McKae Properties Real Estate Market Commentary

On this day December 31, 2021, the last day of 2021 it seems prudent to look back and determine the lessons we have learned from the experiences in 2021.  Lord Toynbee stated that History Repeats Itself.  So then, as the Lessons below should be a guide to what will repeat in 2022. I.   70% of buyers have been younger consumers.  This was reflected in their financial ability to escape from metropolitan or highly populated areas.  Covid 19 and the mutants had an impact on future lifestyles.  Superior homes with large spaces and multiple rooms that gave authenticity to their life styles and provided a positive environment for the "work-at-home" attitude. II.  Location and property types and sizes were no longer the only consideration.  An increased knowledge on the importance of achieving more well-being, deeper consciousness, and cultural relevance, that would ultimately empower buyers to make ethical decisions, were important motivations.      This was clearly reflected in the

 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

 Serendipity is the "Occurrence and Development of Events by Chance in a Happy or Beneficial Way." This is how the development of Facebook and its growth was established.  At least in the eyes of Facebook.  But there is many professions in which that occurred.  Traders, whether they be stock, bond or commodities; all had their instances of a serendipitous event while in a trading room, on the floor or in the local bar after trading hours.  It is this event that has been centered in large cities or a metropolis; in which the profession was centered. The result is, or was, that the cost of living all expanded to fit the large incomes that the profession provided. Take that and look at Silicon Valley.  Prices have escalated and the cost of living and home prices all went up accordingly.  While there has been a calling of a top and calling for a correction in home prices, it has all been for naught!  Once incomes continue to expand and the related benefits of working in such an a

 The increase in home values has gotten much attention.  Prices have less to do with inflation and more to do with increase in value due to remodeling and updating older homes. As I look over the sales for the past year and work on Broker Price Opinions I find that the homes either for sale or sold have been fully updated to today's standards and buyer desires, marketability.  When an older home sells and then is remodeled and listed and sold the increase reflected in home prices have more to do with updating costs and buyer demand premium.  Increased home prices show that the new home is completely different in interior and exterior that the homes sale in the most recent past.  (Buyers are looking to buy what is current.)  The result of the sale price or list price is increased by the cost of remodeling with a demand contingent applied.  This is more a redevelopment phase in our real estate market.   Buyers today are among three groups.  The first group is the buyer who does not w

 At the end of a piece of literature there is an "Epilogue" that brings "Closure". Let's see if closure occurs in the "Fix & Flip" movement.  It appears to have been the case for Zillow. The error is human nature and the belief that a bunch of wires and semiconductors can replace the greatest computer that has been created...the brain and mind of an individual. The CEO of Zillow stated in one of the commentaries I read was that they got the formula wrong.  REALLY?   Algorithms are mankind's' answer to the future.   I thought the Zestimate was wrong from the start when I used it the get values of Estate Properties in Woodside and Portola Valley. They were all under priced.  Land, on which improvements are upon, is the largest part of real estate value.  The structure is only the desire and likes of the individuals occupying the structure.  We humans are unique and our likes and dislikes are as unique as we are.  Initially the Zestimate could

  Oops I do not want to say that losing a lot of money on a trade is  as good  as making a lot of money on a trade. It is not. For one thing, if you make a lot of money on a trade, then you have money, which can be used to buy goods and services. For another thing, if you make a lot of money on a trade, then you were at least in some rough sense  correct  about the trade, and being correct often about big questions is a valuable skill in finance and life.  If you lose a lot of money on a trade, neither of those things are true. And yet there is a certain prestige to it? Being correct is not the whole ballgame. Being  important  is important. “Important people like to deal with important people,” the  Goldman Sachs commandment  goes; “are you one?” The most famous JPMorgan Chase & Co. trader of the last decade, the one JPMorgan trader whom many people know by name or at least by nickname, is Bruno Iksil,  the London Whale , who is famous for losing $6.2 billion of the bank’s money.

Zillow the on-line Home-Listing Platform, said on Monday October 18th, it would pause its automated House-Flipping operations for the rest of the year!   Instead Zillow said it would close existing purchase contracts and selling the homes it has on hand.   Zillow further said, it was experiencing back logs related to to renovating the homes.   Constraints for on-the-ground workers created back logs. To further detail the announcement I have gone to the Wall Street Journal for Tuesday October 19, 2021;  Zillow stated the practice of buying refurbishing and selling homes using its database 3 years ago.  The WSJ article further opines that sales volume has recently begun to cool.  This was a profitable business for Zillow as they obtained fees on both the buy and sell side.  We call that DOUBLE ENDING.  While most realtors and agents have mixed opinions on the practice as it puts to question Agency, whose interest do you represent, the buyer or the seller?   Zillow Offers, the house flipp

 On September 30, 2021 the eviction moratorium ended.  The estimates I have is that there were 1.7 million homes in forbearance.  These are properties which have not made mortgage payments during the Pandemic.  1.7 million is down from over 7 million at the peak of the Pandemic.  There were 600,000 homes for sale in the U.S. at that time. The benefit today is that this is not 2007 during the financial crisis.  Home values have escalated at rates that have ben historic.  That would indicate that of the 1.7 million in forbearance a major portion should be able to refinance or re-negotiated to present-day mortgages.  Considering that interest rates are at historic lows; this gives the new mortgage payments a lower payment that previous loans in forbearance.  Those owners who are unable to afford have the benefit of a strong real estate market to sell their homes and pay off the debt and walk away with proceeds.  This was uncommon during the  Financial Crisis. As the Law of Supply and Dema

 When I read about the "bubble", the over pricing of real estate and "pandemic fears", I am reminded of an old Wall Street saying: "The Market Climbs a Wall of Worry". One thing for certain real estate is far different than the stock market.  No mater when or where, crisis or prosperity value can always be found in real estate.  It is just a matter of learning where to look.   The legislative end of the Eviction Moratorium will bring property on the market.  OPPORTUNITY! How many homes?  I can't tell you that.  I do know that there are certain statistics that are a telling indicator. There are approximately 1.7 million home is "Forbearance".  That means 1.7 million home owners have decided they will not pay their mortgage for one reason or another.  That number of 1.7 million is down from over 7 million during the peak of the Pandemic.  Of those 1.7 million who have not paid their mortgage from anywheres from 18 months or less, they are  or s

 Do you realize that not all the States have a FULL DISCLOSURE law in real estate transaction for residential properties?  That's right those documents, sellers are required to complete and provide to buyers and buyers are required to sign and initial, are not a standard in all states.  To those states who do not have the full disclosures the buyer is required to do their own research.  The seller is not required to inform the buyer if there is an issue with the property.   Take my first real estate transaction when I moved to Hawaii after graduation from college.  The house MLS listing stated "sewer", "yes".  Not all houses in Hawaii and in this case Kailua in Oahu had sewers, but septic systems.  Months after my purchase the toilet backed up.  I called the city and was told I was not connected to the sewers.  The prior owner did not pay for the hook up. How much...WOW, I just borrowed money from my widowed mother to buy this house to supplement my savings.   I

  Breakneck. That's the best way to describe the pace of the 2021 housing market. The bidding wars got so intense this year that  home price growth set an all-time record . The rush of buyers into the housing market during the pandemic absolutely crushed housing inventory—the number of homes on the market—with that figure falling for 12 consecutive months. By April, housing inventory was down a staggering 53% from a year earlier. There has been a change.  Ever so slightly, but a change indeed.  Well at least that is so in the Nation.  Here in Silicon Valley inventory has declined.   In February 2021 we started out with a 2-month inventory in Silicon Valley. Slowly it has dropped and leveled off at a 1-month inventory.  One would expect the law of supply and demand would keep prices moving upward.  Not so, in February 2021 the 6 city area average price went from $3,318,431 in February to $3,874,913 in June and dropped to $3,201,528 so far this month of August. What's the story? 

 While it's a shift of only 1-2 degrees, but the red-hot housing market is finally starting to cool. Despite the median home price hitting yet another record high in May the year-to-year date statewide home sales dipped by 2.7% in May.  They had been rising steadily since February.  But, for the first time in 2021, the median number of days that a single-family home was on the market did not drip, but rather held steady at seven, the same number recorded in April. John Graff, a Los a Angeles based broker and chief executive of Ashby & Graff said, "Buyers are getting fed up at this point with submitting as many as 8-12 offers and getting rejected."  "They're throwing up their hands at this point", said John. The median price of a single family home in California hit $818,260 in May, an uptick of 1/2 % from the previous month.  It's an acceleration with a foot off the gas.  In April the median hit $814,000 up 7% crossing $800,000 for the first time in

The prices of everything, everywhere, are going up.  A house in Phoenix is going up, a Ford F-150, a plane ticket to New York City, they are going up for as much as everything all over the country.   Well, maybe not San Francisco.  There the prices of homes are all down from 10-12%.  The only part of the country and the State of California that is not going up?  Down from 10-12% where the rest our metro areas are up over 12%.  For pseudo-scientist, aka Economists, it is a dismal picture!  They, along with the people that brought you the last recession, aka Wall Street Banks, say it is only temporary.  "A transitory event that will disappear."  Mark Zandi, the chef Economist at Moody's...yes Moody's the people that gave AAA ratings to bonds supported by mortgages that went into default and put us on the verge of economic collapse WORLD-WIDE...... “Inflation is one of the mysteries of economic study and thought. A difficult thing to gauge and forecast and get right. Tha