The inflation reading for October, released yesterday, declined – from 3.7% to 3.2% for the overall index, and from 4.1% to 4% for the “core” index – fueling a continuation of the very dramatic stock market rebound that began on November 1st with the Fed’s pause on rate hikes.

Soaring stock markets:  The percentages below reference changes in the stock market indices since the year began, but one can see the tremendous jump that has occurred in the last 2 weeks.

The daily average interest rate – illustrated below – is roughly where it was after the big decline in early November (after the Fed announcement of a continued pause in Fed benchmark rate increases) – substantially down from October highs. The 11/15/23 reading was 7.45%. The new weekly average reading from Freddie Mac comes out tomorrow, but based on interest rate changes over the last week, it seems likely to stay relatively close to last week’s reading (7.5%).

Freddie Mac’s weekly average reading will be updated tomorrow, 11/16/23 @  https://www.freddiemac.com/pmms

Jumbo loan rate chart:  As of yesterday’s reading, running at about 7.6%.

4 charts from an updated Bay Area market survey. (PDF & JPGs are in this folder).  The survey includes several comparisons of our current market with the pre-pandemic market in 2019. I’ve included Sacramento County in the first 3 charts below.

Median house sales price appreciation since autumn 2019:

Comparative median $/sq.ft. house values:

Percentage home sales declines – in # of residential sales reported to MLS – since autumn 2019:

In this YTD comparison with 2019 luxury home sales, the “luxury home” category is defined as $5 million+ in the 4 most expensive counties (SF, Marin, Santa Clara, San Mateo), and as $3 million+ in the other counties.

The national unemployment rate ticked up slightly in October – which financial markets liked since it indicated some cooling in the economy, which presumably influenced the Fed in their decision not to raise the benchmark rate – but remains close to historic lows.

October unemployment data for the Bay Area has not been released yet, but through September, the general picture is similar:  Close to historic lows.

It’s hard to put a positive spin on recent economic and political realities. It’s good news that Powell has signaled that the Fed will hold off on a monthly increase in the Fed rate, but doesn’t change the basic situation of steadily increasing interest rates.

Here are 3 angles on interest rates over varying periods of time: average daily, average weekly, and jumbo loan rates (all of which use different methodologies in their calculations):

Stock markets through yesterday. Still well up for the year, but well down from the YTD mid-summer high. As of this morning, they are falling again (but this can change very quickly):

According to NAR, The national percentage of all-cash buyers in September was at its highest point in 8+ years. An increased percentage of total sales does not necessarily mean an increase in the actual number of all-cash buyers. But as a share of the market, all-cash buyers are participating more actively than those requiring loans.

NAR released September sales data yesterday. Below is the chart on national single family home prices since 1990. Though many Bay Area markets have seen strong, sometimes very strong, rebounds in median sales prices in 2023, generally speaking, the overall national market has rebounded closer to 2022 peak house prices.

The new inflation report for August was released yesterday, with the general CPI reading ticking up, and the Core-CPI reading ticking down. Neither bond markets nor stock markets have, so far, responded dramatically.

Interest rates:  Daily and weekly averages.

Stock markets:

The Census just released national household income figures for 2022 (which ticked down slightly), and I charted the difference in appreciation between U.S. median home prices and U.S. median household income.

The June inflation readings came out yesterday, with a substantial drop in the overall index, and a more modest decline in the “Core-CPI” index:

Today’s weekly average 30-year interest rate reading climbed from last week (but will not reflect any reaction to the new inflation report), but the daily average interest rate illustrated in the 2nd chart below, had a significant, if preliminary, reaction to yesterday’s CPI:  Falling almost a quarter point in 2 days.

So far, stock markets have reacted very positively to the new inflation report:

The latest monthly overview of the national real estate market from the U.S Department of Housing & Urban Development:  Link to Report

An interesting article – with graphics on many angles on housing, including the one below – published by the U.S. Census on June 29, 2023, Owning or Renting the American Dream.

Click below to learn all about the real estate market as of July 2023.

San Mateo County – July 2023

State Farm and Allstate announced earlier this month they will no longer sell new home insurance policies in California because of wildfire risks and an increase in construction costs. Here are some facts:

1. State Farm and Allstate are not leaving the California Insurance Market:  State Farm and Allstate will continue to service and renew policies of existing clients in the state and will continue to offer new auto insurance policies. However, they will not be issuing any new property insurance policies for the time being in California.
2. What are the implications of the decision for prospective homebuyers?  In certain high-risk areas of the state, there are very few insurance companies willing to write new policies. In some higher risk areas, State Farm was the last private insurance company writing policies. In those areas, unless the Insurance Commissioner is successful in its effort to get more private insurers to write policies in such areas, the generally more-costly California FAIR plan may end up being the only property insurance available.
3. Why did State Farm and Allstate stop issuing new policies? State Farm stated that it made the decision “due to historic increases in construction costs outpacing inflation, rapidly growing catastrophe exposure, and a challenging reinsurance market.” Allstate said the company “paused” its offerings “so they can continue to protect current customers.” State Farm and Allstate’s decision is not necessarily an indication of what other companies will do.
4. Will more companies follow State Farm and Allstate’s move?  There are still a wide range of companies writing policies in California. However, those willing to write new policies in higher risk areas in particular are declining and as stated above, with the departure of State Farm and Allstate, those in more high-risk areas may have no option than the FAIR plan.
5. What are the main problems for the insurance market in California?  The California market is heavily regulated and has various strict requirements for rate increases, which were put into place by Proposition 103 in 1988. However, there are two areas where possible changes could result in a better climate for insurance without requiring major changes to consumer-friendly rate increase requirements. Those include allowing insurance companies to have rates that better reflect their reinsurance costs and allowing insurance companies to utilize forward looking risk models. Current law only allows companies to look back when setting rates. However, given the issues with climate change, many insurance companies argue that looking backward does not allow companies to adequately capture risk.
6. Where can you go for information if you are looking for homeowners insurance?  The California Dept. of Insurance provides several information guides, tips and tools to help you understand home/residential insurance so that you can make the best decision for your situation. You can also call the California Dept. of Insurance Consumer Hotline for assistance.
7. What is California Association of Realtors doing? C.A.R. has been in discussions with both the Insurance Industry representatives and the Department of Insurance on State Farm and Allstate’s move and other homeowner insurance issues. The Insurance Industry and the Department of Insurance have also been looking at and discussing ways to address the state’s insurance challenges. The issue is large and complicated. We have  cautious hope that these moves may create some greater urgency on how to address this insurance situation.
   Source: C.A.R.

https://www.compass.com/marketing-center/editor/v2/flipbook/273da351-b3b1-4011-a4d5-e18cc750e1de

May inflation report released yesterday:  The general index (chart 1 below) saw a significant decline to its lowest reading in 2 years (though 4.1% is still considered a relatively high inflation reading). The “core” inflation index (chart 2)  ticked down slightly, and has seen only modest change since December. Both are well down from summer 2022 peaks.

Today, the Fed decided to hold rates steady after 10 consecutive increases since March 2022, but according to the WSJ, “signaled they are leaning toward raising them next month if the economy and inflation don’t cool more.”

Interest rates have been generally stable since debt-default fears subsided, but running relatively high at just under 7% (as of 6/13/23). Today’s daily average rate was basically unchanged from yesterday, but we may see more reaction to the Fed’s decision tomorrow.

Long-term weekly average rates: The next weekly average reading will come out tomorrow.

Stock markets have seen substantial recoveries in 2023 – especially the Nasdaq – though they are still well down from peaks in late 2021. The next chart illustrates changes since 2023 began, while the 2 charts after look at long-term trends. Affluent buyers are usually most sensitive to major changes in financial markets, as they typically see the biggest impacts on household wealth. And the Nasdaq, of course, is focused on high-tech companies. So far today, stock markets are basically flat from yesterday, as they try to digest the latest news from the Fed.

Venture Capital Investment in the Bay Area:  Though VC investment plunged in 2022, the Bay Area still receives the most of any region in the country.

From NAR regarding all-cash purchasing: “Since October 2022, the share of buyers purchasing their home without a mortgage has been more than one-quarter of the market.” Their chart is below. Link to 4/2023 full NAR article.

And according to a 6/2023 Mansion Global article, based on a Redfin report – presumably based on Redfin sales only – a third of buyers in April 2023 purchased all-cash. Note that a higher percentage doesn’t signify more all-cash buyers than last year, but a bigger slice of a smaller pie of sales.