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Elevated mortgage rates, high home prices and limited housing inventory are making the dream of homeownership difficult for Americans, National Association of REALTORS® Chief Economist Lawrence Yun told REALTORS® attending the “2023 NAR NXT The REALTOR® Experience” conference and expo in Anaheim last week.
Yun analyzed the current state of the U.S. residential real estate market and shared his 2024 outlook during the Residential Economic Issues and Trends Forum. He explained that high mortgage rates and low inventory have dominated 2023, and as a result, he predicts home sales will likely decline by 18% this year.
The housing shortage continues to be what’s edging up home prices, said Yun. “Lack of inventory is providing the support for high prices, but it’s also making it super difficult for first-time buyers to enter the housing market.”
First-time buyers face steep challenges. High rent, student and credit card debt, car loans, and childcare costs for those with children have made it difficult for many to save for a down payment.
High interest rates have had a great impact on the U.S. overall economic performance, said Yun. While the latest GDP figure of 4.9% shows growth, he warned there are some worrying signs in the economy. Business spending is essentially flat. Goods inventory is rising, which means products are being produced but they are not getting sold.
“We cannot keep adding to the shelves,” said Yun. “Just like in housing, businesses have to borrow money, and business spending is down because it’s more expensive to borrow.”
Yun said the jobs data is still positive, but each passing month shows diminishing strength. Based on the trendline, employment could become negative, which makes the upcoming GDP number looks to “worrisome.”
Yun noted that currently, the consumer price index (CPI) is much calmer, and with community banks suffering from high interest rates, the Fed should adjust its monetary tightening posture. In fact, the bond market appears to be reacting as if the Fed will be cutting interest rates next year.
“I believe we’ve already reached the peak in terms of interest rates,” Yun said. “The question is when are rates going to come down?”
Yun projects mortgage rates will head towards 7% in a few months and into the 6% range by the spring of 2024. He also anticipates that more sellers will enter the market.
“Builders are back on their feet, up 5% in newly constructed home sales year to date,” said Yun. “Builders can simply create inventory. In a housing shortage environment, builders are really benefiting.”
Other numerous trends point to possible pent-up seller activity that could trigger much-needed inventory due to life changes. This would include growing families, couples marrying or divorcing and seniors. There are seven million newborn babies, three million marriages, and 1.5 million divorces. Seven million people will turn 65 years old and will be looking to downsize or relocate to live closer to their children and grandchildren. Additionally, four million deaths, four million net new jobs, 50 million job switches, are all reasons sellers will need to sell sooner than later. Yun added that international buyers have declined, but once they return to the market, there will be a boost in buying.
“Pent-up sellers cannot wait any longer. People will begin to say, ‘life goes on,'” said Yun. “Listings will steadily show up, and new home sales will continue to do well. Existing home sales will rise by 15% next year.”
Nearly 12,000 NAR members and industry stakeholders from all 50 states, several U.S. territories and 40 countries attended last week’s NAR conference and expo. Representing the Silicon Valley Association of REALTORS® at the event were President Jim Hamilton and SILVAR NAR director Denise Welsh.
State Farm and Allstate insurance companies’ recent announcements that they will stop writing new property insurance policies in California have shaken many property owners in the state. Silicon Valley REALTORS® are aware this will impact their clients and future homebuyers and are ready to provide resources to help with their insurance needs.
State Farm General Insurance Company announced it would cease accepting new applications, including all business and personal lines property and casualty insurance, effective May 27, 2023. This decision does not impact personal auto insurance. State Farm says it made this decision “due to historic increases in construction costs outpacing inflation, rapidly growing catastrophe exposure due to climate change, and a challenging reinsurance market.”
Allstate soon followed with the same announcement stating the company “paused” its offerings so they “can continue to protect current customers.” These two large insurance companies join American International Group (AIG), which notified thousands in California that their policies would not be renewed last year.
“Many of the problems in California are a result of the increasing risks in certain areas of the state, in part due to climate change. The increased risk of fires and floods in more areas have put a strain on both the companies and potentially on the FAIR plan, which is California’s insurer of last resort,” said Jim Hamilton, president of the Silicon Valley Association of REALTORS®.
The California Association of REALTORS® has good information and resources for those who are affected by these recent developments, said Hamilton. “We are asking our members to share the following facts and tips with their clients. Additionally, United Policyholders, a non-profit insurance information resource organization, features a free webinar titled ‘Keeping Your Home Protected When Insurance Options are Limited and Expensive?’ on their website at www.uphelp.org to help consumers find insurance in fire-prone areas.”
- Will State Farm and Allstate continue to service and renew policies of existing clients in the state. Yes, and they will continue to offer new auto insurance policies.
- What are the implications of the decision for prospective homebuyers? In certain high-risk areas of the state, there are very few insurance companies willing to write new policies. In those areas, unless the Insurance Commissioner is successful in his effort to get more private insurers to write policies in such areas, the generally more-costly California FAIR plan may end up being the only property insurance available for those homeowners.
- Will more companies follow State Farm and Allstate’s move? There are still a wide range of companies writing policies in California. However, those willing to write new policies are declining to include properties in higher risk areas. With the departure of State Farm and Allstate, property owners in more high-risk areas may have no other option than the FAIR plan.
- What are the main problems for the insurance market in California? The California market is heavily regulated and has various strict requirements for rate increases, which were put into place by Proposition 103 in 1988. However, there are two areas where possible changes could result in a better climate for insurance without requiring major changes to consumer-friendly rate increase requirements. Those include allowing insurance companies to have rates that better reflect their reinsurance costs and allowing insurance companies to utilize forward looking risk models. Current law only allows companies to look back when setting rates. However, given the issues with climate change, many insurance companies argue that looking backward does not allow companies to adequately capture risk.
- Where can I go for more information about homeowners insurance? The California Department of Insurance provides several information guides, tips and tools to help understand home/residential insurance. You can also call the CDI Consumer Hotline at 1-800-927-4357 for assistance.
The Silicon Valley Association of REALTORS® (SILVAR) 2019 leadership team was installed last night at the Los Altos Golf & Country Club. California Association of REALTORS® (C.A.R.) 2019 President-elect Jeanne Radsick administered the oath of office to SILVAR President Alan Barbic and the 2019 officers and board directors. C.A.R. 2005 President Jim Hamilton served as master of ceremonies and welcomed members and guests at the special event. Immediate Past President Bill Moody led everyone in the Pledge of Allegiance and 2019 President-elect Mary Kay Groth delivered the inspiration message.
SILVAR’s 2019 officers include Barbic, a broker associate with Sereno Group Los Gatos; Groth, a REALTOR® with Sereno Group Los Gatos, President-elect; and Jeff Bell, a REALTOR® with Coldwell Banker Residential Brokerage Cupertino, Treasurer.
Joining SILVAR’s lead officers are Moody (Referral Realty), Past President; Denise Welsh (Alain Pinel Realtors), Region 9 Chair; Leannah Hunt (Sereno Group), NAR Director; Jasmine Lee (Coldwell Banker Residential Brokerage), Menlo Park-Atherton District; Lynn Wilson Roberts (Compass) Palo Alto District; Greg Boudreau (Coldwell Banker Residential Brokerage), Los Altos-Mountain View District; Jim Light (Jim Light Broker), Cupertino-Sunnyvale District; Jim Hamilton (Alain Pinel Realtors), Los Gatos-Saratoga District; Directors At-large Mark Burns (Referral Realty), Joanne Fraser (Alain Pinel Realtors), Katherine Frey (Katherine Frey Real Estate), Penelope Huang (Golden Gate Sotheby’s International Real Estate), and Karen Trolan (Alain Pinel Realtors).
The Silicon Valley Association of REALTORS® Los Gatos-Saratoga District got off to a good start for the new year with over 100 members in attendance at Wednesday’s meeting. An upbeat District Chair Jim Hamilton told members 2019 “will be what you make it.”
The first meeting featured a top producer panel with Carol Jeans (Sereno Group), Michael Nevis (Alain Pinel Realtors), Mary Clark (Intero Real Estate Services), Chuck Nunnally (Keller Williams Bay Area Estates) and Audrey Hutton (Hutton Mortgage Group).
The panelists, all experienced in the business, are doers and work hard. Nevis said “the knowledge that this is my business” is what motivates him each day. Nunnally stressed real estate takes hard work and like a hunt, he is constantly searching for business.
Asked their thoughts on forming teams, Nunnally, Jeans and Clark prefer to be independent, while Hutton believes teams are important to grow your business. Her team is comprised of five people who each have roles in the business. Nevis also has a team and finds it serves as a good sounding board. He did note you have to really get to know the person before forming a team.
The top producers stressed the importance of referrals. Referrals only happen through relationships and maintaining then, said Nevis. He likes to invite clients to his home for dinner, to meet his family and get a glimpse of his lifestyle.
“This way things are more real, more personal than talking about average price and days on market,” said Nevis.
Hutton likes to wow her clients, pleasantly surprising them with candy and the like. She holds parties and education classes for past clients.
The REALTORS® stressed the need to get to know clients at an intimate level and connect frequently. Jeans likes to write her past clients, while Clark likes to stop by their home twice a year to connect. She also holds annual client appreciation parties or invites them to events, like a Giants game.
“Keep in touch with past clients and show them your care,” said Nunnally. “This is a people business.”
The REALTORS® said the 2019 housing market may not be as fast and furious as in the past, but they don’t believe it will crash and burn either. Nunnally advises agents to attend seminars, get educated about the market, and spend money. You need to spend money in order to make money in real estate, he said.
Jeans encourages agents to learn as much as they can, work with discipline, build relationships and “remain who you are in the business.” She believes there will always be a demand for homes in the region.
Nevis encourages agents to team up with someone with experience and “find your cheerleaders,” while Hutton advises agents to be specific, have a purpose, and share their goals with their clients.
“This year will be awesome. There is opportunity in any market,” said Clark.
In Los Gatos, Jim Hamilton, who served as auctioneer, reminded members the money raised will go to needy children for presents during the holidays.
The month of October ushers in holiday festivities, beginning with Halloween. It is also the time when members of the Silicon Valley Association of REALTORS® (SILVAR) help make sure the holidays are brighter for families in the communities where they work and live.
This week SILVAR’s Los Gatos-Saratoga District topped last year’s proceeds at its annual Pumpkin Auction, raising $7,000 for the Family Giving Tree for Operation Reindeer. California Association of REALTORS® 2005 President and District Chair-elect Jim Hamilton was able to encourage members to be generous this year and think of the children.
“Open your wallets, open your hearts. It’s for the kids,” said Hamilton.
Operation Reindeer, now coordinated by the Family Giving Tree, is a program that distributes gifts, including food certificates, to needy families and seniors in the community during the holiday season. REALTORS® and affiliates of the Los Gatos-Saratoga District have supported the program for more than 20 years.
Toward the end of the auction, Jim Myrick shared his own experience of being grateful as a child for receiving presents through the program. After sharing his story, Myrick invited members to stand up and pledge $10 each and followed with a “Heads or Tails” fundraising game. The generous contributions from members and the pledge of brokers Brian Crane with Intero Real Estate Services, Doug Evans with Coldwell Banker and Mark von Kaenel with Keller Williams Bay Area Estates to double members’ pledges brought the auction to the $7,000 amount.
READ MORE AND SEE PHOTOS HERE
Here Greg Boudreau, who served as auctioneer in Los Altos, enticed members to bid by mentioning the prize the next auction item offered.
In Los Altos last Friday, SILVAR’s Los Altos-Mountain View District’s 6th Annual Pumpkin Auction did not disappoint members either. The event was festive with some members dressed in costumes and many auction items donated by local companies and individuals. The crowd was engaged and did not hesitate to raise their paddles when egged on by auctioneer and District Chair-elect Greg Boudreau. The District raised $5,500 for the Silicon Valley REALTORS® Charitable Foundation, thanks to the generous donors and bidders, including members who donated to the Charitable Foundation without expecting an auction item in return.
The auction items included a wine and dine basket, children’s fun basket, teal hand-blown pumpkin, Dom Pérignon champagne, La Rochere champagne flutes, gourmet food items, Star Wars Steins Collectibles Set of Three and gourmet items, sets of Windsor Village platinum status wine with free wine tasting, an electric LED water vapor effect smoking pumpkin, and more. The top prize was a Tahoe Getaway – two-night stay at Tavern Inn condos in Squaw Valley, plus a $100 gift card for a meal at the Tahoe River Grill and lots of other goodies donated by Golden Gate Sotheby’s International Realty.
READ MORE AND SEE PHOTOS HERE
On top of these donations, at SILVAR’s Oktoberfest Happy Hour to Benefit the Silicon Valley REALTORS® Charitable Foundation, members raised $4,000, bringing to total amount of donations to $16,000 just this month! The Silicon Valley REALTORS® Charitable Foundation thanks everyone who contributed at these events and all the event organizers.
The Silicon Valley REALTORS® Charitable Foundation is a trust that makes grants available to organizations from donations by realtors and affiliate members of the Silicon Valley Association of REALTORS®. The Charitable Foundation also awards $1,000 scholarships each year to 18 graduating seniors from public high schools in Silicon Valley.
REALTORS® discuss issues with Congresswoman Jackie Speier.
The leadership of the Silicon Valley Association of REALTORS® (SILVAR) joined more than 9,000 REALTORS® and guests from across the country in the nation’s capital this week for the 2018 National Association of REALTORS® (NAR) Legislative Meetings & Trade Expo to advance policy initiatives that strengthen the ability of Americans to buy, invest, own and sell real estate.
On their agendas this year were visits with members of Congress, regulatory agency officials and top industry leaders; attending some of the nearly 100 available conference sessions on topics ranging from policy to technology; and focusing on the yearlong commemoration of the 50th anniversary of the Fair Housing Act.
REALTORS® are advocating support for several important legislative initiatives, including strong net neutrality protections to ensure the internet is open and competitive for consumers and businesses; renewing and strengthening the long-term viability of the National Flood Insurance Program; indexing homeownership tax incentives for future inflation and permanently extending the tax exclusion on mortgage debt forgiveness; and adopting sexual orientation and gender identity as protected classes in the Fair Housing Act.
NAR is also urging Congress to adopt sexual orientation and gender identity as protected classes in the Fair Housing Act. As members of NAR, REALTORS® subscribe to its strict Code of Ethics, which includes a commitment to provide equal professional services regardless of race, color, religion, sex, disability, familial status, national origin, and as of 2009, sexual orientation, and since 2014, gender identity.
SILVAR leadership met with U.S. Representatives Anna Eshoo, who represents California’s 18th Congressional District, Jackie Speier, who represents the state’s 14th Congressional District and Ro Khanna, who represents District 17. Representing SILVAR at the Hill meetings were SILVAR President Bill Moody, President-elect Alan Barbic, NAR Directors Leannah Hunt and Jim Hamilton, Federal Political Coordinator of Congresswoman Eshoo Carole Feldstein, Executive Officer Paul Cardus and Government Affairs Director Ryan Carrigan. Also at the meetings was Board Director Joanne Fraser.
The 2016 Silicon Valley Association of REALTORS® (SILVAR) leadership team was installed Thursday night at La Rinconada Country Club in Los Gatos. California Association of REALTORS® 2013 President Don Faught administered the oath of office to SILVAR’s new president, officers and board of directors. C.A.R. 2005 President Jim Hamilton served as master of ceremonies and welcomed about 180 members and guests to the special event. Alain Pinel REALTORS® Vice President/Regional Manager Jeff Barnett led everyone in the Pledge of Allegiance and delivered the inspiration message.
Karen Trolan, a REALTOR®, broker and assistant manager of the Alain Pinel REALTORS® Los Gatos office, was installed as 2016 President; Denise Welsh, a REALTOR® with Alain Pinel REALTORS®, Los Altos, President-elect; and Phyllis Carmichael, a REALTOR® with Coldwell Banker Residential Brokerage, Los Altos, Treasurer.
Joining SILVAR’s lead officers as this year’s board directors are Chris Isaacson (Coldwell Banker), past president; David Tonna (Alain Pinel REALTORS®), Region 9 Chair; Brett Caviness (Coldwell Banker), Menlo Park/Atherton District Chair; Amy Sung (Pacific Union International Real Estate), Palo Alto District Chair; Katherine Frey (Alain Pinel REALTORS®), Los Altos/Mountain View District Chair; David Hunt (W.A. Krauss & Co. Property Management), Cupertino/Sunnyvale District Chair; Suzanne Yost (Alain Pinel REALTORS®), Los Gatos/Saratoga District Chair; and Directors At-large Jeff Bell (Coldwell Banker Residential Brokerage), Davena Gentry (Sereno Group), Eileen Giorgi (Sereno Group), Gene Lentz (Keller Williams Realty), Cassie Maas (Alain Pinel REALTORS®), Ryan Nunnally (Alain Pinel REALTORS®); and Affiliate Chair, Eric Temple (Willow Glen Organics).
Trolan is a Los Gatos resident and has been a REALTOR® and broker for 30 years. She began her real estate career with Van Vleck REALTORS® and continued on with Cornish & Carey and later Coldwell Banker Residential Brokerage. From top agent, Trolan moved up the ranks quickly to vice president and manager of the Cornish & Carey’s Palo Alto Midtown office, vice president/managing broker for the Los Altos office, and finally, when Coldwell Banker bought Cornish and Carey, Trolan was named senior vice president and regional manager of Silicon Valley Coldwell Banker Residential Brokerage.
Despite suffering severe injuries from a tragic airplane accident in 2009 that left her paralyzed from waist down, Trolan through sheer perseverance and hard work went back to doing most of the activities she did before the accident. In April 2011, Trolan joined the Alain Pinel REALTORS® Los Gatos office, where she is currently assistant manager, responsible for agent improvement, community involvement and other special projects.
Silicon Valley Association of REALTORS® says ... 