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Category Archive: ‘Forecasts’

Prices Should Be Rising Faster?

houses

The folks at CE are talking about the housing market in the UK, but the principles are similar – if there were more homes selling, it could provide more pricing momentum.

Just keep an eye on sales – demand would have to subside for prices to alter their current trajectory.  From HW:

Home prices have consistently increased around 5% year-over-year for the majority of the last two years, but this percentage could be severely off according to a new report from Capital Economics.

A new housing market update report from Capital Economics shows that given the current housing conditions, past experience suggests that house prices should be rising at double their current rate of around 5%.

Due to the lack of housing inventory, there are more buyers than homes available, which would typical lead to an much higher acceleration in house price growth than where it sits now.

Currently, there is less than five months’ supply in the market, which looking at past data would normally be associated with house price growth of around 10% year-over-year.

So what’s causing this abnormality?

Read full article here:

http://www.housingwire.com/articles/37293-capital-economics-whats-keeping-home-prices-from-rising-even-higher

hpi

Posted by on Jun 20, 2016 in Forecasts, Jim's Take on the Market, Market Conditions | 0 comments

Bubble to Pop Again?

mh

We are happy to cover all sides of the bubble beat.  This is the second release this month from our perma-bear, Mark Hanson.  He has been saying the same thing for 3-4 years, and it’s all based on theory and previous history.  Around here, our market is almost completely driven by owner-occupiers who are buying homes for the long-term:

http://mhanson.com/2242-2/

An excerpt:

If 2006 was a known bubble with housing prices at “X”, affordability never better, easy availability of credit, unemployment in the 4%’s, total workforce at record highs, and growing wages, then what do you call today with house prices at X+ 5% to 20%, worse affordability and credit, higher unemployment, weakening total workforce, and shrinking wages? Whatever you call it, it’s a greater thing than “X”.

6-14 Hanson…Bubble 1.0 vs Bubble 2.0; “Green Shoots” and “Shadow Demand”

Posted by on Jun 15, 2016 in Bottom Talk, Forecasts, Jim's Take on the Market | 3 comments

Pending-Home-Sale Index Surges

nirvana

A title rep came by the open house yesterday.  She said it has been so quiet over the last couple of weeks that she has had people call her cell phone just to make sure it was working!

http://www.housingwire.com/articles/37125-pending-home-sales-surge-to-10-year-high

Pending home sales overcame industry hurdles and increased for the third consecutive month in April, surging to the highest level in over a decade, according to the National Association of Realtors.

The Pending Home Sales Index, a forward-looking indicator based on contract signings, hiked up 5.1% to 116.3 in April from an upwardly revised 110.7 in March and is now 4.6% above April 2015 (111.2).

After last month’s gain, the index has now increased year-over-year for 20 consecutive months.

Lawrence Yun, NAR chief economist, says vast gains in the South and West propelled pending sales in April to their highest level since February 2006 (117.4).

“The ability to sign a contract on a home is slightly exceeding expectations this spring even with the affordability stresses and inventory squeezes affecting buyers in a number of markets,” he said. “The building momentum from the over 14 million jobs created since 2010 and the prospect of facing higher rents and mortgage rates down the road appear to be bringing more interested buyers into the market.”

Pending home sales in the South jumped 6.8% to an index of 133.9 in April and is 5.1% higher than last April, while the index in the West climbed 11.4% in April to 106.2, and is now 2.8% above a year ago.

Although the future of mortgage rates lies in question, Yun said, “Even if rates rise soon, sales have legs for further expansion this summer if housing supply increases enough to give buyers an adequate number of affordable choices during their search.”

As it stands, mortgage rates have remained below 4% in 16 of the past 17 months, and Yun predicts that they will continue to hover around 4% in coming months.

Looking ahead, Yun expects sales this year to surge higher than earlier estimates, coming in around 5.41 million instead, a 3% boost from 2015. After accelerating to 6.8% a year ago, national median existing-home price growth is forecast to slightly moderate to between 4% and 5%.

From CAR:

April REALTOR® Market Pulse Survey**:

In a separate report, California REALTORS® responding to C.A.R.’s April Market Pulse Survey saw a decrease in floor calls, open house traffic, and listing appointments/client presentations, likely due to the tight inventory and low affordability conditions constraining the California housing market. Floor calls and listing appointments both reversed three months’ growth in April. Open house traffic declined also but has been in positive territory since the beginning of the year.

• The share of homes selling above asking price in April shrank for the first time since December 2015, slipping to 32 percent from 34 percent in March and 36 percent in April 2015. Conversely, the share of properties selling below asking price rose for the first time in four months to 40 percent. The remainder (28 percent) sold at asking price.

• For the homes that sold above asking price, the premium paid over asking price declined for the second straight month to an average of 9.6 percent, down from March’s 9.8 percent and 10 percent in April 2015.

• The 40 percent of homes that sold below asking price sold for an average of 12 percent below asking price in April, down from 9.6 percent in March and 11 percent a year ago.

• Nearly seven of 10 properties for sale received multiple offers in April, indicating the market remains competitive. Seventy-two percent of properties received multiple offers in April 2015.

• The average number of offers per property decreased for the first time in three months to 2.9 in April, down from 3.3 in March and 3.6 in April 2015.

• With home prices leveling off in recent months, more sellers are adjusting their listing price to become more in line with buyers’ expectations. About one in four (23 percent) of properties had price reductions in April, down from 28 percent a year ago.

• Low housing inventory continued to be REALTORS®’ biggest concerns, cited by one in three (33 percent), while 16 percent indicated declining housing affordability, and 14 percent stated overinflated home prices.

• REALTORS® remained somewhat optimistic about market conditions over the next year, with the index increasing slightly from 60 in March to 61 in April. However, optimism is waning as the index is down from 73 a year ago, indicating fewer REALTOR® respondents are positive about the market.

Posted by on May 26, 2016 in Forecasts, Jim's Take on the Market | 0 comments

Nothing Price Won’t Fix

sv

A pullback in Silicon Valley? It could happen anywhere!

http://www.bloomberg.com/news/articles/2016-05-17/silicon-valley-mansions-linger-on-market-in-real-estate-slowdown

Excerpts:

A custom-built home in the heart of California’s Silicon Valley had its price cut by $500,000 last week after sitting on the market since the end of March — a move that would’ve been almost unfathomable a year ago and a signal that frenzied demand has peaked.

The six-bedroom, five-bath house in Palo Alto — located blocks from Stanford University and the homes of Google co-founder Larry Page and Steve Jobs’s widow, Laurene Powell Jobs — is now listed for $7.5 million. It joins a growing inventory of high-end homes in the area that are taking longer to sell.

“We’ve recently noticed a slowdown,” Jack Woodson, who works at Alain Pinel Realtors in nearby Menlo Park, said on a tour of the house in the Old Palo Alto neighborhood. “Buyers are taking more time to decide about making offers.”

Silicon Valley, the most-expensive U.S. housing market, is seeing a pullback by the wealthiest homebuyers after a four-year real estate boom marked by bidding wars and multimillion-dollar prices. Stock-market turmoil, a drop in foreign investors and concerns of a technology-industry slowdown are cooling demand at the high end, even as interest remains robust for more moderately priced properties.

In Palo Alto, an ultra-wealthy city that’s home to many Google and Facebook Inc. executives, homes costing more than $5 million were on the market for a median of 16 days in April, compared with 11 in the same month in 2015 and 10 in 2014, according to data from Irvine, California-based John Burns Real Estate Consulting. The 11 active listings in that price range as of May 14 have been on the market a median of 30 days.

“The seemingly inexhaustible well of very high-end buyers has proven exhaustible after all,” said Dean Wehrli, a senior vice president at John Burns. “The peak is behind us, and that’s becoming clearer and clearer to builders and buyers.”

“We’re probably moving toward normalization,” said Katharine Carroll, vice president at Pacific Union Real Estate in Palo Alto. “Buyers see that they have a few more options. They don’t feel the urgency that they have to decide on something right away and put an offer in. They can kick the tires a little bit more.”

http://www.bloomberg.com/news/articles/2016-05-17/silicon-valley-mansions-linger-on-market-in-real-estate-slowdown

Posted by on May 17, 2016 in Forecasts, Jim's Take on the Market, Market Buzz, Market Conditions | 1 comment

Buffett Says No Bubble

warren

For the vast majority of Americans who just skim the real estate headlines, a quote from Warren Buffett should keep the party rolling.  But does he qualify as a cheerleader now that he owns one of the biggest realtor companies? And this photo they used – is that a perp walk?

http://fortune.com/2016/04/30/warren-buffett-there-is-no-bubble-in-real-estate/

An excerpt:

Warren Buffett says now is a good time to buy a house, though not as good as it was four years ago. Still, Buffett says he thinks the chances of housing prices collapsing are very low.

“I don’t see a nationwide bubble in real estate right now at all,” says Buffett.

Buffett made remarks at the annual meeting Berkshire Hathaway, which took place on Saturday in Omaha. “In Omaha and other parts of the country people are not paying bubble prices for real estate,” says Buffett.

Earlier in the day in response to a question about banks, Buffett said he did think derivatives are a “ticking time bomb.” But when it comes to housing and mortgage loans, Buffett said, while real estate was certainly a problem in 2008, he didn’t think that would be the source of the next problem for the financial system. “I don’t think we will have a repeat of that,” says Buffett.

Posted by on May 2, 2016 in Forecasts, Jim's Take on the Market, Market Conditions | 1 comment

Price Forecasts Move Higher

risingprices

The hustle to move up the housing ladder is something people did when they were younger – and prices cheaper.  Those move-ups have gotten you here, and hey, it’s not so bad – especially if it means that to replace your home, it costs two or three times more than you paid! 

Expect the housing-inventory stalemate to continue, regardless of how high prices get – people have no better place to go, they don’t want to bother moving, and taxes plus expenses are outrageous.

http://www.realestateeconomywatch.com/2016/04/price-realities-are-blowing-away-forecasts/

This was supposed to be a year of “moderating” prices and a “return to normalcy.”  Instead, upward price pressures have not abated, and red-faced economists are scrambling to crank up their forecasts as price trends at the outset of the buying season knock their protections into a cocked hat.

The culprit? Most forecasters predicted three years of rising prices would encourage more owners to sell, and supplies of homes for sale would catch up with demand, which is increasing as a result of the improving economy and continued low interest rates.

Posted by on Apr 25, 2016 in Forecasts, Jim's Take on the Market, Market Conditions, Sales and Price Check | 1 comment

San Diego Undervalued

The crew over at CL came out with their year-end report today, which included their forecast for 2016.  They consider the San Diego-Carlsbad metro area to be undervalued…..just like San Francisco and Boston(?). They also expect that prices in our area will rise 7.8% in 2016, after going up 6.7% last year:

core1

From MND:

http://www.mortgagenewsdaily.com/02022016_corelogic_hpi.asp

Once again a report on home price changes indicates that appreciation has not yet slowed.  CoreLogic issued a report on its Home Price Index for December of Tuesday which indicates a pick-up in monthly increases.

The index shows prices nationwide, including distressed sales, rose 0.8 percent from November to December compared to a 0.5 percent change from October to November. On an annual basis there was a 6.3 percent gain, the same as the November 2014 to November 2015 pace.

“Nationally, home prices have been rising at a 5 to 6 percent annual rate for more than a year,” said Dr. Frank Nothaft, chief economist for CoreLogic. “However, local-market growth can vary substantially from that. Some metropolitan areas have had double-digit appreciation, such as Denver and Naples, Florida, while others have had price declines, like New Orleans and Rochester, New York.”

Posted by on Feb 2, 2016 in Forecasts, Jim's Take on the Market, Sales and Price Check | 1 comment

San Diego Is Hot

seattle

Zillow came out with their Hottest Housing Markets of 2016, and San Diego didn’t make the list:

http://www.zillow.com/blog/hottest-markets-2016-190331/

They based their ‘hotness’ on a combination of employment, recent income growth, and the expected increase in the Zillow Home Value Index.

They expect that the San Diego HVI will rise 2.7% this year, and I think our employment and income numbers should at least be steady:

sdzhvi

Zillow isn’t considering retirees into their algorithms – especially the rich folks who want great weather to live out their life.  Any of them who have grandkids in the Southwest will give us a look, and when they compare to Los Angeles or the Bay Area, they will like our prices much better.

The towns in the Zillow Top Ten have expected HVI increases of 4% to 5%.

At the end of 2016, let’s see how San Diego compared to their list of ten.  I say that we beat at least half of them – in spite of fewer sales than we had in 2015.

Posted by on Jan 13, 2016 in Forecasts, Jim's Take on the Market, Local Flavor, Market Conditions, Sales and Price Check | 3 comments

Price Increases to Slow

sf

A forecast of 2% to 3% price appreciation for SD in 2016. From HW:

http://www.housingwire.com/articles/35996-is-the-west-coast-about-to-finally-witness-a-slowdown

An excerpt:

“The West, which has largely outpaced the rest of the nation in terms of growth in the last several years, is beginning to see market slowing across some of its major metropolitan statistical areas,” the report said.

The Clear Capital report said that Western markets began to slow in the latter half of 2015, with San Francisco, Los Angeles, and San Diego currently seeing QoQ growth rates under 1%.

Meanwhile, other cities like San Jose and Denver are hovering slightly higher at around 1.3% and 1.5% QoQ, respectively, the report said.

If Clear Capital is right in its annualized predictions, these current levels would project to roughly half of the performance seen in 2015.

http://www.housingwire.com/articles/35996-is-the-west-coast-about-to-finally-witness-a-slowdown

Posted by on Jan 11, 2016 in Forecasts, Jim's Take on the Market | 1 comment

NSDCC Sales in 2016

ratess

There will still be late-reporters, but let’s review the annual NSDCC sales.

Year
NSDCC Annual Sales
Median Sales Price
2012
3,154
$830,000
2013
3,218
$952,250
2014
2,849
$1,025,000
2015
3,011
$1,095,000

What can we expect for sales this year?

Rates have dropped back under 4% this week, which will help.  But sellers will be expecting higher prices in 2016, which will dampen the buyers’ enthusiasm.

My guess for 2016?

Rates at or below 4% = 5% fewer sales.

Rates above 4% = 10% fewer sales.

If rates get into the mid-4s, then my guess is for 25% fewer sales.

The lack of quality inventory will contribute greatly too.  Buyers don’t mind paying a little more if they get something extra for it.

But we need to become accustomed to a regurgitated inventory.

It’s likely that we will continue to see sellers try to get their inflated price year after year, rather than lowering the price until it sells.  Of the 88 new NSDCC listings this year, 61% of them were on the market in 4Q15.  It is a higher-end phenomena too – virtually all listings over $2,000,000 were refreshed.

Posted by on Jan 7, 2016 in Forecasts, Jim's Take on the Market, North County Coastal, Sales and Price Check | 0 comments