Housing, the Herd, and "She did It!"

Some years ago, my pal's  9 year old daughter Sandy interrupted our conversation (with some urgency on her part, too), by saying, "Dad!!!  Remember I told you Emmy Sue in my class said she was "gonna kick my butt after school?"  Fortunately, dad did not have long to wait for Sandy to finish with the answer.  "Well, SHE DIIIIIIDDDDDDDDD IT!!!"  Sandy was very surprised, indeed, by what had just happened to her.

Well, the San Francisco Bay Area Housing Market is as hot as it was and on last check, is leading the nation with San Francisco as Numero Uno in the Nation. Also noted, is 6 more Bay Area locales take up an equal number of positions on the top ten on the List.  Wow. 

Interestingly, housing in the Bay Area is performing just as it we forecast it would, and just as Emmy Sue said she would.

Last year, the question of whether or not the Bay Area is to experience a Housing Boom and are we in a Housing Bubble were the topic.  Well, come on, people say, "Is it gonna happen, or is it not?  What, housing?  Emmy Sue?  What?  Absolutely, both are happening, just look around.

Here in the Bay Area, rents are high and people are buying homes--more so here than almost anywhere in the nation.  “The construction industry is expected to experience 1.2 percent compounded annual growth for jobs over 2014-2024."  What does this mean to me, the home dweller? 

Also, the top dog of the California Mortgage Association said last year, "our government is not doing anything to stir our housing market."  And yet, the San Francisco Bay Area has home construction at the highest rate since 2009. 

You know Real Estate, like everything else, is still not too much on Bay Area peoples' minds until they develop that seering personal interest. We humans are just "not interested until something tickles our mind and stirs an interest.  We are the herd, are we not?   We only buy or sell a home only when our interest is piqued acutely.

The red-hot San Francisco Bay Area, where locales take up 7 spots out of 10 on the list of the nation's 20 hottest real estate markets is a very, very unique place on this planet Earth.

Folks ought to be very interested right now, right here, whether buying or selling in our San Francisco Silicon Bay Area.  Did they just say the US homeownership rate is the lowest in 48 years?  We are at that bottom, nationally, maybe?  Yes, but remember, in addition, we set our own level of hyper achievement here in the Bay Area.

While flying over the Bay Area a long time ago, I saw large open spaces, fields, and orchards between our cities. But now, I notice, the Bay Area is a grown-together civilization between lovely cities. Home inventory may improve some, but growing more space for people to live on is just not gonna happen anytime soon.

A boom?  Are you kidding?  Why here?  Is it another bubble?  Nope.  And you say, "tell me why you say nope."  Simply, the very same reason as Emmy Sue came for Sandy after school: she said she was gonna and all housing signs say its gonna.

Global technology is headquartered in Silicon Valley and on the Peninsula-that's why. In this prized tech land, startups blossom and bloom more and more each week. Robotics for your household is just around the corner (we're to be just like the Jetsons!).  Really, tech is driving this housing boom?  Yes, not to mention the Bay Area is an outstanding place to nest.

OK, well, what about demand? A large percentage of Cash Buyers, 33% of home buyers are still writing checks for houses. The percentage of folks buying homes with mortgages has been tepid, and is a relatively small percentage compared with other years.

When Mortgage Buyers enter this picture in a big way, when the "herd" becomes interested again in houses and a few other stars line up, loan-equipped buyers might just send demand to the moon, mon.  

And what makes you think there will be lots of people who will buy with mortgages? Our government most certainly has not been promoting housing, so what will happen when they do?

When Banks see they can increase their profits (and actually get the money back) by lending to you and me, they will develop loan programs to help make this happen-that's why.  This government is about to change key figureheads, and when it does, a likelihood exists the new adminstration may actually promote housing to get things moving in the economy.

And, you ask, why should a Buyer take out a loan to buy now? Well, last year, the Opportunity Cost Report identified 10 markets where there was an estimated 30-year financial benefit, by owning a home, in excess of $500,000! The Report specifically identified California's Metropolitan Statistical Areas, the very same Bay Area lands I flew over when they were just orchards. The Report said these areas offer the "greatest buying opportunity Nationwide."

The Report went on to say that "waiting three years might cost a buyer who hesitates as much as $200,000."  We are at the bottom of the homeownership cycle, so, uh, homeownership may be ready to become a very popular thing once again.

In the Bay Area, maybe its time to get interested before the opportunity passes us by. Buyers, we are close to the bottom in rates and not at the peak for home prices. We are at a bottom with homeownership.  Sellers, it may be a great time for you, too, because equity has returned.

The housing market somewhat tracks and corresponds to equity markets. If the Stock market is doing well, peoples' portfolios do well. Armed with profits, more Buyers become interested and start looking to make a move.

If we add more Buyers with mortgages buying homes choosing from the same amount of home inventory, the market could really shift into high gear.

I believe three elements are needed to light off the already-robust housing markets in the Bay Area--if these elements line-up simultaneously:

1. When interest rates rise in earnest, banks add programs to allow more Borrowers to qualify;

2. When household income improves, people become interested as homes become more affordable;

3. When the job situation improves. Everyone needs a job to buy a home.

When all 3 of these elements come together, we may be looking at the hottest housing metropolitan area in the nation.  

A housing boom.  Seriously?  Yup.  And when it is recognized as a San Francisco Bay Area Housing Boom, it will be just like Sandy said about Emmy Sue.  

"Well, she diiidddddd it!"

Michael Hatfield enjoys working with Real Estate Buyers and Sellers as a Broker Associate with the Michael Hatfield RE/MAX Accord Team in the greater San Francisco Bay Area. His passion is in leveraging his Team's *Five Star Agent* abilities as priority #1 to his client's real estate goals. A frequent guest on Pat Vitucci's "Your Financial Life" on KGO TalkRadio 810am, Michael is also heard on KCBS 740am and KKSF NewsTalk Radio 910am.

Michael may be reached at (925) 322-7775 or [email protected] His offices are at RE/Max Accord in Danville with 9 more locations serving the Bay Area.