The Problems are The Path: Year End Opportunities

It has always been my contention that the end of the year is the best buying opportunities for assets; due to the fact, they are under pressure by year end selling.  Whether it was stocks and bonds, when I was in the Securities Industry, or now in the Real Estate Industry.  

Assets; such as, stocks and real estate are not like a pound of coffee with a set price per pound.  They are open to negotiation.  A set price, an offer price, will be given and  a bid below the set offer could be accepted.  Why, emotions, taxes, leverage or just tired of carrying a position.

Real Estate has gone through a Down Hill Slide this past year and a half.  I saw the potential some time ago when rates went ridiculously low with over $9 trillion added to money supply.  The speculation that occurred was in asset values; along with, the creation of new investments without any reason of fundamental value; other than, demand.  ECON 101 Supply Demand Curve is always in play.  Lack of supply and demand creates higher prices until supply is created. Now if the supply is from a computer formula the supply is unending and can be manipulated.  

This is not the case in fundamental assets.  There are only so many shares outstanding, bonds issued and real estate built, and vacant land is limited to the pure and simple fact that only a volcano can create land.

The Money Supply has shrunk since it hit over $9 Trillion to just below $9 Trillion.  During that time of shrinking slightly, the cost of money, say Mortgage Rates as an example, has gone from under 3% in March to over 7% in November.  Now consider that it has taken 22 years for mortgage rates to decline from over 8% to under 3%, this increase is traumatic!

I have reiterated Elon Musks comment that the FED is after Asset Inflation.  The other inflation we incur is in the supply of goods and services.  If the price of gas is high, then drill and create refiners to supply cheaper sources of fuel.  If the price of meat or grain is high plow more fields and raise more cattle, poultry and meat product sources. 

Now let's look at Real Estate, that is why you are reading this dispatch, blog or newsletter.  Demand for real estate has not diminished!  Yes, prices offered and prices of the end product sale have declined.  Those that have bought in the past year may not be able to sell at the price they bought at.  That has nothing to do with where you live, where you come home to at night and how you raise your family.  The house you own is not a pound of coffee or shares in Sales Force or Meta.

Here is the recent market survey in our area.

Housing Inventory SnapshotNovember 30, 2022
 Average List Price30 Day TrendAverage Sold Price30 Day TrendAverage DOM: active/sold30 Day TrendNumber of Active Listings30 Day Trend
Santa Clara County, CA
Single Family$1,662,607-0.03%$1,604,598-0.52%64 / 2514 / 0545-96
Luxury Single Family$6,112,576+1.32%$4,009,515-5.26%94 / 2223 / -7166-35
Condo/Townhome$833,336+4.03%$836,513+4.17%64 / 3615 / 10243-70
Luxury Condo/Townhome$1,752,901+5.17%$1,525,764-1.57%61 / 2212 / -879-23
San Mateo County, CA
Single Family$2,020,002+2.50%$1,877,099-1.74%60 / 2316 / 0319-76
Luxury Single Family$9,460,324+12.87%$7,888,042+13.79%116 / 3025 / -5103-28
Condo/Townhome$823,741-0.08%$834,009-6.90%94 / 4318 / 12122-18
Luxury Condo/Townhome$1,764,565+0.40%$1,739,770+7.84%69 / 5719 / 2637-9
Santa Cruz County, CA
Single Family$1,248,956-0.80%$1,200,800-3.48%80 / 3516 / 5157-35
Luxury Single Family$3,783,000-2.31%$2,763,270-15.85%104 / 147 / -2950-9
Condo/Townhome$695,946-4.02%$828,675+11.44%123 / 1521 / -2721-9
Monterey County, CA
Single Family$980,174+5.14%$896,542-1.96%74 / 4313 / 15245-9
Luxury Single Family$7,114,145-1.42%$8,841,111N/A128 / 1059 / 4375-5
Condo/Townhome$692,621+3.76%$620,665+12.93%51 / 3412 / 628-2
Contra Costa County, CA
Single Family$779,621-2.46%$788,829-0.64%58 / 358 / 1722-158
Luxury Single Family$2,660,086+0.16%$1,980,510-2.37%70 / 2416 / -7236-53
Condo/Townhome$529,713+1.20%$490,914-6.58%53 / 328 / 6189-34
Luxury Condo/Townhome$1,266,745+2.57%$1,306,849+16.47%43 / 22-2 / -259-11
Alameda County, CA
Single Family$960,625-3.76%$1,032,679-1.68%57 / 3015 / -1588-253
Luxury Single Family$2,790,735+4.26%$2,099,827-4.64%67 / 2718 / 2195-69
Condo/Townhome$635,130+2.94%$624,694-0.66%62 / 3810 / 3262-68
Luxury Condo/Townhome$1,204,352+3.53%$1,082,671-4.88%58 / 2316 / -283-29

Nothing looks horrific, does it?

Fidelity Title gives me a regular analysis of our markets.  Fidelity does have access to the county records and can provide a clear picture of our real estate market's health.

Atherton has a Slight Buyer's Market

Los Altos has a Strong Seller's Market

Menlo Park has a Strong Seller's Market

Palo Alto has a Slight Seller's Market

Portola Valley has a Slight Seller's Advantage

Redwood City is a Strong Sellers Market

Woodside has a Slight Buyer's Advantage

What is this telling you?  It tells me that the price declines are giving opportunity to buyers to buy when price declines occur.  It gives buyers an opportunity to buy without competing offers and the need to over bid.  The Seller's Real Advantage is their property sells.  

The Federal Reserve tells me that the almost $9 Trillion in Money Supply has not been taken away and buyers can afford to buy a home irrespective of interest rates.  It tells me that the layoffs in the Technology Industry are on a wide spread basis over the United States and not localized in the Bay Area.

Could interest rates go higher?  Probably, but I feel we have seen the severity of the increase.  The only adjustments will be minor.  Banks and mortgage companies will go back to the old form of lending.  They will create mortgages that buyers can afford in monthly payments.  The other side is those with cash can adjust their asset allocation from stocks, bonds and esoteric investments that express volatility and doubt of value for real estate which they can touch, feel and live in and off of.  IT IS YOUR REAL ESTATE!

HAPPY HOLIDAYS TO ALL AND TO ALL A GOOD NIGHT!


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