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Category Archive: ‘Forecasts’

Upbeat on San Diego Market

2014-01-17 16.54.56

I think this is the first time we’ve heard from the chief economist of realtor.com, so glad they are trying to at least stay even with Zillow in the sound bite department.  From the UT:

http://www.utsandiego.com/news/2014/dec/04/trulia-realtor-housing-forecast-mortgages-homes/

An excerpt:

“San Diego falls into a short list of markets where I would say demonstrably already that demand outpaces supply,” Smoke said.

“That very tight supply condition puts it in a market that has next to zero chance of seeing prices decline.”

Jed Kolko, the chief economist for Trulia, noted that people expected interest rates to rise last year, and that never happened. He listed San Diego as one of the nation’s 10 markets to watch next year, with Fresno the only other California metropolitan area to make the list. Others making the positive list are Boston, Dallas, Nashville and New York.

“They have strong fundamentals for the housing market without the risk that prices look overvalued,” Kolko said. “These are the markets who are in that sweet spot where the conditions are ripe for a strong year, without much downside risk.”

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At the end of this video she mentions the most hilarious comment in the history of real estate by the Case-Shiller talking head, David Blitzer - a guy who has never been seen outside of his ivory tower:

“It’s no longer about location, location, location, it’s about data, data, data.”

Posted by on Dec 5, 2014 in Forecasts | 0 comments

Local Valuation Changes

Zillow has refined their forecast of local ZHVIs over the next year.  The Zillow Home Value Index results have tracked the Case-Shiller Index closely, and are probably as good as any crystal ball in predicting the future.

These are the predicted changes in the ZHVI by October 31, 2015:

Zillow Appreciation Forecast
La Jolla
+1.7%
Carlsbad
+1.4%
Solana Beach
+1.2%
San Diego
+1.2%
Del Mar
+1.0%
Carmel Valley
-1.0%
Encinitas
-1.0%
RSF
-2.0%

The Case-Shiller Index for September will be released on Tuesday, and Zillow is predicting that the non-seasonally-adjusted numbers (which are the ones publicized) will be negative:

z prediction sept 2014

The media will be using words like ‘fragile’, and ‘struggling’ to describe the real estate market, and we’ll probably hear calls for more intervention.

But the market is supposed to go up and down; that’s why they call it a ‘real estate market’, and not a ‘real estate guarantee’.  The history of real estate has followed a ten-year pattern (which it did until Angelo’s creative financing skewed the timeline), which means we are due for at least a plateau.  The local trough was April, 2009, and we’ve been flat for at least six months.

Our market is fine – you will still be able to sell your house next year for more money than it has ever been worth.  We’ll still see bidding wars and OPTs.  Just don’t buy the media’s version that the sky is falling just because prices aren’t going up constantly.

More forecasts here:

http://www.calculatedriskblog.com/2014/11/update-more-2015-housing-forecasts.html

Posted by on Nov 23, 2014 in Forecasts, Jim's Take on the Market | 3 comments

2015 California Housing Forecast

2015 forecast

C.A.R. released their 2015 forecast:

http://www.car.org/newsstand/newsreleases/2014releases/859066?view=Standard

The California median home price is forecast to increase 5.2 percent to $478,700 in 2015, following a projected 11.8 percent increase in 2014 to $455,000.  This is the slowest rate of price appreciation in four years.

“With the U.S. economy expected to grow more robustly than it has in the past five years and housing inventory continuing to improve, California housing sales and prices will see a modest upward trend in 2015,” said C.A.R. Vice President and Chief Economist Leslie Appleton-Young. “While the Fed will likely end its quantitative easing program by the end of this year, it has had minimal impact on interest rates, which should only inch up slightly and remain low throughout 2015.  This should help moderate the decline in housing affordability we saw occur over the past two years.”

“Additionally, the state will continue to see a bifurcated market, with the San Francisco Bay Area outperforming other regions, thanks to a more vigorous job market and tighter housing supply.”

They are projecting an 8.2% decline in sales this year – and they think sales AND prices will rise next year in spite of their expectations of higher rates and less affordability?

Their own graph shows pendings on a YoY downward trend for two years:

pending home sales

An improving economy next year – if it improves – probably won’t change the momentum of flatline pricing we have experienced over the last few months.   The only thing that could directly and positively impact sales and pricing will be mortgage rates in the 3s – hope they stick!

Posted by on Oct 16, 2014 in Forecasts | 5 comments

Big Box vs. Independents

Though I speculate in this video that buyer agents will get phased out, it’s not the best alternative – buyers should have representation, it is just a matter of cost/quality.

In this futuristic scenario, the listing agent will only be representing the seller, and will likely want to process your order at the seller’s price.

Buyers may prefer to get their own representation.

There will likely be real estate consultants available to assist buyers with pricing, and to help address the major deal points.

If you were buying, would you be willing to pay for good help?

Posted by on Oct 9, 2014 in Bubbleinfo TV, Commission War, Forecasts, Jim's Take on the Market, Listing Agent Practices, The Future | 7 comments

Future Appreciation

We saw John Burns lead the pack with his 4% prediction, and now others are weighing in:

http://www.housingwire.com/articles/31541-realtor-confidence-on-home-price-growth-slips-but-solid

Members of the National Association of Realtors expect home prices to increase modestly in the next 12 months, with the median expected price increase at 3.5%, according to data gathered from the August 2014 Realtor Confidence Index Survey.

This tracks closely, but more modestly, with estimates from Capital Economics, which told HW Monday that it expects annualized growth to slow to 4% in the coming year, and estimates from Lawrence Yun, chief economist for the National Association of Realtors, who expects 4-5% home price growth.

Posted by on Oct 1, 2014 in Forecasts | 2 comments

Home Appreciation & Supply

John has an in-depth article out on home-price appreciation, and he’s no ivory-tower guy – his staff is on the street daily:

https://www.linkedin.com/pulse/article/20140917105113-3073844-behind-the-scenes-the-never-ending-puzzle-of-projecting-home-price-appreciation

An excerpt:

Rolling it all up, we are projecting 4% price appreciation for the country next year, with wild variations by market, huge vulnerability to changing mortgage rates, and a wide variety in risk levels (San Francisco looks to be in a mini bubble, but bubbles can go on for quite some time, while Atlanta looks to be very underpriced).

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He mentioned that the best measure of pricing trends is the “number of months of supply of homes”.  He didn’t say what he considers ‘normal’, and not sure we’ll ever have that again anyway!  But it used to be that six months of supply was considered balanced.

Here are the current active listings of detached homes, divided by August closed sales:

NSDCC: 1,100/244 = 4.51 months.

SD County: 5,814/1,885 = 3.08 months.

I’m not sure how much you can read into this statistic though, because 867 (79%) of the NSDCC homes for sale are priced over $1,000,000, and only 1,086 sales have closed over $1,000,000 this year.  If we divide the 1,086 by 8.5 = 128 per month, which means there is an approximate 6.8-month supply of million-dollar homes for sale currently.

But following this stat over time would identify the trend.  I’ve added a new category so we can track it from now on!

Posted by on Sep 25, 2014 in Forecasts, Jim's Take on the Market, Month's Supply | 0 comments

Not Too Overvalued

SD overvalued again

From an article at wsj.com: 

http://online.wsj.com/articles/how-to-play-the-real-estate-market-before-it-s-too-late-1411333001

An excerpt:

Now is also a good time to buy a home, many analysts argue. The slowing growth in prices makes homes more affordable, even as rental costs inflate for single-family homes and multifamily apartments. Meanwhile, interest rates remain slim. The average rate for conforming 30-year fixed-rate mortgages recently was 4.19%, close to the lowest levels of the year, says HSH.com, which collects mortgage data.  Keith Gumbinger, vice president of HSH.com, says, “Price gains have cooled in many areas, and mortgage rates are lower than they were expected to be this year. The combination is a favorable one, and if it holds, it should provide a solid foundation for home sales this fall.”

Ivy Zelman, founder of Zelman Associates, says the current gloom is overstated and housing prices will continue to slowly appreciate. “People still believe in the American dream,” says Ms. Zelman, who was early in predicting the housing downturn and anticipated the rebound. “The housing market is lukewarm and will get warmer.”

Posted by on Sep 23, 2014 in Forecasts | 4 comments

More Guessing

Hat tip to Richard for sending in this article:

http://realestate.msn.com/blogs/post–report-20-percent-of-homes-to-lose-value#scpshrjmd

The housing market has bounced back dramatically since the 2008 recession, but conditions have started to slow, a new survey says.

Veros reports 20 percent of homes are expected to lose value, while 80 percent are set to gain value.

Still, the housing market is yearning for a boost, instead of simply pent up demand from an unusually cold winter, which hampered economic growth and caused slightly stronger housing numbers toward the end of first quarter and the beginning of second quarter.

SD market

A slowdown in the pace of buying isn’t necessarily something to worry about when it comes to the health of the housing market, as this could bring price stabilization.

“We’ve been seeing major price swings over the last seven years and stabilization will be positive and will provide predictability to the market,” says Dani Babb, Broker/President of The Babb Group Real Estate Inc. “Some appraisers can’t even figure out how to value homes because of the swings.”

Unpredictable prices make conditions difficult for sellers who are trying to score the best price and buyers who may delay purchases if the market is telling them a significant price drop is on the horizon.

Posted by on Aug 7, 2014 in Forecasts, Market Conditions | 1 comment

Effect of Higher Mortgage Rates

From Fannie Mae:

http://www.fanniemae.com/portal/about-us/media/commentary/062314-palim.html

In July 2013, we wrote an FM Commentary about the impact of rising mortgage rates on the housing recovery.  At that point, rates had risen to 4.51 percent.

We examined the impact of rising rates on home prices and home sales during the two periods since 1990 when the market had experienced a sharp rise in mortgage rates.

The first instance was a 14-month period from October 1993 to December 1994, when mortgage rates increased by 237 basis points (from 6.83 percent to 9.20 percent).

The second instance of a meaningful rise in rates was longer and the rate rise was smaller – a 19-month period from October 1998 to May 2000, when mortgage rates increased by 180 basis points (from 6.71 percent to 8.51 percent).

Based on these past experiences, we suggested that rising rates were more likely to lead to a slowdown in home purchases rather than a decline in prices.

Read More

Posted by on Jun 23, 2014 in Forecasts, Interest Rates/Loan Limits, Market Conditions | 4 comments