Real Estate Market Update for August 2013
It’s hard to believe August is nearing it’s conclusion, summer is almost over and kids are going back to school…definitely things will be changing for many families very soon. One thing that does not seem to be changing is the real estate market, which is still doing very well. Here are the latest happenings in the market.
Prices Continue to Rise. Most metros report that sales prices continue to rise. The National Association of Realtors reported this week that sales rose 6.5% in July, which is up 17.2% from 12 months ago. This is big news. Sales have continued to stay above an annual pace for the last 3 months. Inventory has also been up this summer, and while rates are still low (they did come up earlier this summer but have held steady), it is possible the summer buying season may continue into Fall. Of course, it is important to understand your specific market area, so if you are considering buying or selling make sure to contact a skilled local real estate agent.
Sales Could Slow As We Head Into 2014. As we approach the end of this year it is important to consider what may happen in the coming year. While no one has a crystal ball, there is a chance that interest rates could rise if the Federal Reserve cuts down on its bond purchasing. Another factor to consider is timing – many markets typically slow down after the summer season ends. Homes that don’t sell in the first part of Fall could be taken off the market as we head into the holiday season. If this happens, there is no assurance that rates will be where they are now after the holidays and heading into the spring season. In other words, if you are thinking of buying or selling real estate NOW may be the time to do so.
Distressed Sales are Down. Distressed sales (bank owned properties resulting from foreclosures, and short sales) continue to drop or hold steady in most areas. According to NAR, “the proportion of distressed sales including foreclosures stayed at 15 percent, the lowest since the Realtors began tracking the figure in October 2008.” This is good news because we can assume that the rise in prices may have helped some homeowners out of the negative equity doldrums. One might consider it is a sign that lenders are being more cooperative in granting loan modifications, or approving short sales rather than initiating foreclosures, but I seriously doubt that (just being realistic here) – lenders are still creating problems with short sales and they continue to be painful processes (for more information on whether short sales are still good deals, click here.)
Cash is Still King. A report recently released by Goldman Sachs states that over 50% of home sales were cash transactions nationwide, 57% in the first quarter of this year. The report indicates that the majority of these purchases are in the lower price range market, which indicates that many are likely investment purchases being used as rental properties. Cash buyers obviously can have a detrimental effect on buyers that need to obtain loans, possibly preventing many people from being able to purchase homes. Personally, I saw this as more of a problem in 2012, so again it depends on your specific market – talk to an experienced local real estate agent. I feel comfortable in stating that here in San Diego the number is most likely not that high.
California Homeowners are Locked Out of the Market. A report from PropertyRadar states that nearly a third of all California homeowners are locked out of the current market due to the persistence of negative equity (people who owe more on their homes than they are worth) – all this despite the rising sales and sales prices across the state. The report claims that 26% of all homeowners with mortgages across the state are in a negative equity position. This means that 2.3 million homeowners are unable to sell their properties. The rising interest rates do not help these property owners at all either.
All in all the market seems to continue to heal. Although I do not think prices will continue to rise dramatically heading into the last quarter of the year, I think we will see a slow correction with small annual price increases from here on out. The sharp increases most markets have seen this year put the housing market on a path toward healing and consumer confidence, and I believe that will continue.
