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Mortgage Rates 2015

ratesoct29

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:

http://www.housingwire.com/articles/31887-qe3-ends-how-long-until-interest-rates-rise

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:

Month
M-O-M
Y-O-Y
Jan ’13
-1.0%
+9.8%
Feb ’13
+1.0%
+10.2%
March ’13
+2.0%
+12.1%
April ’13
+2.8%
+14.7%
May ’13
+3.2%
+17.3%
June ’13
+2.8%
+19.3%
July ’13
+2.0%
+20.4%
August ’13
+1.8%
+21.5%
September ’13
+0.9%
+20.9%
October ’13
+0.3%
+19.7%
November ’13
+0.0%
+18.7%
December ’13
-0.1%
+18.0%
January ’14
+0.6%
+19.4%
February ’14
+1.0%
+19.9%
March ’14
+1.3%
+18.9%
April ’14
+0.8%
+15.3%
May ’14
+0.5%
+12.4%
June ’14
+0.68%
+10.2%
July ’14
+0.34%
+8.3%
Aug ’14
-0.08%
+6.2%

sd case shiller aug 2014

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

Year
Annual Change
2004
+26.60%
2005
+6.64%
2006
-4.21%
2007
-14.97%
2008
-24.84%
2009
+2.71%
2010
+1.72%
2011
-5.38%
2012
+9.23%
2013
+17.99%

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

Inventory Watch – Halloween

The inventory count dropped 24 listings this week, which isn’t many, considering it’s the week of Halloween.  Pendings haven’t dropped a lick – scroll to very bottom.

The UNDER-$800,000 Market:

Date
NSDCC Active Listings
Avg. LP/sf
DOM
Avg SF
November 25
95
$376/sf
47
1,988sf
December 2
79
$371/sf
50
2,047sf
December 9
72
$383/sf
43
1,954sf
December 16
81
$378/sf
42
1,948sf
December 23
77
$374/sf
49
1,937sf
December 30
76
$373/sf
51
1,950sf
January 6
74
$370/sf
49
1,995sf
January 13
71
$381/sf
44
1,921sf
January 20
72
$384/sf
41
1,877sf
January 27
75
$399/sf
40
1,891sf
February 3
78
$409/sf
41
1,876sf
February 10
82
$395/sf
38
1,927sf
February 17
85
$387/sf
35
1,929sf
February 24
90
$383/sf
37
2,008sf
March 3
82
$397/sf
39
1,942sf
March 10
88
$377/sf
37
2,008sf
March 17
89
$366/sf
34
2,038sf
March 24
79
$369/sf
34
2,031sf
March 31
78
$367/sf
39
2,069sf
April 7
87
$373/sf
32
2,054sf
April 14
97
$380/sf
31
2,000sf
April 21
87
$377/sf
32
2,062sf
April 28
107
$379/sf
29
2,044sf
May 5
114
$376/sf
27
2,046sf
May 12
108
$385/sf
31
2,012sf
May 19
107
$385/sf
0
0sf
May 26
105
$375/sf
34
0sf
Jun 2
102
$376/sf
36
0sf
Jun 9
102
$377/sf
37
0sf
Jun 16
104
$369/sf
35
0sf
Jun 23
111
$380/sf
34
0sf
Jun 30
119
$376/sf
36
0sf
Jul 7
122
$387/sf
36
0sf
Jul 14
127
$388/sf
34
0sf
Jul 21
135
$381/sf
36
0sf
Jul 28
144
$382/sf
37
0sf
Aug 4
148
$379/sf
39
0sf
Aug 11
135
$375/sf
42
0sf
Aug 25
135
$374/sf
43
0sf
Sep 1
126
$377/sf
46
0sf
Sep 8
130
$375/sf
46
0sf
Sep 15
134
$369/sf
45
0sf
Sep 22
127
$376/sf
49
0sf
Sep 29
132
$378/sf
48
0sf
Oct 6
130
$367/sf
48
0sf
Oct 13
131
$378/sf
44
0sf
Oct 20
130
$385/sf
45
0sf
Oct 27
128
$375/sf
48
0sf

Read More

Posted by on Oct 27, 2014 in Inventory | 0 comments

Who’s Selling?

Yesterday we wondered if there was a possible threat of a baby-boomer liquidation sale in the coming years, and we had a load of comments – thanks for participating!.

Can we get a feel for what’s happening now?  Here’s a check of the 67 NSDCC houses that have sold between $750,000 and $1,000,000 in the last 30 days.

These are the years when the sellers purchased:

Years Purchased
Number of Sellers
1965-1980
8
1981-1990
4
1991-2000
12
2001-2007
23
2008+
20

Only a couple sold for less than the price they paid, and there were 3 short sales too (no REO listings).  The newer homes in Carmel Valley bolstered the more-recent stats too.

About 36% of the sellers bought their home prior to 2001, and are probably baby-boomers (or older). Most will at least be empty-nesters by now, and could be candidates for the ‘downsize and travel’ crowd. If their numbers increased, they would most likely be offering older fixers upon which flippers can feast, and eventually be sold to those looking for a substitute for new homes, which are in short supply.

Posted by on Oct 24, 2014 in Jim's Take on the Market, Market Conditions, North County Coastal, Thinking of Buying?, Thinking of Selling? | 16 comments

Boomers Not Saving

Though we have reverse mortgages available, you can’t help but think we’ll be enduring a baby-boomer housing liquidation sales event over the next 10-20 years.  I think it’s already underway, and disguised as those wanting to “downsize and travel a bit”. 

Hat tip to daytrip for sending this in from Wells:

https://www.wellsfargo.com/about/press/2014/middle-class-retirement-saving_1022.content

Saving for retirement is a formidable challenge for middle-class Americans, with 34% not currently contributing anything to a 401(k), an IRA or other retirement savings vehicle, according to the fifth annual Wells Fargo Middle-Class Retirement study.

Forty-one percent of middle-class Americans between the ages of 50 and 59 are not currently saving for retirement. Nearly a third (31%) of all respondents say they will not have enough money to “survive” on in retirement, and this increases to nearly half (48%) of middle-class Americans in their 50s.  Nineteen percent of all respondents have no retirement savings.

On behalf of Wells Fargo, Harris Poll conducted 1,001 telephone interviews from July 20 to August 25, 2014 of middle-class Americans between the ages of 25 and 75 with a median household income of $63,000.

Sixty-eight percent of all respondents affirm that saving for retirement is “harder than I anticipated.” Perhaps the difficulty has caused more than half (55%) to say they plan to save “later” for retirement in order to “make up for not saving enough now.”  For those between the ages of 30 and 49, 59% say they plan to save later to make up retirement savings, and 27% are not currently contributing savings to a retirement plan or account.

Sixty-one percent of all middle-class Americans, across all income levels included in the survey, admit they are not sacrificing “a lot” to save for retirement, whereas 38% say that they are sacrificing to save money for retirement.

While a majority of middle-class Americans say that they are not sacrificing a lot to save for retirement,  72% of all middle-class Americans say they should have started saving earlier for retirement, up from 65%  in 2013.

When respondents were asked if they would cut spending “tomorrow” in certain areas in order to save for retirement, half said they would: 56% say they would give up treating themselves to indulgences like spa treatments, jewelry, or impulse purchases; 55% say they’d cut eating out at restaurants “as often”; and 51% say they would give up a major purchase like a car, a computer or a home renovation.  Notably, fewer people (38%) report that they would forgo a vacation to save for retirement.

Read full article here:

https://www.wellsfargo.com/about/press/2014/middle-class-retirement-saving_1022.content

Posted by on Oct 23, 2014 in Boomers, Jim's Take on the Market | 35 comments