Posts Tagged ‘housing market’
Tuesday, March 27th, 2018
There is a new voter measure that could put an end to the housing shortage in California if placed on the November voting ballot and passed. The proposition would allow homeowners 55 and older to reap tax benefits upon selling their homes by eliminating the “disincentive” to sell, and making it possible to move to other California counties while taking the tax benefits with them.
Here is how the proposal would work: older homeowners who want to sell their larger homes and downsize would be able to do so, while being allowed to move from any county in CA to another without a big tax hit, so long as the new property value is the same or less than the home they are selling.
This may sound familiar to you – it draws on the premise of Proposition 13, and this new measure would allow the sellers to retain their benefits under that law. Currently many would be downsizers have elected to stay in their larger homes in order to prevent higher tax liability by losing their Prop 13 status upon selling.
Prop 13 allows property taxes to be capped at 1% of the purchase value of the property, and they are normally limited to 2% annual increases so long as the homeowners stay in the home. Sale of the home results in a reassessment of the property value for the new purchasers – thus the reason many would-be sellers have decided to stay put.
Currently, homeowners who want to downsize and move to different counties, say to be closer to family or save money on living expenses, may opt NOT to sell for the reasons above. This creates a problem for current homebuyers, as inventory remains very low. This drives up prices and encourages multiple offer situations – not good news for buyers as they may get priced out of markets, especially with interest rates and prices increasing simultaneously.
Both the California Association of Realtors and California Chamber of Commerce support this measure, as it is seen as one way to ease the housing problem in the state by increasing availability of “modest-priced homes and move up housing for young families.” Many counties in California oppose these inter-county tax transfers, as they could reduce revenues collected in property taxes upon the sale of homes.
Wednesday, March 14th, 2018
The reality of rising mortgage rates is of concern to home buyers and sellers. Normally interest rate increases alone would not be much of a concern but combined with continued low inventory and high prices many wonder if the housing market will be able to sustain itself; there are 3 – 4 expected rate increases remaining this year.
I feel it is safe to say that rising interest rates will have an effect on housing affordability and inventory. Here is how I see it:
1. Higher rates mean many buyers will not be able to afford the house they could afford today (if inventory was not an issue). Many people, especially the would-be first time home buyers, may choose to continue renting or live with parents. If there is less demand for the homes that are on the market, prices will drop.
2. Sellers may continue to withhold homes from the market for the same reason – if there is no inventory for them to move either up or down, selling may not make sense. Especially when you take into consideration the higher rates, plus property tax increases for move up buyers. With less homes hitting the market we will continue to see inventory shortages, BUT combined with higher rates, which could lead to lower demand, prices should start to come down.
3. Luxury markets will face even tougher challenges as rates rise. Combined with the new tax laws, which raise tax on purchases for loans over $750,000, many potential luxury buyers may decide to hold off. Luxury sellers will likely see longer market times and lower prices.
It is important to keep in mind that every market is different. Here in San Diego we have year-round desirable inventory due to weather and location – but the coming changes will affect us and could alter the second/vacation home market purchases as well. It is important to consult a local area real estate agent to understand what is going on in your specific area.
If the inventory rut continues on this path it could lead to a big problem in the real estate market. I feel, and many economists and real estate market watchers agree, that it will stall purchases, keep sellers in homes they would have otherwise sold, and have a deep effect on buyers currently in the market and future buyers. As we head into the Spring and Summer it is a good time to think about selling and purchasing, prior to further rate increases.
Thursday, November 30th, 2017
Sales in North San Diego have jumped considerably between October 2016 and October 2017. The chief economist for the California Association of Realtors predicts that sales will be up 8% for the year. For 2018 the prediction is a 4.2% in appreciation and a slight increase in sales volume.
Here are the statistics for North County coastal zip codes from October 2016 to October 2017, for both single family homes (SFR) and condos:
Wednesday, June 28th, 2017
As those who watch the real estate market know, here in Southern California it has been a bit crazy over the last year or so. Despite some reports to the contrary it has been a seller’s market, especially here in San Diego County. That means that prices have risen and it has basically been a great time to be a seller. Low inventory and high demand give sellers an advantage.
BUT, there are some signs that the market may be changing. Let’s have a look at how:
1. Buyers getting priced out of the market. Many buyers cannot afford to live in areas in which they were able to afford a short time ago – in some markets just a year or less! With the choice of moving to completely different areas some are deciding to rent in their preferred areas instead, hoping that prices will drop down the road.
2. Interest rates rising. The interest rates have risen a few times and then dropped. The Feds are trying to sustain the market by making home sales more desirable, but buyers still have to deal with the higher prices and, in many cases, multiple offer situations that raise them even higher.
3. Buyers getting frustrated and putting searches on hold (many opting to rent instead). Many buyers are tiring of the raise in prices. I just showed a condo to buyers (second home purchase) that is priced over $100,000 higher than the model match that sold in January – this is crazy!! I have had several buyers tell me they are just going to wait it out, as they do not want to pay “ridiculous” prices for homes.
4. Home sales are slowing down. May was the third straight month for declines in home sales. Sales listings dropped 8.4% over the last 12 months, due to higher prices and fewer options for buyers.
5. Summer selling season won’t last long. The “hot” selling season that is summer won’t last forever, and many buyers with families want to get into a new home before schools start up again in late August/early September. Those who cannot find homes will be forced to rent, which could take them out of the market for likely a full year, possibly longer. Also, many out of area buyers – a larger percentage here in San Diego which come from tourists – may not be able to find anything to purchase due to low inventory, which means they will be going back home empty-handed. Many of these buyers typically become second home or investment buyers and tend to focus on condos and lower priced homes.
It is evident that the market is causing issues among buyers, and the solution is to inundate the market with more listings. But until the sellers feel they can find replacement property many are electing to stay in their homes, creating a vicious cycle that had no clear end. Ironically, this is typically the best time to sell, so those who want to take advantage of the great seller’s market will need to take a risk and have a Plan B (such as renting in the interim).
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 aÂ 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.
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 anÂ 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.
Friday, October 7th, 2016
It has been an interesting time lately in the real estate market, and it is difficult to figure out exactly what is going on – is it slowing down, is it still hot…many people are confused. It really depends on your specific area, but there are some interesting things going on in my local markets…let’s take a look.
Multiple offers – still?! Yes! There are still some of those crazy multiple offer situations going on out there, and believe it or not they make it look like a seller’s market in the heat of summer. But this is not happening everywhere. It seems – at least in my neck of the woods in North San Diego – to be happening with condos and towhhomes that are very nicely upgraded, in good areas, and priced up to $550,000. Just last week I wrote an offer on a townhome for clients. The offer was super clean, priced over asking price, which was already stretching the appraisal potential, and a quick close in 30 days. We received a multiple counter offer asking us in essence to come up higher, remove the appraisal contingency at the outset, reduce all other contingency periods, and specifying that the sellers would make no repairs. We lost that one (I would never allow a buyer to remove an appraisal contingency unless they insisted, after being fully aware of the consequences).
Buyers are not jumping as high: Yes, this may sound like it contradicts the above paragraph, but it is true in most cases that buyers are not giving into inflated prices any longer. Most buyers (with the exception being the above scenario) are taking longer to find the right home, and then trying to negotiate the price. Much of the real estate news I read follows this position – after a crazy summer with prices inflating many buyers who missed the boat (or even those who intentionally waited out the crazy buyer storm) are finding that they can negotiate prices down and for that matter do not mind waiting until homes have some market time to make offers. This to me indicates the slow approach of a buyers market.
Fewer listings, fewer escrows opened: As is normal after the end of the summer season, listings are not as plentiful. But even after a fewer-than-usual-listings summer the Fall numbers continue to drop. Fewer escrows were opened in the last month compared to summer months. If this continues – fewer active properties, steady demand – it could spur the seller’s market to stick around for a bit…which means we could see prices rise. Interest rates will play a big part in this equation, as of course will jobs – people have to be able to afford homes.
In a nutshell the market is a bit hard to predict right now and doing so requires focusing on the specific community in which you are searching. For those buyers out there who are ready, willing and able to purchase my advice is to not rush into anything (unless you find your absolute “must-have it” dream home – but even then you need to be careful), consult with an experienced real estate agent to make a plan,Â stick to your budget and stick to your guns when negotiating price, repairs and other items.
Thursday, September 8th, 2016
Many blogs and articles have alluded to the idea of a pending housing bubble, and some people even seem to be nervous. This kind of talk is always prevalent after a strong sales season, but how do we know how much credibility to give these claims, and could we be facing a housing bubble any time in the near future?
The answer in my opinion is a loud NO. In the July pending home sales index the National Association of Realtors (NAR) revealed that pending home sales are now at the highest level since 2006 (the highest month was April 2016). But wait, you may say, it was not long last time between the strong sales season to when the market actually crashed. However, there are some differences between the last housing bubble and our current economic situation.
Here are some reasons why the housing market won’t likely crash,Â nor any bubbles form in the near future:
1. Mortgage applications are up. While purchase activity dipped in August, there has been an increase in the last few weeks and the MBA reports a 1% rise in the last week alone. With rates still low many homebuyers are jumping off the fence.
2. Consumer credit is strong. Credit servicing continues to strengthen and Fannie Mae reports that the single family home delinquency rate continues to decline. Those home borrowers who are either 3 months or more behind in payments, or who are actively in foreclosure, hasÂ dropped, with a total fall of close to 25% in the last year – resulting in the lowest level since 2008.
3. Mortgage availability has increased, according to the MBA. But credit is not as loose as before the last crash, when many people were given loans without being able to afford them.
4. Inventory is down/little or no new building – many active homes are now in escrow and with scarce inventory the chance of a bubble forming is slim to none. Unlike in 2007/2008, there is very little or no new home construction in most areas. As prices have risen many buyers have been priced out of markets. Eventually buyers will give up in many areas and prices will then be driven down. Population is growing in many areas, like here in San Diego County, faster than housing supply – this means that there is not likely a chance of a bubble.
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, thereÂ 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 healthyÂ 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 -Â 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.
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.