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As of early March 2026, Monterey County's housing market demonstrates encouraging stability. Sales volume rose modestly in the first two months compared to the same period in 2025, while active inventory decreased slightly, sustaining limited supply without overwhelming demand. Median sale prices and price per square foot also increased. These short-term indicators can be affected by a limited number of high-end transactions, so they require measured analysis. The market environment is balanced: restricted new listings and steady transaction levels. If these patterns continue, 2026 could exceed 2025's results, provided no major external economic shifts occur.

Key broader factors impacting the market include:

• Stock Market Signals from Influential Investors:Warren Buffett, after transitioning from his role as CEO of Berkshire Hathaway at the end of 2025, and Peter Thiel, a prominent tech investor, both shifted significant holdings to cash. This move reflects changing approaches to evaluating investments, potentially amid the rapid advancements in artificial intelligence (AI). Traditional methods for assessing a company's future cash flows, revenue growth, profit expansion, and returns on AI-related capital expenditures have become less reliable. Many investors, including these two, may struggle to predict outcomes on the other side of the AI revolution, leading to reduced confidence in committing funds. Additionally, tech companies that have relied on proprietary software as a competitive advantage may face disruption. For instance, non-technical individuals, such as developers, entrepreneurs, and creators, can now use AI tools to build alternatives to established products like Adobe software at minimal cost, then launch them as subscription services without needing advanced coding skills. This lowers barriers to entry and could erode the market share of incumbents.

• Explaining High Stock Valuations: The S&P 500's Cyclically Adjusted Price-to-Earnings (CAPE) ratio, which measures stock prices relative to average earnings over the past 10 years (adjusted for inflation), averaged 39.8 in February 2026. This is the highest level since the dot-com bubble in 2000. Historically, whenever the CAPE ratio has exceeded 39, the S&P 500 has experienced an average decline of 30% over the following three years, with no exceptions in the data since 1957. A high CAPE suggests stocks are priced at premiums that assume exceptionally strong future growth, which may not materialize, potentially leading to corrections as reality adjusts expectations. The Dow Jones Industrial Average briefly crossed 50,000 in early February before pulling back, highlighting this volatility. While AI enthusiasm has driven much of the rise, retail investors continue purchasing during dips, contrasting with the caution from experienced figures like Buffett and Thiel.

• Housing Market Trends:Foreclosure referrals increased 25% year-over-year in 2025 to 401,000, the highest since 2019, with active inventory up 25% and completed sales rising 17%. Consumer debt challenges are evident, with 90-day delinquencies on credit cards reaching 12.7% (highest since 2011) and auto loans at 5.2%. However, a massive surge like the post-2008 housing crisis is unlikely, as current issues stem from isolated financial strains rather than systemic over-leveraging. Zillow projects U.S. home prices to rise +0.9% from January 2026 to January 2027, down from a prior +2.1% estimate. Google searches for "can't sell house" hit record highs in early 2026, surpassing 2008 and COVID-19 levels. In my view, this reflects frustrated sellers dealing with prolonged listing times due to high interest rates and buyer affordability issues, rather than indicating a broad market downturn. Mortgage rates on 30-year fixed loans dropped to 5.99% in late February, boosting refinance applications by 130% year-over-year. Home values have appreciated in 78 of the last 83 years, underscoring real estate's enduring appeal.

• Federal Reserve Outlook: Recent Federal Open Market Committee (FOMC) minutes revealed internal debates on interest rates, which remain at 3.50% - 3.75%. Markets anticipate one-to-two 25-basis-point rate cuts by year-end, possibly starting in June. For mortgages, this could translate to further declines in rates, potentially by 0.25% to 0.50% overall, improving affordability, encouraging more buyers, and stimulating transaction activity without reigniting rapid price growth.

• Employment and AI-Driven Changes:Nonfarm payrolls, which track job additions excluding farming, rose by 130,000 in January (twice the forecast), with unemployment dropping to 4.3% and average hourly wages up 0.4% month-over-month. However, layoffs spiked to 108,000 in January (a 17-year high for the month), and job openings fell to five-year lows. Block's reduction of 40% of its workforce (about 4,000 employees) highlights potential overhiring during the post-pandemic boom, including a $29 billion acquisition at peak fintech valuations. Broader layoffs signal AI's role in enhancing worker efficiency, reducing the need for as many employees in certain roles. This "structural pivot" in tech reallocates resources from hiring to AI infrastructure, creating a divide: AI-skilled workers see pay increases, while routine or managerial positions face automation risks.

• Money Supply Trends: M2, a measure of money in circulation including cash, checking deposits, and savings, reached a record $22.44 trillion in January, growing 3-4% year-over-year, in line with overall economic expansion. This could support asset prices in the short term without immediate inflation risks, but it depends on where that money is going. If new capital flows into savings or corporate cash piles, it often skips the grocery store and goes straight into assets. This is why we could see "stable" inflation at the store while home prices and stock valuations (like the 39+ CAPE ratio) continue to climb.

Deep Dive: GLP-1 Drugs and Their Broader Impact

GLP-1 medications, such as Ozempic (from Novo Nordisk) and Mounjaro/Zepbound (from Eli Lilly), mimic a hormone that regulates blood sugar and appetite, leading to significant weight loss and health improvements for conditions like diabetes and obesity. Beyond individual benefits, they could drive substantial economic growth: Extending average U.S. lifespan by just one year might add approximately $700 billion annually to GDP through increased productivity, reduced healthcare costs, and extended working years, an often-overlooked catalyst for future expansion. During a recent visit to an IV lounge in Carmel, I inquired about popular treatments; the owner noted GLP-1 as their top seller, with microdosing (small, frequent doses) being especially common for sustained effects without side effects like nausea. This local demand mirrors national trends, where these drugs are shifting from specialty prescriptions to broader wellness applications, potentially reshaping industries like food, fitness, and insurance.

The rise of GLP-1 medications isn't just transforming personal health, it's sparking bigger questions about longevity and the economy. If these drugs meaningfully extend average U.S. lifespans (even by a year or two through better metabolic health, reduced obesity-related diseases, and improved quality of life), two countervailing forces could emerge in real estate:

1. Potential Constraint on Supply (Fewer Homes Coming to Market) Longer, healthier lives often mean people stay in their homes longer. Seniors today are "aging in place" at higher rates than past generations, preferring to remain in familiar surroundings rather than downsize or move to assisted living. Recent analyses (e.g., from the Mortgage Bankers Association's Research Institute for Housing America) show that increased life expectancy and higher homeownership rates among those over 50 are delaying the release of homes into the market. Projections indicate no meaningful excess supply from older Americans over the next decade, with excess demand for existing homes instead. In Monterey County, where many owners are long-term residents (including retirees drawn to the area's lifestyle), this could tighten inventory further. Fewer "empty nesters" or heirs listing properties means sustained low supply, especially for single-family homes and premium coastal properties.

2. Boost to Demand via Economic Growth (Upward Pressure on Prices) On the flip side, GLP-1-driven health improvements could add meaningful GDP growth, estimates range from 0.4% (baseline adoption) to 1%+ annually through higher productivity, fewer sick days, reduced healthcare burdens, and extended working years. A healthier, more active population supports stronger wage growth, wealth accumulation, and consumer confidence. This fuels housing demand: more people able to afford upgrades, second homes, or relocations to desirable areas like ours. Combined with the supply drag above, this could create a classic imbalance, with demand outpacing available homes, pushing prices higher over time.

Deep Dive: Japanese Builders' Expanding U.S. Footprint

Japanese firms are accelerating acquisitions of U.S. homebuilders, driven by Japan's shrinking domestic population and aging demographics, which constrain long-term growth. In contrast, U.S. population and household formation, especially in the Sun Belt, provide scale and stability.

Recent activity includes:  

Sekisui House’s $4.9 Billion Acquisition of M.D.C. Holdings: Completed in 2024, this landmark deal for the parent company of Richmond American Homes catapulted Sekisui to the position of the 5th largest homebuilder in the U.S. This provides a massive platform for porting Japanese ESG and construction technology to the American mass market.

Sumitomo Forestry’s "Wood Cycle" Expansion: By acquiring regional stalwarts like JMC Communities and Hallenbrook, Sumitomo is scaling toward a goal of 23,000 annual U.S. deliveries by 2030. Their vertical integration strategy focuses on managing the entire timber-to-tenancy lifecycle to achieve carbon neutrality.

Market Consolidation & Share: Following the Sekisui/MDC merger and sustained buying from Daiwa House (Stanley Martin, Trumark), the "Big Three" Japanese players are projected to influence approximately 5-6% of the U.S. single-family market by 2030, operating through 30+ owned regional builder brands.

Benefits include:

Increased Supply - Aggressive capital infusion from Japan’s low-interest environment addresses persistent U.S. housing shortages.

Technological Advancements - Introduction of precision-manufactured components and modular assembly can reduce site lead times by ~30%, mitigating chronic skilled labor shortages.

Market Consolidation - Strategic roll-ups of regional operators provide improved land access and deep institutional expertise backed by capital that is less sensitive to U.S. rate cycles.

Sustainability Focus - Application of "Shawood" technology and net-zero standards to create disaster-resilient, fire-resistant, and highly energy-efficient residential designs.

This trend is a net-positive for housing supply across the country. It brings Industrial-scale automation to an industry (homebuilding) that has not innovated much over the past century compared to other place in the world. Regarding affordability concerns for many Americans, these homebuilders will be accretive in that effort.