McKae Properties Real Estate Market Commentary

Interest rates continue to rise; along with, mortgage rates.  Retired investors take on unhistoric risks by shifting their portfolio's weighting to equities.  Sellers of real estate continue to hold off as the mortgage rates are above the average rate of an existing mortgage of around 4%.  Banks continue to see warnings of an equity crisis.  Nicolet Bank of Wisconsin sold bonds classified as "Held to Maturity" and took a $ 9 million loss.  Large commercial office buildings face a interest rate adjustment that will force giving keys to lenders.  All the time home prices in the affordable areas of Silicon Valley take a jump of 5%.  The stock market has a major rally led by High Tech Stocks.  Venture Capital money stays hidden from new ventures as the window to Initial Public Offerings remains closed.  "Sell in May and Go Away" did not work for the stock market.  At least so far. The real estate market is not confusing.  Residential buyers are sick of renting and w

Silicon Valley has always been in my experience a unique real estate market.  A sort of a Camelot where the high walls of technology, money and education kept out the evils of recessions and a financial crisis.  A place were housing prices in the High Tech Community remained stable with only a few exceptions coming from overzealous speculators caught with properties that have rising cost of carry from increasing interest rates and fears of economic slowdown. Today, or at least since about February/March prices have differed.  The starter home areas of Redwood City, San Carlos and San Mateo have seen demand and multiple offers with over bids.  As you look at the "roll up markets" like Palo Alto, Menlo Park and Los Altos, the prices have remained strong with a few over bids and multiple offers, as compared to the first time buyer markets as previously quoted. When one looks a the high end luxury markets you begin to see weakness and markets that go from a seller's market to

 One of the greatest difficulties for any investor or real estate buyer is to realise the adjustments that occur during a market cycle.  This past month; in fact, the past several months, we have seen home prices increase from the levels of December 2022 and January 2023.  The adjustments are difficult to see.  The easiest method most people have is to look at what a house sold for, the amount over list, and if possible where there multiple offers.  When the novice looks at those number the most likely outcome is for the assumption of the revival of a bull market or an increasing trend upward in home prices.  In stock broker and trader term this bounce up from a sharp decline in prices a "Dead Cat Bounce". The market place we see is dominated by borrowing costs, rising interest rates, bank failures and bank lending criteria.  As banks are saddled with bonds with low coupons that eventually must be sold at a lost. Credit card loans, car loans and in general consumer loans come