Market Trends Report

Fed, Economy, Rates Steady (SCC & SMC)

January 29, 2021 — Although equity markets seem to be having a bit of a rough (or at last interesting) time of it lately, the overall economy seems to be on a pretty level stance, propped up as it is from all angles. With more stimulus seeping into the overall economy and arguments about the next and perhaps larger round in process, an already-performing economy may be set to perform a little more strongly as we work our way toward spring.

Certainly, the economy will do better once the pandemic is damped down. A wide swath of the leisure, hospitality and entertainment sectors of the economy simply can’t fully function while the virus rages. The only question is “how soon?” and for that, there simply isn’t one clear answer available. Meanwhile, the economy that is functioning did so at a pretty solid level in the fourth quarter of 2020, and that despite increasing sickness and tightening of restrictions in a number of hard-hit locales.

As far as inflation goes, there was no concerning acceleration in December, with PCE inflation rising 0.4% for the month and core PCE 0.3%. Annualized, headline PCE is running at a 1.3% clip while core PCE a 1.5% clip. Both remain well below the Fed’s desired level, but are a touch firmer than they have been in recent months. We think that inflation will firm more in the months ahead, but since the Fed won’t be paying any mind to it until core PCE is above 2% for some time there’s no real reason to expect monetary policy implications. Market-based rates (such as mortgages) however are a different story, and will tick up a bit if price pressure prove persistent.

Sales of new homes have cooled from their heady pace of a few months ago, but some seasonal slowing as the holidays kick in isn’t uncommon at all. The Census Bureau reported that 842,000 (annualized) homes were sold in December, up 1.6% from a (downwardly) revised 842,000 in November. No worries, though, since sales are still some 16.5% above December 2019 levels, so it’s not as though the market has slowed appreciably — more like settling back to a more sustainable pace. The supply of new homes available to buy at the present rate of sale rose 0.1 to 4.3 months (302,000 units built and ready for sale) and prices of new homes sold were 2% higher compared to November (about 8% higher than last year during the same month). With spring soon on its way, sales of new homes will likely flare higher again as is the normal seasonal case.

Existing home sales may level off for a bit, though. The National Association of Realtors Pending Home Sales Index was down by 0.3% in December, a fourth consecutive decline. As this is indicative of signed contracts, it’s not surprising to see a softening as during the holidays, as fewer homes are available to buy (inventory levels are presently record thin) and fewer homebuyers are out and about looking at the homes that are available. The PHSI is more than 21% higher this year than a comparable month a year ago, and looking forward, spring’s coming, and it may be that we’ll have a more normal spring housing season this year.

Applications for mortgage credit declined by 4.1% in the week ending January 22, said the Mortgage Bankers Association. Applications for purchase-money mortgages declined by 4% for the week, but have been mostly positive over the last month or so. Applications for refinancing were off by 5% for the week (and 4.7% the week prior), but that’s to be expected since mortgage rates saw a bump mid-month, which has been softly fading since. A small decline in rates last week and a small decline in rates this week have moved mortgage rates to the middle of a recent range.

For further details and a city-by-city breakdown statistics, go to https://avi.rereport.com/market_reports.

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Real Estate Related Articles

California homeowners interested in building accessory dwelling units on their property just caught a break, potentially shaving off thousands of dollars in fees and permits.
In a move proponents say will help ease the Bay Area’s housing crisis, Gov. Jerry Brown on Tuesday signed Senate Bill 1069, making the so-called “granny units” easier and less expensive to build throughout the state.

For more read California eases restrictions on ‘granny units’
and www.hcd.ca.gov/policy-research/AccessoryDwellingUnits.shtml

Helpful resource for home owners

Many new home owners or owners who consider remodeling or rebuilding their homes should take advantage of their county Tax Assessor web site. These web site and their respective city building departments web site typically have vest information regarding the process for applying for permits, the impact on their taxes and many other resources that home owners should be aware are available for them.
For the San Mateo County Tax Assessor office visit https://www.smcare.org/default.asp
For Santa Clara County Tax Assessor visit https://www.sccassessor.org/index.php

The Silicon Valley 150 Index Corner

The Silicon Valley’s Real estate market is a derivative of the local economy–it prospers and withers depending on how well the local innovation-based sector performs. The San Jose Mercury News tracks the performances of the largest 150 publicly traded companies headquartered in Silicon Valley through an index called the SV150, which may be found at www.mercurynews.com. Stocks are valued based on several criteria, but one of the more important criteria is a company’s future earnings. Therefore, I see the SV150 as a leading indicator for Silicon Valley’s real estate market.

Investors Corner

S&P CoreLogic Case-Shiller Index Shows Annual Home Price Gains Climbed to 9.5% in November

JANUARY 26, 2021 – S&P Dow Jones Indices today released the latest results for the S&P CoreLogic Case-Shiller Indices, the leading measure of U.S. home prices. Data released today for November 2020 show that home prices continue to increase across the U.S. More than 27 years of history are available for these data series, and can be accessed in full by going to click here

U.S. Housing Markets Moving Into Rent Territory for First Time in Over 8 Years: Report

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San Mateo County (SMC): San Mateo Market Starts Year on Up Note

Sales of single-family, re-sale homes in San Mateo County were up for the seventh month in a row, year-over-year, in January. They rose 42%. There were 230 homes sold in San Mateo County last month. The average since 2000 is 398.

Although continuing to back off the high set in August, the median sales price for single-family, re-sale homes was up, year-over-year, by 11.7%.

The average price also backed off the high set in August. It was up 8.3% year-over-year.

Inventory of single-family, re-sale homes was up 15.3% compared to last year. As of February 5th, there were 287 homes for sale in San Mateo County. The average since January 2000 is 1,287.

The sales price to list price ratio rose to 103.1% from 102.0%.

Days of Inventory, or the amount of time it would take to sell all homes for sale divided by how many homes have sold, rose eighteen days to thirty-seven days.

It took thirty-three days, on average, to sell a home last month. That is the time from when a home is listed to when it goes into contract.

The median sales price for re-sale condos fell 1.2% year-over-year. It was up 5.9% from December. The average sales price fell 32% from December. Year-over-year, the average sales price rose 1.9%.

Condo sales were up 29.6% year-over-year. Condo sales were down 62.9% from December. There were 92 condos sold last month

Inventory jumped 109.5% year-over-year. It was down 40.4% compared to December.

As of February 5th, there were 155 condos for sale in San Mateo County. The average since January 2003 is 350.

Days of inventory fell to fifty-one from thirty-six.

It took an average of thirty-eight days to sell a condo last month.

If you are planning on selling your property, call me for a free comparative market analysis.

January  2021 Sales Statistics

* Total inventory is active listings plus pending listings. Active listings do not include pending.

Call or email me if you have any questions.

For further details and a city-by-city breakdown statistics, go to

https://avi.rereport.com/market_reports.

Looking to Downsize?

Keep Your Property Tax Base

Under Proposition 60, California homeowners 55 and older get a one-time chance to sell their primary residence and transfer its property-tax assessment to a new one, but the market value of the new home generally must be equal to or less than the market value of the old home.

Prop. 60 was designed to help longtime California homeowners who want to downsize but don’t want to give up the low property-tax assessment they enjoy in their existing home.

Under Proposition 13, homes are reassessed for property-tax purposes when there is a change in ownership or new construction. In between ownership changes, the assessed value can go up by an inflation rate not to exceed 2% a year. (Homeowners can get temporary reductions when property values go down.)

Prop. 60 lets homeowners 55 or older transfer their base-year value from an existing primary residence to a new primary residence, but there are restrictions.

The new home must be in the same county as the old one or, as Proposition 90 added, in one of eleven counties that accept transfers of base-year value from other counties. The eleven counties are: Alameda, El Dorado, Los Angeles, Orange, Riverside, San Bernardino, San Diego, San Mateo, Santa Clara, Tuolumne and Ventura.

Also, the new home must be purchased or built within two years – before or after – the sale of the original property.

If the new house is purchased before the old house is sold, the market value of the new house on its purchase date cannot exceed 100% of the old home’s market value on the date it is sold.