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Market Update Apr. 12, 2024

April 12, 2024

Yesterday’s inflation release: Overall inflation ticked up in March to 3.5% from 3.2% in February. The “Core” rate remained at 3.8%. The Fed’s target rate is 2%.

The discussion regarding the Fed’s expected benchmark rate cuts this year has markedly changed in recent weeks. From today’s WSJ: “The latest data [regarding inflation] raises two different possibilities. One is that the Fed’s expectation that inflation continues to move lower but in an uneven and ‘bumpy’ fashion is still intact…In such a scenario, a delayed and slower pace of rate cuts is still possible this year. A second possibility is that inflation…is getting stuck at a level closer to 3%. Without evidence that the economy is slowing more notably, that could scrap the case for cuts altogether.” That is a big change from the recent commonly held expectation of 3 cuts this year – but if CPI swings lower suddenly, the outlook could change very quickly.

Another article in the WSJ talks about another big issue beyond interest rates in housing affordability, not just for buyers, but for existing owners, The Hidden Costs of Homeownership Are Skyrocketing: “Rising insurance premiums, property taxes and maintenance costs show little sign of abating.” Of course, how hard specific issues are hitting any particular market can vary enormously. As we know, some regions prone to natural disasters are seeing stupendous increases in insurance premiums. But virtually all markets have seen enormous home-price appreciation since 2019, with parallel effects on property taxes (except in CA where Prop 13 limits these for existing owners). And inflation has deeply affected the costs of maintenance and repairs. This is like a triple-whammy hitting the real costs of buying and owning, and one big reason why the market is being more driven by more affluent home buyers now.

Weekly Average 30-Year Conforming Interest Rates from Freddie Mac. Since it’s a weekly average, it was not much affected by yesterday’s inflation reading. From the year’s beginning, it has been oscillating within a relatively narrow band of readings.

Daily Average 30-Year Interest Rates (not limited to conforming loans). Today’s headline on the Mortgage News Daily website: “Basically The Worst Day for Interest Rates Since October 2022.” As one can see these short-term changes can reverse direction very quickly, but the general trend since the year began has been upward, not what we were hoping for. Though so far, as we’ve seen, the market has been taking this in stride.

Stock markets have also been generally taking the latest CPI reading in stride, falling a bit yesterday, but already rebounding today: This is a daily rate chart for the S&P since 11/1/2023, when the market began its huge surge. Stock markets have a big effect in more affluent markets, on household wealth and consumer confidence.

The preliminary Consumer Sentiment (or Confidence) for April comes out tomorrow. You will be able to find it here.

Foreign-Born Map just released by the Census. CA has the highest state percentage of foreign born residents, and some Bay Area counties see percentages significantly higher than the state.

The price of oil has been rising in 2024.

 


Market Update Apr. 5, 2024

April 5, 2024

As illustrated in the first 5 charts, trends in interest rates, stock markets and consumer confidence have been relatively steady.





Bay Area overviews – Regional markets are generally seeing similar trends, but they do vary.



 


Market Update Feb. 23, 2024

February 23, 2024

Interest rates: Weekly and Daily averages from sources that use different methodologies, but show the same trends.

Stock markets had another very big day yesterday. The change in stock markets has had an enormous effect on household wealth in the Bay Area – especially among more affluent buyers – who seem to be jumping back into the market in greater numbers than buyers in lower price segments.

Nationally, per NAR, the percentage of all-cash sales hit 9+ year high. Besides investors, who often pay cash, 40% of homeowners own their homes free and clear – when they sell, they have plenty of cash to buy. And long-term owners who still have mortgages have generally accumulated a lot of equity. Then there’s the new stock market wealth, and, of course, the very affluent.

The next 2 data charts illustrate short-term seasonal market trends, September to Present:

Bay Area Sales Price Seasonality by Month: Median sales prices typically peak in spring for 2 reasons: The scale of demand outpacing the number of new listings coming on market – buyer competition is the main factor behind price increases – and because luxury home sales usually increase as a percentage of sales in spring. The luxury home market is even more fiercely seasonal than the general market.

 


Market Update Jan. 18, 2024

January 19, 2024

Mortgage rates decreased this week, reaching their lowest level since May of 2023. This is an encouraging development for the housing market and in particular first-time homebuyers who are sensitive to changes in housing affordability. However, as purchase demand continues to thaw, it will put more pressure on already depleted inventory for sale.” Freddie Mac, 1/18/24

Generally speaking, weekly average rates have been flat for the last 4-5 weeks, after their dramatic decline in late 2023. Recent comments by Fed Board members have slightly dampened expectations for benchmark-rate declines in coming months. Trying to constantly read the tea leaves of Fed comments is an iffy basis for confident forecasts.

Daily average rates have been climbing over the last couple days (though few days data is not particularly significant).

Jumbo rates are running over 7%.

Consumer Confidence/Sentiment is soaring: “Over the last two months, [consumer] sentiment has climbed a cumulative 29%, the largest two-month increase since 1991…For the second straight month, all five index components rose…a broad consensus of improved sentiment across age, income, education, and geography…and is likely to provide some positive momentum for the economy…Year-ahead inflation expectations softened to 2.9%.” Univ. of Michigan Consumer Sentiment Index, Director Joanne Hsu, 1/19/24

Stock markets are climbing rapidly again. The S&P 500 Index hit a new all-time high today. Though the Nasdaq has increased much more over the past 13 months on a percentage basis, it remains slightly below its late-2021 peak. Stock markets are a major factor in household wealth, and especially important in more affluent housing markets.

 




New state/county migration data; interest rates continue to fall; gender pay gap

December 21, 2023

New state and county migration data was published by the U.S. Census on 12/19/23: State data goes through 7/1/23. Foreign migration continues to rebound, but net domestic migration remains deeply negative, leading to a small decline in total CA population in the last 12 months measured (after adding in the increase from natural growth, i.e. births less deaths). 2023 population data for counties has not yet been released by the Census.


SAMPLE of the 12 Bay Area (+ Sacramento) Migration slides from 12/2023 Census release. Sadly, county migration data always runs at least 2 years behind: This is through 2021 and is the most current data available. In another year, we’ll get 2022 migration data.

Today’s weekly average interest rate reading declined again: “The 30-year fixed-rate mortgage remained below seven percent for the second week in a row, a welcome downward trend after 17 consecutive weeks above seven percent. Lower rates are bringing potential homebuyers who were previously waiting on the sidelines back into the market and builders are already starting to feel the positive effects.” Freddie Mac, 12/21/23

Interesting data regarding the gender pay gap: The gap, of course, is very unfortunate, but at least CA has the smallest gap in the nation. (The Census data uses only the 2 genders in its analyses.)

 


Getting to Know Silicon Valley International School – Right Here in Our Community

December 18, 2023

Set amid the innovation hubs of Menlo Park and Palo Alto lies a hidden gem that’s not just a school but an embodiment of global education—Silicon Valley International School. As a Realtor deeply invested in our community, I have had the pleasure of delving into the fascinating world of this private institution, thanks to one of my esteemed clients who serves on the school’s board.

In January of 2020, the school changed its name from International School of the Peninsula (ISTP) to Silicon Valley International School (INTL). On January 1, 2021, Alto International School merged with Silicon Valley International School, creating the premier bilingual International Baccalaureate World School on the West Coast, and the only IB continuum school in the Bay Area.

This comprehensive Preschool-12 institution seamlessly blends education and multiculturalism. With a diverse student body drawn from across the globe, INTL stands as a testament to the global perspective that sets it apart from the educational landscape.

As my client has shared insights into the school’s ethos, I have discovered that INTL is not merely a place of learning; it’s a community where students are exposed to a wealth of languages, fostering both linguistic proficiency and a genuine appreciation for diverse cultures. The commitment to holistic development extends beyond the academic realm, with robust extracurricular programs ensuring that students graduate as well-rounded individuals.

For those unfamiliar with INTL, it’s not just about impressive classrooms and modern architecture (though those are undeniably present). It’s about creating an environment where students thrive academically while embracing the multicultural tapestry that makes our community so unique.

Despite its private status, INTL is somewhat of a well-kept secret in our community. Many local residents may not be aware of the incredible educational haven right in our midst. As a Realtor, I take pride in not just helping you find a home but in enriching your life by connecting you with the vibrant aspects that make our community extraordinary. Silicon Valley International School is undoubtedly one of them.

Credit: Google

 


Market Update Dec. 15, 2023

December 15, 2023

The general inflation reading for November released this morning ticked down to 3.1% from 3.2% in October, while the “core inflation” reading was unchanged at 4%. Below are short-term and long-term charts. As of early Tuesday, stock and bond markets seem bemused by the lack of significant change, and index movements have been slight.

Daily average interest rates through 12/11/23:

Weekly average interest rates through 12/7/23 – the next update is Thursday:

Consumer Confidence jumped in the preliminary December reading, as people projected that inflation will continue to rapidly decline.

The Bay Area foreclosure rate was updated through Q2 – it remains close to zero.

 


Market Update Nov. 21, 2023

November 21, 2023

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.