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Hedemark Law

Assisting clients in Estate Planning, Probate, and Trust Administration in the San Francisco Bay Area.

Estate Planning including Wills, Living Trusts, Powers of Attorney, Advance Health Care Directives, Trust Administration, Probate Administration, and general advice.

12/25/2024

📊 Why Are Rates Rising Despite Fed Cuts?

You might wonder why interest rates are climbing even as the Federal Reserve cuts the federal funds rate. The answer lies in real interest rate returns, which factor in inflation. For example, a $100 bond with a 10% nominal rate has a real return of 10% minus inflation (currently 2.4%). If inflation expectations rise, nominal rates can increase to keep real returns stable—or at least minimize their decline.

🌟 What’s Driving This?

Inflation Expectations: Economic policies like tax cuts and tariffs under Trump’s administration are inflationary.
Capacity Constraints: The U.S. economy is near capacity, with low unemployment and increased demand from tax cuts.
Tariffs Impact: Higher tariffs on imports raise the cost of everyday goods, fueling inflation.
🏦 With higher inflation, the Federal Reserve is likely to approach rate cuts cautiously, balancing economic growth with price stability.

Stay informed—this shift could impact everything from your investments to day-to-day expenses.

JUSTIN HEDEMARK | 650.483.9506
Realtor®
DRE # 02020225
justin.HELMRealEstate.com

11/25/2024

"Months of Supply Inventory in September 2024 indicated a sellers’ market for single-family homes and a buyers’ market for condos"

Months of Supply Inventory (MSI) measures the supply/demand balance by showing how many months it would take to sell all homes listed at the current sales rate. In California, an MSI of three months is considered a balanced market. An MSI below three means it's a sellers' market, while above three signals a buyers' market.

San Francisco's housing market usually favors sellers, reflected in its low MSI, particularly for single-family homes, which has been below three months since October 2023. MSI dropped significantly from May to August, but spiked in September as new listings surged. While condos saw a buyers' market in September, single-family homes still favored sellers.

JUSTIN HEDEMARK | 650.483.9506
Realtor®
DRE # 02020225
justin.HELMRealEstate.com

11/22/2024

"New listings spiked in September, causing inventory to rise"

In September, sales dropped while new listings nearly doubled, which is typical for this time of year in San Francisco. New listings are on par with last year, but inventory is down 10%. Sales for single-family homes are up 1% year-over-year, but condo sales have dropped 13%.

San Francisco's housing market is unique, as mortgage rates have impacted prices. The typical supply-and-demand dynamics don't hold as well due to higher mortgage rates. Single-family home prices peaked at $2.05 million in April 2022, but rates have pushed prices lower to keep buyers active.

Inventory has been declining since 2010, with a significant drop in listings between 2020 and 2021. The market has slowed, with low inventory, high mortgage rates, and fewer new listings. While inventory typically increases in early spring, it’s expected that supply will remain tight through spring 2025.

JUSTIN HEDEMARK | 650.483.9506
Realtor®
DRE # 02020225
justin.HELMRealEstate.com

11/20/2024

"Median home prices declined month over month but are still near all-time highs"

In San Francisco, home prices have stabilized since the initial price correction from April 2022 to August 2022. Since then, median single-family home prices have hovered around $1.6 million, while condo prices have been around $1.1 million. Year over year, the median price is up 3% for single-family homes and 8% for condos.

Prices are more likely to rise when more sellers enter the market, as seen in September 2024. Low inventory means that rising supply helps prices, as buyers can better find the right match. A healthier market requires more homes on the market.

High mortgage rates soften both supply and demand, but buyers and sellers seem more comfortable with rates near 6% than at 7%. As rates decline, sales could see a boost, though the housing market typically slows in the fourth quarter of each year.

JUSTIN HEDEMARK | 650.483.9506
Realtor®
DRE # 02020225
justin.HELMRealEstate.com

11/18/2024

"How Mortgage Rates and Market Trends Are Shaping Today’s Home Prices and Inventory"

Last September, the average 30-year mortgage rate was 7.31%, meaning a $500,000 loan would cost $3,431 per month. Now, that same loan costs $3,056 per month at 6.08%. Since interest rates significantly affect affordability, fewer buyers entered the market, allowing inventory to build. Despite fewer sales over the past year, home prices still rose, which is typical.

This trend is relatively new but here to stay. Since the mid-1990s, home prices have moved more like risk assets (stocks, bonds, commodities), a significant shift from the previous 100 years. From 1890 to 1990, inflation-adjusted home prices rose only 12%, a stark contrast to the 94% national price growth seen over the last 10 years. In the long run, home prices generally move in one direction—up.

Regional variations exist, so we’ve included a Local Lowdown to provide more in-depth coverage for your area. As always, we’ll continue to monitor the housing and economic markets to guide you in buying or selling your home.

JUSTIN HEDEMARK | 650.483.9506
Realtor®
DRE # 02020225
justin.HELMRealEstate.com

11/15/2024

"How the Fed’s Pandemic-Era Policies Shaped Today’s Housing Market: The Rise and Fall of Mortgage-Backed Securities"

During the early pandemic, the Fed provided huge incentives to buy homes as part of its easy monetary policy by purchasing Mortgage-Backed Securities (MBS) and dropping interest rates. MBS play an integral role in home financing by allowing banks to bundle and sell mortgage loans, turning the bank into an intermediary between the financier and financial markets (investors).

Banks get some fees, while investors (rather than the bank) get the interest and incur the risk from the bundle of mortgages. So, in many ways, the bank facilitates the loan but investors are the ones really lending the buyer the money. The Fed was a huge investor in 2020 and 2021, doubling its MBS holdings to $2.7 trillion by 2022. However, the Fed isn’t buying any more MBS and, in fact, has sold 15% ($4.16B) of its MBS holdings over the past two years. Even though rates are coming down, the MBS market has shifted to make loans less easy to originate, which has contributed to the market slowdown.

JUSTIN HEDEMARK | 650.483.9506
Realtor®
DRE # 02020225
justin.HELMRealEstate.com

11/13/2024

"Improved Affordability, Lower Prices, and High Inventory: What Q3 2024 Means for the 2025 Housing Market"

Affordability improved significantly in Q3 2024, with monthly mortgage payments for a 30-year loan dropping 10%. Home prices peaked in June 2024 and are now following a more typical cycle of rising from January to June and contracting from June to January. Despite a slowdown in sales over the past three years, inventory has reached its highest level since 2020.

Although we hoped sales would pick up due to declining rates, they fell to historic lows in September. The Fed’s 0.50% rate cut didn’t significantly affect mortgage rates, as they were already priced in. However, median home prices fell 2.8%, and with lower rates, monthly payments dropped by 10%. Buyers saved $100,000 over the life of their loans by purchasing in September instead of June.

Looking ahead to 2025, we expect lower rates, high inventory, and seasonal price declines to create the ideal conditions for a strong spring market.

JUSTIN HEDEMARK | 650.483.9506
Realtor®
DRE # 02020225
justin.HELMRealEstate.com

08/19/2024

Inventory hits a record low in June

In 2023, single-family home inventory followed fairly typical seasonal trends, but at a significantly depressed level, while condo inventory has been in decline since May 2022. Low inventory and fewer new listings have slowed the market considerably. Typically, inventory in San Francisco has two peaks, one in May and one in September, and then declines through December or January, but the lack of new listings prevented meaningful inventory growth.

New listings have been exceptionally low, so the little inventory growth throughout 2023 was driven by fewer sales. In November and December 2023, new listings dropped significantly without a proportional drop in sales, causing inventory to fall to an all-time low in December, which further highlights how undersupplied the market has been over the past year.

In the beginning of 2024, we were hopeful that inventory and new listings would resemble historically seasonal patterns. However, new listings haven’t come to the market in the quantity needed to bring a significant increase in inventory.

This year, inventory looks to have already seen its first peak in April, which was an early sign that inventory would remain tight in 2024. The second sign was inventory falling to an all-time low in June, which is far from the seasonal norm. The number of new listings coming to market is a significant predictor of sales, and buyers simply aren’t able to buy homes that aren’t for sale. The demand in San Francisco is there, but supply — especially new supply — hasn’t come to the market. Now that we’re halfway through the year, it’s clear that supply will remain tight until spring 2025 at the earliest.

JUSTIN HEDEMARK | 650.483.9506
Realtor®
DRE # 02020225
justin.HELMRealEstate.com

08/15/2024

"Navigating the Housing Market: What Rising Inventory Means for You"

Sales fell 0.7% month over month, while inventory rose 6.7%. The combination of rising prices and high interest rates has kept sales historically low. Since January 2023, sales have trended more horizontally, although we expect sales to decline until spring 2025.

Overall, inventory growth is great news for the undersupplied U.S. housing market. According to data from the National Association of REALTORS® (NAR), inventory reached its highest level since August 2022. The market is still broadly undersupplied, but the increasing inventory level should cause rising home prices to slow.

In the pre-pandemic seasonal trends, sales, new listings, inventory, and price would roughly all rise in the first half of the year and decline in the second half of the year. Sales and new listings have been far lower than usual since mortgage rates started climbing, which is to be expected. Because we don’t anticipate sales to pick up until the spring of 2025, inventory could continue to grow in the second half of the year.

Different regions and individual houses vary from the broad national trends, so we’ve included a Local Lowdown below to provide you with in-depth coverage for your area. As always, we will continue to monitor the housing and economic markets to best guide you in buying or selling your home.

JUSTIN HEDEMARK | 650.483.9506
Realtor®
DRE # 02020225
justin.HELMRealEstate.com

08/03/2024

Navigating the 2024 Housing Landscape: Peak Prices, Mortgage Trends, and the Sales Slowdown

Since January 2024, prices have climbed 10.6%, reaching an all-time high in May 2024. Similarly, the median list price per square foot hit an all-time high in April and again in May 2024. Affordability for homes has reached a record low.

In May, the average 30-year mortgage rate fell to 7.03%, dropping 0.19% from the 2024 high reached in April. The Fed has expressed hesitation around lowering rates due to higher-than-desired inflation. Currently, we expect rates to remain between 6% and 8% for the rest of 2024.

Sales fell 1.9% month over month, while inventory rose 9.0%. The combination of rising prices and high interest rates has continued to price more buyers out of the market, slowing sales.

JUSTIN HEDEMARK | 650.483.9506
Realtor®
DRE # 02020225
justin.HELMRealEstate.com

08/02/2024

Federal Reserve Holds Steady: A Detailed Look at Local Housing Market Impacts

During the Fed’s May meeting, the Federal Reserve Board unanimously voted to hold policy rates steady for the sixth consecutive time, leaving the federal funds target rate unchanged at 5.25% to 5.50%. Although this letter was written before the June 11-12 Fed meeting, we are confident the Fed will hold rates steady. If there’s a silver lining, it’s that even though rate cuts are extremely unlikely, rate hikes are even less probable.

Different regions and individual houses vary from the broad national trends, so we’ve included a Local Lowdown below to provide you with in-depth coverage for your area. As always, we will continue to monitor the housing and economic markets to best guide you in buying or selling your home.

JUSTIN HEDEMARK | 650.483.9506
Realtor®
DRE # 02020225
justin.HELMRealEstate.com

08/01/2024

U.S. Housing Market Hits Record Prices Amid Rising Rates and Growing Inventory

According to the National Association of Realtors® (NAR), the median sales price for existing homes grew 5.6% to $418,900 between May 2023 and the present — the eleventh consecutive month of year-over-year price growth, and the highest median price ever reached. Typically, the median price peaks in June each year, so we will likely see prices climb even higher when the data comes in for this month.

In addition to NAR, the Case-Shiller 20-City Composite Home Price Index, which measures the aggregate price level of homes in the largest 20 metropolitan statistical areas, has reached a new high for the eighth month in a row. The combination of elevated mortgage rates and rising prices has brought affordability to an all-time low, which translates to fewer sales and growing inventory. However, at the same time, homes are spending less and less time on the market.

Demand is still high relative to supply, even though inventory is building. The buyers that haven’t been priced out of the market are moving quickly on homes that suit them. Despite the high demand and quick market, there are simply fewer buyers in the market. Higher mortgage rates can only lead to fewer market participants. On the bright side, inventory growth is great news for the wildly undersupplied U.S. housing market. According to data from realtor.com, inventory reached its highest level since August 2020.

The market is still broadly undersupplied, but the increasing inventory level should cause rising home prices to slow. Decreasing home prices mid-year is also normal on a seasonal basis. In the pre-pandemic seasonal trends, sales, new listings, inventory, and price would roughly all rise in the first half of the year and decline slightly in the second half of the year. Sales and new listings have been far lower than usual since mortgage rates started climbing, which is to be expected.

JUSTIN HEDEMARK | 650.483.9506
Realtor®
DRE # 02020225
justin.HELMRealEstate.com

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