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| Each week, the Silicon Valley Association of Realtors (SILVAR) shares local housing data, sales trends, expert insights and other real estate-related topics. This week, the association shares financial planning strategies from Chris Andrews, wealth management advisor at Northwestern Mutual in Redwood City and founder of Nerd Nation Financial. |
It may be too early to determine whether impending tariffs will have a major trickle-down effect on the Bay Area housing market, but given the constantly shifting landscape of national policy, one local financial expert is advising residents to be prepared for the possibility of substantial impacts.
Chris Andrews, wealth management advisor at Northwestern Mutual in Redwood City and founder of Nerd Nation Financial, said tariffs – along with national deficit consequences, rising yields and inflation – are among the many major and unprecedented national concerns right now.
“What we’re seeing now in current policy is a lot of uncertainty and wild swings that the (financial) market doesn’t like,” Andrews said.
Unpredictable trade policies can lead to economic uncertainty and market volatility, affecting property values, according to Andrews.
In the Bay Area, where the housing market is already competitive and challenging, these economic uncertainties could make the market even tighter.
Andrews said the Bay Area’s real estate sector and economy have changed significantly over the past decade. Home prices have skyrocketed, he said. In 2014, the majority of Bay Area homes sold for less than $1 million. Currently, only 26% of homes on the market are listed below $1 million, according to data from the California Association of Realtors.
For sellers, higher sales prices indicate a potentially favorable market, but Andrews noted that, “What we’re seeing throughout California right now is that the incentive to sell is very low.”
This reluctance, he said, stems from various factors, including economic uncertainties, high transaction costs and the difficulty of finding suitable replacement housing in a competitive market.
Andrews said it is still possible to buy a home in this market and shared some financial planning strategies he has recommended for his own clients:
- Try “scenario planning” over trying to predict the future. It is important to thoroughly consider how different economic environments like inflation could impact assets.
“Hard assets, like real estate, tend to perform well during inflationary periods,” he said. “For clients who plan on buying a home, we’ve helped them focus on cash flow through financial spreadsheets and educating them about how homeownership involves more than just mortgage payments.” - Consider taking larger loans initially and paying them down over time, especially when stock values are down. Andrews said the key is to break into an already competitive housing market.
“While the initial loan terms might seem daunting, the emphasis is to get into the market itself, with the understanding that refinancing could be an option in the future if conditions change. This approach can alleviate the anxiety that many first-time buyers might feel due to high costs. - Hold liquid cash in government money market funds. These funds are short-term and safe, currently yielding around 4%. High-yield savings accounts are another option, but Andrews warned that they may not offer the same range of interest rates, he said.
- Diversify your portfolio as a safety net strategy. “Don’t think of your portfolio as one bucket. That way, you can pull from the things that are doing well,” he said.
Silicon Valley Association of Realtors (SILVAR) is a professional trade organization representing 5,000 Realtors and affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.
The term Realtor is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of Realtors and who subscribes to its strict Code of Ethics.
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