Archive for December, 2012

2013 Real Estate Market Predictions

Friday, December 28th, 2012

There has been a lot of speculation as to what will happen in the real estate market as we head into a new year. Here is my take on real estate market resolutions for 2013:

Home prices will rise, slowly. Based on the current market and the rise in prices in 2012, especially toward the end of the year, I believe that prices will continue to rise, although at a very slow pace. People who are thinking they should wait to sell in order to make a big profit will be waiting a long time, but those who see the opportunities – demand, low inventory and continued historically low interest rates – have the chance to sell in what will slowly become (if it’s not already) a seller’s market. Those homes that show very well and are well-maintained will garner the most interest and could set trends for neighborhood comparables.

Interest rates will remain low. Because of continued uncertainty with the economy interest rates have to remain low. If the feds raise them at this volatile point, when Americans are just beginning to feel comfortable spending again, albeit cautiously, it would be devastating. I do not believe that such a risk is healthy and thus I think rates will stay low for some time.

Inventory will rise. This one is hopeful, but I truly believe that due to the fact that markets are becoming seller’s markets, more people will decide to list their homes in the coming year. 2012 was a difficult year for inventory in most areas, and San Diego county was no exception. Multiple offer situations on the first day properties listed were not uncommon, and many buyers ended this year without the new homes they so desired, feeling frustrated. I think savvy homeowners will see the silver lining in selling their homes as we head into the new year.

Distressed sales will slow. Many lending institutions and federal and state governments vamped up programs in 2012 to assist troubled homeowners, and the numbers from many of these programs indicate that they are working. There are still many more people who need assistance, but I believe that we will see fewer foreclosures. Most banks seem to have warmed to loan modifications and short sales, bypassing the rush to foreclose.

More underwater homeowners may be able to refinance in the future. There is finally a rumbling about extending refinancing programs to those non-equity homeowners who fall outside of the Fannie Mae/Freddie Mac loan requirements – this could be HUGE and prevent a slew of foreclosures and even short sales down the road…this will be the real estate story at the top of my watch list in 2013.

All in all, the housing market it improving. It is important to mention, as I always do, that every market is different. If you want specific information about your area/market, consult with a qualified local agent before making any decisions about buying or selling real estate. One more caveat – keep in mind that market improvement is relative. The above analysis is based on numbers that show improvement in the local San Diego market, as well as reports from trusted sources and personal experience working in the local market.

I think 2013 will be a great year for real estate. Please let me know if I can provide any information about your San Diego home sale or home search, and have a very happy New Year!


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Happy Holidays to You!

Monday, December 24th, 2012

I wanted to wish everyone a wonderful holiday and a very happy New Year. I hope that you all are able to spend time with loved ones this holiday season, and that those times are filled with love, joy and laughter.

It has been a pleasure blogging for you over the last year, and I look forward to continue keeping you updated on the real estate market and local news in the coming year. If there are any particular stories about which you would like me to write, please do let me know.

Wishing you all the best in 2013,


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Could Certain Price Increases Cause Another Market Crash?

Saturday, December 15th, 2012

Something is happening in the local market that is very scary, and could lead to disastrous consequences for the housing market. It is hard to understand, and even some appraisers do not know how to respond, but it IS going on and it is alarming…

Fannie Mae has a program called Homepath. It gives buyers, especially first time homebuyers, the opportunity to purchase homes without large downpayments, without appraisals, and without competition from investors (at least for the first 2 weeks the properties are listed). Sounds incredible, right? Here is the catch: the bank sets the price. Oftentimes these properties, especially as of late, are listed quite a bit over comparable sales values. The buyers are willing to pay the prices, because they know there is no appraisal and they also know that they likely will be outbid by investors or those buyers with higher downpayments.

All this may sound like a good idea – the buyers get a home, and there is now a higher comparable property in the neighborhood at closing time…good for future sellers, right? Unfortunately it is not that simple.

An example might illustrate this better:

Neighborhood comparables in ABC Neighborhood say homes are selling at an average sales price of $180,000. One completely remodeled home sold in the neighborhood for $200,000. Fannie Mae Homepath property is listed at $235,000. It has been painted and cleaned up, but not exceptionally remodeled. Mr. and Mrs. Buyer purchase the home and it closes escrow – neighborhood comps are now higher ($55,000 over average sold prices). Mr. Seller (who lives next door and has just completed a full remodel, with high end flooring, new stainless appliances, etc.) lists his home at $240,000 and gets into contract for that price. Mr. Seller’s home does not appraise and he has to either sell if for less OR wait until the market goes up.

Are you confused? It seems simple that Mr. Seller in the above example should be able to sell his home for more than the last comparable property (the Fannie Mae Homepath sale), as he had an identical floorplan and substantial upgrades. But the fact of the matter is that there is a good chance that Mr. Seller might not even get the same amount – $235,000 – as his Homepath neighbor. Why? Because most appraisers will look at the comps in general, and include the Homepath sold property as one sale in the mix with other sales over the last 6 months. Because the price is so much higher, Mr. Seller likely will not benefit from the high sales price.

This sounds insane but it is true, and I have confirmed it with appraisers. The bottom line is that the Homepath sales, when sold at higher prices than comparable solds will support, are falsely inflating the market values. Can you see all the potential problems here? If we have falsely inflated market values, it could lead to 2 big problems:

1.  Prices could rise too fast in short periods of time, causing a replay of what happened in the early 2000s

2.  Home buyers – especially first time buyers – will be priced out of many markets, and unable to purchase homes

3.  Sellers will not be able to take advantage of higher sales prices right away, unless appraisers focus on the higher priced sales and not the rest of the sales – and this could reasonably happen in a period of several months where there is a Homepath property comparable sale, creating a big jump in sales prices in some neighborhoods. This could either cause fewer homes to be listed – not good for a market with an already-low inventory, or cause a rush to list – with the possibility that many homes will not end up closing (either because the buyers’ lenders won’t appraise the values, or sellers and buyers won’t be able to renegotiate sales prices).

All in all, we are dealing with a scary scenario. Luckily Homepath properties are few in most areas. But if you live in a townhome or condo under $300,000 there may be several in your neighborhood. This is one of those situations that we will have to watch unfold. I welcome comments on this from agents, appraisers, home buyers and sellers…many people do not even know this is happening. If we start a discussion maybe we can make others more aware.



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Beware: Secondary Lien Holders Could Sue You…

Saturday, December 8th, 2012

If you are facing foreclosure and have more than one lien (mortgage), there is a new law that could greatly affect you. The California Supreme Court just denied review of a state appeal court ruling that allows second “purchase money” lien holders to sue homeowners for deficiency judgments after a first lien holder has foreclosed. Don’t worry, I’ll break it down in simple terms.

In California the homeowner is protected from lawsuits for the amount of the difference between what is owed on the mortgage, and what the home sells for at foreclosure auction (or even a short sale) – this is called a deficiency judgment. Other states allow lenders to sue homeowners for deficiency judgments, but California is a non-deficiency state. So if you only have one loan and are foreclosed upon, you are safe for now from a lawsuit by your lender.

The new ruling applies to secondary lien holders and foreclosures. Back in the boom of the real estate market many people took out two loans to purchase their homes. The second lienholder almost always loses big when there is a foreclosure, as there is not enough money to cover the debt owed to the first.

NOW, that second lender can sue the homeowner after the foreclosure for the deficiency, BUT only if the second lender is not the same lender as the first. (It is important to remember is that many loans are bought and sold on the secondary market, so even though you may originally have had two loans held by the same lender, one may have been sold. So it is imperative to know who your lienholders are before heading into a foreclosure).

It is very important for any homeowner facing foreclosure to contact an attorney to discuss their particular scenario, to make sure that you understand whether there is a chance you could be sued after foreclosure. Do not wait until the last minute – this could severely effect your options and what you could possibly do to avoid future lawsuits. For more information on this particular case, here is the citing: Cadlerock Joint Venture, L.P. v. Lobel, 206 Cal.App. 4th 1531 (2012); 143 Cal. Rptr. 3rd 96.


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It’s a Tough Time for First Time Homebuyers

Wednesday, December 5th, 2012

The real estate market continues to improve, demand is high, inventory is low, and prices are going up in many local markets, including here in San Diego county. Many areas/neighborhoods have even become “seller markets,” meaning that properties are going into escrow for over asking price or over neighborhood comparable sold values (and often times with multiple offers). But there is one type of buyer that seems to be taking a hit with the new surge – the first time homebuyer.

Armed with a preapproval letter and a saved downpayment, first time homebuyers in certain price ranges – usually under $400,000 – are faced with challenges. Many properties in this price range are being snatched up by investors and other cash buyers, oftentimes over asking price. If no appraisal is needed, these cash buyers can offer as much as they like – and for the great properties they are doing just that.

Most first time homebuyers, on the other hand, need to obtain a loan to purchase a property, and therefore the property value must appraise. Thus these buyers cannot offer over comparable value unless they have the cash to pay any difference between an appraisal and the offered price. This puts first time buyers in a hard position, as they can offer their best price but are prevented from going too high due to appraisal restraints. This usually causes them to be outbid by those buyers who either have cash or have a larger downpayment.

It is a frustrating prospect, and it is made even harder by the lack of local inventory. I showed 2 properties in the last week the day they came on the market. Both times we were ready to write offers, and then the listing agents called me back. Both properties had multiple offers (both properties had over 10 on the first day), several of them cash and most of them over asking price (and asking price was already higher than the comparable sold properties in the area). The rest of the offers at asking price were from buyers who were putting more money down than my first time buyers…it was not even worth it to write an offer.

It is hard to keep your clients excited about the prospect of purchasing a home if they keep running into these situations. But my advice is to be persistent. Don’t let your buyers get frustrated and give up. The silver lining is that they will get to know different neighborhoods and floor plans. They will be more educated and will really know what they like and do not like. When the inventory starts to rise – which I am thinking will happen after the holidays end and we head toward Spring – your buyers will find the right property.

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Homes Are Selling FAST in California!

Tuesday, December 4th, 2012

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