Before prices began to decline, we were overvalued [nationally] by around 25%. Now, this means prices will normalize. Affordability will be restored. The [housing] market will not be overvalued after this process is over.
“A winner is a dreamer who never gives up.”
– Nelson Mandela
Did You Know?
* Chatter has emerged defining the economy now as experiencing a ‘rolling recession’…..A rolling recession occurs when the recession only affects certain sectors of the economy at a time. As one sector enters recovery, the slowdown will ‘roll’ into another part of the economy. On the whole, rolling recessions occur regardless of nationwide or statewide economic recession, and the effects may not be in the national economic measures (e.g.GDP))
* 13% of all mortgages originated in 2021 were by people 65 years of age and older……over 1.9 million mortgages. (WSJ)
* About 30% of all foreign buyers in the USA come from Canada, Mexico, China and India. 35% of foreign buyers choose Florida and California, both sunshine states. The median purchase price is $366,000 in 2021, notably lower than most believe. No, most foreign buyers are not billionaires or oligarchs! 70% of these buyers came from business or personal contacts. Foreign buyers represent less than 2% of all existing home sales annually. In 2021 less than a third of the volume of sales happened compared to 2010. 31% of Chinese buyers bought in California and 10% in New York, and they had the highest average price point at $1 million. 44% buy all cash. And 44% bought these homes as vacation homes. 58% of Canadian buyers bought for vacation purposes. Just 3% of foreign buyers called on their own or walked into an open house…… (NAR)
* 21 US States cut income taxes in the past 2 years (Tax Foundation) and are betting that returning revenue to taxpayers will spur faster economic growth. Many states are flush with cash after the massive stimulus programs of the past 3 years. Florida, Texas and Idaho – states that draw the most new residents from other states – tend to have much lower tax rates. Other states have low or no local income taxes too. Population decliners like New Jersey, New York and California are among the most punitive taxers. Do lower/no local income taxes impact the quality of services, education, etc? The results vary. Often real estate taxes are raised to compensate for lost income. (WSJ)
* Economists estimate the U.S. economy grew at a seasonally adjusted annual rate of 2.8% in the fourth quarter of last year, down slightly from 3.2% in the third quarter. (WSJ)
* Researchers at Capital Economics believe housing market activity is bottoming out with growing signs that market activity may be close to a trough. The decline in mortgage rates over the past couple of months has led to a small improvement in affordability and a rise in homebuyer sentiment, albeit from a record low. Corroborating this, mortgage applications for home purchase ticked higher in the past 2 months, which should feed through to higher sales. (FORTUNE)
* Prices of homes for sale fell year-over-year in 18 of the largest 50 cities in the U.S in the week up to January 15th. (Marketwatch)
Tools
- Capital Gains Tax Rates For 2022 And 2023
- Capital Gains Tax Calculator
Trends & Forecasts
- Inflation Outlook For 2023
- Sonoma County Market Flipbook
- Mortgage Forecast For 2023
- Mortgage Rates Forecast For 2023: Will Rates Drop?
- Sonoma, Napa & Solano Counties: Home Price Map
Market Update
What a difference six months can make. Come to think of it…what a difference one month can make. Looking back at the first half of last year, we started out on the same fast track of the previous two years. Crazy list prices,
multiple bids on those high-priced listings and even higher over-bids on them. Then the effect of the interest rate hikes that started in March of last year really began to make an impact mid-year. As we commented then – “it felt like someone flipped a switch”. And it wasn’t just the interest rates – although that seemed to be the catalyst.
The stock market struggled, and we saw the beginnings of the layoffs that would impact every industry and continues today.
So, here we are through the first month of the new year. The feds just raised the rates again by another one-quarter point – lower than some would have anticipated last year. And, they have signaled that other rate hikes this year may be on a smaller level than they were last year. Seemingly this is very good news, and the mortgage market has responded favorably to these signals of an improving market.
There is a lot of talk about the decrease in real estate prices that we should be expecting. However, if we rely on that good old theory of supply and demand, it seems that it might be hard to see prices drop when there is so little inventory for buyers to buy. Just in Sonoma Valley alone, in January this year, there were only 59 listings on the market and the median list price clocked in at $1,675,000 a whopping 32% higher than January of 2022. Even the median price of the closed transactions in January came in 20% higher than the same month a year ago. We are still seeing well-priced properties in good condition and desirable locations selling very quickly, although not at the same rate of one year ago.
As we discussed in our December report, this transitional market will take some time to even out, and it appears that patience may be one of our most beneficial assets going forward – at least for the foreseeable future.
Please note, all information is for single family residences in the Sonoma Valley as reported to BAREIS, the local multiple listing service through Broker Metrics.
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