U.S. Commercial Real Estate Is Headed Toward a Crisis
U.S. Commercial Real Estate Is Headed Toward a Crisis
podcast
Introduction to the Real Estate Market Shift
Commercial real estate is seeing a shift in inventory. US inventory is coming in issue and mortgage rates need to be at 5%. Along with that, we're doing an inventory snapshot, Mountain View home, and Apple home of the week, and let's get going. All right.
Rising Inventory in Various States
There's a shift happening in us housing markets that just looks at inventory.
If you look at this inventory starts to rise. Quite a bit. As a matter of fact, you look at New Mexico, Washington, Georgia, and Florida. Those are some issues over there. Why? Because people moved out there and they realized, I don't, I don't like being here. I want to go back to where I am, what I know, and I want to feel better going back to what I am, where I came from.
Impact on California and Florida
So people are moving back up to New York and back to California, back to wherever they came from.
California insurance is crazy expensive. Housing is expensive. So in different places outside of the Bay area, Inventory is starting to grow. You're starting to see that, especially in the. Central Valley is on the coast down here. And in Florida, people are paying an average of 10, 000 a year, just for the privilege of owning an insurance house.
It's, and that's kind of like throwing money away unless a hurricane happened. So while we're seeing, inventory increase across the nation, specific areas.
Bay Area Housing Market Analysis
Are not as affected as our Bay Area. Our Bay Area inventory is still hugely underwhelming. We're at 50 percent of where we need to be as far as single-family homes in San Jose, as well as Santa Clara County.
This could be one of the house of cards or one of the cards stacked in the deck to bring down the economy. If the economy goes down, then yeah, prices will go down. In the Bay Area inventory, investors will come and take that up because Silicon Valley, the Bay Area always bounces back.
Right? I talk about this a lot. I'm showing this as a Graphics. So you can revisit this. Maybe I need some more coffee,
but our housing here, I don't think it's going to be the tipping point. Talk about the automotive industry.
Concerns in Commercial Real Estate
I talk about the health industry and credit cards being overwhelmingly top-heavy right now, commercial real estate right now. Is a place where I am really concerned. I keep seeing this and maybe it's just the algorithm keeps pointing it towards me because I focused on it.
But if you look commercial, the last couple of days I've been sending you, I've been showing you videos about big, huge, multimillion, hundreds of millions of dollars being foreclosed on in commercial real estate. It's dangerous. It's precarious and it's because these banks are leveraged and they, Can't service these loans.
And the minute there's a whiff that asset, that investment is seeing any kind of trouble, they're going to pull the foreclosure trigger on it, and that could be part of where we're going with the economy. Talk about unemployment, talk about this. I just saw something where stocks are starting to tumble a little bit.
That's all normal stuff, right? That's nothing to worry about until it becomes something to worry about. This is something to worry about. I would do a lot more reading if I were you to understand what's going on here. Could this trigger an economic crisis? This could be the tipping point.
This could be the reason why our house of cards falters. And that's, what's important to understand. We all are intermingled with this. It's not just one myopic view of the real estate market, right? We have multiple different things that are coming in.
We don't talk about unemployment because that's the numbers that they produce are
mingled at best. So understand that something to be aware of is that these markets are here. and I don't want to sound like a crash, bro, I just want you to be aware of what's going on. be very educated about where your investments are and understand that anything could be the one thing that knocks down our house of cards.
This just came up yesterday or today. It looks like today. This is the bank rate.
Mortgage Rates and Home Buying Challenges
47% of homeowners would need a mortgage raise under 5% to be comfortable buying a home this year. homeowners, how about home buyers, first of all? And yeah, everybody would be comfortable at 5%, especially since we're at 7% right now.
This is very painful right now, right? We're going to see 2%, or 3% if we see another. Pandemic or something, right? Something that triggers the market, but then guess what's going to happen. The investors are going to come in and then you're paying 400, 000 over the list price for a house.
Now there's the other side of this coin saying. loan officers pushing buyers into these loans at 7 percent saying, don't worry about it in a year and a half, the rates will come down. Well, we've been saying that for two years now and rates aren't coming down.
So that's putting people into a precarious situation where they might feel a little overwhelmed having to pay this huge onerous debt. People today, it's very difficult for us to pay about 7, 000 a month for a home.
Unless you have A massive down payment to cover that, to drop your monthly nut down, it's going to be difficult for you to move. And that's why we have the inventory problem.
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Overpriced Listings and Market Impact
That's why we have houses like this costing two and a half million dollars. Not my listing three bedrooms, one and a half baths, 1100 square feet.
This is near Apple. That's why I brought it up. Look at this. it looks like a mobile home built in 1950. Nothing great about it. The only thing great about it is this near Apple, right? Apple is right there. You can walk to work if you work at Apple. So that's why it's two and a half million dollars.
It's been on the market for 62 days. Haven't touched the pricing. Why? Because the seller. Thinks that their house is worth two and a half million dollars and they're willing to wait to find the right buyer. I think this hurts everybody. I think it hurts the market. I think it's unreasonable.
Remember when we talk about attracting the market or being a market maker, the seller wants to be a market maker and there's nothing special about this house. I mean, look at it. I think we've looked at this one before. It's just a piece of crap house. There's like all the values in the land. Well, okay, then I have, I'm not gonna, I'll pay him one and a half million for the land, but when you're on the market two months.
You become part of the statistic. You become part of the problem. So I think originally this was a two bedroom and then they built this out right here. They built out the garage into it. nothing special about that house. This one is semi-close to Castro Street.
Mountain View Home of the Week
This is the mountain view home of the week.
Again, not my listing. Three bedroom, one bath, 1182 square feet, built in 1952. I think it's a nice little ranch house. Been on the market for 16 days. So it's still fairly fresh. Okay, really quick. Just show you the numbers here.
Current Market Statistics and Trends
July 24th. We have the days on the market report as 40 days on the market. We have 165 single-family homes in Santa Clara County and 90 days. We have 39, which is staying fairly nominal. If you look back at the last couple of months, back in March, we had 57 homes for sale, but again, It's kind of a normal thing when you see you go into the summer and things slow down.
So I wouldn't be too worried about it. We have 78 bank-owned properties in the Bay area and all of California is 167. Those numbers went down from last week. So bank owns a kind of ebb and flow where they'll put a bunch of homes on sale. At the beginning of the month and toward the end of the month, they want to capture that.
And it kind of goes every month. So it kind of ups and downs every by the monthly cycle. So I'm going to say we have 500 homes for sale. We need a thousand, but right now it's actually good because the volume of sales transactions right nowise slowing down. After all,e it's the summer and some people are waiting for the Election to happen.
They have this. It doesn't matter who the president is. It doesn't matter who the governor is, depends on the. Economy. And it doesn't matter if you buy a house today or the day after the economy crashes the value will come back eventually, right?
It's about when you buy and when you sell, and if you can afford to compete with investors, then do that.
Final Thoughts and Advice
But if you're a first-time buyer, I say, buy a house now, suck it up. And if the market does crash, rates will come down and then you can refinance. And in 10, 15 years, you'll be doubling your equity there, Santa Clara County, a thousand homes for sale.
Same thing. 180 closed homes. Again, not anything special, probably the Third highest, fourth highest that I've seen so far this year, but volume is severely down mostly because inventory is down and because of interest rates. Right. So there you go.
A
A 5 percent loan is a great target rate for homebuyers. And, there's a shift happening across the United States, not necessarily in the Bay area on inventory. So just keep an eye on everything. Come back to the website. Come back to my blog. My blog is here every week. every day I put a new blog up and it has all this information and the videos so you can revisit it.
And there you go. All right. Have a great Wednesday. I'm Vito with Abitano. We'll see you out there.
Vito Scarnecchia Real Estate Broker, Veteran, Dad DRE#: 01407676 408-705-6817 Vito@abitano.com Website: abitano.com https://www.onereal.com/vito-scarnecchia-1 update your home value: https://hmbt.co/bT7qRJ RELOCATION@ABITANO.COM FREE DESKTOP APPRAISAL https://www.propertyrate.com/agent/vitoscarnecchia If you are moving ANYWHERE in the world - Let me know! I know a LOT of AMAZING Agents! Book appointments here: https://calendly.com/abitano/15min Home Buyers Course YT YouTube.com/SanJoseLiving IG https://www.instagram.com/abitanogroup/ FB https://www.facebook.com/vito.scarnecchia/ LI https://www.linkedin.com/in/vito-scarnecchia/ Blog http://blog.abitano.com/ POD https://spotifyanchor-web.app.link/e/oxdH1Hwfcvb Professional Photography by Kim E https://photosbykime.com / Local Real Estate Market and Home Value Report https://hmbt.co/bT7qRJ Financial Intelligence https://docs.google.com/forms/d/e/1FAIpQLSc0R5pjHIAPguZ5GDEB-fTbGJXKpWK3coK9Khymv_GTWkMnyQ/viewform?usp=send_form https://www.onereal.com/vito-scarnecchia-1 Willow Glen's five most expensive homes https://youtu.be/3A_E2ck0ePg
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