By: Michael S. Hatfield
August 8, 2015
The Wall Street Journal just reported the second quarter of 2015 has the lowest US homeownership rate in 48 years. Cycles. Everything in this universe moves in cycles–hold that thought for a few paragraphs.
You know, Real Estate is just not on peoples’ minds until, behold, they develop a personal interest. We humans are just “not interested until something makes us interested.” When we are hungry, we become interested, and buy a burger. When we need to get somewhere, we buy a car. We buy or sell a home only when our interest is piqued.
The red-hot San Francisco Bay Area, where locales take up 7 spots out of 20 on the list of the nation’s hottest real estate markets is a very, very unique place on this planet. Folks ought to be very interested right now, right here, whether buying, selling or leasing in our San Francisco Silicon Bay Area. Did they just say the US homeownership rate is the lowest in 48 years? We are at the bottom, 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 going to happen anytime soon.
A boom? Are you kidding? Aren’t we in one now? Why here?
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!) Note there were 40 startup tech companies that went public in just one year-last year!
OK, well, what about demand? A large percentage of Cash Buyers, 38% 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.
When Mortgage Buyers enter this picture in a big way, when the “herd” becomes interested again in houses, these loan-equipped buyers might just send demand to the moon, mon.
And what makes you think there will be lots of people who 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 by lending to you and me, they 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 will 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 week, 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, it is 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 (it has been), 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 for the same amount of inventory, the market may really shift into high gear.
Three elements just might light off the already-robust housing markets in the Bay Area when they occur simultaneously:
- When interest rates rise in earnest, banks add programs to allow more Borrowers to qualify;
- When household income improves, people become interested as homes become more affordable;
- 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 a housing boom. Seriously.
Michael S. Hatfield enjoys working with buyers and sellers of Residential Real Estate as a Broker Associate with RE/MAX Accord in the greater San Francisco Bay Area. He has a passion for leveraging his experience as a Home Builder, Developer, large company CEO to his clients real estate goals. As often heard on “Your Financial Life” on KGO Talk Radio, Michael has lived and enjoyed the Bay Area his entire life.
A former Captain and FAA Designated Lead Airline Check Pilot for one of the nation’s largest International Airlines, Michael frequently authors articles on airline issues and real estate matters.
Michael may be reached at (925) 322-7775 or at firstname.lastname@example.org. His offices are at RE/Max Accord in Danville with 9 more locations serving the Bay Area.