Archive for the ‘housing market’ Category
Thursday, March 16th, 2017
As many in the real estate industry anticipated, the mortgage interest rate has been raised, and predictions are that rates will go up again, possibly multiple times this year. What does that mean for home buyers, sellers and the real estate market in general?
1. Inventory will likely remain low. Since inventory in most markets is already low the rise in rates could keep it that way. That is because home sellers who were considering selling may choose to stay in their homes. Those who have low mortgage rates currently may decide not to make a move if their new rates will be higher – it will all depend on numbers for many sellers. OR – there is always a chance that rising rates may cause some to sell quickly in order to prevent being locked into their homes for potentially years to come…it will remain to be seen.
2. People may be priced out of markets. If there are fewer homes on the market then home buyers will have a more difficult time finding homes due to high demand and low supply, which normally creates higher prices. As competition heats up, some buyers – likely many first time home buyers – will be priced out of the housing markets in many areas. Unless home builders supply the market with new inventory there could be a stall ahead.
3. Cash buyers will continue to play a role. In many markets, especially condo and townhome markets priced at $650,000 and under, I believe cash buyers will continue to be out in force snatching up these properties. Many first time buyers will have to contend with these cash buyers, and usually that is a losing game for the buyer who is getting a loan (since cash buyers do not require appraisals and can close more quickly; not having to rely on a lender to get the sale closed is a plus to many home sellers).
4. Rental market will continue to be saturated. If the above holds true then the already saturated rental market will continue to be busy – landlords will be able to make good money and raise rents because there will be plenty of renters needing homes who will pay the higher prices if current tenants cannot. This point correlates with the increase in cash buyers that we have seen lately in the “lower end” markets – many of them have been purchasing the lower priced properties for income potential, and it is a great time to make money in the rental market.
5. Real estate industry could see changes. With less inventory real estate brokers and agents could see a big change in the industry. Much like the exodus of sales people during the foreclosure crisis of 2008-2011, I predict many agents will again leave the business because they will not be able to survive in such a tight market. I also predict agent commissions will go down if there are fewer homes which sell faster.
The bottom line is that the real estate market in many areas, at least here in San Diego County and others in California, is still “hot,” but it is getting more difficult for people to get into it. This could affect future home ownership rates and the real estate industry as a whole.
Friday, March 10th, 2017
This seems to be the million dollar question right now as home buyers survey the lack of inventory and multiple offer situations present in many markets. A strong seller’s market and high prices make some buyers nervous. So is it better to buy now or wait?
There are a few very good reasons why now is the time to make that home purchase:
Interest rates are rising – We have already seen this happen and word is they will do so again this year, likely several times. This affects mortgage payments and down payments, so jumping in and securing that lower rate now could be smart. It is also important to note that some lenders are charging a lot more for interest rate lock extensions, so that is something to think about if you have a long escrow period or are pursuing a short sale.
Lack of inventory – Inventory in many markets is still very low – San Diego County included. Many buyers cannot find properties to purchase and when they do there are often multiple offers, especially in the $650,000 and under price range. Cash buyers are out in force as well in many lower range markets, making it even harder for first time home buyers. Being picky is getting more and more difficult – right now is a good time to be preapproved and ready to write an offer once you find a home that meets your criteria. See the home as soon as it comes on the market and submit your best offer right away.
Prices are not dropping as we head into the “busy season” – Lack of inventory is making it difficult as demand outpaces supply. Unless this changes we will not likely see price drops in the busy Spring and Summer months to come. The buyer who decides to wait this period out may find herself down the road with still low inventory and higher interest rates.
Here is an example: A house that currently sells for $766,000 with an interest rate of 4.75% and a 20% down payment would yield a payment of a little over $4000 a month. To get that same payment down the road with a home price drop to $727,000, assuming a higher 5.125% interest rate increase, the buyer would be losing $1585 over 3 years. So even if prices drop 5% and rates increase 3/8th of a percent, the buyer who purchases with a lower rate now will be ahead in the long run.
Uncertainty – Worry about the future and economy is still prevalent among home buyers. Uncertainty about taxes and home write offs, as well as the expected rise in interest rates, make some buyers hesitate to make big purchases. The real estate market, like any market, is cyclical. If you are buying a home with a long term commitment then it is a great time to do so, before there are more rate hikes.
Before you decide whether it is best for you to purchase now or wait, it is important to discuss your scenario with you accountant or financial adviser, an experienced real estate agent in your area and your mortgage professional. Information is power.
Sunday, February 19th, 2017
The real estate market in Carlsbad is strong but there is still a shortage of inventory. Although Zillow reports that market is currently a buyers’ market, I do not agree (at least not in certain price ranges), as we are still seeing multiple offers in some ranges. Higher priced homes seem to be accruing slightly longer market times than “starter” homes (condos and townhomes from about $650,000 and under).
The median attached home list price in Carlsbad is currently just over $549,000. Home sellers are in a great position at this time, as the market still favors a strong seller advantage, with no change in average asking price per square foot (average of $379). Average market time was 76 days and 22% of properties had a price decrease last week. From my position in the trenches with buyers I am finding though that many properties under $650,000 are literally going into contract in a matter of days, often with multiple offers.
Single Family Homes:
The median list price for single family homes is currently $1,049,900, and the 199 homes in Carlsbad (as of last week) have been on the market an average of 90 days. Pricier homes (those over about $1 million) seem to take longer to sell than those under $800,000 – one Carlsbad neighborhood that typically sells in the high $700,000-low $800,000 range can’t keep inventory on the market more than a week, and homes are selling over asking price with multiple offers in days. Although inventory and market action has been trending downward, inventory is sufficiently low to keep the market labeled a seller’s market.
Sale values have risen in some Carlsbad markets 7.5% over the last year and are predicted to rise 2.7% in the next year, according to a study by Zillow, making it a great time to be a seller.
Wednesday, December 21st, 2016
If you are like me you are surprised we are at the end of the year already, but the good news is that the real estate market fared well this year, and will likely continue to do so in 2017. Here are my annual predictions for the market, at least here in San Diego County:
1. Home inventory will remain low. Due to a combination of factors – rising interest rates, expenses of moving up and difficulty of finding replacement housing, many potential home sellers will likely choose to remain where they are and not sell. This trend defined the market in 2016 and I believe it will continue. Until Americans see how the new President will affect the market I am betting on this.
2. Prices will stabilize for the most part. 2016 saw prices still rising slightly in some areas, and higher in others (especially in summer months), but for the most part things seem to be leveling off. I think we will return to “normal” annual price appreciations of 5-7%. Of course this is always area-dependent so check with your local realtor for market statistics and area comparables.
3. Market times will decrease or remain low for desirable homes. Due to the continuation of lower inventory levels I believe we will see desirable homes sell quickly. But I also think that buyers are very savvy and will not pay crazy high prices either – although in a multiple offer situation you never know.
4. First time buyers could have a difficult time with competition. As interest rates rise, inventory levels decrease (or remain low) and prices remain high, many first time home buyers may find themselves in challenging situations when looking for homes to purchase. Competition will also factor in, especially in areas where there is an influx of repeat homebuyers who are moving up and are well qualified (with large downpayments). My advice is for those first time buyers to get preapproved and start looking now. Click here to read more on how to “win” that home you want.
5. Interest rates will rise. This is inevitable and we have already seen the beginning of the end of the lowest interest rates in history. The new administration will also play a role in the interest rate rise as economic goals fluctuate.
The bottom line is that I believe the housing market will do well in the coming year. I do not predict any “bubbles” as some (very few) have done. I think here in San Diego County our market is strong and will continue to be as we head into 2017.
As I always say, if you are thinking of buying or selling in the future you need to do your homework and start early – even a year is not too early. Study the markets, visit homes for sale, get to know inventory, neighborhoods and floorplans. Talk to a mortgage professional and plan ahead. Find a great local real estate agent and let him or her keep you informed so you are ready to go when the time is right. Be prepared and have a wonderful new year!
Monday, November 28th, 2016
If you have been looking for a home recently you may realize that doing so has become tougher: there is less inventory out there and when a great home lists there are often multiple offers. So how does a buyer get ahead to secure a home when many others are in the same situation? Here are some tips.
Hire a great real estate agent. This is above all the number one way to find a home in a tough market. Not only can your agent give you advice about what price and terms may get you that house you love, but they are also locally connected, which can make all the difference in the world.
Here is an example – After losing out on a few multiple offer situations I found buyers a home through my connections with other local agents – one that had not gone on the MLS yet. In another situation, I notified buyers of a home that was about to come on the market (they lost out on purchasing my listing in the same neighborhood), and they got into contract prior to the home going on the MLS. Some say this is unfair for the other buyers out there as they never had a chance to see or bid on the home, but many real estate sales work this way. Those of us who work particular areas often stay in touch and know when there is a listing coming up. Having that on your side as you search for a home is priceless.
Be Paperwork Ready: There is no better advice than to be ready to make an offer. This means you need to be preapproved with a lender (the lender should have all your paperwork so s/he is ready to go once you write an offer, and you should have a preapproval letter). Have a copy of your latest bank or investment statement showing proof of funds for your downpayment, in order to submit with your offer. Your offer should be as strong as possible so speak with your agent to determine what needs to be in there and what may be left out in order to avoid a multiple offer situation.
Know what you want: Often this is difficult when one is focusing on multiple areas or neighborhoods, but if you really know those you prefer, including floorplans and other amenities, you will be able to act quickly to see the home and make and offer. Even if multiple offers do come in, being first to present can often be helpful. Start looking at areas and homes before you are ready to purchase – the more information you have the better and more prepared you will be when the time to buy is right.
All in all, buying a home in a low inventory market can be tough. With interest rates rising every day counts – if you can lock in a rate prior to another rate increase that is great – and it just means you need to be ready when that right home becomes available. Of all the above tips, having a great buyer’s agent is the best advice I can provide. Many people think they can find a home without an agent, but a good agent is worth her weight in gold when it comes to finding the right home.
Happy home shopping!
Tuesday, June 28th, 2016
Attention home buyers and sellers: home inventory is growing. Over the last few years we have seen decreased inventory in many areas, including here in San Diego County. This has made it tricky for many buyers as supply has not met demand, but has been positive for sellers as the seller market picked up speed. But inventory appears to be growing and there are many extenuating circumstances that make now a good time to sell or buy real estate.
Home ownership holding period – Over time most homeowners have tended to occupy their homes on the average for about 6-7 years before selling. But over the last few years this number increased and many sellers were staying in their homes 9-10 years due to economic factors. However, there has been a trend downward lately due to equity increases and market conditions.
Equity – The last few years have brought equity gains to many homeowners, and low interest rates make it a great time to buy – this combination is positive news for housing. But like any market there will be a correction in time, where equity stops rising as quickly. Here in San Diego County we are starting to see slight slow downs with sales – sales prices are dropping slightly and many homes are sitting on the market longer.
Seller Market – It has been a seller’s market for some time now, due to lack of inventory in many housing markets, combined with a healthy demand. but with external changes on the rise more sellers will likely consider selling due to strong market conditions and other economic factors that may make them question how long the equity rise will continue. As inventory increases it may turn into a buyer market so long as demand is still prevalent and supply increases.
Economy – There are several economic factors that may influence a seller or buyer, and moving forward these will likely play a role in decisions to buy or sell. For buyers, low interest rates and international economic conditions that affect our US economy could play into the decision- making process. As markets are cyclical most buyers and sellers know that low rates will not last forever. The looming Presidential election could also factor into housing, as well as international situations like Brexit and terrorism.
The bottom line is that no one has a crystal ball. Many predictions abound and feeding into them can make a buyer or seller crazy. Each individual has to consider their own factors – equity, supply, prices, external and personal economic factors. Talk to your accountant and an experienced real estate professional – but don’t wait too long because the market will change at some point.
Wednesday, April 13th, 2016
If you have been paying attention to what is going on in the political circus…I mean arena…you may or may not understand how different candidates feel about certain issues. While some have not made clear statements on many issues, and others have literally changed their minds and don’t appear to have opinions (or don’t care to share them with the American people), some have wondered where the candidates stand on housing.
It is a fact that many people in this country were affected by the crash of 2008-2010. Many lost homes, lost jobs, declared bankruptcy. Although the economy has come a long way since then, as has the housing market, there are many who still distrust putting their money into home ownership for fear of another collapse. The number of renters has skyrocketed since the crash (according to the Huffington Post there are 9 million more renters today than existed a mere decade ago), and renting in many areas (including most parts of California) costs more than home ownership – and rents continue to rise in most areas. But of those who would like to purchase, many cannot afford a downpayment.
So you may wonder what will happen to housing once a new President is elected, and whether the choice of candidate will make a difference. Let’s take a look at party philosophies first to get an idea of what might happen depending on whether a democrat or republican is elected.
Hillary Clinton is the only candidate who has authored a specific plan for housing and home ownership attainment. The plan aims to provide better support and credit for those who wish to own homes. Under a Clinton presidency rentals will be more affordable as well, benefitting lower and middle class Americans. The plan details job creation, apprenticeship and investment in American youth, as well as the creation of job programs for convicts re-entering the work force and investment in small businesses. Where will the money for all this come from? Do your research. Click here to read her plan in detail.
Bernie Sanders does not have a specific housing plan, but plans to raise taxes across the board – both for individuals and businesses. This would likely mean salaries will decline, as businesses will have to pass the tax increases along to employees. However, other things would be beneficial to Americans under a Sanders presidency, like free colleges and medicare. As for housing, it will of course be affected by lower wages and higher taxes, so one has to weigh the positives and negatives.
Ted Cruz has vocalized his across-the-board tax plan, which would put everyone in the same 10% tax bracket. Sounds good, especially if you pay a lot more, but he also wants to institute a flat tax on business payroll and profits. This could lead to salary cuts for workers, which would be detrimental to the real estate market (lower salaries mean no new home buyers and many owners that could need to sell to heed their new lower income levels). With the promise to end local and state tax deductions as well American homeowners could get hit hard, depending on where they live.
Donald Trump also has no specific housing plan, but has talked about substantial tax cuts and less tax deductions. The big tax cuts could cause interest rates to rise, which will likely affect mortgages – again, this could make homeownership less attainable.
John Kasich plans to cut the tax rate, but there is not much more about his proposal for housing or direct effects on housing due to his plans.
Housing plays a very important part in our lives as Americans, so make sure to do your research and decide whom has the best plan for your needs. Hopefully whomever is elected will keep housing on track so people to afford to become homeowners in the future and the housing market will continue to thrive.
Wednesday, December 10th, 2014
It never fails – every year I always think I will have a quiet holiday season and be able to catch up on personal errands and have extra family time. But every November things always start to heat up in my real estate business. Offers on listings tend to increase (often multiple offers), there tend to be a flurry of showings, and buyers step out in force to see properties.
I hear many real estate agents say that the end of the year is accompanied by a slow down in the real estate market, but I have not yet found that to be the case. Those agents who decide to not work as hard or to take a break miss out on the plethora of opportunities at this time of year. But for those who continue to work hard with existing clients, answer their phones and tap into their client base, this time of year can be lucrative.
Busy Time for Sellers
As for sellers, I have written blogs over the years as to why the holiday time is a great time to sell. The main reason is that there is not a lot of competition, so the buyers who are out there searching for homes (and believe me, there are many) don’t have as many options. If you list your home at this time and it is priced and shows well, you may be surprised at the amount of interest you get… and of course there is the potential for multiple offers. If you are a seller, make sure to speak with your agent about the best way to market and stage your home during the holidays, because that will have an impact on its selling potential.
The other reason it is a great time for sellers is because interest rates and inventory are still low. This makes it an optimal time for buyers who may have otherwise decided to wait until Spring.
Finally, it is fair to say that the majority of buyers who are out there looking at this time of year are very serious, not just looky-loo buyers. Many people would rather not focus on purchasing a home during the holidays, so as they say “the early bird gets the worm.”
Busy Time for Buyers
The end of the year/holiday season is a great time for buyers, for many of the same reason outlined above. There is less competition, the listings that are active are usually placed there by serious sellers who need to sell, and right now interest rates are still very low. In my opinion many properties are priced more accurately at this time of year than say in the Spring, when many sellers test out the market to see how high they may be able to list above comparable sold properties.
Buyers, sellers and agents can all benefit during the last quarter and during the holidays if they continue to work extra hard into the New Year. Happy buying and selling, and I hope everyone has a prosperous and happy holiday season!
Monday, December 1st, 2014
The chart below shows the latest existing home sale numbers for October, as well as median home prices, unsold inventory index, median time on market, and the housing affordability index. The National Association of Realtors reported a 2.5% increase for the homes sold in October, compared to the same month a year ago. This makes it the first month in 2014 to see a significant yearly increase in home sales. The reasons for the increase were cited as lowering of mortgage interest rates (which dipped under 4% in October) and the slowing of home price appreciation.
Interestingly, several reports I have read indicate that housing prices are not going down, and that this trend will continue into 2015, with many states hitting new all-time highs as the housing recovery continues. Of course, much will depend on inventory levels, mortgage rates and other factors that we cannot predict, but the positive note is that properties are definitely going into escrow. Most escrow agents, home inspectors and appraisers I have spoken with are busy.
Chart provided by the California Association of Realtors.
Wednesday, October 22nd, 2014
The last few months have been very busy for the real estate market. Many areas seem to have corrected and although prices did rise through the summer it seems that now they have stabilized in many areas. The one thing that still seemed strong was demand, as buyers were still out there looking at homes and shopping. Until about a week ago.
I have noticed in the last week a drastic slow down in showings and phone calls, as well as new listings. When interest rates dipped under 4% last week I thought it would spur buyers and result in more pending properties, but that does not seem to be the case in my area. Here are some of the challenges that could be having an effect on the market:
Bond Market Collapse – Last week the bond market took a substantial nose dive. Did this create fear about the housing market? It is possible, but one has to consider that all markets are cyclical, and unless we are talking about a full blown economic crash it is doubtful that the one will affect the other.
Challenges in International Markets – There are still many European countries that are facing difficult economic times…could this create fear amongst US buyers? Possible, but again it is important to realize that our housing market just underwent a big correction and now is back on the track to normalcy, so fears about other markets outside of the US should not have an impact on whether or not a buyer purchases a home.
Time of Year – Typically the Fall-to-Winter housing market tends to be slower and include lower inventory. With the holidays and the end of the year many sellers choose not to list or take their active homes off the market. Many people are not thinking about purchasing homes at this time of year, except those who need to (and actually, if you can do it, it is a great time to sell…click here for more information)
Lack of Inventory – This definitely could be a reason why the market seems to be slowing. Summer did finally see an increase in inventory in many markets that had been in an inventory slump for a while, but there are fewer new listings now; this could be due to a variety of factors, most notably the time of year. Once the holidays have passed we should slowly start to see inventory creep up, as we head into the Spring and Summer.
Fear – There is still talk out there of a housing bubble, believe it or not. This could be creating fear amongst buyers, and in addition to any of the above categories could combine to make some think they’d better sit on the fence for a time and see what transpires. Personally and professionally, I do not agree with this viewpoint. I believe most markets HAVE stabilized, and that we have returned to a more “normal” housing market. I do not believe we will see more than a 3-5% annual price increase moving forward from year to year. Those who are in the market solely to make a profit won’t have much opportunity to do so, but conditions will be perfect for those who are purchasing with long term benefits in mind. There will always be issues and problems that could affect housing, BUT housing is still historically one of the most stable markets in which to invest.
The bottom line is that buyers need to feel comfortable when they are contemplating a home purchase. Sellers also need to feel comfortable in listing their home. Overpriced homes will not be sold in the current market; of course there are always exceptions, but in general we will not see this happen now or in the coming year, in my opinion.
The key for any buyer or seller is to get educated on the neighborhoods in which they are focusing their searches, and to really understand comparable values. Working with a skilled area agent is the first step in the right direction. Buying a home can feel scary, but in reality it should not be a difficult decision for those who understand the local market. Renting has been proven to be more expensive, but is also more risky -rents can be raised, leases can be terminated, and rental properties can be sold, leaving tenants to find another – which is no easy task.