8 Critical Factors Affecting the Real Estate Market in 2010 Part I

The 2010 San Mateo County Housing Market will present challenges and opportunities as never before to home buyers, home sellers and real estate investors.  Here’s how we see the 2010 San Mateo County real estate market.

The First 4

Today, we’ll give you the first four of our 8 critical factors affecting the San Mateo real estate market in 2010.

• Bi-Focal Market Persists
  
• Upper End Price Tier Correction
  
• Cash Rich Investors
  
• Tax Credit Deflated
  

San Mateo is a Bi-Focal Market

The San Mateo County (CA) housing market is a tale of unique two markets.  In the most vigorous segment, we find home buyers and investors competing for the same single family homes but with different motivations.  Home buyers who may have been priced out of the market are clamoring to buy the most affordable homes in the past decade.  With more leverage are investors armed with cash who are aggressively purchasing single family homes for immediate cash flow and long term appreciation.  Multiple offers and over bidding in this price range will continue to frustrate buyers as they hear national stories about “fire sales” and “bargain deals”   that don’t exist in San Mateo, California.

The other segment in San Mateo County comprised of homes priced in the $800,000 – $1,100,000 price range – typically the trade-up market – will see prices stabilizing and a perceived degree of relative normalcy returning in 2010.   However disconcerting is a buyer pool that is not exuberant and contract price appraisals will not be a certainty.  With the new Fannie Mae and FHA appraisal guidelines, one or two foreclosures in a neighborhood can have significantly adverse effects on an individual home’s appraisal.   One foreclosure can diminish the value of a home.  This is a price sensitive market where buyers diligently comparison shop.  Sellers who are serious and committed to selling their home must recognize their home is only worth what a buyer will pay, and the seller’s need or desire to sell has no influence on the value of the property.

Upper End Price Tier Correction

The upper price tier of San Mateo County’s housing market will undergo a price correction due to increasing unemployment and a smaller, more cautious buyer pool.  Many trade-up home buyers are willing to rent while taking a wait and see attitude.   As mortgage interest rates climb, the buyers’ perception of home values diminish, the upper end of the housing market will experience added downward pressures as prices are more aggressively negotiated by buyers seeking greater value and return on investment.

Cash Rich Investors

Cash is king, but that’s not news.  The big news is the composition of the investor market where investment pools buying in bulk will begin to impact the San Mateo County foreclosure market.  Frustration will mount for the individual home buyer – especially the lower-end home buyer – who cannot compete with cash rich investors who can buy quickly with less concern for the condition of the property and more concern about the financial terms.  Many foreclosed homes will not be seen on the MLS as investors side step REALTORS by going directly to the asset managers and banks.

Tax Credit Deflated

The bubble of hype will burst as the $8,000 Tax Credit extended through April 2010 is tarnished by climbing interest rates and tighter underwriting standards.  For buyers, this means that the longer you wait to buy the less financial benefit will be available.  Interest rates – particularly increasing interest rates – will have a much more significant impact on purchasing a home than a one-time tax credit.  For sellers, this means just another reason for home buyers to move to the sidelines in hopes for better opportunities.

Want the Next 4? Check Out Part II

8 Critical Factors Affecting the Real Estate Market in 2010 Part I

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Raymond Stoklosa, Chela Stoklosa and Rebecca Williamson are Realtors with The RayChel Realty Group specializing in Santa Clara and San Mateo Real Estate.

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