Solano Real Estate Scene: Solano real estate market remains healthy
Holy cow! The last time we had our IRA and 401(k) values drop like they have over the past month was in March 2020 at the start of the pandemic.
The Fed came out a few weeks ago and showed their cards to the market and transparently announced three rate hikes coming in 2022 along with a reduction of Fed bond purchases, which has been stimulating the economy since the crash in 2008. The first of those rate hikes will likely come as soon as March, the Fed announced after a policy meeting Wednesday.
The government has purchased $2 trillion worth of bonds over the past 13 years, which has kept interest rates down for consumers as well as corporations. The Fed funds rate today is close to zero. The Fed funds rate in January 1972 was 3.5%. It was 13% in January 1982; 4% in January 1992; 1.75% in January 2002; was near 0% in January 2012; and today sits at near zero.
These three rate hikes, if they happen, will bring the rate to 1% by October 2022, which is still historically low.
Blood is in the streets this past month or so because of fear certainly, but it is not just about interest rates. The stock market is up more than 25% per year for three years in a row and investors are selling stocks like Peloton that were overvalued along with trimming their exposure in strong value stocks so they have dry powder available to take advantage of great stock investments that may come at a cheaper price over the next few months.
The good news for our local real estate market is that mortgage companies have had strict underwriting standards for the past 13 years and almost everyone who bought a house can afford their house payment, which means, unlike many high-flier tech stocks, homes are not overvalued. We still have more buyers than sellers in the Bay Area and so even though mortgage rate increases affect affordability for some buyers, it feels like the real estate market will remain healthy in 2022.
Now would be a great time to list your home for sale and move up, move down or move out.
Jim Porter, NMLS No. 276412, is the branch manager of Solano Mortgage, NMLS No. 1515497, a division of American Pacific Mortgage Corporation, NMLS No. 1850, licensed in California by the Department of Financial Protection and Innovation under the CRMLA / Equal Housing Opportunity. Jim can be reached at 707-449-4777.