McKae Properties Real Estate Market Commentary

While rents collapsed, rent went unpaid and landlords fought to keep above water an exodus evolved from the Bay Area; but within Silicon Valley, Luxury Homes escalated in numbers sold and in median prices. Quite an aberration.  In San Mateo County the number of Luxury Home Sales went from 564 in 2020 to 679.  In Santa Clara the number of Luxury Homes sold went from 1465 in 2020 to 1498 in 2021.   For 2021 Luxury Median Priced homes popped from $1.45 million to $2.90 million and Santa Clara from, $1.33 million to $2.66 million. (Thank you Louis Hansen of the Mercury News) The rush from San Francisco was  evident as Woodside, Portola Valley with their 1 acre minimum parcels provided space and safety.  *News Break states that East Palo Alto is among the Cities where home values are falling the most.  Between January 2020 to January 2021 the typical American Single Family home appreciated by 9.1%.  In East Palo Alto it declined 2.6% with a change in population, only to be beat by San Franc

 Do we need a "wake up call"?  Since the beginning of the year to present, interest rates on 10-year US Government Bonds have risen 3/4%, give or take a few basis points or so (100 basis point equal 1 % point).   SO WHAT? Well the current yield of the 10-year T-bond is the rate mortgages are based upon.  Rising rates also are one of the measurements that banks and mortgage lenders use to determine their willingness to make loans either for their portfolio or to sell in the open market.  Once mortgage originators find an unwillingness to buy mortgages, interest rates must rise to make the buyers willing to take on the potential of higher rates.  The Federal Reserve has been the buyer of last resort that has kept interest rates down.  The FED has failed to stop the dramatic rise in rates. The FED has not accelerated its buying of mortgages in the after market.  Pension funds and investment companies who are the normal sources of buyers of mortgages have been reluctant to buy mo

 2020 was indisputably a year for the real estate history books!  The onset of the global pandemic in a year of stops and starts.  It led to a shift in how we conduct our personal and professional lives.  The navigation through the pandemic witnessed a social and cultural movement that restructured societies, how we conduct business, adjusted to online learning and experienced a shift from large urban centers to rural small communities. The housing market went from cold to hot as the average price of existing home rose on a U.S. average.  It was not necessarily the once hot cities and urban hot spots that dominated.  The resiliency of the real estate industry was one of the biggest surprises of the year.  The large scale shift to working from home created a shift from homes close to work to locations that did not require commuting.  Families sought out more spacious properties to achieve a better work-life balance.   The home migration created a hot market outside of the once hot urban

There is and has been a constant movement of residents from the Bay Area.  Few have realised that the movement has not been  predominantly  out of state.  The movement has been to areas in California that provide Affordability, Good Schools, Lower Cost of Living and larger and less expensive homes. Rents have collapsed at spectacular rates, with San Francisco leading the race down.  To those who have rented solely for the night life and commuting to work it has ended with COVID 19.  The cramped conditions of apartments with no night life has taken the glamour out of "nightlife".   The one and two bedroom starter homes too have become an upgraded solitary confinement quarters; irrespective of, the ability to walk around a 6000 square feet lot  occupied  by a 1350 square foot home with attached garage. When those who decide to look for a larger home in a community with safety and good schools they are faced with: A  recently  sold West Menlo, "elegant and artistic...modern

 SFGate reports that San Francisco rents may have finally hit bottom.  The rental market may be reflecting the action in the recent Game Stop trading.  Never try to catch a falling knife in stock trading, which begs the question, what does one apply to property rentals?  Apartment List shows that rents fell just .4%, while Zumper is reporting prices actually rose .8%.  After monumental declines of 25% and 27%, depending on which service you wish to follow, even a minimal loss or gain is noteworthy. It questions the point of  who  will be the parties renting?  The techies have departed from the Bay Area to parts unknown, whether it be to Hawaii or parts east of the Bay Area or even out of state.  After the rise in unemployment benefits, checks from the US treasury, matched with renter relief from the State of California, the poor souls who lost their homes or apartments to soaring rents replaced by Techies coming to Facebook, Google, Yelp and the like, have the opportunity to come back

  In my last edition, Zillow estimated a 10% increase in home values for  2021.  These will come from inflation. Near the end of 2020, lumber prices increased due to the lack of production thanks to the Coronavirus.  Several large lumber mills in the U.S. came to a halt.  Home builders suffered the consequences.  Pressure treated wood prices increased 79%, dimensional lumber 73%, plywood 59%, decking 60%.  Along with these specific items all associated building products increased.  It was not usual for new home prices in the U.S. to increase $90,000 as a result of rising lumber costs.   The other issue for rising lumber prices was the tariffs with Canada.  Our domestic market cannot supply all our needs so our partner in Canada is relied upon to pick up the difference.   Next, we had wildfires on the west coast.  Our proud Redwoods stood the challenge, but the pines and other trees relied upon for construction became smoke and ash.   The small home builders and contractors have had a h

Prior to 2020 Bay Area exodus really did not prove to be a fact.  Some 3% of the population moved prior to 2020  While many talked the story about moving for various reasons.  The climate, job opportunities far outweighed the cost of living. (More to follow) March 2020 the Pandemic created many changes in housing.  The ability to work from home created an attitude of staying in the Bay Area.  The first attitude to be affected was the rental market.  Rents in San Francisco plummeted.  The move helped areas outside the Bay Area to see demand and increases in home prices.  Besides San Francisco San Jose dropped in rental prices as did other communities within the Peninsula.  The result was not in the lower income housing rental.  They remained the same as the ability to move severely restricted an exodus as the ability to find work anew made the lower income families to stay put. What has resulted was the decline in the luxury end of the market.  Laurence Du Sault in the January 15, 2021