As we navigate the thick of the holidays and we think about friends, family and the year or years we’ve had together, I want to also take this time to look back at some home trends from the past.
HGTV did a really sweet article about some fun trends over the course of the last 25 years. If they hadn’t come out with this article, I think I would have completely forgotten about Shabby Chic and Industrial Design.
For more fun reminders of the past, click the link below!!
Here is the takeaway from the article:
More Californians can purchase a home in third-quarter 2025, compared to previous quarter and a year ago, C.A.R. reports
Now, this isn’t an exact reflection of our local market. However, it does demonstrate that our market has a larger pool of buyers. With a larger pool of buyers we should have corresponding growing demand. The growth in Orange County was marginal, but it is still positive for our path moving forward.
| Qtr. 3 2025 | C.A.R. Traditional Housing Affordability Index | |||||||
| STATE/REGION/COUNTY | Qtr. 3
2025 |
Qtr. 2 2025 | Qtr. 3 2024 | Median Home Price | Monthly Payment Including Taxes & Insurance | Minimum Qualifying Income | ||
| Calif. Single-family home | 17 | 15 | 16 | $887,380 | $5,590 | $223,600 | ||
| Calif. Condo/Townhome | 27 | 25 | 25 | $649,990 | $4,090 | $163,600 | ||
| Los Angeles Metro Area | 16 | 14 | 15 | $837,060 | $5,270 | $210,800 | ||
| Inland Empire | 23 | 21 | 22 | $595,000 | $3,750 | $150,000 | ||
| San Francisco Bay Area | 22 | 20 | 21 | $1,295,000 | $8,150 | $326,000 | ||
| United States | 36 | 35 | r | 35 | $426,800 | $2,690 | $107,600 | |
| San Francisco Bay Area | ||||||||
| Alameda | 21 | 19 | 18 | $1,250,000 | $7,870 | $314,800 | ||
| Contra Costa | 26 | 23 | 25 | $860,000 | $5,420 | $216,800 | ||
| Marin | 22 | 19 | 20 | $1,612,500 | $10,150 | $406,000 | ||
| Napa | 16 | 15 | 15 | $940,000 | $5,920 | $236,800 | ||
| San Francisco | 22 | 19 | 21 | $1,626,500 | $10,240 | $409,600 | ||
| San Mateo | 18 | 16 | 17 | $2,080,000 | $13,100 | $524,000 | ||
| Santa Clara | 19 | 17 | 19 | $1,915,000 | $12,060 | $482,400 | ||
| Solano | 26 | 27 | 26 | $606,000 | $3,820 | $152,800 | ||
| Sonoma | 19 | 17 | 18 | $825,780 | $5,200 | $208,000 | ||
| Southern California | ||||||||
| Imperial | 26 | 27 | 28 | $418,500 | $2,640 | $105,600 | ||
| Los Angeles | 12 | 13 | 11 | $954,130 | $6,010 | $240,400 | ||
| Orange | 13 | 12 | 12 | $1,400,000 | $8,820 | $352,800 | ||
| Riverside | 23 | 21 | 21 | $625,000 | $3,940 | $157,600 | ||
| San Bernardino | 29 | 29 | 29 | r | $497,800 | $3,130 | $125,200 | |
| San Diego | 13 | 13 | 12 | $1,009,500 | $6,360 | $254,400 | ||
| Ventura | 16 | 14 | 13 | $926,000 | $5,830 | $233,200 | ||
| Central Coast | ||||||||
| Monterey | 9 | 10 | 10 | $1,001,500 | $6,310 | $252,400 | ||
| San Luis Obispo | 13 | 12 | 11 | $929,350 | $5,850 | $234,000 | ||
| Santa Barbara | 12 | 10 | 13 | $1,220,000 | $7,680 | $307,200 | ||
| Santa Cruz | 14 | 14 | 14 | $1,304,220 | $8,210 | $328,400 | ||
| Central Valley | ||||||||
| Fresno | 30 | 30 | 30 | $443,000 | $2,790 | $111,600 | ||
| Glenn | 37 | 39 | 40 | $365,500 | $2,300 | $92,000 | ||
| Kern | 31 | 30 | 30 | $400,000 | $2,520 | $100,800 | ||
| Kings | 34 | 34 | 33 | $377,000 | $2,370 | $94,800 | ||
| Madera | 32 | 31 | 31 | $446,750 | $2,810 | $112,400 | ||
| Merced | 27 | 26 | 27 | $427,250 | $2,690 | $107,600 | ||
| Placer | 31 | 30 | 30 | $675,000 | $4,250 | $170,000 | ||
| Sacramento | 28 | 27 | 26 | $550,000 | $3,460 | $138,400 | ||
| San Benito | 26 | 22 | 21 | $750,000 | $4,720 | $188,800 | ||
| San Joaquin | 29 | 26 | 25 | $545,000 | $3,430 | $137,200 | ||
| Stanislaus | 28 | 26 | 29 | $485,000 | $3,050 | $122,000 | ||
| Tulare | 33 | 30 | 31 | $380,000 | $2,390 | $95,600 | ||
| Far North | ||||||||
| Butte | 27 | 24 | 29 | $461,000 | $2,900 | $116,000 | ||
| Lassen | 52 | 46 | 52 | $257,500 | $1,620 | $64,800 | ||
| Plumas | 30 | 34 | 23 | $466,500 | $2,940 | $117,600 | ||
| Shasta | 35 | 33 | 34 | $375,000 | $2,360 | $94,400 | ||
| Siskiyou | 35 | 37 | 36 | $329,500 | $2,070 | $82,800 | ||
| Tehama | 35 | 29 | 38 | $341,500 | $2,150 | $86,000 | ||
| Trinity | 34 | 30 | 34 | $302,480 | $1,900 | $76,000 | ||
| Other Calif. Counties | ||||||||
| Amador | 36 | 35 | 38 | $437,500 | $2,750 | $110,000 | ||
| Calaveras | 34 | 33 | 31 | $472,000 | $2,970 | $118,800 | ||
| Del Norte | 34 | 29 | 28 | $384,000 | $2,420 | $96,800 | ||
| El Dorado | 29 | 27 | 27 | $690,000 | $4,340 | $173,600 | ||
| Humboldt | 25 | 23 | 23 | $446,620 | $2,810 | $112,400 | ||
| Lake | 29 | 34 | 35 | $358,250 | $2,260 | $90,400 | ||
| Mariposa | 29 | 26 | 27 | $425,000 | $2,680 | $107,200 | ||
| Mendocino | 26 | 20 | 18 | $470,000 | $2,960 | $118,400 | ||
| Mono | 7 | 8 | 7 | $1,079,000 | $6,790 | $271,600 | ||
| Nevada | 30 | 27 | 26 | $550,000 | $3,460 | $138,400 | ||
| Sutter | 28 | 27 | 28 | $455,000 | $2,860 | $114,400 | ||
| Tuolumne | 36 | 38 | 40 | $430,000 | $2,710 | $108,400 | ||
| Yolo | 25 | 22 | 24 | $620,000 | $3,900 | $156,000 | ||
| Yuba | 28 | 26 | 27 | $437,000 | $2,750 | $110,000 | ||
Projects that you might choose to sell your personal home can be drastically different from what you might choose to do in order to sell your rental property. For example, to sell a single family home, you might consider changing countertops, paint, flooring and hardware. However, if you’re selling a rental property, that might be what my family calls “SEP”: someone else’s problem. In this case, the problem belongs to the tenant and often it is sufficient for them.
So what should a landlord consider as a capital expenditure project prior to listing a property? You can start with your major systems. Oftentimes a lot of landlords are not first time home owners and they have some experience with roofs, HVAC systems and water heaters. You can also consider what are the least appealing calls to get as a landlord. I might put a roof leak at the top of my list. Nothing like having a simple roof leak expand into a much more significant problem. The last thing I might consider would be the curb appeal. Re-imagining landscape and fencing such that both a new owner and a tenant are happy to walk the property is certainly a great way to invest in your investment property.
The big complaint since summer of 2022? Rates are higher than they were during COVID. Sure. We all anticipate that rates will come down, but by how much and how long do we need to wait for things and rates to get good?
For awhile, the thing that made the most sense was a temporary buy down. Makes entry a little easier and takes a lot of pressure off when those big unknowns come up and it’s not covered under your home warranty or insurance costs. Or maybe you wanted to do a couple things right away and reducing your monthly payment early on enables you to do those sooner rather than later AND add equity right away.
But now we know rates are coming down so your buy down is just kind of chasing the market. That doesn’t really do you any favors if you aren’t getting that artificially low rate. So now what?
If it’s available to you, relationship discounts. Most big banks oftentimes offer a discount on a rate if you keep your money with that bank. There are thresholds you meet that correspond to numerical discounts and that’s how they determine your new rate. What this essentially translates to is that you are paying your bank to borrow your own money. So what’s the incentive to do that? If it were me, I don’t want to tie up “X” percent of my money in one particular asset. Paying to borrow your own money affords you the opportunity to stay diversified especially at an artificially lower rate.
This actually came up when I was chatting with a lender friend of mine. We realized that if someone had enough money with his bank, along with being well qualified of course, he might be able to offer someone a rate in the 4’s!!! When was the last time you heard about a new loan with a rate in the 4’s? It was probably at least 3 years ago at this rate.
The answer? Investors!! They’ve been sitting on the sidelines waiting for a parting of the seas and they’re seeing it.
For anyone who has had money invested in the stock market they have been enjoying a really strong bull market. Over the course of the last two years, the Nasdaq is up by over 80% and the Dow Jones is up by over 40%.
Real estate investors have been battling high rates, higher prices and tenants who are less inclined to move because the job market has tightened up so much. However, things are changing. Rates are dropping and we have what looks like a path forward to more rate cuts. We have stagnant inventory. And because there isn’t a lot of mobility, when people do move, they oftentimes want to head to premier locations.
We’ve got a perfect storm for investors:
Things are looking very promising for investors. The investors will also likely continue to drive our market until more individuals feel more confident with their employment and decide that it is time to upgrade their homes.
The Wall Street Journal recently had a spectacular instagram post that really succinctly captures the difficulties that we have faced within the real estate market: lack of mobility. Mortgage rates are nearly twice as high as they were during COVID. Employers are not fighting for new employees anymore. Quiet quitting is no longer a common phrase. If anything, many employees are happy to not be losing their jobs.
So what does this look like within our market? It looks like low inventory coupled with lower demand. The consequence of this is low price growth and not too many transactions. Good news: many homeowners have low rates and a lot of equity. The pressure to sell, negotiate, and mobilize our market doesn’t necessarily exist.
For insight into the predictive changes surrounding the Fed’s path for interest rates, come back next week!!
If you aren’t incrementally increasing rents, you could be losing more money every year that goes by. Your property taxes increase and wear and tear is a regular expense.
Between property taxes and ongoing maintenance costs like water heaters, appliance repair and replacement, leak repair, etc, expenses with property ownership can grow. This doesn’t even include the amount of repair after a tenant leaves. Those can be major deterrents to life as a landlord.
However, if you do small, incremental rent increases, you can mitigate some of those unforeseen expenses. Also, if you do this every year, you can teach your tenant to expect increases to their rent every year and never have the difficult, “why is my rent going up” conversation again all while collecting more rent!!
The big question now, how far off market rent are you? Is it best to work with your tenant? Maybe it’s not worth it and it’s time to replace your property for one that is currently generating market rent. Contact me today to help you walk through this decision making process.
Can you believe it!! We’re already half way through 2025. Time to look at how our market has changed. As a point of reference, I’m going to include and highlight my notes regarding the subjects from the beginning of the year.
Rates
Yes the fed has dropped the federal funds rate. However, according to Mortgage News Daily , mortgage rates haven’t progressively decreased. As of right now, the expectation is for two more fed rate cuts. This doesn’t directly correlate to lower mortgage rates. At a minimum, the hope is for mortgage rates to not increase.
We’re halfway through the year and we have not yet received any rate changes. There appears to be some amount of conflict between the Fed Chair Jerome Powell and President Donald Trump. Trump vehemently wants lower rates. Powell expresses concerns regarding tariffs and how those changes will affect our economy. There is still some level of hope for two rate cuts. That being said, according to Mortgage News Dail, rates are roughly down by about half a point.
Rent growth opportunity for first half of 2025
Because inflation has still been relatively high, most landlords will be able to increase rents by 8.9% until July 31, 2025. The general rule of thumb is 5% plus CPI with a cap of 10%. This doesn’t mean that all rents are up by 8.9%. Given that CPI is likely to come down with the Fed’s effort to combat inflation, there might not be opportunity to charge rent at an increase of 8.9%. It is probably most applicable for long term tenants who are currently under market.
For the upcoming year and in Orange County, the allowable rent increase is 8%. This indicates that CPI is at 3% and that inflation is slowly coming down. This ought to provide a little relief to tenants as well as continued growth for landlords.
Year over Year changes in Sales Price
Over the course of the past year, our average sale price slumped by nearly 20%. This is a good reflection of lower rates having a strong impact on the market. Higher rates mitigate affordability for buyers and reduce purchasing power. As rates drop/level off, it’ll be valuable to compare rates against sales prices.
Flat. Nearly absolutely flat in terms of year over year changes. This seems fair given the conjunction of more inventory and slightly reduced demand.
Affordability
Affordability has improved by about 14%. Although mortgage rates are currently a little higher than they were this time last year, purchasing a home is now a little easier for current buyers for home prices that have softened. If rates or prices come down, this will continue to improve affordability.
Affordability, slowly but surely continues to improve marginally. If the changes don’t already seem negligible, let me reinforce it with a number: 2.8% improvement in affordability. With little to no changes in year over year pricing budding up against marginally improved interest rates, buyers are getting a slight relief in affordability.
Inventory
Inventory ticked up by about 11%. This seems to support the picture of pricing coming down. With more inventory, there is less competition for buyers and greater opportunity to negotiate.
What did change significantly is the increase in inventory. Our inventory grew by more than 26%. This jump would be very concerning if we weren’t in a high demand marketplace like Southern California. The other variable in this is that a lot of these sellers have a lot of equity in their homes. The sale isn’t the house of cards that drove a lot of the recession. A lot of that is about changing lending practices as a side effect of the recession.
Year over year volume of sales
On the other hand, we had a nearly 10% increase in the volume of sales. Deals got done. Buyers could negotiate. This also seems to support the idea that we aren’t crashing. Demand is still strong. However, it is muted with lower affordability in contrast to. years past.
Not quite proportionately with the increased volume of inventory, we also have an increased volume in sales. Our volume of sales increased by just over 17%. I mention the increased inventory in correlation as it reflects ongoing demand. As long as both sales volume and inventory are moving in the same direction, the market is communicating clearly: we still have good demand.
List price versus Sale Price
Ultimately, this ratio didn’t change. Sellers met the market.
Our list price versus sale price increased by 1%. This number in conjunction with our increased volume of inventory are definitely indicating the significance of pricing properties correctly.
Year over year changes in days on market
Average days on market came down. Demand is still relatively strong.
Our average days on market continued to come down by 14%. It also demonstrates that when sellers want to sell, they price their property well and meet the market.
It’s the beginning of a new year!! Time to look at how our market has changed over the course of the year.
Rates
Yes the fed has dropped the federal funds rate. However, according to Mortgage News Daily , mortgage rates haven’t progressively decreased. As of right now, the expectation is for two more fed rate cuts. This doesn’t directly correlate to lower mortgage rates. At a minimum, the hope is for mortgage rates to not increase.
Rent growth opportunity for first half of 2025
Because inflation has still been relatively high, most landlords will be able to increase rents by 8.9% until July 31, 2025. The general rule of thumb is 5% plus CPI with a cap of 10%. This doesn’t mean that all rents are up by 8.9%. Given that CPI is likely to come down with the Fed’s effort to combat inflation, there might not be opportunity to charge rent at an increase of 8.9%. It is probably most applicable for long term tenants who are currently under market.
Year over Year changes in Sales Price
Over the course of the past year, our average sale price slumped by nearly 20%. This is a good reflection of lower rates having a strong impact on the market. Higher rates mitigate affordability for buyers and reduce purchasing power. As rates drop/level off, it’ll be valuable to compare rates against sales prices.
Affordability
Affordability has improved by about 14%. Although mortgage rates are currently a little higher than they were this time last year, purchasing a home is now a little easier for current buyers for home prices that have softened. If rates or prices come down, this will continue to improve affordability.
Inventory
Inventory ticked up by about 11%. This seems to support the picture of pricing coming down. With more inventory, there is less competition for buyers and greater opportunity to negotiate.
Year over year volume of sales
On the other hand, we had a nearly 10% increase in the volume of sales. Deals got done. Buyers could negotiate. This also seems to support the idea that we aren’t crashing. Demand is still strong. However, it is muted with lower affordability in contrast to. years past.
List price versus Sale Price
Ultimately, this ratio didn’t change. Sellers met the market.
Year over year changes in days on market
Average days on market came down. Demand is still relatively strong.
It’s subtle, but the market is slowly cooling. We’re seeing less new inventory. The existing inventory is becoming stale. The number of escrows is down significantly. All of this being said, we still only have 4 months supply of inventory. That may suggest that we’re not in a buyers’ market yet. List price versus sale price is tending down, but really negligible. Finally, pricing is relatively flat for the last 4 months.
So what’s the takeaway? We appear to have 3 different variables all working in conjunction with one another: rates, inventory and pricing. It appears that an awful lot of buyers are happy to wait for lower rates. We are not seeing more new inventory, but the existing inventory is hanging around. Some of the pent up inventory is waiting for lower rates too. Most homeowners are experiencing the golden handcuffs effect where they don’t want to give up their low interest mortgages to take on much higher rates for a preferred home.
Prices held firm through rate hikes because our inventory and volume of transactions plummeted in comparison. Good news for all parties involved, rates are dropping. Lower rates makes the exact same price for a home more affordable. Just like prices held through rate hikes because of low inventory, if inventory is rising and rates are dropping this ought to provide justification for prices to stay steady or increase. This would increase affordability without increasing prices and open the door for a lot more transactions for both buyers and sellers.
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