HOW IS MY INVESTMENT PERFORMING?
A prevalent misconception is that mortgage rates move in direct tandem with the Federal Reserve’s benchmark rate. In reality, mortgage rates are more closely linked to movements in the bond market. Investors, rather than reacting primarily to recent interest rate cuts by the Fed, appear to be placing greater emphasis on resilient economic indicators and the trajectory of inflation. Given prevailing market dynamics, should investors reassess the bond market’s influence on mortgage rates, and what implications might this hold for future borrowing costs? Why are mortgage rates remaining high when the Fed keeps lowering rates?
The question underlying the ever-popular inquiry—”How’s the market?”—is, at its core, a straightforward one: “How is my investment performing?” The past five years have been nothing short of a rollercoaster for real estate, marked by unprecedented volatility and a deluge of headlines chronicling its twists and turns. The pandemic-era housing market saw an extraordinary surge, with both transaction volumes and median home prices rising sharply between March 2020 and mid-2022. However, by July 2022, headwinds emerged. The 30-year mortgage rate began its ascent, climbing relentlessly until late 2023, when it peaked just shy of 8%. This dramatic shift in borrowing costs sent ripples through the market, leading to a sharp decline in both home sales and price growth. While year-over-year metrics often serve as the standard barometer, this year offers an opportunity to take a longer view—assessing a decade’s worth of appreciation. Despite prevailing economic uncertainties and the broader mood of caution, San Francisco real estate remains one of the most resilient and rewarding long-term investments available.
2024 VS 2014
↑ 36.7% MEDIAN SALE PRICE
↓ 22.7% NUMBER SOLD
↑ 20.8% AVG $ / SF
↑ 5.44 % TOTAL SALES BY VOLUME
↑ 23.53 % DAYS ON MARKET
Property Market Trends: A Decade of Homeownership
For homeowners assessing the real impact of market fluctuations, the numbers provide a compelling narrative. Consider a property acquired in 2014 for $2 million. Based on market trends, its current valuation would stand at approximately $2.73 million—down from a peak of $2.92 million in 2022, when property prices reached record highs before the Federal Reserve’s tightening cycle began. This represents a gain of $733,700 purely from market appreciation, in addition to the equity accrued through mortgage repayments. Assuming a 20% down payment and a 30-year mortgage at a historically low 2.5% interest rate, the outstanding loan balance would now be approximately $1.2 million. This translates into $795,230 of equity built through principal payments alone. When accounting for market appreciation, the homeowner’s total equity position rises to an estimated $1.53 million —all while maintaining residency in the property. This underscores the long-term wealth- building potential of homeownership, despite cyclical fluctuations in the housing market.
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