The Peak of the Market

The Peak of the Market

People ask me about it all the time. I kept looking for it day-by-day, week-by-week. No, it wasn’t Sasquatch. I knew what I was looking for because I’d seen it before. Many times before, in fact. For a long time I couldn’t find it. Then suddenly, there it was, right behind us.

It” is the “peak of the market.” Many people want to find it. Generally, just for curiosity, not for any substantive reason. Statistical market peaks don’t really mean much in our everyday lives. Not even for most real estate matters. Really? Yes, it’s true. Consider these four topics:

Refinancing: There are a variety of reasons to refinance a mortgage loan. Some of which may depend more heavily on appraised value than others. But in all cases the financing options and pricing available will depend on the desired loan amount, income, debt, credit scores, and other factors. In the context of refinancing, if there is sufficient equity to satisfy borrower objectives and lender requirements, a little more or less equity probably wouldn’t change the outcome dramatically, so timing a refinance at the peak isn’t necessary.

Remodeling: Contractors in Silicon Valley are busy and have been for years. Many general contractors are booked solid for six to twelve months, even more. They can’t or won’t take on new business. For most categories of contractors their pricing is based on the demand for their services. When they’re hungry to get more business their prices decrease. But when they’re busy they can afford to turn down business and many of them do so by intentionally “pricing themselves out” of projects they don’t want to take on. This reality has nothing to do with real estate market conditions.

Tax Assessment: In California, Proposition 13 allows the County Assessor to increase property taxes by a maximum of 2% per year. Our market appreciation for the last several years has far exceeded that rate, so it will take a long time for the assessor to “catch up” with property values. And even if values dropped (that’s a whole different discussion) assessments will continue to increase until baseline assessed values creep much closer to each home’s actual market value. Peak or not, the county assessor has a lot of catching up to do whether values rise or fall in the near future.

Sales Price: In all market conditions, whether a peak, valley, or something in between, there are things a seller and a good agent can do to buck market trends. Peak statistical values contain data from low and high-end properties in a broad range of condition and geographical areas. Properly preparing a home for sale, given the unique aspects of the individual property and the seller’s objectives is where the focus should be, not on what the broad numbers may be indicating.

The real estate market peak is similar to a company’s stock price, or maybe the stock market as a whole. We only know when we hit the peak a few weeks or months after it happened. The peak is behind us, for now. No fake news here, as the data clearly shows. But just like in the past, we’ll see more of them as time goes on.