Market Update • September 18, 2023

Market Update

by Selena Young

Buyers and sellers’ sentiments remained virtually unchanged in August as housing market participants wait for more signals on what the Fed’s next move will be in the upcoming FOMC meeting. With the economy looking stronger than what was anticipated six months ago, interest rates will remain elevated for a little longer. Consumers could be tapped out, however, as costs of borrowing continue to rise, and their financial conditions begin to tighten up. As such, the economy will likely show more signs of slowing later this year and the Central Bank will have no choice but to cut rates starting in the first quarter of 2024. Mortgage rates will decline starting in the fourth quarter of this year and will further improve next year. The decline will likely be gradual though.

Lack of affordability and tight supply keep homebuyer confidence at low level: Housing sentiment stalled by unusual market dynamics in August as rates remained elevated, reported by Fannie Mae in their latest national housing survey. Those who believed that it is a good time to buy remained at 18%, the lowest level the market has seen in at least the last three years. With rates rising throughout most of last month, consumers continued to feel pessimistic about home buying conditions and they did not expect things to turn around soon. In fact, only less than two out of ten (18%) expected mortgage rates to decline in the next 12 months. On the sell side, however, consumers were more upbeat with 66% of them reported that it is a good time to sell. Consumers have become more positive about home selling since earlier this year as home prices continued to stabilize and housing supply remained tight.

Share of homes with negative equity remains low in California: Home equity dropped on a year-over-year basis in the second quarter of 2023 but improved on a quarterly basis from the first quarter of 2023, reported by CoreLogic’s latest Homeowner Equity Insights report. At the national level, homeowners with mortgages in aggregate have seen a drop in equity by a total of $287 billion, or a loss of 1.7% year-over-year, from Q2 2022. On average, U.S. homeowners with mortgages lost $8,300 in equity last quarter compared to a year ago but gained an average of $13,900 from the Q1 2023 when home prices in general bottomed out. Roughly 2% of all mortgaged properties, or 1.1 million homes, were underwater or had negative equity last quarter. While the number of under-watered homes increased 4% from a year ago, the share of residential properties with negative equity was still significantly below the peak of 26% observed in Q4 2009. California was one of the 16 states that posted an annual equity loss in Q2 2023, with the average homeowner losing $48,000 in Q2 2023. The state, however, had a share of homes with negative equity at 0.8%, which was the lowest of all states reported by CoreLogic.

Soft landing odds improve… for now: The resilience of the U.S. economy continues to surprise economists to the upside and the chance of falling into a recession has been lowered again. The probability of the U.S. entering a recession in the next 12 months has been reduced to 15% from an earlier 20%, according to Goldman Sachs’ latest forecast outlook. The investment bank expected the Fed to pause rate hike in September and believed that a “very gradual” cuts of 25 bps per quarter will begin in Q2 2024. Goldman Sachs also predicted that the slowdown in economic activity resulting from monetary policy tightening will slowly diminish and eventually become a non-factor by early 2024. Real disposable income will pick back up next year as solid job growth continues.

Households not as optimistic about their financial conditions as before: Despite a solid job growth and decent economic conditions in the first half of the year, consumers have become less confident about their financial situations as the labor market began to slow while costs of borrowing remained high. The slowdown in wage growth could be a contributing factor to the decrease in optimism, as the expected growth rate in household income dipped 0.3% to 2.9% in August, reaching the lowest level since July 2021. Interest rates rising sharply between mid-July to mid-August might also have resulted in the deterioration of perception of credit access in August from a year ago, as nearly 60% of households reported that it is harder to obtain credit than the same time last year when the peak of the series was recorded. Households were also less positive about their future financial situation in August. Less than a quarter (23.8%) of households believed that they will be better off one year from now, the lowest level recorded since October 2022.

New supply continues to soften rent growth: Long gone is the day when the market had double-digit rent growth, and apartment rents could see year-over-year declines in coming months. Rents at the national level in August only increased 0.28% from 12 months ago, according to real estate tech platform RealPage. Other than a brief drop during the Covid lockdown, rents have not experienced a decline on an annual basis in over a decade. A surge in apartment supply is the primary factor for the recent slowdown in growth. Over a million new units have been built in the past three years and more than 460,000 new units – a 50-year high – are expected to be completed this year alone. With supply remaining high at the national level through next year, rent growth could remain low through 2025, but a bounce-back is likely in the year after as far less supply is expected in 2026.

Local News • September 18, 2023

Mountain View Moves Forward with Revenue Measures

by Selena Young

Government Affairs Mountain View Moves Forward with Revenue Measures At a recent study session, the Mountain View City Council agreed that while the budget is secure, the city lacks funding to address critical infrastructure needs. One of those critical needs is the $160 million estimated for a new public safety building. There are also needs for fire services, park space, affordable housing, and climate change initiatives. These were all presented in the same study session that can be seen HERE.

City staff presented several options for revenues, all looking to generate around $5 million per year. This generally was agreed upon to take the form of a general tax, which only requires 50%+ approval to pass. However, they are still considering whether or not this should be a transient occupancy tax (TOT or hotel), a property transfer tax, a utility users tax, or a sales tax. It appears the primary focus now would be evaluating the feasibility of a TOT which hasn’t been updated since 1991 and still sits at 10%. Some neighboring cities are as high as 15%.

Real estate taxes received healthy discussion, but the council was split on a transfer tax increase. Mountain View already has one of the higher rates, with $3.30 being charged per $1,000 of value. A tiered approach was discussed, similar to San Jose, but received tepid support. Another suggestion was a parcel tax on commercial and industrial properties. The only formal action was to hire a consultant to conduct polling and organize community outreach around the various proposals.

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Selena Young
Realtor | Coldwell Banker Realty
DRE# 02073411

Market Update • August 29, 2023

Market Update

by Selena Young

Rates have risen sharply in the past few weeks, but the housing market has weathered this rise relatively well. Although the primary measures of mortgage demand show that homebuyers remain affected by higher rates, the gap between 2022 and 2023 levels has yet to widen noticeably. In addition, rates have begun to inch down slightly since the gathering of economists in Jackson Hole last week where the Federal Reserve Chairman seemed more cautious about raising rates at the upcoming FOMC meeting in September. Despite this optimistic news for financial markets, consumers remain a primary area of risk for the macroeconomy as delinquencies on various forms of debt have begun to rise, taking some steam out of our primary engine of growth thus far. While many have begun to celebrate the possible achievement of the proverbial ‘soft landing,’ the leading economic index suggests that we may not be out of the woods quite yet.

Rates inch down from 20+ year highs: After rising to almost 7.5% in the previous few weeks, daily tracking shows that mortgage rates have come down roughly 10 basis points since the Chairman of the Federal Reserve spoke in Jackson Hole where he indicated that the committee will take a data driven approach and be flexible in the months ahead. Some interpreted these comments to mean that another rate hike in September may not be in the cards. Since then, 2-year Treasury rates have inched down slightly, although 10-year notes have come down far less. This means that the yield curve, a reliable correlate with future recessions, remains inverted and suggests that we may still face headwinds next year. However, it also suggests that rates could begin to dip again if 10-year rates start to follow shorter-term yields down.

Shrinking money supply could help with inflation: Although the economy is not yet fully out of the woods on its battle to reign in inflation, recent data from the Federal Reserve shows that M2, a primary indicator of liquid money supply currently in circulation, has now been dropping for the past 8 months consecutively as the FOMC tightens monetary policy and raised its benchmark interest rate. This should have the effect of curtailing some demand for products and services and helping to alleviate the shortage of workers currently needed to fill open positions, which, in turn, would help to reduce upward pressure on inflation in the months ahead.

Credit card and auto loan delinquency rates are on the upswing: As credit card balances rose above $1 trillion for the first time in the second quarter in the U.S., more Americans are falling behind on their payments. According to data from the New York Fed, new credit card delinquency rate hit 7.2% in Q223, while the rate of new auto loan delinquencies reached 7.3% in the same time period. Both rates surpassed pre-pandemic levels in the latest quarter. With student loan payment set to restart in October, consumers could be stretched even thinner financially in coming months, and a slow down in retail spending in the last quarter of this year should be expected.

Rent growth continues to slow: U.S. single-family rent growth continued to rise but at a more moderate pace. The latest Single-Family Rent Index released by CoreLogic shows that rent growth eased for the 14th consecutive month in June and registered a year-over-year gain of 3.3%. The increase was the lowest since autumn 2020. The monthly growth rate of 1.1% recorded in June was consistent with the pre-pandemic average of 1%, which could be an indication that the measure is returning back to its long-term normal. Chicago had the highest annual increase in single-family rent growth in June at 6.6%, while Los Angeles/Long Beach/Glendale posted a 2.7% and San Diego/Carlsbad recorded a 4.3%.

Mortgage demand peaks in 2023 at half 2022 levels: Although mortgage demand saw its typical bounce during the spring homebuying season, the monthly index of new purchase applications peaked at roughly 200 in May of this year compared with a peak of roughly 300 last year. This is consistent with the volume of sales transactions, although California bounced back to slightly more than half of the roughly 510,000 units that it hit at the end of 2021. The effect of rising interest rates has sidelined some potential buyers as the effects of rising prices have compounded the reduced purchasing power.

Existing home sales fall, while new home sales rise and capture additional market share: As noted in previous editions of this report, new home sales have been steadily gaining market share as existing homes suffer from a lack of inventory that has prevented transactions from rising. Nationwide, resale transactions fell to 4.1 million units on an annualized basis last month, which is a 2.2% decline from June. At the same time, new home sales rose 4.4% bringing the share of new to all single-family homes sold to nearly 16%. Builders have been increasingly relying on incentives like rate buy-downs and a relatively less depressed stock of new home inventory to achieve gains in the level and share of homes sold as existing homeowners remain reluctant to sell their properties and abandon their historically-low interest rates. Even in California, where existing inventory is up slightly for July, the current unsold inventory index remains at 2.5 months of supply, which means that without any new inventory, California will be out of homes to sell before we enter winter.

As always, as news headlines raise questions, I am happy to provide you with real-time information and answer all of your real estate questions. Feel free to contact me today!
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Selena Young | Realtor
DRE# 02073411
Coldwell Banker Realty

Market Update • August 16, 2023

Market Update

by Selena Young

Housing affordability remained an issue in the second quarter and the problem will persist in the second half of the year as rates continue to stay high. Despite inflation easing closer to 3% in the last couple months, rates have been climbing further in the last two weeks as food and energy prices are expected to increase in coming months. With inflation not likely to come down meaningfully in August and September, there is a chance that the Fed could raise its policy rate one more time before the end of the year. As such, mortgage rates could remain elevated for a longer period than what the market previously anticipated.

Housing affordability lowest since 2007 as rates remain elevated: C.A.R. just released its second quarter Housing Affordability Index and the share of households in California that can afford to buy a typical single-family home dropped to 16%, the lowest since Q3 ’07. Higher mortgage rates continued to push cost of borrowing to an all-time high, resulting in an increase of 8.1% in mortgage payment from Q1 ’23 and a 5.3% jump from Q2 ’22. A minimum qualifying income of $208,000 was required to make the monthly payment of $5,200 for a median-priced home, at the prevailing 30-year fixed-rate mortgage of 6.61% in the state. The minimum income required in Q2 ’23 was a new record high and was the second time in the last three quarters that it exceeded $200,000. With interest rates near the highest level in the past 17 years and expected to remain elevated for the remainder of the year, housing affordability will remain a challenge for many homebuyers in the coming quarters.

July inflation continues to moderate but may inch up August: Despite headline inflation rising annually from 3% in June to 3.2% in July, the monthly increase of 0.2% last month continued to moderate from the 0.5% average gain in 2022. Meanwhile, core inflation continued to decline gradually on a year-over-year basis from 4.8% in June to 4.7% in July, and the 3-month annualized average of 3.1% was the slowest pace since September 2021. Prices of housing remained up but cooled from early 2023, while used cars/trucks softened further in July and airline fares dropped sharply on a year-over-year basis. The downward trend in the headline inflation figure, however, could reverse in coming months as gasoline began to head up again while producer prices for food also climbed up in July. Geopolitical tension and weather-related factors could continue to put upward pressure on food and energy and may disrupt the declining path in inflation in the next few months.

Mortgage rates reach highest level since November: Interest rates have been steadily rising since early April and just hit the highest mark in nine months. The average 30 year fixed-rate mortgage rose 5bps and reached 7.24% on August 14, 2023, as reported by Mortgage News Daily. Cooler inflation in July was supposed to minimize the odds of the Fed’s next rate hike and reverse the rising trend in rates observed in the past few months. Instead, the upward momentum continued shortly after the release of the consumer price index and rates kept rising after the release of the producer price index last week. Elevated oil and food prices in the short term and the increasing odds of achieving an economic soft-landing in 2024 might have suggested to many in the market that the Fed could hold its policy rate steady for a little longer. As such, rates continue to climb in the past couple of weeks despite cooling trend in inflation and will likely stay elevated through the rest of the third quarter until the Fed sends a more decisive message to the market about its next rate move.

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Selena Young | Realtor
DRE#02073411
Coldwell Banker Realty

Market Update • August 9, 2023

Market Update

by Selena Young

Mortgage rates stay close to their recent high nearly two weeks after the Fed announced another rate hike in late July. Elevated rates have been affecting buyers and sellers’ sentiment and the market will continue to observe low sales in July and August as a result. While the labor market is easing, wages continue to grow well above pre-pandemic levels, and it will take some time before the Fed is convinced that the economy is truly cooling. As such, rates could remain elevated and volatile throughout the rest of the third quarter before gradually coming down in the winter season. With the economy slowing but showing signs of mild growth, home sales could pick up in the fourth quarter as rates begin to show a more consistent declining trend.
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Selena Young | Realtor
DRE# 02073411
Coldwell Banker Realty

Quarterly Market Update • August 8, 2023

Q2 2023 Market Update | Santa Clara & San Mateo Counties

by Selena Young

The Quarterly Report offers insight into residential real estate sales activity and regional trends.

If you are interested in receiving more information on your local market, please let me know. I would be happy to send you those reports! •

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Selena Young | Realtor
DRE# 02073411
Coldwell Banker Realty

Recent Sales • August 2, 2023

Closed | 1425 45th Ave. #2, Capitola

by Selena Young

Buyer Co-Represented with @realtortowatch

What a whirlwind! Jasmine and I got a call from a friend of ours, letting us know that their cousin had just toured a property in Capitola and was ready to make an offer but needed an agent. Within a matter of minutes we were on the phone with our future client walking him through the offer process and pulling disclosures.

In another couple of days we had submitted our offer and negotiations began. We were competing against another offer, coming in around the same price. But our consistent communication with the listing agent was setting us apart. On top of that, we were given the opportunity to write a letter to the seller explaining why our client was interested in this particular property.

Not many sellers are willing to accept them anymore, due to potential issues with fair housing and discrimination issues, so we were very grateful the seller was open to reading ours. Our client explained that, that particular property was located steps away from one of his closest relatives and how wonderful it would be to live nearby. Due our letter and proactive approach, our offer was accepted with a loan and investigation contingency!

Not only was this a quick negotiation, but this was also our first crypto client as well! (Thus the loan contingency.) We had some concern at first, but working with a lender you trust and who has a proven track record puts one’s mind at ease. So I would like to thank @maxbottaro1 and his team at PNC for ensuring the smooth and timely closing on this sale.

Have questions about the shifting market? Jasmine and I are here to help. Don’t hesitate to reach out!
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Selena Young
Realtor | Coldwell Banker Realty
DRE# 02073411

Market Update • July 25, 2023

Market Update 7.25.23

by Selena Young

June home sales came in below the 300,000-benchmark for the ninth consecutive month, as rates remained elevated in the past couple of months. The year-over-year decline, however, moderated further with the annual dip dropping below 20% for the first time in 12 months. Meanwhile, the statewide median price remained above $800,000 for the third straight month, as tight supply continued to provide upward support. Monthly price dips in the coming months are anticipated, however, as the market goes through its typical seasonal pattern and rates remain elevated for most if not the entire third quarter. As for the economy, consumers appear to be more resilient than predicted six months ago, and economists are lowering the odds of a recession for the U.S. That’s good news, except a solid economy could mean a delay in the Fed loosening its monetary policy, which could be translated as mortgage rates staying high for a little longer.

Have questions about when the best time is for you to make your move? I’m here to help, give me a ring today!
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Selena Young
Realtor | Coldwell Banker Realty
DRE# 02073411

Uncategorized • June 22, 2023

🌞 Embrace the Summer Vibes: Top Interior Design Trends for 2023 ☀️

by Selena Young

🌞 Embrace the Summer Vibes: Top Interior Design Trends for 2023 ☀️

As the sun-drenched season approaches, homeowners and design enthusiasts are seeking captivating ideas to revamp their living spaces. Get ready to transform your home into a haven with these sensational interior design trends of 2023. From vibrant hues and mesmerizing patterns to eco-friendly choices and organic elements, prepare for an awe-inspiring summer makeover.🎨 Burst of Boldness: Dive into a world of striking colors and daring combinations that breathe life into every room.🌿 Nature’s Embrace: Infuse your space with the serenity of nature using sustainable materials, eco-conscious furniture, and earthy textures.✨ Chic Minimalism: Embrace the simplicity of clean lines, uncluttered spaces, and curated essentials, radiating a sense of calm and sophistication.🌊 Coastal Escape: Channel the beachy vibes with nautical accents, breezy textiles, and coastal-inspired colors, transporting you to a seaside oasis.🌸 Floral Flourish: Let your home blossom with floral patterns, botanical prints, and lush greenery, bringing the beauty of nature indoors.🏡 Multifunctional Marvels: Discover the art of maximizing space with clever storage solutions, versatile furniture, and multi-purpose design elements.🌈 Eclectic Fusion: Unleash your creativity by blending different styles, textures, and eras, creating a harmonious tapestry of individuality.✅ Sustainable Serenity: Opt for eco-friendly materials, energy-efficient lighting, and sustainable decor, fostering a tranquil environment while caring for the planet.🔮 Mix and Match: Break free from convention by combining unexpected elements, textures, and colors, allowing your personality to shine through.🌟 Embark on a summer design adventure and let these captivating trends breathe new life into your cherished spaces. Embrace the season and make your home a true reflection of your style and spirit. ✨🏠

Market Update • June 20, 2023

Market Update Week June 19th, 2023

by Selena Young

The Federal Reserve met last week and decided to pause rate hikes in their latest FOMC meeting. While the Committee held the fed funds rate steady this time around, Fed Chairman Powell suggested that they are prepared to raise rates a couple more times, or another 50 bps, this year to tame stubborn inflation. Next year, Fed officials see interest rates falling by 100 basis points as economic growth slows further. This is the first time since January 2022 that the Fed made no rate change following a policy meeting. Before the Fed’s announcement, the bond market generally priced in one more 25bps rate increase by the end of 2023. Interest rates have been moving sideways since the announcement but will stay elevated longer than what the market previously anticipated.

California housing market back on the upswing: The state housing market bounced back in May after sales dipped back-to-back in March and April. Sales of existing homes in California surged nearly 10% monthly and recorded the highest level in eight months. Mortgage rates reaching the lowest point in two months in early and mid-April might have prompted homebuyers to open escrows then and led to many of these transactions being closed in May. Despite the month-to-month gain, home sales continued to decline by double-digits from the same month of last year. The year-over-year drop in sales was relatively mild compared to recent months and was the lowest yearly decline since June 2022. Through the end of May, sales have declined on a year-to-date basis by 35.1%.

Inflation continues to cool Rates flat after Fed pauses rate hikes: After the initial increase in the run-up to the debt ceiling debate, rates have hovered in the high-6% range and remained there in the wake of the Fed’s decision not to raise their target interest rate at their June FOMC meeting. The weekly Freddie Mac 30-year fixed rate mortgage averaged 6.7% for the week ending June 11^th. That is only 2 basis points different from the previous week, and Mortgage News Daily shows average rates at 6.95% at the time of this writing—essentially unchanged from the previous week. However, 10-year Treasuries have begun to rise, so it is possible that mortgage rates will go back above 7%. And with the Fed signaling as many as 2 more rate hikes this year, the return to sub-6% rates is likely to take long than many initially expected.

California job growth decelerates, but still adding jobs: Although the rate of growth has been slowing in California, the Golden State continue to add jobs in May. Employers added a net of 40,000 new jobs in May after a revised 70,000 increase in April. This puts the year-to-year gains at 2.4%, which is well below the average of 6.4% that persisted during the ‘reopening’ phase of this business cycle. The unemployment rate held steady at 4.5% as signs that the labor shortage continues to thaw slowly. The state’s labor force expanded by more than 25,000 workers last month—most re-entering as unemployed, which prevented the unemployment rate from falling despite a total employment jump of nearly 10,000 in the EDD’s monthly unemployment survey.

General macro indicators remain relatively upbeat, but risks evident below surface: On the surface, many of the macro indicators released last week point to an economy that remains on the upswing. Small businesses were more optimistic in May with the overall index climbing by 5.5% on an annualized basis, but many expect to raise prices in the near future. Manufacturing activity rose slightly last month, but the entire industrial production index fell as mining and utilities declines. Retail sales also rose by more in May than in April, with headline sales up by 1.6% year-to-year. However, in real terms (net of inflation), retail spending has been falling for four months consecutively. The second quarter GDP numbers are likely to remain positive, but growth may be more lackluster as we enter the second half of 2023.

Labor force participation rate remains depressed after early retirements: Despite participation having either nearly or fully recovered to pre-pandemic levels for workers aged 54 and under, the participation rate remains depressed for workers aged 55 and above. During the pandemic, home prices rose dramatically and many long-term homeowners sold their homes and moved closer to family or to desirable destinations and retiring early. This has led to a shortfall in available workers, particularly those with extensive experience, to replace those roles and has kept the labor shortage from shrinking more quickly. It has also caused wages to grow more quickly than they have for much of the past decade, which is one factor keeping inflation from falling faster as well.

Have questions about when the best time is for you to make your move? I’m here to help, give me a ring today!

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Selena Young Realtor | Coldwell Banker Realty DRE# 02073411