Sellers rejoice: it is finally a sellers’ market in many areas. For those homeowners who need or want to sell, this news has been a long time coming, after the last few years of the housing market collapse and bad news. There are some very positive market conditions that accompany this changeover:

Home price increases: If you follow the housing market in your area you may have noticed that prices are increasing in most areas (of course, you should check with your local real estate professional, as every area is different). The median national home price has increased 12.3% in San Diego county from this time last year, according to the National Association of Realtors (NAR).

The great news is that this will move many homeowners from being underwater, to being able to finally sell and move on. Many of these people were “stuck” in their homes because they owed more than their homes were worth. Zillow reported that over 2 million homeowners came out of the negative equity doldrums on their homes in 2012, and that is expected to continue this year. Over the next year we will see many of these underwater homeowners get out of negative equity situations, which will then increase the inventory levels and bring the market back into “normal,” aka healthy, status.

Increase in buyer demand: Also, according to NAR, buyer traffic has increased 40% from a year ago. There are many buyers out there ready to buy, and less inventory for them to see. This keeps prices climbing and leads to…

Multiple offers: Many listings are obtaining multiple offers, and many are also selling not only over comparable market value, but over appraised value. Lots of buyers are willing to pay cash out of pocket for homes where their appraisal has come in too low (they pay the difference between the appraisal and the sales price), thus driving neighborhood comparables upwards.

Market times have decreased: Due to all the above factors, market times have decreased and homes are selling more quickly. In San Diego county, average market times decreased for almost every city. The average days on market in North San Diego for detached homes was 36, down from 48 days in December 2012. Market time for attached homes similarly fell in the majority of San Diego county cities, some as much as 84%, with the median attached home market time all across the county at 48.  (Source: HomeDex)

The market is improving and all signs are pointing toward a healthy 2013 for the real estate market. The biggest plus is that we will eliminate the negative equity situation for many homeowners, creating more inventory for buyers, and allowing many current homeowners to sell and purchase properties that are more cost-efficient for them. All this, of course, will create higher home values, which benefit neighborhoods.

All in all, this is a great time to be in the position to sell, so get your home in tip-top shape and enjoy the turn of the market. If you are thinking of selling your home, it is important to consult with an experienced neighborhood real estate agent.

Just in case you needed more reasons as to why it is advantageous to buy a home, here is an extensive list about the advantages and disadvantages of owning and renting…

Rent Advantages

• May be cheaper than a mortgage payment
• Fewer (if any) maintenance costs
• No down payment required (less deposit)
• No real estate taxes (renters insurance optional)
• Less stress (who cares, it’s not yours!)
• Freedom to move or downsize when necessary
• No risk of home price depreciation
• Some utility bills may be included
• “Free” amenities such as pool, gym, security
• Money can be used for other, more profitable investments
• Can’t be foreclosed on (but you can be kicked out at the end of your lease if the owner is foreclosed upon)
  

Rent Disadvantages

• Rental payment may exceed monthly cost of mortgage
• No ownership or wealth creation
• Payments never stop when renting
• Rent will rise over time
• Must deal with a landlord or management company
• No tax benefits
• Rules, regulations, and limitations
• More temporary, less stability
• Always at the mercy of the property owner
• Pets may not be allowed

Ownership Advantages

• You can build home equity and wealth
• Status- Status-Status
• Sizable tax deductions possible
• Your space, your rules (pets welcome)
• Ability to remodel, expand, tear down
• Pride of ownership (social status, accomplishment)
• Potentially better for children, family structure
• Mortgage can improve your credit history/score
• Ability to borrow against your home (HELOC or cash-out)
• No more monthly payments once mortgage paid off
• Fixed payments (if you choose a fixed mortgage)
• Mortgages are the cheapest loans available
• No landlord
• Can exclude capital gains when you sell (partially)
• Inflation hedge
• Can rent out to others
• Can sell and use proceeds for bigger/better home
• Retirement nest egg
• It’s the American Dream!

Ownership Disadvantages

• Home prices may lose value
• Could overpay for your property
• Obtaining a mortgage (and finding a home) is a hassle
• Not everyone qualifies for a mortgage
• You must pay taxes and homeowners insurance
• Total housing payment can be more expensive
• Mortgage payment can rise (if an ARM)
• Sizable down payment necessary
• Maintenance costs can be excessive
• Pricey HOA dues (if applicable)
• You’re “stuck” in a home (long-term commitment)
• Increased liability and responsibility
• Transactional costs of buying and selling
• Ownership is stressful!
• Taxes and insurance generally rise
• Your home can be damaged or destroyed (and not fully insured)
• Can be foreclosed on and lose your home

The preceding post was written and shared with permission by Dan Dobbs, of Capital Mortgage Services. He can be reached at DanDobbs6@gmail.com, or http://danieldobbs.org. Or call him at 949-250-3981. DRE#00986886, NMLS# 307631

Is Fannie Mae hurting the real estate market? Those following the practices of this government lending giant know that as of late, Fannie has been accused by many in the industry of price fixing and falsely inflating the real estate market. What is going on, and how can this happen at this time, after the housing market is finally on the road to recovery?

The majority of lenders and those who guaranty loans seem to be cooperating recently with foreclosure avoidance, opting for the less painful option of short sales. They claim that not only do they want to ease the homeowners’ pain, but that they do not have a desire to own property, and would rather take a loss sooner than have to go through the foreclosure process – one which has a hefty price tag.

There is one exception to this rule, and real estate agents are baffled. Fannie Mae – a government agency, who along with it’s cousin Freddie Mac guarantees and purchases loans, and owns or controls about 31 million U.S. mortgages  – has been implementing some strategies lately that go against this notion, despite statements of intentions to help:

1. Price Fixing? One of the claims expressed most frequently as of late by real estate professionals is that Fannie is engaging in price fixing. Here’s how it works: instead of opting for short sales, it is choosing to proceed with foreclosures. Then, once the home is ready to list, it’s selected agents list the property for over comparative market value, under Fannie’s Homepath program. No appraisals are needed, as Fannie is the largest provider of mortgage credit. Buyers are jumping in and paying over market value for these properties, and are closing escrows.

Initially this looks like a win-win, as the buyers get their home and do not have to go through the appraisal process, and the area comps are raised with the closing of the property at a value  higher than any other recent sales, thus increasing comps for the next seller. Sounds good, right? Not so fast.

The downside of this tactic is that the buyers are literally moving into their new homes as UNDERWATER homeowners. Their homes have no equity – they own the most expensive property in the neighborhood because Fannie has falsely inflated the home values. Appraisers will not look solely to the most expensive home that sold, but will include it with the other comps…thus leading to the next problem:

As  a result, future sellers will not likely benefit from the most expensive neighborhood sales (for more on this click here.). Appraisers will include the most expensive sale in their analysis, but they will not focus solely on that one sale; thus the next home to sell, even in better condition and with more to offer, will be evaluated by appraisers based on the combination of recent sales. What seller in their right mind, who did not have to sell, would choose to do so in such a situation? This will keep homes off the market, sustaining  low inventory levels.

2. Countering short sale offers at prices higher than comparable sold properties. Another tactic that is being used by Fannie when they DO agree to short sales, is to counter offers received higher than comparable sold properties. Again, this is crazy! These homes will not appraise, but still there are buyers willing – and doing it! – to pay cash over and above appraisal value in order to close escrow. Again, these new homeowners move into their homes in negative equity positions. This tactic also prices many homebuyers out of the market.

I’m not sure how to explain what is going on, but it scares me. Our market is healing right now, and if prices are falsely inflated and comparable sold properties ignored, we will see large market increases in short time periods. If you remember, this is what led to the last market crash. Please share your thoughts.

If you have been contemplating purchasing a home, whether it be a starter home, your dream home, investment property, or any other type of property, you may want to get serious now before it’s too late. Here are some reasons why it’s better to jump off that fence now rather than wait:

1. It is cheaper to buy rather than rent. The last time this was the cast was 1973.

2. Home affordability is better now than it has been in a long time. Prices now are discounted 61.5% from 1981, the last time they were at an all-time low.

3. New home inventory has hit a 50 year low, contributing to very low inventory levels, which are not expected to improve for 3-6 years. Between 1968 and 2008 there were at least 1 million homes built per year. With the new home inventory at such a low, we have a deficit of 900,000 homes a year (homes that are not being built), thus making inventory even lower.

4. One third of all closed escrows in 2011 were cash transactions (2012 numbers are likely higher). There is a lot of competition out there, and will continue to be as inventory and rates remain low.

5. Recent changes to lending laws will likely make getting a loan much harder. While the new laws afford protections to consumers, lenders will scrutinize applicants even more so now. Click here to read more about this.

6. Interest rates will rise. With low inventory and high demand, and with an improving economy, it is only a matter of time until the rates are raised. (In fact, they just went up slightly last week).

7. Foreclosures are decreasing. Lenders are vying away from foreclosures, opting for short sales – which are being appraised closer to comparative market value nowadays, making the chance of getting a “great deal” lower. Many federal and state programs are also helping underwater owners to refinance and stay in their homes, meaning less distressed inventory.

(Information compiled from the Charfen Institute and Data Quick)

San Diego is not included in the following infographic, but entry level home prices here are between $200,000-$300,000.. However, note that it may vary greatly by area. If you would like information on a specific area please let me know and I will be happy to provide it.

There are some rules in the works that may make it harder to get a loan to buy a home. But wait, you say, it’s already VERY hard – most lenders already demand everything but your first-born. Let’s take a look at one new rule that may make purchasing a home even more difficult in the near future.

Ability to Pay Rule/Qualified Mortgages. This rule forces lenders to make a good-faith decision as to whether lenders will be able to pay back a loan that it is offering.  This is being aided by creation of “qualified mortgages (QM)” – those that conform to the standards of Fannie Mae and Freddie Mac, even if they are not being purchased by Fannie or Freddie.

The rule enables the lenders to feel secure in issuing a loan, and affords borrowers protection against deceptive practices. Lenders also escape liability if the borrower does default – shielding them from lawsuits for originating loans they knew borrowers would not be able to repay.

Not all mortgages are QM mortgages. California is a high cost state, with many jumbo loans, so the goal is to make sure that there is no bias against borrowers in such states, which could restrict underwritten mortgages in these states. The California Association of Realtors will be working closely to make sure this does not happen.

I am all for preventing abuse by lenders, as the consumers will benefit immensely. But are these new rules a price worth paying if it will  make getting loans harder? The fact is that getting a loan could become a more difficult process, which in turn makes it more challenging to sell homes, which leads to the bad news for housing…just when we are on the uphill climb to a stronger market.

The new rules went into effect January 10. If you would like more detailed information on how these rules may affect your ability to get financing, please call your loan officer. If you need a reference to a great person, just shoot me an email.

If you are looking for land, or have horses, this is the property for you! Nestled on over an acre, this private oasis has everything…you can move right in. Features include:

•            3209 square feet with over $100,000 in upgrades

•            Over an acre, with all living space -except for bonus room – on the same level

•            Hardwood flooring, travertine tile in bathrooms and laundry room

•            Custom paint throughout

•            Remodeled kitchen: Granite, top of the line stainless appliances, new cabinetry w/sliders, glass cabinet facades

•            Plantation shutters

•            New dual pane windows throughout

•            New electrical panel

•            Dual water heaters

•            Remodeled master bathroom – marble sinks, Jacuzzi tub, stained glass

window, wainscoating, new fixtures and lighting, extra large marble shower

•            Recessed lighting

•            High beam ceilings in bright family room, plus built-in storage, and adjoining den/office/playroom

•            2 fireplaces, in family room and master

•            Master suite southwest-facing view deck with French door

•            Office/playroom/craft room off living room

•            Spacious living room with bay window and window seat

•            Pool and spa

•            Large bonus room – use as a studio, guest suite, office, pool house

(square footage not include in assessor record)

•            Koi pond with pump

•            Numerous fruit and nut-bearing trees – apple, orange, lime, tangerine,

avocado, almond, walnut, lemon, peach, pear, plum…

•            Tons of storage throughout home

•            Three car garage

•            Bernardo Elementary, Bear Valley Middle School, and San Pasqual High

•            No mello roos or HOA

•            Property is zoned for 2 horses (buyer to verify)

•            Close to parks, highway, shopping, dining and Lake Hodges

To see the virtual tour, click here. Call for a showing or more information – 760-310-9466. CA DRE number 01399682. MLS #130001828

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!