite statistics from the National Association of Realtors (NAR), the National Association of Home Builders (NAHB), and Realtor.com, showing demand still outweighs supply in many price points, property types, and locations. All indications are that those who need to buy and/or sell are continuing to do so, but for those whose criteria are more based on ‘wanting to buy,’ there is hesitancy as they hope inventory choice will improve and/or prices will become more favorable. |
Will Prices Fall?
This is a big question, and yet the jury remains cautious as to what extent prices will fall and which locations, property types, and sizes will be most affected.
Since July 2022, there has been a slight, but continued decline in the median sold price for single family homes dropping from $1,311,000 in July to $1,275,000 in September; however, in October, the median price climbed back up to $1,313,525.
In contrast, in the attached luxury property market, the median sold price increased from $832,375 in July 2022 to $890,500 in September, only to drop to $878,500 in October.
These are not dramatic swings, but they show there is some volatility in the luxury market.
Interestingly, a recent article by Nasdaq1 speaks to an increase in the ultra-wealthy currently investing in luxury real estate.
“As the value of the dollar remains volatile, we’ve seen more new clients looking to park their money in a low-risk, luxury asset whose likelihood of appreciation is higher, forged by historically beautiful surrounding neighborhoods, sprawling acreage and square footage, and newly renovated constructions.”
According to their article and The Trend Report 20222 by Coldwell Banker Global Luxury, they foresee the value of luxury properties will continue to appreciate. Both site the historic gains in this segment of the real estate market and explain that prices will oscillate by month or quarter, but how the appreciation is clearly recognized by investors and homeowners as being a long-term decision.
“Prone to behaving cautiously, the affluent have begun to signal that they are looking for more stable long-term investments to protect their wealth and give them peace of mind.”
Shift in Mindset
The Trend Report also sheds light on why affluent homeowners have shifted from their fearless and ‘FOMO’ buying of last year to taking a more considered approach.
“Between rising economic uncertainty, stock and crypto market volatility, climate change, and two years of living through an unprecedented health crisis, wealthy buyers have begun turning toward opportunities that give them long-term financial security and quality of life.
Real estate generally offers reliability and stability for those investors who are able to play the long game: hold onto their asset when the market trends down and wait until prices start to rise again.”
Equally, with interest rates more than double compared to 2020, 2021, and the first quarter of 2022, many homeowners recognize that selling their home to purchase another would be an expensive replacement unless they need to sell.
This has led to many sellers deciding not to put their homes on the market, which, when combined with buyers taking more time to make their decisions, has ultimately resulted in the slowing down of the market.
Demand vs. Supply
It is supply rather than demand that is creating the bigger conundrum in the market today. Buyers are still eager to buy, albeit at a slower pace, but there is simply a lack of new inventory entering the market.
Inventory levels may have increased compared to last year, but without new inventory, the return to pre-pandemic levels is unlikely, adding a further complication for buyers as current levels are unlikely to create the downward pressure on home prices they anticipate.
According to Nasdaq, there has never been more liquidity on the buyers’ side for quality homes, but until sellers’ price expectations start to align with buyers’ perception of value, we will continue to see this contradiction in the market.
Not All Markets Are Equal
After two years of affluent buyers heading away from urban centers, there has been a significant return to traditional centers of luxury in 2022, and old favorites across North America, such as New York, Boston, Chicago, Toronto, and Vancouver, are seeing the benefits of this demand.
While prices decreased during the pandemic for the smaller city footprints, they subsequently became comparatively more affordable against the escalating values seen in rural destinations, emerging markets, and resort markets.
Much like the ownership of luxury real estate, these metropolises have once again been recognized by the affluent as locations that will hold their value over the long term – seen equally by domestic and returning foreign investors as safe investment havens.
In contrast, markets that benefited from the demand frenzy of 2020 and 2021 and the subsequent influx of buyers may see the greatest cooling off during the last part of 2022. Indeed, compared to 2021, the velocity of sales has already dropped significantly in many, and expectations are that demand and prices will settle into a more mature rhythm in 2023.
Luxury Market Still Offers Opportunity
While there is much debate about how things will play out over the next six months, like all markets, there is always an opportunity for those who are ready. There are niches in every market: whether moving to a location that affords a better cost of living, recognizing luxury pockets or property types that are next in the demand cycle, or simply biding one’s time in anticipation of finding a property that is below market value.
But more importantly, according to a survey conducted by Coldwell Banker Global Luxury for their Trend Report, it seems that luxury real estate remains an important asset for the affluent.
“Regardless of an affluent buyer’s financial profile, there is still significant confidence in the luxury real estate market. According to our survey, nearly 90% of respondents believe in the stability of owning property. Even if some buyers have dropped out of the real estate game due to fatigue, frustration, or even hesitation this year, they may be primed to return as inventory levels improve.”"
MY COMMENTS CONTINUED
The FED will move forward with rising rates. Home prices and assets will be affected. Affordability is the focus of the FED, in my opinion. The inflation rate we have experienced is most commonly affected in housing costs. That is in Rents and Home Prices.
I feel that the next market that will see price pressure in the Rental Market. The Foreclosure Moratorium has put some almost 2 years of inventory on the market. Looking at the condition of the properties to the price landlords are asking is a condition of lack of rationality. As one landlord tells me, the only renters he has applying are transients from other countries that bring numerous families together to afford rentals. They pay cash, but leave the property a mess!
The most recent issue of the Wall Street Journal front page dealt with investors backing out of the purchasing of single family homes for the rental market. Down 30% from last year they are faced with a fall off in demand and political reasons over price hikes that will limited rental increase.
Watch prices through the end of the year, the low inventories at the beginning of the year and the inventory increases in Mid February to tell us more of the direction to answer the QUESTION..."HOW'S THE MARKET?"
Happy Thanksgiving, now run off the excesses!
The Problems are the Path
Somewhere's in my readings, I came upon the quote,"the problems are the path". It was based upon the learning process of humanity; in that, we learn and progress from problem solving.
We do have problems we need to solve. The problems started with the Pandemic, the shortage of employees and the shortage of homes for sale. This was then combated with the Federal Reserve System (FED) dropping rates to unheard of low that affected the entire world with some countries going to negative rates. At the time the Risk Free Rate of Return was down to less than 1%. That meant that investments of all sorts were fair game. Next to nothing in money market funds, T-Bills or saving accounts were not with leaving money in them and panic buying occurred in Real Estate, Commodities, Stock Bonds and the esoteric investments; such as, Crypto Currencies.
With the Pandemic over, those laid off went back to work. All were flush in savings with the $9+ Trillion the FED fed into the economy. Back to work and buying came in all sorts of products which were short in supply due to the lock down. Inflation ran up. The administration did not help by limiting Oil and Gas exploration.
An old play book from the 1970's and early 80's was opened up by the FED and interest rates soared. At the beginning of 2000 mortgage rates were just over 8%. It took 22 years to get mortgage rates down to a sub 3% level. It only took 6 months to get mortgage rates up to over 7%.
It appears the old Playbook is not much of an answer as Japan does not have inflation and does not have an extreme case of interest rates. So maybe it means the Playbook is BAD?
The Pandemic Housing Boom unleashed an “investor mania” unlike anything seen in the U.S. housing market since the aughts housing bubble. Average Joes poured into the market in hopes of building Airbnb empires. Institutional investors, like Blackstone-owned Home Partners of America, quickly expanded their single-family home portfolios. Homebuilders, eager to strike while the irons were hot, broke ground on a record number of “spec” homes. While iBuyers, like Opendoor and Zillow, ramped up their algorithmic home buying programs. (Opendoor just wrote off $573 million in inventory)
Fast-forward to October, and that investor mania has been replaced by investor panic. The ongoing housing correction—U.S. home prices have fallen 1.6% between June and August—and further declines in September and October to a point that home prices are equal to or less than one year ago in 2021. This has scared many investors to the sidelines. That marks the first national home price decline since 2012.
The investor pullback makes sense. While most housing economists don’t foresee a correction on scale with the Great Financial Crisis bust—during which U.S. home prices fell 27% between 2006 and 2012—they do acknowledge that this home price correction is sharper than it was in 2006. The lagged Case-Shiller Index already shows that home prices are down 8.2% in San Francisco.
Historically speaking, home prices are sticky. Sellers simply don’t want to relent on price unless economics, like a supply glut, force their hand. That’s not as much the case for institutional investors and builders. If they think prices are about to drop, they want to get out first. The fact that the Pandemic Housing Boom saw investors become a higher share of buyers, Glenn Kelman, CEO of Redfin says, ultimately makes the U.S. housing market more vulnerable to a faster swing down.
“When the shiitake mushrooms hit the fan, you [investors] want to get out first. The way to do that is to figure out where the lowest sale is, and be 2% below that. And if it doesn’t sell in the first weekend, move it down [again],” Kelman says.
In other words, Kelman is suggesting that real estate investors, including Redfin’s iBuyer business, helped drive home prices up faster during the boom and will push prices down faster during the correction.
“My take is that because builders and iBuyers account for more inventory, that leads to a faster correction. We’re one of them, we’re an iBuyer,” Kelman says. “We notice immediately when fewer people are on our website and fewer are signing up for tours…We’re sitting on $350 million worth of homes for sale that we bought with our own money, or worse bought with borrowed money. And what we always told investors is that we would protect our balance sheet by acting quickly. We don’t have hope as a strategy. We immediately started marking down things.”
A combination of low mortgage rates, record appreciation, and soaring rents simply made it irresistible for investors. It brought out everyone from home flippers, to mom-and-pop landlords, to Wall Street juggernauts.
We were in a "Perfect storm" of low interest rates, appreciating property values, appreciating rents, high income buyers were going higher and higher in purchases which led to expanding to markets like Boise and the like, and the California exodus to one conservative states where home prices were low and properties were larger.
While spiked mortgage rates have caused a historic pullback in buyer demand, it hasn’t translated into a massive inventory spike. Most homeowners aren’t scared. So how can home prices fall even if inventory levels are tight? It’s because leveraged investors don’t want to play the “wait and see” game. And all it takes is one home to fall below its comp price to reduce comps for an entire area.
“As soon as demand weakened, we were marking properties down, and that drives prices down. Every other home for sale in a neighborhood where we marked the listing down now has a comparable sale that every buyer is going to know about and talk about,” Kelman says.
Of course, so-called investor mania during the Pandemic Housing Boom wasn’t one-size-fits-all. The investor frenzy was particularly fierce in Western boomtowns like Phoenix, Austin, and Las Vegas. That helps explain why those frothy housing markets are correcting so dramatically right now.
Look no further than this property in North Las Vegas. In May, Opendoor bought the home for $540,800. Just weeks later, Opendoor listed it for sale in July at $581,000. But Opendoor was too late: The Las Vegas housing market had already rolled over. Fast-forward to October, and the listing just got taken off the market after a series of price cuts brought its list price to $472,000.
At first glance, one might assume Opendoor could soon take a loss of around 13% on the property. Not exactly. See, when iBuyers like Redfin and Opendoor buy a home, they charge sellers a “service fee” in exchange for the speedy transaction. On one hand, that buffers the potential loss for the iBuyer. On the other hand, that buffer means the iBuyer is less afraid to mark down the price.
I believe the religion of housing prices going up maybe dead! There are places in the U.S. that home prices do not escalate as we have witnessed. There are places where home owners are happy to live in a house and not treat it a part of their stock portfolio.
So, where does it leave us today. Frankly, I see prices continuing to be weak. The Fix and Flip investors have a real issue ahead of them in the Bay Area, think East Menlo Park and East Palo Alto. Facebook, AKA Meta has announced putting some $5 billion or so in reserves to get out of there real estate expansion. First to go was New York City. What does that indicate for the strip of property along the Bay across form the original Facebook Campus? No more plans for Hotel? What about the housing complex or the shopping centers. In fact; how long will those newly built offices stay empty before shareholder push the button to cut expenses and create funds for the Meta expansion. On a daily basis I search and find another Meta complex being unloaded
Buyers are all holding back. That is a mistake. There is no bell that rings when a bottom occurs. Take advantage of the liquidations and pay the high mortgage rates and refinance later.
REFINANCE LATER? Right! There is $8.7 Trillion in the FED balance sheet. The rate of return is 2.3%. The bank deposits at the FED get 3.4% per my last count. The FED is loosing money. The lost money is then put in an IOU that is put in the balance sheet that the FED redeems when it makes money again. They certainly are not going to sell bonds at a loss, They will let them mature and create liquidity. Remember the FED controls interest rates. At some point the pain factor comes home to roost and even the FED bites the bullet and lowers rates.
When rates come down the panic buying will occur. Who knows the level of home prices then?
Remember you are not buying from a neighbor. You are buying from a speculator. NO PITY! Offer a big discount, they must get out.
This period like the early 80's was the best time to buy real estate; as it was, in the period after the Lehman Collapse.
The problems are our path out to the future.
| ousing Inventory Snapshot | October 31, 2022 | |||||||
| Average List Price | 30 Day Trend | Average Sold Price | 30 Day Trend | Average DOM: active/sold | 30 Day Trend | Number of Active Listings | 30 Day Trend | |
| Santa Clara County, CA | ||||||||
| Single Family | $1,663,094 | -1.25% | $1,612,977 | -2.13% | 51 / 26 | 3 / 1 | 641 | -66 |
| Luxury Single Family | $6,032,715 | +3.90% | $4,232,002 | +2.66% | 71 / 30 | 8 / 6 | 201 | -17 |
| Condo/Townhome | $801,023 | +0.20% | $803,023 | +1.39% | 49 / 26 | -1 / -3 | 313 | -1 |
| Luxury Condo/Townhome | $1,666,810 | +2.99% | $1,550,134 | +3.67% | 49 / 30 | 1 / 5 | 102 | 3 |
| San Mateo County, CA | ||||||||
| Single Family | $1,970,812 | -8.34% | $1,910,334 | +5.31% | 44 / 22 | 1 / -4 | 395 | 27 |
| Luxury Single Family | $8,381,831 | -3.93% | $6,932,211 | +8.46% | 92 / 34 | 10 / -21 | 131 | 9 |
| Condo/Townhome | $824,423 | -0.87% | $895,835 | +2.26% | 76 / 31 | 13 / -7 | 140 | -18 |
| Luxury Condo/Townhome | $1,757,580 | +0.73% | $1,613,322 | -10.07% | 50 / 31 | -1 / -14 | 46 | -5 |
| Santa Cruz County, CA | ||||||||
| Single Family | $1,259,037 | +0.96% | $1,244,052 | +7.43% | 64 / 30 | 3 / 2 | 192 | 25 |
| Luxury Single Family | $3,872,505 | +10.87% | $3,283,889 | -15.22% | 98 / 43 | 22 / 3 | 59 | 1 |
| Condo/Townhome | $725,127 | -2.71% | $743,600 | -10.23% | 102 / 42 | 1 / 27 | 30 | 3 |
| Monterey County, CA | ||||||||
| Single Family | $932,274 | -4.30% | $914,445 | -2.87% | 61 / 28 | 3 / -1 | 254 | -6 |
| Luxury Single Family | $7,216,933 | -4.11% | $3,622,778 | -18.89% | 120 / 62 | -16 / 28 | 80 | 0 |
| Condo/Townhome | $667,497 | -0.05% | $549,600 | -27.74% | 39 / 28 | 4 / 6 | 30 | 2 |
| Contra Costa County, CA | ||||||||
| Single Family | $799,320 | -3.03% | $793,909 | -5.94% | 51 / 33 | 5 / 2 | 880 | -33 |
| Luxury Single Family | $2,655,950 | +0.51% | $2,028,524 | -10.14% | 54 / 31 | 6 / 4 | 289 | -15 |
| Condo/Townhome | $523,446 | +2.22% | $525,515 | +1.34% | 45 / 26 | 5 / -2 | 223 | 18 |
| Luxury Condo/Townhome | $1,234,951 | +3.86% | $1,122,019 | +1.09% | 46 / 25 | 10 / 3 | 70 | 3 |
| Alameda County, CA | ||||||||
| Single Family | $998,177 | -3.80% | $1,050,329 | -2.79% | 42 / 30 | 0 / 4 | 841 | -23 |
| Luxury Single Family | $2,676,608 | +2.02% | $2,201,929 | -1.31% | 49 / 25 | 6 / -5 | 264 | -23 |
| Condo/Townhome | $617,000 | -1.61% | $628,870 | -2.08% | 53 / 35 | 5 / 7 | 330 | -18 |
| Luxury Condo/Townhome | $1,163,236 | +1.68% | $1,138,194 | +6.21% | 42 / 25 | -4 / 1 | 112 | -4 |
The Problems are the Path
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