As we stride into 2020, there is a battle of perspectives raging among the realms of real estate, economics, politics, fiscal policy, and consumer confidence. Rarely have I seen consumer sentiment so divided.
If someone is optimistic, they are heavily invested in Apple, Tesla, or the stock market as a whole. They believe the economy is good and will only get better. If they are pessimistic, they believe we are in the midst of a housing and stock market bubble that will soon burst in some capacity. They feel that being conservative is the right course, especially given that we are in an election year.
In terms of politics, we have a trade war that may be calming down, impeachment proceedings that are heating up, and gritty foreign policy in the Middle East, making even the calmest of consumers nervous. Economically, our manufacturing base is declining but unemployment levels are fantastically low. In terms of fiscal policy, interest rates are the lowest they’ve been in years and appear to be headed even lower.
But how low can interest rates go and are perpetually low rates a good thing? In real estate, we have a shortage of homes with strong buyer demand. However, home prices are really high, and even with these low rates, buyers are getting maxed out. All this creates a mixed bag of consumer confidence. While confidence is high right now, many people are simultaneously wondering when the other shoe will drop.
So what does all this mean for our local real estate market? I am so glad you asked! What would be the point of studying this stuff every day if I didn’t share my thoughts? J Ultimately, our actual market results are determined by the fundamentals so I always go back to basics. Low interest rates and a short supply of homes means prices will be rising through July. We will see peak pricing in May and early June. I anticipate interest rates staying low throughout the summer for both economic and political reasons.
Economic forecasts estimate a 2.5% appreciation in 2020 but I just can’t see it being that low given the current conditions. Our local community is in HIGH demand. Murrieta was recently ranked the third safest city in America by 24/7 Wallstreet. We are consistently in the top 50 safest cities - usually the top 15 - so I will not be surprised to see a 6-8% increase going into summer and then a reduction of 2-3% in prices from August until year-end. A great community has value and with these interest rates, Murrieta’s real estate values will shine in 2020!
If you or a family member has real estate plans for 2020, please give me a call so we can game plan early. I will always give you my best recommendation built around YOUR goals.
Stefan West, aka Mr. Murrieta.
What an absolutely stunning April day! It’s a sunny 67 degrees and I am hosting back-to-back open houses today for two of my new listings. After only two hours, I have already received one full price offer for my first listing and a second one is moments away. I also just received an offer for my second listing, and that open house hasn’t even started yet! It doesn’t get much better than that in the real estate business.
Now, why am I telling you this? Is it because I want to brag and rock Facebook while using words like amazing, awesome, and #hashtag something? No, while lots of agents do that, it has never been my bag. My boys would totally call me ancient for saying “not my bag” BTW. When I write Facebook posts or client letters, I want them to provide useful information or market my clients’ properties, not feed my ego.
The reason I am sharing this news with you is because hosting open houses is a great way to learn about the marketplace by actually talking to active buyers and sellers. Sure I can quote Zillow or Redfin projections (often wrong), but nothing beats actual feet on the ground. The activity I have seen shows that we are shifting into high gear and moving toward more of a buyer’s market, especially for the larger homes.
Inventory is climbing and although I am receiving offers on upgraded and turnkey properties, open houses have not been particularly busy. While fewer people are attending, the buyers who show up are focused, qualified, and ready to buy. They are just VERY picky and go after only the most well-presented properties. Areas such as Wildomar, Menifee, and Winchester are also seeing more interest as buyers expand their search radius in hopes of getting a bit more for their money.
Along with increasing sales prices, we are starting to see property appraisal values coming in short. I have two wonderful couples who have been recently impacted by appraisals coming in significantly under the agreed upon sales price. Although I fought the appraisals with in-depth rebuttals, the appraisers wouldn’t budge. While buyers are willing to pay more for the best homes, they can’t get loans with low appraisal values, leading to a great deal of frustration for buyers, sellers, and agents alike.
Stefan West, aka Mr. Murrieta.
What a weekend we are having! We have lots of rain, big booms from Camp Pendleton, and it is Super Bowl weekend. I traditionally do not talk religion or politics, and for many people football is a religion, but I can’t get behind this Super Bowl. Yes, both teams worked hard but both also had a lot of ref help.
Now you may be thinking, why is my real estate guy writing to me about his Super Bowl angst?! Well, in many ways it is very similar to our real estate market. As a homeowner, you can increase value by upgrading your home with a pool, solar, new kitchen, etc. You can also create wealth by aggressively paying down principle or refinancing to a 15-year loan. However, as with championship football games, there are many things outside of your control regarding the market value of your home.
One of the biggest “refs” that dramatically impact our market is the Federal Reserve. Last week, they decided not to raise interest rates. This affects a myriad of things including consumer confidence, the stock market, interest rates, and even consumer cash flow as it stabilizes credit card rates after they have been on the rise for months. By keeping rates low, it spurs higher buyer activity which will reduce the supply of homes on the market. Low supply amid high demand means that this spring your home will be a winner.
We are already seeing a shortage of supply play out with homes $425,000 and under. When interest rates dropped down, home sales really start to pick up. When you are out showing homes in Murrieta and can only find 8-12 homes in total for new buyers, you know things are tight. When five of the homes go into escrow within the same week, you know the party is just getting started. Next up, offers over asking!
This means that between now and June will be the ideal time to sell. Usually, we would see this trend start in April, but the large decreases in rates and increase in consumer confidence are pushing things to an early start this year. Tax plan returns in April will likely further invigorate our local real estate market.
The Federal Reserve is always a factor but for some reason, this one call last week really had a much larger impact that usual. The timing was just right with the trade war, government shutdown, and lots of politics going on, thus my NFL analogy. One call at the pivotal moment can mean everything! Fortunately for homeowners, the Fed made the right call at the right time. Please let me know if you or someone you know needs help. As always, I appreciate your referrals!
Stefan West aka. Mr. Murrieta