Filling The Holes (SCC & SMC)
April 2, 2021 — The economy was doing well and actually was starting to pick up some steam in early 2020 after being damped by all manner of “trade wars” with China and others back in 2019. Agreements being put in place and lessening of rhetoric set a new playing field, and uncertainty was beginning to lift, allowing for acceleration of growth again.
Then, the COVID-19 pandemic hit, injecting unprecedented uncertainties, cratering economies across the globe with restrictions on activity and creating gigantic holes in nearly all facets of every economy. At least initially, those holes were kept from getting deeper by extraordinary responses by central banks to create and promote liquidity and market function, and were later joined by varying rounds of fiscal stimulus to help people and industries bridge the gap the virus caused.
As beneficial as these programs may be for many, they can have disruptive effects of their own. Ultra-low rates may be great for borrowers, but bad for savers; high levels of money sloshing about an economy may lead to frothy asset prices. Blowout spending programs by the government can add to aggregate demand, which can outstrip supply, creating price pressures (transient or not) and conversely, financing all of this by issuing record levels of bonds may see greater bond supply than investor demand, pressing interest rates higher. To varying degrees, all of these have been in play so far in 2021, and interest rates and mortgage rates have firmed up considerably.
For the most part, though, the holes in the economy here and elsewhere remain. Filling them all completely will take time, but we are starting to see important steps in that process; in fact, these holes in many ways are filling up faster than had generally been expected. For example, the Federal Reserve has ratcheted up its expectations for growth and inflation notably over the last few meetings; the housing market went from a pretty pedestrian rate of existing home sales and relatively modest price gains to 14 year highs for sales and 15% annual rates of price increases.
As expected, construction spending throttled back in February as wicked winter weather curtailed activity. Overall outlays for construction projects declined by 0.8%, dragged down by a 0.2% decline in residential projects, a 1% decline in non-residential spending and a 1.7% drop in public-works project outlays. President Biden has just outlined a plan to spend a couple of trillion dollars on infrastructure spending, but a review of the bill suggest that perhaps only half of the dollars are actually aimed at roads, bridges, rails and the like. Regardless of that, spending for housing will show a sharp revival for March and non-residential will probably also recover a bit, too.
The National Association of Realtors index of Pending Home Sales dropped by 10.6% in February. Weather plays a role here — few want to venture out in thigh deep snow or bone-chilling cold to see homes for sale — but a serious lack of inventory to review even if one wanted to venture out, prices that are rising quickly and financing costs that were firming during the month were also likely deterrents to getting a contract to buy an existing home.
The rise in mortgage rates has leveled off, at least for now, but the increase has had the expected tempering effect on mortgage applications. The Mortgage Bankers Association reported another 2.2% decline in requests for mortgage credit in the week ending March 26, the seventh decline in the last eight weeks. Applications for purchase-money mortgages eased by 1.5%, breaking a four-week string of increases, while those for refinancing slid another 2.5%, also making it declines in 7 of the last 8 week. Refi activity is approximately at a May 2020 level, when mortgage rates were last at about present levels, give or take a few basis points.
For further details and a city-by-city breakdown statistics, go to https://avi.rereport.com/market_reports.
For a focused review of current and historical market trends go to https://avi.rereport.com/market_reports and click “change’’ see below
Real Estate Related Articles
By Wolf Richter
By Wolf Richter
By Parmy Olson
The staff of WSJ
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.
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.
S&P CORELOGIC CASE-SHILLER INDEX REPORTS 11.2% ANNUAL HOME PRICE GAIN TO START 2021
NEW YORK, MARCH 30, 2021: S&P Dow Jones Indices (S&P DJI) 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 January 2021 show that home prices continue to increase across the U.S. More than 27 years of history are available for the data series, and can be accessed in full by going to click here