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Hey, guys 11 trillion in lost commercial real estate value lending is going to get much worse. And bay Area market forecast. That's what we're talking about today. I'm MUTOs Garo with the YA Group. Thanks for watching. Real quick, we're going to go through a couple different things, but let's talk about inventory.
Inventory is still like an. I, know you want me to go, Hey, talk about this 11 trillion, but I gotta hold out a little bit. I gotta make it fun, right? So let's make this so that you can see it. And every week we do this just to see what San Jose's doing. Remember, we do high levels then down and highs and lows yesterday, halfway through it and it died on me.
Multiple retail outlets- wholefoods, home depot, gap, closing shops - stated theft is too much.
Bay Area Housing Market Forecast
Okay. Yeah. If you look. Inventory's become quite the issue. It slowed down a little bit in the first part of January and December, which we expected, but we really haven't recovered from it. It went up a little bit and then went back down. Guys, that's dangerous. It's dangerous because affordability is dangerous because even though rates have come down, people are still going to panic, we need to have a better choice, a better set of choices.
Houses are still selling. We still, closed 71 houses last week just in San Jose. These are single-family houses, not condos, townhouses, or what have you. We closed over 300, I think it was three hundred, a hundred thirty-seven, sorry, 137 homes last week in Santa Clara County. Altogether.
That's good. That means the demand is there. It doesn't matter what the rates are, we just don't have the supply. My feeling is we had twice the amount of supply I, think it needs to be about. Seven to 800 units live active first sale in San Jose at any given time to make it a healthy equilibrial, Librium, or e equal, equally balanced market so that we, for the rate that we're looking at and the number of people that can afford it, these people that are buying it right now they're the haves.
They're the people that have a ton of money. They don't care about their rate. They know they can negotiate it. They're doing transactions from last year. Now again you're, going to start seeing that this number gets lower as the year continues. But remember this is from the firestorm that we have had for the last three years since Covid o all the way up until April of 2022.
It was a firestorm. People just bought, they panicked. So that's why we're seeing prices come down a little bit. I don't think we're going to see much more of a contraction unless what we talk about with the 11 trillion market loss. All connected dots here. Okay, so list price. The average list price in San Jose is 1.5.
The average sales price is 1.6. Now, that doesn't mean anything because you look at the averages here and we're still down from last.
Considerably by 200,000, right? The medium price is 1.5. The list price of sales. The price ratio is 94.3 on the whole, right? We had a high of 1 28. We actually had somebody misrepresent the, let's see if I can revert this real quick. Oh. Somebody actually
messed up a little bit. We had 107 close the Century Oaks. No Wait, Oh, somebody sold. Oh, I got it, I guess it got changed. Good. Good for them. Somebody, closed it and listed it as this these, are actives. I think, hang on a second.
Obviously, Vito, you need to work more in your MLS, not like you don't work into it. Enough. Sold last seven days, 74, that's the number I gave you. You have a 71. So we had a couple extra closes just now. This one right here, Creekview Middle Lane, listed at 2.99, went down to 2.0. No, it didn't. It lasted 25 days and nothing against the agent, it was just a small mistake.
It sold for 2.85 million, not 28.5. So as skewed the numbers around. So when you look at the numbers here, these numbers are not exact, so please forgive. But at least I let you know. So 128 is the high one. 89% is a low off of the original list price. And we had 53 out of the 71 homes sold over 100% over the list price.
That's impressive. That pop that nu number up, you have to actually remember that it's not 51 because it's 52, so that's 73%. So it's not that much of a difference. We have 82 pending, that's 82 houses in San Jose, which went into contract over the last seven days. So how houses. Decreasing. We had two more than last week, and we had 22 come back on market.
Lending it going to get much more difficult.
Margins going up
This is cumulative as well. And then cancellations. The last seven days are 15 because people had with pricing. That number has gone down. Quite considerate. Okay. Lending is going to get much tighter. Okay. Okay. Now, from a lender's point of view, whether you go to Bank of America, Quicken, or Hector, there's something.
Margin. That's the profit that the lender, not the bank, not the originator needs to make for them to make their job profitable. They're in everything you do, you have to do it with profit. When we had prices go down crazy and rates went super low, Margin compression happened, which meant that their manager went down, which is part and parcel.
The reason why that signature Bank and Silicon Valley Bank went out was cause they bought a bunch of low-margin loans. Margins are pouring back to normal, which is almost 2% now. So on the, fed rate, whatever that is, let's call it 4% banks now are going to charge 6%, and that's their profit. That's how they make business.
That's how they make money. That's just a natural thing. Because of this, now there is going to be more, or less competition, so now it's time to get their money. And they're going to make it much more difficult for you to buy a loan or buy a house with a loan. And that means your, credit has to be better.
Your down payment has to be better. Your reserves have to be better, your income has to be better, or you're going to pay for it because you're much more of a risk just like you were before. However, there was so much competition before, but now it's less competition. Now it's time for them to make it.
And as we stated, the market isn't dying. Demand is not dying. So natural competition allows the banks to charge a little bit more, which is what they're going to do. So just be on the lookout and be aware that you can shop, shop, shop all you want. You can go to Quicken, you can go wherever you want, and you're going to see prices go up a little bit higher.
Where you make better rates by buying points or giving points to the lender. Bringing that right down. And we have ways of making the seller do that right now. They are hard, so this forecast right here, depending on where you are, like San Francisco County's going to be hurting for a while. Napa County's hurting mostly because it's just a small little county.
Very still, very country, but it's modernizing. But our mar our, the forecast is inventory will remain low all the way across, mostly because, and we've talked about this before, 64% of the houses that have a mortgage on it now have something less than three and a half percent as an interest rate.
Why would anybody walk away from that? Sell their house and then buy a house at 6%? They won't. They'll just deal. Or they're going to become, they'll be forced into becoming a landlord. So there's there, there's no reason for them to do that. And even if they have to put a thousand dollars a month into a house, they'd rather do that and keep that spread so that somebody pays down their mortgage a lot faster than somebody else, and then they go out and buy another house for at 6% or six and a half percent.
Pardon me. So my, thoughts are, F being myop because real estate is, the market is going to stay stable for the next year, the next six months to a year. One of the tipping points is when we talk about the tipping points being healthcare, credit cards, automotive what is, and other things.
Another thing that I just learned about is commercial retail. Now you go down and see all these other houses, all these buildings, and half of 'em are empty, or you can't get 'em prepared or fixed because the permit department, the inspectors aren't coming through. And shame on you San Jose for doing that, but.
Retail outlets, the mega stores, and you see it all over on YouTube and TikTok and Facebook and everywhere you see people coming in. I saw it just the other day at Safeway. I was buying donuts for my camera people at the church, and on Easter, I saw a young girl stealing a big arm full of groceries out of the Safeway, down the street from here.
Theft is out of control. And they're like, screw you. What are you going to do? You're going to arrest me. Okay, see you. Bye. I'll be out in a couple days and you're not going to whatever, because there's no backlash there's no punishment for the crime, so why not do it? So what we're seeing is Home Depot, just like what happened last year when they lost, what was it, 30 billion, 30 million, 13 million worth of inventory.
The Home Depot, which is right across from Oak Ridge went up in flames because somebody lit up the lumber yard a, as a diversion to steal some tools, right? They caught him. He probably got a slap on the. Home Depot Gap is selling off Whole Foods in downtown San Francisco. Closing down, we've heard c v s is closing down.
Just I understand that we have these measures to let these people go through and whatever that is, it's not for me to decide, who knows, but the problem is, retail capitalists, are not going to deal with it. Home Depot, gap whole Foods, all these other stores Safeway, they're not going to, they're not going to stand for that.
And if you don't turn things around and massively punish these people that are stealing outright c b s, they're going to close down. And then you're not going to have any offerings, retail offerings for your people, your residents, which is why San Francisco is being emptied out in drove. You can't. It used to be that there was a 3% vacancy.
Now it's 30%. 30% of the retail commercial property out there is taken. So there's over 60% vacancy in San Francisco on commercial property. That's where you're losing that. Why am I mentioning this? Because that could be a tipping point that could offset our economy here and in light. A powder keg of problems, not just here, but across the country.
Just like the credit cards, just like the automotive industry, just like the healthcare, just like everything else, that's another tipping point that is coming, becoming evident, and we're not dealing with it. We're just sticking our heads in the water. So I hope that if you're a politician and you hear this, you and I are pretty sure you're already aware of it, and they're like I can't do anything because.
Upper people say I can't do anything about it. That's too bad. You really should make a stand and say, we need to stop that. This is ridiculous. We're losing residents. We're losing revenue. We're losing tax revenue. We're losing property tax revenue. We're losing retail outlet stores.
We're going to lose massive amounts of value in our housing in our real, estate because of these loose measures. So enough of that. But I wanted to make sure that we talk about this, and if you have comments about it, please do in the bottom of the comment section, I'd love to hear your thoughts on this.
11 trillion, that's a lot of money. I don't think we can. I think this could be one of the major tripping tipping points for the comp the, country for our economy, and I, hope it doesn't happen. I hope we just keep our heads in the sand and nothing else happens, but who knows?
that's it for me. Today, we talked about the San Jose inventory. Oh, we didn't talk about real estate WTF of the week. We gotta look at this. Hang on a sec. Don't look at that. Looks like a spider. There's a little kid there. That's cool. I didn't just notice that, but what? I don't, what are you going to do? All right.
I'm Vito Scarnecchia with Abitano. We'll see you out there.
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