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.
Interest rates are going up and will go up further in the future. The stock market most of Silicon Valley buys in taking a BEATING. There are no vestal virgins in the temple the Visigoth's have taken them home.
So where do you put your investment savings. One area that has always held up is rental or income producing real estate. From single family homes, multi-family and apartment buildings. They offer cash flow and tax shelter with appreciation from the growth in income to the amortization of mortgages.
Kevin definitely gives some solid "insider" tips in this video.
If you'd like to continue the conversation and start the process of finding a great local deal, feel free to reply to this email or text me @ 650-743-7249 anytime.
Mortgage rates jumped again this week, giving no relief to the price-weary homebuyers still in the market.
The rate on the 30-year fixed mortgage increased to 5.66% from 5.55% the week prior, according toFreddie Mac, and is up more than a half-point from two weeks ago. While lower than the 5.81% registered in June, the rate remains over 2 percentage points higher than the start of the year.
Higher borrowing costs have left cash-strapped homebuyers at a divide. Some folks have opted to put off their purchase plans and wait for better market conditions, while those who remain are taking advantage of the dip in competition to strike a bargain with sellers.
“The increase in mortgage rates is coming at a particularly vulnerable time for the housing market as sellers are recalibrating their pricing due to lower demand, likely resulting in continued price growth deceleration,” Sam Khater, Freddie Mac’s chief economist said in a news release
As the housing marketcoolsand returns to pre-pandemicnorms, sellers — once in the driver’s seat — now have to readjust.
A new Realtor.comsurveyfound that 92% of sellers accepted some buyer-friendly terms and 41% accepted some contingencies in the contract. This is a stark contrast to thebidding warsand contingency waivers last year and earlier this year.
“We're seeing a shift from a seller's market to a buyer's market for at least a few months and now is the time where buyers can actually ask for more,” Krystle Moore, CEO of Pacific Shore Capital, told Yahoo Finance Live. “We're not having to ask for no contingencies or going over list. We're not seeing those things happening anymore, so buyers definitely do have the upper hand.”
A return to normal means that sellers won’t be receiving multiple offers and that homes in need of repair won’t sell as high.
GOLDMAN SACHS ON HOME PRICES:
On home prices:
"Our model suggests that home price growth will slow sharply in the next couple quarters (+8½% quarter over quarter annualized rate (AR) in Q3, +3% quarter over quarter AR in Q4, corresponding to +14% Q4/Q4 in 2022), as the imbalance between supply and demand continues to shrink, mostly through lower demand. Thereafter, we expect home price growth to stall completely, averaging 0% in 2023. While outright declines in national home prices are possible and appear quite likely for some regions, large declines seem unlikely.
Our market continues to show weakness. Home prices in San MAteo and Santa Clara on average dropped a little over 5% from last month. It is the second month in a row that home prices have declined. The high end market is now selling below list. Price cuts are becoming the norm and days on the market are increasing.
It is still my belief that waiting to get a better price on a home is not as favorable as a lower mortgage rate which the buyer will have for 30 years. The but what if rates come down are offset with the refinance option. I wouldn't count on "what if". Opportunity can escape. Those homes still on the market will see seller's who are willing to negotiate price. Leaving the Bay Area was shown in a recent article on the revival in home prices San Mateo and Santa Clara where still down while San Diego and Los Angles were up over Pre-Pandemic.
The virtual Zoom towns have shown the greatest weakness in prices as the return to the office and escape from the Bay Area appears to have ended. Now the movements will be based on the "cost of living".
List price is not sales price as we see below. The history of market action will see the point when list price is down and sales prices are up. That will be the bell to sound a bottom. Until then, as long as the FED continues to raise rates and liquidate their balance sheet we will see higher mortgage rates and weaker prices for all assets from growth stocks to real estate
Housing Inventory Snapshot
August 28, 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
$1,609,432
+2.14%
$1,602,468
-0.84%
47 / 22
9 / 4
753
-154
Luxury Single Family
$5,337,174
+10.85%
$3,919,539
-2.06%
57 / 23
10 / 5
239
-53
Condo/Townhome
$802,514
-0.78%
$773,063
-7.98%
44 / 25
8 / 5
344
-64
Luxury Condo/Townhome
$1,572,169
-2.72%
$1,523,805
-3.66%
41 / 20
6 / 1
114
-18
San Mateo County, CA
Single Family
$1,942,666
+0.74%
$1,937,808
-0.33%
40 / 21
1 / 5
335
-17
Luxury Single Family
$8,096,115
-1.71%
$5,727,911
-3.33%
83 / 20
2 / 2
112
-6
Condo/Townhome
$850,930
+0.62%
$829,057
-3.77%
56 / 38
5 / 12
169
21
Luxury Condo/Townhome
$1,705,320
+3.92%
$1,743,087
+2.62%
45 / 8
1 / -4
54
2
Santa Cruz County, CA
Single Family
$1,262,070
-3.16%
$1,248,044
-1.21%
56 / 29
7 / 11
176
-18
Luxury Single Family
$3,759,096
-0.90%
$2,786,350
-7.00%
81 / 19
5 / -1
59
-2
Condo/Townhome
$682,323
-5.48%
$765,717
+3.83%
68 / 28
12 / 10
37
-9
Monterey County, CA
Single Family
$992,740
-5.24%
$995,047
+0.08%
49 / 26
6 / 5
277
-10
Luxury Single Family
$7,275,753
+13.67%
$4,765,556
+5.82%
123 / 63
18 / 47
84
-7
Condo/Townhome
$612,103
-1.81%
$565,529
-13.10%
33 / 20
-1 / 11
26
0
Contra Costa County, CA
Single Family
$825,352
-4.42%
$818,768
-8.48%
39 / 25
5 / 4
979
-58
Luxury Single Family
$2,581,967
-6.68%
$2,175,229
-7.84%
44 / 25
8 / 8
329
-15
Condo/Townhome
$526,661
-1.05%
$538,428
+7.74%
37 / 21
4 / 5
207
-11
Luxury Condo/Townhome
$1,193,359
-0.96%
$1,170,500
+1.91%
30 / 15
0 / 3
65
-7
Alameda County, CA
Single Family
$1,042,248
+0.07%
$1,093,767
-2.90%
39 / 23
3 / 5
871
-47
Luxury Single Family
$2,679,999
+3.99%
$2,284,248
+4.59%
42 / 23
5 / 7
287
-28
Condo/Townhome
$642,430
-1.61%
$617,471
-6.33%
41 / 27
4 / 8
377
-24
Luxury Condo/Townhome
$1,178,446
-0.78%
$1,115,407
-1.01%
41 / 21
5 / 6
118
-13
The worst market is San Francisco's Commercial market . Commercial Properties once for sale have ben removed from the market. Offers of 70% below 2019 values indicate investors have little taste for the risk ahead. 24% vacancy rates from "the work at home" syndrome have had a big impact on values based upon cash flow and cap rates. That appears to be only one of the potential issues keeping investors out of the San Francisco Commercial market. The City's budget is taking a hot, lack of conventions, empty storefronts, homeless encampments and open air drug dealing have investors assessing the risks to realities of the San Francisco investment climate.
It's been a long day coming. We finally have a relief from bidding wars and over pricing of real estate. The fact that the nation saw a 6% decline in average real estate price and the Bay Area saw a 4.5% decline gives testimony to the strength of Silicon Vally and the shortage of housing.
What does this all portend? On Friday Mr. Powell speaks at an annual conference in the Rockies to give his credentials on being a "Hawk" on interest rates. A big turn around from the past, and a delayed one of course. With the rising of interest rates ahead of us the mortgage market will adjust to high mortgage rates. High mortgage rates will convert to either higher down payments or a reduction I offering prices and sales prices. Or, a search for homes within the buyer's approval range. Call it a redistribution of population. A fact of life in human evolution.
There has already been a sharp drop in the ratio Sales Price to List Price and an extension of Days on the Market. Woodside has been the most notable with a decline of sales below list of 94% for July. The rest of our cities have seen the same, but nothing below list to date.
The major risk before the market and buyers is the US Mortgage Lenders are Starting to Go Broke. It all starts with the Capitalization of Non-Bank Lenders. They traditionally create mortgages which they keep in their inventory to sell to institutional investors and Fannie Mae. The risk they bear is that they have or had more demand for mortgages than capital. That led them to borrow. Doing so using a high leverage rate. That creates a risk to the market value of their portfolio as rates rise. Just like any speculator knows, leverage works both ways. To highly leverage investors it is dramatic. Let us use a 4% average portfolio in a 5.5% market. The converts to 72.73% of par value. The average loan was made at 100% or par. The non- bank now has a margin call. They either raise money in the after market or file for bankruptcy. The usual request will go to Fannie Mae for "help" to bail them out the the problem. Until that happens loans are not going to be available from non-banks and mortgage brokers will have only the major banks to go to for quotes. The major banks have cut back on lending and staff. Their preference is why give you money and loans when we have our own mortgage broker employees? Unless, you can give us a discount. Either way the lender will eventually pay for it.
"There’s no systemic meltdown coming this time around, because there hasn’t been the same level of lending excesses and because many of the biggest banks pulled back from mortgages after the financial crisis. But market watchers nonetheless expect a string of bankruptcies broad enough to trigger a spike in layoffs in an industry that employs hundreds of thousands of workers, and potentially an increase in some lending rates. More of the business is now controlled by independent lenders, and with mortgage volumes plunging this year, many are struggling to stay afloat." Bloomberg Financial
The problem in going to Fannie Mae is that they have a maximum loan they will buy. The jumbo lenders have a deep problem without deep pockets to go to.
How will this all play out will be of interest. It does have some similarity to the decade of the 1970's when inflation, high interest rates and a declining stock market all created a financial crisis. During that decade the Real Estate Investment Trust industry had Mortgage REITS. They had a handsome plan of borrow short and lend long. It all came a crashing end, when the short market rose above the long market and it cost them more to borrow that to lend. Bankruptcy and massive liquidations tore apart this market and in general they ceased to exist.
For buyers the first process is to find a lender who is willing to give you a loan commitment based upon your income and a set mortgage Be aware that if rates rise the commitment has a bow out clause with the contingencies within the commitment. Next, buyers must remember to make offers contingent upon appraisal and financing. The worst position to be in is the appraisal comes in below the offer and rates have risen when that contingency is not applied. The buyer makes up the difference. Unless the contingency is within the offer the buyer stand to loose their "Full Faith Deposit". A very bad situation to be in. Once the contingency is in place the option is to submit a modified offer in line with the new appraisal. If not accepted, the buyer gets their Full Faith Despot back (usually 3%)
For sellers, the concept of "I want what my neighbor sold his house for" is dead. So too is the Zillow and Redfin guesstimates. They look at a computer program of past sales. The past sales do not represent the current market. Trust the price your agent recommends and to be certain take 10% off what ever it is. While you may not like it there is little chance you will see an uptick in valuation as long as rates increase and the fear of recession is in the media.
Contact Gary McKae at 650-743-72-49 or gary.mckae@exprealty for your listing or purchase.
With the employment numbers jumping to 528000 from an expected 250,000 an upset of the apple cart in forecasts and the direction of the economy has occured.
People are going back to work. The people going back to work were those who were laid off or idled due to the pandemic. It was the service industry and the travel industry. It was all those who couldn't pay rent or their mortgage that the Government protected from eviction or foreclosure. So why the upset?
The low interest rates that created the situation we are in created a wealth of opportunities for risk takers and the growth industries. Investment are measured against "Risk free rate of return". That means 90-day T-Bills. When T-bills went to 0% or less the sky was open and mana fell from heaven. Every idea under the sun came out of the minds of the aggressive risk takers with little or no alternative to invest measurement of risk to.
The majority of investors in America are institutions. That means your pension fund, your insurance company and even your bank and broker. The risky investment took off, earning per share became another useless measurement of the past. There was a new normal. ( How often have I heard this comment.) A rationalization to keep the money flowing to high risk investments as there is no other choice. Does the investor keep their money in fractional return risk free investments or do they plunge with the crowd into stocks selling at multiples of income growth and no earning now or for the foreseeable future. What they offered now is appreciation. The Greater Fool theory in operation.
More assets created more disposable income created and excess savings with no place to go; other than, joining the crowd. Price became a useless measurement. We have money and we want it! I will show you how much money I have and over pay for it and make you give up. I WIN! REALLY?
Somewhere in the latest research from the McKae Properties Research Team came a report from either RedFin or Zillow that the last 10% in home prices was all worthless over bidding.
Open house are a common site along with Garage Sale signs today. A welcome return to the past?
The cost of living, is even putting into question the weather of California?
WE BUY HOUSES are still common so the correct has not taken hold. That leaves those who were considering to sell a chance to get out with something near the top their neighbor got.
Buyers now have the chance to buy a house without over bidding and or worry of over bids. Bank financing and appraisals save buyers from getting into over their heads. Things are beginning to get back to normal. The High End Market is seeing a stronger supply of sellers than the past. The low end market is seeing some relief in affordability
Price cuts are not a local situation, they are all over the country. Even realtors are in dismay of the situation. Take an Hawaii or Incline Valley cut of a $5 million property of $5-10,000 to our cuts of $500,000 to $1 million. I take that as the highly educated of our area see more risk ahead. Best position is to be n cash while interest rates are rising and the return on T-Bills go higher and higher.
Where to Go? I saw that Intel was building a massive chip factory in Chandler Arizona. Wife and I stayed in Chandler many times at her parents home in a +55 Community. Christmas and New Year's was fun. Cold in the evenings, parties at the Club House, Formal dressing with bands. Sunrise brought out shorts and 3 different golf course to choose from, Laying by the pool, water classes, or just sipping a "cool one" by the patio talking to new friends.
I looked at Zillow prices....My Word. The town house we sold there was up almost 100%...That was 18 years ago so it is logical. I asked the same McKae Properties Research Department for forecasts in Chandler on home prices due to the Intel Plant. DOWN 46% they said from Zillow forecasts! It doesn't matter what potential an area has the trend has reversed.
Is the the worst or can it be a collapse in housing? Poppy Cock!
The FED is only bringing rates back up to a level where inflation, asset inflation subsides and people can once again afford a home and pay rent without have two jobs. Remember it was the ultra low interest rates that created inflation and risk taking that escalated asset prices.
What you really have to worry about is the FED"s balance sheet. At present there is $8.9 Trillion dollars in assets. Those are all the bonds the FED has bought to put money into the system to keep from a collapse. A collapse from the Lehman Crisis of 07-8 to the Pandemic of 2020. The average balance before the FED embarked on Quantitative Easing, damn that word and concept, was less than $1 trillion.
The big risk is money is pulled out of the Money Supply. The you know what will hit the fan!
We are going through a transitional phase when the business cycle changes and high risk tech and growth stocks cannot compete with risk free rate of returns. Money does not flow like water from the horn of plenty.
Recent balance sheet trends
Choose one of the 5 charts.
Total Assets (In millions of dollars):4 504 7On October 12, 2015 the FED owned $4.5 Trillion in assets today it is over $9 Trillion,
As the economy grows bonds can slowly mature. Money supply created by the FED s replaced by economic growth and investments in corporate America.
Minimum wages will increase, labor will get higher wages, home price will come down and affordability will match off and all will remain level. Inflation will come down as home price increase attribute to inflation will offset other increases.
People want to own a home, it is not a trading vehicle. They raise families in them. They grow old in them. We need to get out of the will it go lower syndrome. So what if it does, you refinance at a lower interest rate. You save more. You work in the garden on weekends, have family over for cook outs.
