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There’s been a few houses that have come on the market but so far inventory is still very limited. Although limited it’s still not a total sellers market. The two spring houses that were listed Lakepoint and Midway have both taken a bit longer to sell. Lakepoint came out with a very high price ($2 million) and today went down to $1,875k. This is still a highly sought after area but it still has some gravity to it.

Interest Rates

Since March 2022 the federal reserve (the Fed) has hiked interest rates from 0% interest rates ten times to where it currently sits at 5.25%. The fed claims this has been done to tame inflation.

The latest data shows inflation is finally waning to 4%. Still higher than the magical 2% rate they are looking for.

As mortgage rates follow fed rates, those two have increase to where they now sit at 7.22%.

This means the house you can afford is less if you choose to get a mortgage. For example at $1 million home with an $800,000 loan at 7.22% will require $5,441 a month just on the loan (taxes, insurance, and utilities would also need to be paid). But if you had a 2.5% interest rate like many people did in 2021 then you now are only paying $3,160/ month. Almost $200 difference each month.

This should make housing prices go down and historically that has happened. But why not now?

Pandemic effects

The pandemic changed two major things about work life for many Americans:

• Remote work became more common place.
• People don’t go into the office everyday even if they live nearby.

Because of this the pressure to relocate for a job is much less. This translates to less people selling homes and thus makes the market supply constrained. Despite the rising rates by the fed, the labor market has remained red hot with many high paying jobs open and available.

Let’s suppose someone had an $800,000 mortgage at 2.5%. Their monthly payment is $3,160. You can see that if they bought another house with an $800,000 loan at todays rates they are looking at $5,441 payment a month just in mortgage expense. This dramatic increase shows why it would be difficult for someone to move.

This means people won’t move. Less than 10% of all mortgages are above 6%. Even back in the early 2000s I spoke with people who lived in the heart of Huntington and they all said: “There’s no way I could afford my house today”.

One last item: Proposition 13. Buying a home in this neighborhood would make you pay around $15,000 a year in property taxes adding more than $1,000 a month on top of that hefty mortgage payment. Your neighbor who’s lives there for 20 years? They’re paying $7,000 or half of what you would pay. It’s hard for them to want to move and then increase their property expenses.

This leads to a lot of older people remaining in the area, low turnover, higher prices and a lack of pressure to sell. The most likely people selling now in this neighborhood? Older people who are no longer able to take care of the property, walk up stairs and need a different living accommodation.

Ever since I moved out of my parents house on Brentwell and moved north to San Francisco I’ve wanted to buy a home in the heart.

Because of different jobs and family circumstances I was never able to even put an offer down. It seemed to me that if I was able to do $400k then prices would be $600k. Then when I got to $600k the needle had moved to $800k. I always felt like I was just a little late and a dollar short. (Well, a few hundred thousand dollars short).

The other thought I had was that if I bought then I was buying at the top of the market. That always made me hesitate.

There were two times this changed in my adult history. One was in 2008 when the housing market collapsed. At that point I hesitated but could have done it had I dug deeper. I have regrets of not going in when the chance was ripe.

Then in early 2021 I had the chance as interest rates were low and the housing prices hadn’t rocketed (again) yet. But in January 2021 I took action for the first time! The house at 18091 Fieldberry Ln went up for sale. It was the house of someone I knew. (Well I knew one of the girls as she was my age and we grew up together).

I worked with Dixie Long and put down an offer of $1,200,000, the asking price. I was ready to go but was scared. This was the top of the market! (Again) and I told them I was not going to raise my price for nothing. The house was perfect. It wasn’t completely remodeled and it had a gorgeous pool in the backyard. It was even the same floor plan of the home I grew up in!

The house sold to someone who offered $60,000 more. $60,000 is like nothing when you are in for $1,200,000 and the interest rate is 2.5%. I should have bid up. The home on Zillow now estimates at $1,538,700.

As rates went up later that year and I bought a different house (not in the heart) I learned a few things:

1. It’s not about the price it’s about the monthly payment. I hadn’t bought a house nor had a mortgage for many years at that point. I looked at the giant price tag and thought “no way!” Since rates have gone up I’ve realized how manageable it would have been to have that additional $60k.

2. There is a lot of demand in the heart and prices are resilient.

3. This is cliche but you can not time the market. I thought: well prices will go down when rates go up. That hasn’t happened. Some how with rates going up the prices have still gone up.

I remain optimistic that I will still buy in this neighborhood. I foresee a lot of turnover in the next decade. Homes don’t go on sale very often here and they will be less now that interest rates are higher (7%) but an aging population doesn’t care about interest rates.

Many of the people in the heart have lived there for 20+ years. I know people that have been there 40+ years. As this population continues to age there will be a point where many of these homes go on the market.

It may take a while, but I’m patient. I’ve waited 20 years. I can wait another 20.

I used to skate to Hope View back in the 80s and there were a few ways to get there. You could just go straight down Edwards and turn left on Flintstone. That way wasn’t as fun as the asphalt is bumpy. The way we went was back through the maze of Dutch Havens.

These were fun homes and good people. But they are not in the heart. In the first place they are three bedroom homes with smaller floor plans. While I’m good with this the cost of these homes compared to a Bolsa Landmark doesn’t really make sense. These homes will usually be around 70% the price for 60% of the house. Sometimes 50% of the house.

Some of these have also been given atrocious additions making them undesirable.

The ocean breeze isn’t as strong here. it’s hotter and sadder.

I also find the streets aren’t as wide.

Now the people on Balmoral and Hampshire might be saying “hey we have bolsa landmarks too”. Sorry you are still not in the heart. Too much through traffic in your neighborhood.