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Mortgage Rates 2015


With the Fed announcing the end of QE, the next concern is when they will start raising rates.  Mortgage rates are only indirectly tied to any move the Fed might make – which usually means that mortgage rates will start inching up in advance.

Here is a quote from Capital Economics about their expectations:

Unexpectedly, the Fed still thinks it will be a “considerable time” before it begins to raise interest rates. Indeed, the Zero Interest Rate Policy remains in full force, as it has been since inception at the end of 2008.

“We didn’t expect that language to be dropped at this meeting given there is no scheduled press conference, but we wouldn’t be surprised if it is changed at the upcoming December meeting,” Capital Economics said. “Overall, we still believe that the Fed will begin to raise rates sooner than generally expected, with a March 2015 hike the most likely outcome.”

If the Fed adjusts their statement in December, expect mortgage rates to get a jump on any potential rate increase.  Buyers have been cautious for months, and we will probably see a couple more negative readings of the local Case-Shiller Index by next year.

If mortgage rates bump back above 4%, and maybe into the mid-4%s, they won’t kill the 2015 market.  But if you are thinking of selling your house after another 5% to 10% increase in value, you might be in for a long wait.

Posted by on Oct 30, 2014 in Interest Rates/Loan Limits, Jim's Take on the Market, Thinking of Selling? | 3 comments

Estate Sales

We’ve explored a few of the alternative groups of potential sellers, but none are emerging as major contributors.  In a ‘normalizing’ market, it means we are back to the Big 3 sources of new listings; Death, Divorce, and Job Transfer.

Carmel Valley doesn’t have much to worry about here – the oldest CV homes were built in the mid-1980s.  But in the remaining areas of San Diego’s North County coastal region, where houses go back to the 1940s and 1950s, there are many long-time owners who will stay for the duration.

Back in the old days, it was routine to sell your parents’ home and split the proceeds with the siblings.

But that was when everyone could afford their own house.

Today, one of the siblings might want, or need, to take possession because they can’t afford these prices.  As a result, what used to be a steady flow of new listings may not be as fruitful as before.

It will be relative to the quality of the home.

Yesterday I was in Oceanside, where a past client had purchased in the 55+ community of Oceana.  I had sold her house about 10 years ago, and she moved there with her husband thinking it would be the final stop.  It was for her husband, but now she needs assisted living, so she is exploring those facilities.

Oceana is an average senior community – the homes are 1,000sf to 1,600sf and sell in the $200,000 and $300,000s.  Sales are increasing – here are the number of closed sales between Jan 1 and Sept 30:

2010: 57

2011: 57

2012: 50

2013: 69

2014: 66

There are 22 active listings today, which is no shortage of supply is you are thinking of living there, and it is an affordable option.

But in the swankier parts of town, when a homeowner dies, their home is more likely to stay in the family today just because the siblings having such a difficult time buying their own home.

The condition of these homes is usually less than spectacular, and those that do come up for sale will be great flipper food.  You’ll see more of them in areas where homes were built in the 1960s and 1970s, because those original owners have had no better place to live for the money!

Posted by on Oct 29, 2014 in Boomers, Jim's Take on the Market, Market Conditions | 15 comments

SD Case-Shiller Index, Aug 2014

case shiller san diego aug2014

We’ve gone negative!  The Case-Shiller Index for San Diego declined 0.08% in August from the previous month.  The sound bites won’t mention that we’re still up +5.07% year-to-date, which is a good eight-month run historically.  Instead, buyers will be more inclined to wait, and sellers will shrug it off:

These are the Case-Shiller Index NSA changes below for San Diego:

Jan ’13
Feb ’13
March ’13
April ’13
May ’13
June ’13
July ’13
August ’13
September ’13
October ’13
November ’13
December ’13
January ’14
February ’14
March ’14
April ’14
May ’14
June ’14
July ’14
Aug ’14

sd case shiller aug 2014

Here is the chart of the SD CSI Calendar Year Performance – what a ride:

Annual Change

Posted by on Oct 28, 2014 in Same-House Sales | 4 comments

Next Group of Potential Sellers

new sellers

In spite of a WFB survey showing that a third of Americans will not have enough money on which to survive during retirement – and me providing some recent sales data that might back it up – readers here were having nothing to do with the notion that we’d see an exodus of baby boomers.  We live in an affluent area, and certainly most homeowners are probably flush.

Let’s keep exploring who the future sellers might be.  If we can identify a source that might boost the inventory counts, then sellers and buyers can adjust accordingly.

Another category is the waiting-for-the-top-to-sell folks.

These come in all shapes and sizes, young and old.  Here are a few of the groups that could be potential sellers lurking – and just waiting for (more) signs that we’ve squeezed all the price we can out of this low-rate environment:

1.  Formerly underwater and now positive enough to at least pay costs.

Roughly one out of eight homeowners in SD County are underwater, which is about half of what it was at the bottom a few years ago. Those who have reclaimed some equity will need to move up, down, or out of town, because a lateral move doesn’t do any good – they’ve survived the current payment this long (loan mod or not) and are tempted to stay put.  If some can get their price now and need to move, they just might.

2.  The unsuitables.

Those who own a house that is unsuitable – too big, too small, or too much maintenance – might sell if they get their price and move to a better fit.

3. ‘Downsize and travel’ folks, usually baby-boomers.

Probably not desperate, but if they got their price, they’d be on their way.  They are more motivated by moving closer to grandkids than anything else.

These are lukewarm sellers compared to the previous discussion where I suggested that some baby-boomers would need to sell to survive.  There is crossover between the groups, and a common thread is that they are only motivated by a price – theirs.  Any new listings will attempt to push prices higher, and we’ll see if buyers are willing to step up.  These sellers aren’t necessarily going to buy another home locally, which could help balance the supply and demand.

Because these sellers have suspicious motivation, we can probably expect that “The Great Wait”, as Shadash called it, will be with us for a long time to come.

Stay tuned for tomorrow’s Case-Shiller report!

Posted by on Oct 27, 2014 in Jim's Take on the Market | 28 comments