Buffalo No Longer Roam Here
"How about a home, where the buffalo roam and the skies are not cloudy all day?"
Well, sorry, buffalo no longer roam in the San Francisco Bay Area. But, if you can own a home here before the housing boom, your skies may be clear and an uncloudy blue in future years.
Here in the Bay Area, rents have been high and people are buying homes--more so here than almost anywhere in the entire nation. Sure, things slowed "electionally" for a brief moment, but now, due to a belief a stimulated economy is a distinct possibility with the new White House regime, the words "Bay Area Housing Boom" are whispered by some who are just "not afraid to say."
Our new President, a businessman (like him or not, not politics here) is about to take over the biggest business on planet Earth: the economy of the United States of America. He has promised policies designed to grow businesses and provide jobs at the heart of his plan to incentalize our lagging economy. If you believe it may come to pass, look for more jobs, better household income, and look for improvements to happen to an undernourished national housing industry!
The Bay Area housing situation is another thing altogether. Here, we already have a great housing industry to begin with.
Back in 2015, the top dog of the California Mortgage Association said, in frustration, "our government is not doing anything to stir our housing market." And yet, the San Francisco Bay Area has had home construction at its highest rate ever since 2009. Still, we remain short on inventory.
Moreover, the Wall Street Journal recently reported the second quarter of 2015 was the lowest US homeownership rate in 48 years. Cycles. Everything in this universe moves in cycles--hold that thought for a few more moments.
You know Real Estate, like everything else, is still not much on Bay Area peoples' minds until they develop a seering personal interest. We humans are just "not interested" until something tickles our mind and stirs an interest into a burning need. Like, when we become hungry, we then go for a pizza. When we have a need to get somewhere, we buy an automobile. We only buy or sell a home when our interest is piqued acutely and the interest becomes a need. When a person's interest is on high, people buy pizzas, cars, airplanes and homes.
The red-hot San Francisco Bay Area has consistently enjoyed its locales taking up the top spots on the list of the nation's hottest real estate markets since 2011. I know buffaloes have not lived here for many years. This siliconed Bay Area is a very, very unique place on this planet. Hang on, I am getting to it...
With a new President with the business of the economy top of his mind, folks ought to be very interested right now, right here, whether buying or selling, in what is about to happen in our San Francisco Silicon Bay Area. Did they just say the US homeownership rate was the lowest in 48 years back in early 2015? We were close to the bottom then, maybe?
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? Aren’t we in one now? Why here? Is it another bubble? Nope. And you say, "tell me why "nope."
Global technology is headquartered in Silicon Valley and 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!). No fewer than 40 startup tech companies go public each year! And just yesterday, a Venture Capitalist told me to expect a lot more technology companies to blossom-up in 2017.
OK, well, what about demand? A large percentage of Cash Buyers, which was 38% in 2012 but now 30%, of home buyers are 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. That, however, is about to change.
This morning, I received a call from a Mortgage Bank Sales Manager who said, "interest rates are rising like crazy!" Oh boy, you say, "that will kill the housing market. "I say "not so."
Importantly, when Home Buyers who utilize mortgage financing become a greater force of the total home buyer pie, in other words when the "herd" becomes highly-interested in owning their own houses again and a few other stars line up, loan-equipped buyers are likely to send demand through the roof, mon.
Yesterday, Peter, a fellow Real Estate Professional who owns several properties of his own, said to me: "for the first time in some time he has four of his rental properties vacant! People are now more and more looking into buying as opposed to renting."
And what makes you think there will be lots of people who will buy with mortgages? Our government has not been promoting housing for several years, so what is likely to happen when government begins to find ways of helping folks into homes again?
Also, when Banks see they can boost profits by lending to you and me, they develop loan programs to help make this happen--that's why. This government is about to change its key leader, and when it does, many believe the new adminstration will make a point in promoting housing to help get things moving in the economy.
And, you ask, why should a Buyer take out a loan to buy here, now? Here is the why. A few months back, 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." Everything in the universe moves in cycles. 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 it is time to get interested before our home-owning opportunity passes us by. Buyers, it looks as though we are now "off the bottom" in mortgage rates and not yet 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. Post election results, it appears as if the Stock market may be "breaking through its resistance level." When peoples' portfolios do well, Buyers are armed with profits and start looking to make a move.
If we add more Buyers with mortgages buying homes for a given amount of inventory, the market can really lift our Bay Area Markets above the crowd of other states.
Putting a bow on it, three key elements lining up simultaneously are needed to light off our already-robust housing markets in the Bay Area:
- When mortgage rates rise, banks add programs to allow more Borrowers to qualify even though rates are a little higher;
2. When number of jobs increase, then homebuyers will have a job to buy a home;
3. When household income is seen to grow, then homes are affordable.
When these three elements come together, we may be the hottest housing metropolitan area in the nation. No buffalos roam here anymore, but the possibility of unclouded and crystal blue skies may be for our residents. Stay tuned.
A housing boom. Seriously? Yup! Coming to a place near you.
----------
If your home is too large, kids have moved away or you would like to upsize, downsize or "rightsize," Michael's passion as a Realtor is evident by his high level of performance for valued clients.
The Michael Hatfield RE/MAX Accord Team leverages their Team's *Five Star Agent* abilities as priority #1 to clients' real estate needs in the San Francisco Bay Area. A frequent guest on Pat Vitucci's "Don't Invest and Forget" radio show, Michael is also heard regularly on KCBS 740am.