Posts Tagged ‘home prices’
Tuesday, January 31st, 2017
The new housing report was released yesterday by Case-Shiller, indicating that U.S. home prices are still rising. Of course this is really area dependent, but if you are a potential buyer or seller you might feel worried, and justifiably so. Keep reading for important information and advice.
The report covers major metropolitan cities and states that prices in these areas rose by 5.27% in November – above expectations of economists, and also up from the previous month of 5.1%. What does this mean for buyers and sellers? Let’s take a look at some important considerations.
Local markets: Of course these studies are general and tend to focus on big cities, so it is important that you contact an experienced real estate agent in your local market to see what is going on in the area. But, the thing to take away from this data is that prices are not easing up. Combine that with the next factor…
Inventory is still very low: Again, your local market must be studied to get an accurate glimpse and set expectations (your real estate agent can help with this), but using my local North San Diego market as an example I know that this is painfully true. I have buyers who simply cannot find homes, and multiple offer situations in some categories – like properties under $600,000 – are still the norm. With low inventory and prices staying put or rising, a buyer does not benefit from waiting to purchase, especially considering the next factor…
Springtime is coming: Traditionally the “hot” season for housing, spring and summer are just around the corner. But in my view we are already in the heat of things. Hopefully more inventory will pop up as we head into that “busy” season, but honestly I think the entire last year and especially this Fall and Winter, can be considered busy in housing – at least here in San Diego. Waiting until Spring could put buyers in even more of a quandry, bringing an increase in the buyer pool: more competition can drive prices up again.
The National Home Price Index also rose by 5.6% annually – up from 5.5% the previous month. High demand is causing these prices to continue on an upward trend. It is important to note, as some doubters or “bubble-talkers” as I call them, may believe, that these trends are NOT similar to those that occurred prior to the last housing crisis in the early 2000s.
How is this market different than that prior to the last crash?
1. Factors driving prices are not the same. Prior to the crash people were driven by speculation and anticipation of growth. Instead, healthy market factors like a strong job market and low mortgage rates are driving this market.
2. Lending is stricter. Lending requirements are not as loose as they were during the time prior to the last housing crash, so not everyone can qualify for a loan.
3. Demand is high but supply is not. Prior to the last market crash, there is a much lower supply of inventory in most areas. It is not so easy to find property to purchase. Many would-be sellers are afraid to sell, as they don’t know where they will move if there is such low supply and so much demand – so it’s a great time to be a seller if you have the time to wait it out on a subsequent purchase.
The moral of all this information is that if you are a potential seller you are in a great position. But if you have to buy after selling you need to have a “plan B” in place – e.g. stay in a furnished month to month apartment or temporarily move in with a relative or friend will put these people in ideal situations to sell and wait for the right home. But buyers have it a bit tougher – the best advice I can give is to BE PREPARED. Get preapproved, start looking at everything in your price range and desired area – even those homes that may not be as upgraded as you like or in the exact neighborhood you wanted. Do your homework and be ready to pounce once you find that “right” home.
Monday, May 23rd, 2016
If you are a real estate agent or a home buyer you may notice that the market is obviously low on inventory right now. Being that it is the “selling season” of Spring/Summer, and since there are a lot of buyers out there looking at homes, there are many situations involving multiple counter offers and homes selling for well over asking price…all great if you are a seller. However, there are also some fishy things going on out there and it is frustrating to agents and their buyers.
Let’s take a look at what is happening:
1. Homes listed well over comparable value. Many, and I mean a LOT, of homes in North San Diego are being listed over market value – some slightly and some way over. Buyers, who normally would avoid such homes until the price drops, are flocking to them and making offers anyway. No one seems concerned that the home likely will not appraise, and if one buyer walks there are many more who will step right in. This is pricing out first time homeowners and bringing prices up…you may think the latter is good, but it is dangerous because such inflation could create problems for the market – especially when there are many buyers who have incomes that will price them out of neighborhoods they should have been able to afford had prices reflected comparable sold values.
2. Many sellers are taking a long time to respond to offers – even very strong ones. If a buyer makes a very strong offer over asking price, many listing agents are waiting for 4 or 5 days to even respond, during which time they collect more offers. Many then submit multiple counter offers to all bidders asking for the best and highest price. This prices many potential buyers out of the running, and most already submitted an offer slightly over their budget.
3. Sellers are refusing to make repairs or pay for reports. In a seller’s market the seller knows s/he is in the driver’s seat, and many sellers are countering back stating the home is sold as is, and that they will make no repairs and pay for no reports – like termite reports. They want the cleanest offers possible with the least amount of money out of pocket. This means the buyer can get stuck with multiple repairs, termite work, etc. If the buyer is already paying top dollar for the home, s/he has to make sure those things are affordable. No one wants to see a new foreclosure wave hit in a few years.
4. Appraisals are not coming in at contract value – but that is not deterring sales. I have not had problems with appraisals on listings (I don’t market properties in the “insane” price category), but have heard from many agents who have. Even if the home does not appraise at contract value, there are plenty of buyers who are willing to pay the difference in cash if sellers will not negotiate prices down to the appraised value. They feel that is the only way to secure a home purchase in these crazy times. Does this sound like 2003/2004 – “pre-crash” – to anyone else besides me?
5. Overly aggressive listing agents seem to be multiplying, and they are not being cooperative. There are many listing agents who are ruthless and even rude. They don’t care that your buyers love the home and have been looking in that neighborhood for a long time, or that they wrote a very strong offer and submitted it first. To these agents, it’s all about playing the game and finding the highest bidder. Some agents do not return calls and emails, and some violate the Realtor code of ethics – a few may even commit fraud. It is extremely frustrating for buyer’s agents, who are trying to find a home for their well-qualified buyers.
6. Pocket listings and homes listed “off the MLS” are increasing. Many agents are marketing their listings on third party sites like Zillow, and not placing them on the MLS – the cooperative tool used by Realtors to benefit all parties looking in particular areas/price ranges. While it is their right to do so, it makes a problem for buyer’s agents whose clients may see these listings and want to visit them – but when their agent calls the listing agent to make an appointment she is often told that the seller is not paying a commission to buyers’ agents. Imagine you have been helping your buyers for months to find a home and now you cannot show them this one home because the broker will not cooperate with your broker. It puts buyer’s agents – who play an imperative role in protecting buyer’s rights – in a very sticky situation. You may ask why listing agents do this: the answer is so they can find buyers who will work with them, thus saving the seller from paying out a commission to the buyer’s agent. Hopefully the California Supreme Court will soon put an end to double ending sales and this will no longer be a problem.
I am a bit concerned and hope that we are not heading into trouble in the real estate market. I hope that agents keep in mind the spirit of cooperation that is inherent in our business – we all need to work together and be fair. If we do not then buyers and sellers will not be protected from future lawsuits, and many people will be priced out of the housing market – which could cause a domino effect with local economies and eventually the US economy.
Thursday, May 22nd, 2014
Tuesday, January 28th, 2014
Monday, July 8th, 2013
One of the biggest questions in real estate right now is whether the market will continue to see rising prices. Many areas, including San Diego county, have seen price spikes over the last 6 months or so, anywhere from 10% to over 20%, depending on the neighborhood. We know that one of the main reasons for this is the lack of inventory combined with the time of year and low interest rates…but what will happen if those rates go up and as we head into Fall and Winter?
Inventory: Inventory will continue to play a big part in the market recovery, as well as help determine whether prices will continue to rise and the response thereto. It is a unique time right now because it is summer – the time when many buyers think of purchasing, and sellers think of selling. The demand is still very high in North San Diego, and I have agents calling me long after I close listings, asking if I have any others coming up in the neighborhood – AND if I have listings coming up in other places, so there are still buyers out there looking, with little to choose from.
There are several schools of thought as to what will happen to inventory levels moving forward, and how this might effect the market. As I always say, this will be determined by the specific market area, but as long as inventory remains low and there is a demand for properties I do not suspect we will see a drastic slow down in price increases; however I do think that as we coast through the remainder of the summer we will likely start to notice a leveling off, due to the factors below.
Interest Rates. If you have looked at the news lately you have seen that interest rates have risen in the last month, several times, and are expected to continue to do so. Some people fear that it will be the end of the housing recovery if they do in fact rise substantially, but as long as there is demand – and there still seems to be a great deal of it in San Diego – I do not think we will see a big drop in sales despite rising rates…after all, if you look at the rates from a historical perspective slight rises will still be considered low interest rates!
Interest rate effect on new inventory. One interesting thing to ponder is what effect rising interest rates will have on would-be sellers: those who have been thinking of selling but have been waiting (most for prices to continue to rise, many who are underwater and are waiting for the break-even point so they can get out from under there hefty mortgages). If we continue to see a spike in interest rates it is possible we may see a surge of inventory hit the market, created by a fear that buyers will no longer choose to purchase should the rates spike. This could be positive news for local markets, as the supply would be welcomed and met by the demand.
Another idea to consider is that those who have been searching for homes, getting outbid and frustrated with not finding homes, may decide to sit back should rates rise; the more probable scenario is that these buyers will want to jump into a purchase even quicker, and may step up their searches and even increase their range and criteria, in order to get into a home before the rates go up even more. It will be interesting to see the effect this has on the market, but I do not think it will be negative, at least not right away.
Distressed inventory. Over the years distressed and bank owned inventory has had an effect on home prices, playing a big role in gains. However, these sales have decreased in the last year, with REO (bank owned) sales decreasing by more than half. Radar Logic reports that from February of last year to April this year, REO sales declined from 26 percent of all home sales to 11 percent. This causes prices to increase more quickly than normal. If we see a return of these types of properties it could have an effect on prices, but I do not believe such would cause prices to go down, rather I think we would see a slower gain period moving forward.
Call it what you will, but a rise in interest rates could be a boost to local markets, at least those that have been climbing out of the doldrums of the crash and appear to be healthy and competitive. If you are thinking of buying or selling, this could just be the perfect time to do so, especially if you are now able to get out of an underwater loan and break even. Remember, after the market crashed many kept waiting for prices to “hit the bottom;” some people waited too long and missed out on purchasing property at the lowest levels. I do not believe prices will drop in San Diego, but rather I forsee a stabilization, combined with a “normal” annual rate of growth moving forward starting in 2014.
If you are interested in a detailed market analysis of your or other San Diego neighborhoods, please let me know.
Tuesday, February 26th, 2013
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.
Thursday, March 29th, 2012
Home prices are rising and have been doing so for the last three months. According to Standard and Poor’s newest Case-Shiller index report, prices have actually showed a decline, but that fact has been disputed by other reports. In North San Diego, I agree that prices seem to be rising and market times, not including short sales, are decreasing.
The discrepancy between the Case-Shiller report and other reports that have studied markets across the country is that the other reports focus on when contracts are signed – it uses the prices agreed upon at that time, even though it could be months until the properties close escrow. Case-Shiller uses the prices reflected at the close of escrow, so there is quite a bit of lag time, up to several months, which skews the results.
Market Trends: The general consensus is that if you focus on what is trending, rather than waiting until close of escrow down the road, you get a clearer picture of price increase. Of course, there is the possibility that some of these sales may not close escrow, or may not appraise at the agreed price, but there is still a valid argument that focusing on what people are WILLING to pay and do get into contract for is a more accurate measure of hyper-local market analyses.
North San Diego: From a personal standpoint, I agree that prices seem to be increasing in the North San Diego market. We are seeing a lot of multiple offer situations, especially in the lower price ranges (under $400,000) across the county. Also apparent is that that the days on market time seems to be decreasing. In Carlsbad alone the average market time (for all four zip codes combined) for detached homes is 76 days, but if you scroll through all the pending listings you will notice many that sold in under a week. For attached homes in all four Carlsbad zip codes the average market time is 84 days, but again, you will notice a handful of properties that went into pending status quickly.
Sales Time Trends and Short Sales: Another trend I am seeing is that short sales contracts are being presented and accepted faster, especially in the under-$400,000 price range, with both attached and detached homes. These sales go into contingent status (meaning an offer has been signed and accepted by the seller pending approval by the short sale lender(s)) much quicker these days, but the market times are longer because the parties await short sale lender approval. The wait time, which can take months, throws off the market time numbers and makes them longer, so that has to be considered when looking at the sale times.
All in all the news is positive that the market here in San Diego is improving,which is great news for homeowners and buyers alike. According to Altos Research, the statistics indicate that the tables have turned slightly in the condo market, making it a seller’s market for the first time in a long time; the detached home market is still a buyer’s market. Hopefully the road ahead will continue to bring us closer to a more “normal” market.
Please feel free to contact me if you would like any detailed market reports and statistics sent to you, and I will be happy to do so. Send your request to Rachel@LaMarRealEstate.org.
Saturday, July 16th, 2011
It’s one of the questions of the moment, and one that many real estate agents and mortgage brokers fear most at this time: what will happen to the housing market once the conforming loan limits drop at the end of September? How will buyers and sellers be affected, if at all?
Let’s start at the beginning: conforming loans are those that are eligible for guarantee by the government. Because of this, they tend to have lower interest rates. The cap on the amount that the government can guarantee used to be lower, but in 2008 Congress raised the cap to $729,750 in some markets (typically those with higher priced homes, like in California). This made lenders feel more secure in doling out loans, because they knew they would be covered by Fannie Mae or Freddie Mac if the homeowner defaulted on the loan, thus making them less risky.
Also potentially on the chopping block are FHA limits, and lowering them could impact 40 states and hundreds of counties, according to the National Association of Realtors (NAR). Since FHA backed loans are popular right now across a broad spectrum of buyers, this could also be a problem for those seeking to qualify for these types of loans. Many organizations, including NAR, have been making appeals to Congress to not allow limits to be reduced.
Come October 1 these higher limits are set to revert back to the old limits – $625,500 in some markets , such as pricier home markets like San Diego County. Many reports have predicted this will be a huge blow to buyers trying to qualify for loans, and some lenders are already starting to scrutinize current applications in light of the coming changes. How might this affect the borrower?
Interest rate increases: With loan limit decreases higher interest rates are likely. If a borrower needs a loan that exceeds the new caps she will need a jumbo loan, which has a higher rate. This may cause the buyer to look for homes that are smaller and cost less – or simply to hold off on buying. Either way this could effect housing market recovery.
Down payment increases: Buyers will need to make bigger down payments should they need loans that are over the lowered limits, in order to get jumbo loans. Again, this could lead to inventory stagnation in the middle part of the market, with buyers starting to focus on lower-priced homes or just opting to wait.
Price decreases: With the changes in loan limits and thus, buyers being able to qualify, comes the inevitable – sellers may have to reduce home prices to entice buyers to buy (so that they can qualify for a loan without having to get a jumbo loan).
Given the current state of the housing market and economy, this move to reduce loan limits doesn’t seem like a good one…however, there is a ray of hope in the scenario: if you are a buyer you could benefit immensely from prices going down. You may have to adjust your criteria a bit – maybe a smaller home or one that needs a little TLC, but all in all it could have a positive outcome for buyers. Sellers are the ones who will have a more difficult time with the changes.
Buyers still have time to research, find a home and lock in a rate. If you are a seller, you still have time to price your home WELL. This is certainly not the time for overpriced listings, so have a frank discussion with your agent and utilize the comparables to come up with a price that will get those buyers in the door.
Friday, May 6th, 2011
In case you haven’t heard, rumors that our housing market is going into a double-dip are once again alive and kicking. Several people have asked what I think of this in relation to North San Diego, and whether it really is true. My answer: yes and no (you didn’t think it would be simple, did you?)
The latest news, just released yesterday by Clear Capital, states that prices fell in March and April, compared to the same time last year and the prior low in March of 2009. They credit the bank owned inventory (REOs) as the main culprit, stating that there has not been a rate of decline this strong since 2008 – the rate was cited as 11.5% over the previous 9 month period. As more than one third of home sales nationwide are REO the company predicts that prices will continue to drop, since these properties typically sell for less than regular sales, thus bringing down comparable solds.
Although it is true that the Western states were cited as particularly effected by the above data and predictions, it is a misnomer to compare this data to the hyper-local North San Diego market. Let’s take a look at Carlsbad to compare:
1. Average median sales price: Although the average median sales price – $540,000 – dropped slightly from January to March (by an average of $35,000, or -0.6% decrease compared to last year), home sales were up 5.8% compared to last year. The median sales price appears to have remained steady over the last several months, with only slight drops. Comparing to the Clear Capital report for the nation, Carlsbad’s prices have fallen slightly less than the national number (.06% to .07%).
It appears that we are seeing prices drop slightly, but not quite as much as in some other areas, such as the midwest, where they have already entered into a true double dip market.
2. Lower number of REOs compared to other areas. Right now there are currently 31 REO properties on the market in all four zip codes that comprise Carlsbad. There are 695 total active properties listed, so REO listings comprise only .04% of total actives.
3. Lower number of short sale properties: There are currently 95 short sales in Carlsbad, or 0.14% of listed homes are considered short sales. This number is undoubtedly smaller than other areas across the country like Las Vegas or Phoenix. In this light I think Carlsbad and other north coastal areas are fairing quite well. In fact, Carlsbad 92011 in the past had been the zip code with the lowest number of foreclosures in the entire county (I am looking into whether this is still the case, but I assume if not is it surely still one of the lowest).
Even some areas in our own county have higher numbers, like Chula Vista for example. Of 769 active listings in Chula Vista, 98 (0.13%) are REOs and 350 (0.45%) are short sales. These numbers are three times as high as Carlsbad’s numbers. Areas with less distressed properties will not likely see drops in price quite as large as one may see in markets saturated with these types of properties.
The bottom line is that yes, prices have dropped slightly in North San Diego. But you really do need to focus on a specific areas rather than the big picture if you are a buyer or seller. Not doing so is a common mistake many people make, so if you are thinking of buying or selling consult a local, experienced agent in your specific area to provide a complete analysis of prices and sales.
If you would like live market data for North San Diego cities (like the chart above and with different categories to choose from), please visit my website at http://www.LaMarRealEstate.org. Click on the resources tab at the top right, and then Live Market Data. You can even sign up to receive weekly reports.