Posts Tagged ‘home inventory’

5 Changes to Real Estate Markets That May Be on the Horizon

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.

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Will Lack of Home Inventory Curtail Spring Selling Season? Buyers: Prepare

Thursday, March 24th, 2016

Many agents and home buyers are aware of the current shortage of homes for sale in many areas. In California there is currently a 4 month supply of homes, where 6 months is the norm and heading into the Spring it usually is higher. When desirable listings do come onto the market there is a rush of activity and often a quick sale. What will happen to the normally busy Spring selling season if inventory levels do not grow? http://www.dreamstime.com/-image27659734

With interest rates still low and inventory levels down, it is more important than ever for buyers to be as prepared as possible to write a successful offer. Before buyers even start looking at homes, it is important to make sure to do the following:

1. Get preapproved. This is essential. You need to speak with a mortgage professional and get preapproved – not just prequalified – so that you know exactly how much of a loan you can afford and what you will need for a downpayment. There are different products out there so make sure you know which loans will work best for your circumstances. Talk to a qualified mortgage professional and get the preapproval letter before you start home shopping so you are ready to make an offer.

2. Find a good real estate agent. It is great to look at homes yourself online – in fact I always encourage doing so – but to have a skilled agent on your side provides you with an edge. Local area agents often hear of listings before they hit the market, or may even have “pocket” listings (contracted upcoming listings that are not yet on the MLS) themselves. Also, when a listing is on the MLS there may be important confidential agent remarks listed (that only MLS subscribers can see) that could help you prepare in writing an offer. Finally, some third party real estate sites do not list new properties immediately because they don’t sync directly with MLSs, so you may miss out on new listings that other buyers have already seen – even a day can make a difference in a tight inventory market.

3. Write the strongest offer possible. Depending on the circumstances you need to be ready to write the best “on-paper” offer possible, especially in situations where there are multiple offers on a property. Of course, you may not be able to compete with some things (for example, if another buyer is a cash buyer or offers over asking price when you are not qualified to do so), but it is still important to make the offer look as good as it can. This is another reason to have a strong agent on your side – she or he will advise you of the best tactics after assessing the situation, the comparable sold properties, the market and speaking with the listing agent. Your offer still may not be chosen, but there is a chance the one that is chosen could fall through, so you want to be the next best.

4. Be Ready! Make sure you are accessible by phone/text and email, and that you are able to view properties as soon as possible once they list. If a property lists on a Thursday and it looks like a home that meets all your criteria, waiting until the weekend to view it may increase the competition. Even in cases where the seller wants to wait the weekend to evaluate offers, getting yours in first could put you in a better position.

5. Keep an open mind. Check out homes that you may not necessarily find appealing on line, or may not be in your preferred neighborhood. Sometimes buyers reject seeing a listed property, only to later realize that it could have been a great home for them. Pictures can be deceiving, and for the right price a home that needed something to make it “perfect” – like a little updating, could be a great home for you at the right price. The same goes for a home outside of your desired neighborhood.

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Why is Home Inventory Scarce (even in San Diego County)?

Monday, February 1st, 2016

If you are a buyer you have likely noticed that inventory is scarce right now, in San Diego county as well as many other areas. As we head into the Spring/Summer “busy” home selling season, many wonder whether the inventory will pick up, and that has some buyers and sellers worried. For sale

Here are some of the likely reasons why inventory levels remain low right now:

1. Rate increases. In December of 2015 the feds slightly raised interest rates, with the hint that more increases would follow. Many buyers got off the fence and are not out looking for houses before any further increases might price them out of the buyer market. This could be good news for sellers, but it seems they are not jumping to list their properties – likely because they are concerned with finding replacement property themselves.

2. Buyer inability to qualify for a loan. Many buyers may not be able to qualify for loans. Price increases in 2015 and mortgage interest rate increases could cut out the ability of some buyers to qualify.

3. Sellers don’t want to give up prop 13 tax basis. Some sellers may not want to list their properties because they could lose their Proposition 13 tax benefits if they sell – especially if they purchased their homes when prices were lower, the assumption being that a new home purchased will  be priced higher and thus have a higher tax base.

4. Sellers worry they won’t find replacement property. This was mentioned above, and it is a Catch-22 situation: sellers may have plenty of interested buyers and great offers, but they are afraid because of the lack of inventory available for finding replacement property; thus many sellers stay put.

5. U.S. and foreign economic issues. Although this may not play into selling and purchasing decisions as much as some of the other reasons, it could be a deal breaker for some buyers/sellers, who may perceive threats in the economic system and decide it is best to stay put until things feel safer.

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The bottom line is that we do not know how the inventory will be affected as we head into 2016. Buyers who are qualified should probably focus on finding properties sooner rather than later, if they want to avoid interest rate hikes. Sellers who have replacement property, are moving out of the area, or must sell for other reasons will likely find themselves in a great position to sell. Make sure to talk to a knowledgeable and experienced local area agent and mortgage professional to understand what it going on in your hyper-local market, so you know when is the best time for you to buy or sell real estate.

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5 Reasons Why Now is the Best Time to Buy a Home

Monday, October 8th, 2012

Many real estate agents, mortgage professionals and economists have been saying it: “now is a great time to buy.” In fact, those cries have been echoed for the last year or so. Interestingly, there ARE many ready buyers out there, but inventory is so low and it is very difficult to be the lucky one whose offer is chosen, as many homes that are listed on the market obtain multiple offers, often in the first day or two.

So what makes now such a great time to buy real estate? There are 3 main reasons:

1.  (Still) historically low interest rates. The interest rates are still at unprecedented lows. Part of this reason is because there is little inventory in most markets. As prices climb, inventory will rise (because sellers will see a good reason to finally sell again) and in turn interest rates will likely rise. It’s a Catch-22, but if you want the best rates, the end of a long downturn is a great time to take advantage.

2.  Prices are rising in many markets. Many buyers have been waiting, some for a long time, until the market “bottomed out.” Well folks, we have reached that point and are now on the upswing. Prices in north county have risen, homes are receiving multiple offers, and the condo market is officially a seller’s market. Single family homes are soon to reach that level as well. If you are a buyer who has been “on the fence,” now is definitely the time to climb off and start looking, lest you find yourself facing higher prices and more competition as we head toward the Spring/Summer selling season.

3. Distressed inventory is down. Foreclosures have slackened off since the start of the summer, mostly in part to lenders embracing short sales and other programs, like loan modifications or sales to third party investors that help people stay in their homes. With less distressed inventory prices can continue to rise at a steady, “normal” pace. Note that even if you live in an area where there are still a lot of short sales, the jump in averages prices in those neighborhoods will cause lenders who hold paper on the distressed properties to seek prices that are more in line with the comparable sold properties, and since many lenders are trying to close short sales quicker and are being stricter with prices they will accept, it is likely such sales will not have a substantial effect on comparable properties.

4.  Rents continue to rise and rentals are harder to find – great for investors, not so great for those seeking to rent. Rents have risen over the past year and are at a 10 year high, according to research reported in the Wall Street Journal. One study by Trulia even found that it is cheaper to own rather than rent in many markets. Not to mention the rental market is so hot, that it requires much luck to even find a rental and be chosen as a renter, since there is so much competition. I have had renters call on all my listings over the past year, asking if the sellers were willing to rent instead of sell – people are desperate. One of my investors just leased out a newly purchased property – the same floorplan I sold last year to a different investor – and he was able to obtain a monthly rent almost $100 higher per month than the first investor.

5. Low inventory. Low inventory in most markets means much greater competition amongst buyers. How, you say, is this a reason to buy now? Well, since competition is so high and prices are rising, if you are lucky to be the chosen buyer on a property you will likely end up paying less than when there is more inventory. There is only less than a three month supply of inventory on the market now in San Diego. If the many buyers out there looking cannot find a home to purchase now, and hold off until there is more inventory (usually after the holidays), there will also be more competition, as you will also get the buyers at that time of year who want to make a move after school gets out for the summer. Also, you will likely get a lower interest rate if you buy now rather than down the road, as many economists predict interest rate increases as inventory rises.

Do you need a few more reasons? How about this: housing statistics have been and continue to be on the rise. Building statistics are up in many areas, and many markets are becoming seller’s markets. So remember that “now is truly a great time to buy” may sound like an old cliche, but truly makes sense right now. If you are serious about buying now, make sure you understand the importance of writing a strong offer – click here for some great tips. Happy house hunting!

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