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Category Archive: ‘Frenzy’

Rising Rates To Fuel Market?

From the latimes.com:

Mortgage rates have risen half a percentage point since setting record lows last fall, and many economists expect them to continue rising for the foreseeable future.

The increase, a reaction to the improving economy and housing markets, could fuel already hot housing markets as potential home buyers look to seal a deal before rates rise any further.

“I think rates will drift slowly higher,” said economist Christopher Thornberg, head of the West L.A. consulting firm Beacon Economics. The increases might add as much as 1 percentage point to mortgage rates by the end of next year, he said. “But within these ranges, home prices are still cheap compared to incomes and apartments.”

risingratesIn a weekly survey of what lenders are offering to solid borrowers, Freddie Mac reported Thursday that the average rate for a 30-year fixed loan rose from 3.59% last week to 3.81% early this week. It was the highest in more than a year, contrasting with the record low of 3.31% set last fall.

The rates remain extraordinarily low by historical standards. The typical rate exceeded 16% during inflationary times in 1981 and 1982, Freddie Mac’s records show, and the annual average topped 8% as recently as 2000.

The higher rates have arrived as rising home prices and the slowly improving economy also are delivering some good news for mortgage borrowers, who are being offered a wider range of loans on somewhat easier terms these days. That’s allowing buyers without 20% down payments to avoid private mortgage insurance, and family members to sign on as co-borrowers without living in the homes, mortgage brokers say.

Easing lending standards have made it more possible for homeowners to tap into their rising equity. And home equity lines of credit, hard to come by after the housing crash, are now offered again by many lenders reassured by recent increases in home prices.

More here:

http://www.latimes.com/business/realestate/la-fi-mortgage-rates-20130531,0,3499962.story

Posted by on Jun 3, 2013 in Frenzy, Interest Rates/Loan Limits | 5 comments

Flippers Causing Bubble?

Hat tip to SD Squatter for sending in this article from the wsj.com:

LADERA RANCH, Calif.—Rising home prices have fueled the return of a practice that some blamed for inflating the bubble: house flipping.

In California, the number of homes sold in recent months that had been flipped—or bought and resold within six months—has reached the highest levels since late 2005, according to PropertyRadar, a real-estate data firm. About 6,000 homes have been flipped in the state this year through April, or more than 5% of all homes sold statewide.

flipperturnaround

While flipping is re-emerging nationwide, brokers say it is happening most in California, where home prices have risen sharply over the past year. Six of the 10 largest price gains in major U.S. cities over the past year have been in California, according to Zillow. In April, home values rose by 25% from a year earlier in San Jose, San Francisco and Sacramento, and by 18% in Los Angeles.

“When prices rise, this trade works. It’s not anything more sophisticated than that,” said Christopher Thornberg, an economist with Beacon Economics in Los Angeles.

The industry is split over whether the current flipping activity could lead to potential problems. Jed Kolko, chief economist and a vice president at Trulia Inc., an online real-estate site, says the current activity isn’t indicative of a bubble. “A bubble is when prices are rising fast from high levels,” he said. “We’re not there now.”

Competition for homes “is reaching bubble proportions, and I’m very wary of it,” said Rich Worcester, a real-estate agent in San Diego who flipped about 25 homes last year for himself and clients. Mr. Worcester is representing a colleague who paid $675,000 last month for a foreclosed three-bedroom home in San Gabriel, a Los Angeles suburb. After installing new appliances, relandscaping and staging the empty house with furnishings, it hit the market for $867,000 earlier this month. Mr. Worcester said it hasn’t yet received any offers, and he conceded he may cut the price.

Investors generally make all-cash payments, which gives them an extra advantage over buyers who must complete a lengthy mortgage-approval and home-appraisal process.

Robert Ganem beat out four other offers this year when he paid $600,000 for a short sale—in which a home is sold for less than the amount owed on its mortgage—in Ladera Ranch, in southern Orange County. He made cosmetic renovations—fresh paint, new hardwood floors and kitchen tiles—before selling it a few weeks later for $755,000.

“A year ago, I couldn’t give them away. I was definitely swimming against the current,” said Mr. Ganem, who said he flipped 20 houses last year, double the previous year. Before he became a full-time real-estate investor, Mr. Ganem worked as a mortgage broker in Los Angeles. Flippers get a “bad rap” in the public eye, he said. “Most buyers want a home that’s move-in ready. We come in and make repairs that a bank or an underwater owner is not going to do.”

Meanwhile, the growing competition from investors is unwelcome news for ordinary buyers. After waiting years for prices to hit bottom, “buyers are jumping in before prices bounce so high they can’t afford it,” said Christine Donovan, a real-estate agent in Costa Mesa, Calif.

Parviz Goshtasby, who moved to Southern California three years ago, is finding few homes available to entry-level buyers in Newport Beach, where starter homes can begin at $800,000. “I slowly realized that I can’t compete with these investors,” said Dr. Goshtasby, a plastic surgeon.

After three unsuccessful offers, he agreed to pay $1.6 million for a home in January after the seller agreed to finance a 10% second-lien mortgage, but the deal fell through when the seller later got cold feet. Two weeks ago, he offered to pay the $1.2 million asking price on another home that ended up selling to a cash buyer.

http://online.wsj.com/article/SB10001424127887323463704578497143338013974.html

Posted by on May 31, 2013 in Flips, Frenzy, Real Estate Investing | 9 comments

Add-Mustard Report

From cnnmoney.com:

In a dramatic about-face for the housing market, sellers are now calling the shots.

back of a couple looking at a house for saleA survey of more than 2,000 Americans found that 33% of the 365 who were searching for a home have been on the hunt for more than a year and many were willing to make compromises on where they live or the type of home they would buy in order to close the deal, Century 21 Real Estate reported Wednesday.

“The recovery has transformed the mindset of many buyers and sellers who grew accustomed to the buyers’ market we saw for years,” said Rick Davidson, CEO of Century 21. “Buyer confidence is building back up and demand is strong… sellers are now in a more favorable position.”

Currently, there are 2.16 million existing homes for sale, down 13.6% from 12 months earlier.

With fewer homes for sale and more buyers coming onto the market, sellers are less willing to negotiate on price like they were during the housing bust.

According to the survey, 42% of the people shopping for homes have placed offers in the past six months, yet only 11% of the bids were accepted.

That has caused buyers to rethink their positions: 85% said they’re willing to compromise to get deals done. Just over half said they would be flexible on the closing date; 31% said they would purchase a home “as-is;” and 29% would pony up more cash than they originally planned.

The home shoppers said they are also willing to let go of some of the items on their “wish lists.”  More than half would give up on an in-ground pool; 49% would sacrifice a finished basement; 37% would compromise on either an updated kitchen or walk-in closets.

A majority of buyers are also more willing to look beyond their preferred locations, willing to live farther away from work, from family or from restaurants and shopping.

http://money.cnn.com/2013/05/30/real_estate/home-sellers/index.html?iid=HP_LN

Posted by on May 30, 2013 in Frenzy, Market Conditions, Thinking of Buying? | 0 comments

More on Buyer Anxiety

anxietyTwo posts ago it was suggested that buyers are feeling anxious due to increasing prices, and it is definitely a real concern.

But the buyer anxiety is being fed by a number of other reasons too – things that are just as annoying!

Other Causes of Buyer Anxiety

Few Listings to Consider – The inventory is thin because homeowners are keeping their highest-quality properties.  For buyers, that means a thin inventory in general, and virtually none of better-quality properties available at decent prices.  When a hot new listing does hit the market, buyers come rushing because they know it could be months before they see another one

Hard to “Keep Your Chops Up” – With so few to consider, how do you know if the list price is right?  How do you know if you should go up or down on price?  How do you keep paying such close attention to every detail, every pending, every closed sales price, etc.??

Losing a Few Bidding Wars – There are other buyers more frustrated than you, and those with more horsepower will bury you with higher/better offers.  You are going to lose a few bidding wars before you get to the same position, and offer high enough to win.

Lack of Rules/Regs on Bidding Wars – Not only are there no guidelines on how to handle multiple offers, but listing agents have no qualms about telling you that they are going to do one thing, and then do the opposite.  Example: It happens regularly that a buyer will make an offer, and be told that there will be a chance to improve it at the highest-and-best round.  But then the H&B round doesn’t happen, instead it’s the Dear John email, with the obligatory “sorry” from the listing agent at the end.

Sellers Don’t Have to Sell - Have you offered at, or over list price, and been countered? Yep, it happens all the time, or how about when you offer at, or over list and get no response?

Realtor Shenanigans – No showings for days or weeks (or none at all), not presenting offers for days or weeks, and the general arrogance and lack of respect by listing agents is very annoying.  My job is to shield my buyers from it as much as possible, but they want an answer – but most listing agents would rather play around.

We submitted an offer over the weekend, and are one of 8-9 offers on the table - but the sellers aren’t responding until the end of the week.  I told my buyers it is a good thing, because some of the other buyers will quit, or find another property in the meantime!

School District – If one of the main reasons for moving is to get into a better school district, you don’t even want to look at a calendar (BTW, June starts this Saturday!).  If you really want and need to be settled by the end of August, you are looking for the panic button right about now.

Too Difficult - If one of the reasons you are moving is so you and/or the kids/pets can have a new place, how long, and how hard do you try?  This is where buyer exhaustion comes in – for many people, it’s not worth the difficulty.

Bottom Line – Buyers need to be VERY committed to buying a home today.  Having a good agent to assist you with the anxiety is highly recommended!

Posted by on May 28, 2013 in Frenzy, Listing Agent Practices, Thinking of Buying?, Why You Should Hire Jim as your Buyer's Agent | 3 comments

Duration of Frenzy

A frequent question is, “How long will it last?”.  It depends on how long the demand lasts, which at this point appears to be deep and wide.

There are sectors of today’s buyer pool that are still waiting for their shot:

1. Low-Down-Payment buyers.

You can be well-qualified and have no trouble getting any mortgage you want – conventional or FHA/VA.  But if your offers include a smaller down payment and you end up in a bidding war, you are going to lose.

Listing agents tell the sellers that it is safer to take a cash, or big down payment deal, even if it means taking less money overall.

As a result, the low-down buyers are still waiting in the wings.

Here are the percentages of detached-home sales each quarter that were financed using FHA/VA/CalVet loans in San Diego County, and NSDCC:

graph (30)

You can see how tough it is on those with low down payments!

2.  Move-Up Buyers

Many move-up buyers are still waiting, but for different reasons.

If you want to use the equity in your current house to buy the next, good luck making an offer contingent on selling your home.  Those offers go behind the low-down-payments, and you won’t even get a call back.

But if you can figure out how to finance the next purchase without selling, then you still have to find a home good enough to make it worth it, AND be willing to pay enough to win the bidding war.

My rule-of-thumb is that you have to spend 50% more on the new home to make it worth the hassle and expense of moving.  A 50% bump causes these buyers to be pickier than those who don’t own locally yet, and whose desperation level is a tad higher – the “homeless” buyers are inclined to pay more than those who are somewhat comfortable with their current house.

3.  Empty-nesters

According to the census, there are roughly 368,539 people in San Diego County over 67 years old.  Today, there are 1,553 single-story homes for sale – in the county!

Every year that goes by, more baby boomers are thinking about down-sizing, and all deserve to be in a single level.  But they will have to wait, and eventually many will give up and do the stay-in-place aging just because the supply is so limited.

4.  Buyers Who Are Too Busy

You have to devote a major search effort to find the right home, and to make you comfortable enough to bid high enough to win.  The speed at which homes are selling is increasing!

Here is the graph of national stats:

marketspeed

In San Diego it’s faster – 30% of April sales found a buyer in the first week, and 49% found a buyer in the first two weeks!

We will have a very active market place for some time to come – my guess is for at least 1-2 years, and probably longer.  Prices will ebb and flow, but demand and sales should be very strong.

Posted by on May 24, 2013 in Frenzy, Market Buzz, Market Conditions, Thinking of Buying?, Thinking of Selling?, Why You Should Hire Jim as your Buyer's Agent, Why You Should List With Jim | 6 comments

Faster and Higher

Realtors including myself say that we have “low inventory”, but it’s not because fewer sellers are listing – it’s because the heavy demand is gobbling them up faster, and at higher prices:

NSDCC Listings and Sales between Jan 1 and May 15

Year
Total Listings
Sales
Avg $$/sf
Avg DOM
2009
2,163
596
$399/sf
71
2010
2,167
837
$380/sf
73
2011
2,266
891
$374/sf
82
2012
1,910
991
$374/sf
84
2013
2,057
1,118
$405/sf
49

The sales amounted to only a quarter of the total listings in 2009, and this year they are half!

We know that the higher-end market is sluggish at best (there are 713 active listings over $1M). Here’s a look at the UNDER-$1,000,000 markets:

NSDCC UNDER-$1,000,000 – Actives and Pendings/Contingents

City or Area
#Actives
#Pend/Cont
Carlsbad
115
186
Carmel Vly
28
51
Del Mar/SB
6
11
Encinitas
19
59
La Jolla
10
9
RSF
1
3
Totals
179
319

On the street, it feels like the frenzy is slowing.  But until the ACT/PEND ratios get closer to a more normal 2:1 (or at least 1:1), the UNDER-$1,000,000 market will continue to be very competitive.

The lowball season usually starts in June, but there are only 23 active listings under $1,000,000 that have been listed for more than 60 days (out of 184)!

Posted by on May 21, 2013 in Actives/Pendings, Average DOM, Frenzy, Market Conditions, North County Coastal | 1 comment

Not So Fast

CoreLogic said that while the data point to continuing price appreciation, the overall national rate of home price increases is projected to decelerate in 2013 from 2012 levels. The CoreLogic Case-Shiller Indexes project a 2.5 percent home price increase in 2013, as the market dynamic shifts again in bubble/crash metro areas. While homes in these markets are still significantly undervalued, the strong investor demand for foreclosed properties, record levels of housing affordability and other demand factors that have driven recent double-digit price gains are unlikely to persist throughout the year.

Price appreciation is also expected to contribute to an increased supply of available homes as owners who have been locked into their current homes due to negative equity or were just unwilling to sell at existing prices begin to list their homes for sale.  This will tend to curtail the portion of price increases that have been fed by unmet demand.

Dr. Stiff tamped down concerns of another housing bubble. “Even if double-digit price appreciation were to continue in the former bubble metro areas, there is no reason to believe that new home price bubbles are forming. That’s because single-family homes in these markets are still very affordable, even after last year’s large price gains. Consider Phoenix, where home prices rose 27 percent since the market hit bottom in 2011, making it the strongest residential real estate market in the U.S. Yet, home prices there are still 45 percent below their 2006 peak,” Stiff continued.

http://www.mortgagenewsdaily.com/05162013_corelogic_case_shiller.asp

not everywhere

Posted by on May 17, 2013 in Frenzy, Market Conditions | 0 comments

Frenzy Comparison

The last time the market took off, it was for different reasons (easy money, shorter-term thinking, and more move-ups), but the market psychology should be similar this time around – because buyer exhaustion is inevitable.

Here is how it looked then – during the first part of 2003 you could feel the market bubbling up, and by summer it was evident in the closings.

From June, 2003 to May, 2004, average pricing rose from $331/sf to $469/sf, which is a 42% increase:

graph (27)

Here’s the SD Case-Shiller graph, which reports three months late and documents the whole county, which lagged behind the coast:

Case-Shiller Home Price Index: San Diego, CA Chart

Case-Shiller Home Price Index: San Diego, CA data by YCharts

The big difference this time is that while it feels like a frenzy with prices increasing, the overall stats are far more moderate than last time. Comparing last July’s $366/sf to last month’s average of $420/sf, the increase is 15%:

graph (28)

This frenzy is focused on the quality properties, which apparently doesn’t float all the boats higher this time (or at least not as high), and the fraud is keeping a damper on the statistical increases too.

If a frenzy can stay red hot for about a year, then we should be wrapping up this version shortly – probably in the next couple of months. Future pricing trends should fall more in line with the averages (sub-10% annually), with an occasional outburst.

Posted by on May 14, 2013 in Forecasts, Frenzy, Graphs of Market Indicators, Market Conditions | 7 comments

Peak Frenzy 3

JtRphotofromthewebHow do you know if a house will attract a frenzy?

You often see in the MLS remarks the now-standard comments like “this won’t last” or “reviewing all offers on Monday”; whose intention is to make you think it’s a hot buy.  But now that virtually every listing says those same things, you have to look deeper.

The true hot buys require immediate action, but only about 1 out of 10 listings fall into that category – if that many.

About half of the remainder are obvious, like this one which listed today:

http://www.redfin.com/CA/Carlsbad/6833-Jade-Ln-92009/home/6664346

It’s the same floor plan and a few doors down from the REO Craptacular we just saw list for $939,000, so their $1.375 list price makes for an easy choice.

The other half are tougher to figure.

For a house to command a frenzy premium, it needs to have most or all of the following things going for it:

  1. Quality location.
  2. Excellent condition – visually attractive.
  3. Big kitchen, great room, and/or good master suite.
  4. Newer features – high ceilings, big windows for light, etc.
  5. Decent-sized private yard.
  6. Great school district.
  7. Excellent presentation by agent.

Once you see a house that fits into most of these, how do you know if you need to jump on it?  Other signs to consider:

A.  Is the listing agent actively pushing the product, or on the 3-P program? (Put the sign in the yard, Put the lockbox on, and Pray)

B.  Does the listing agent’s recent listing history indicate they are sharp on pricing?  Does their average DOM make you reach for your checkbook?

Of the 338 listings I’ve sold on the MLS, my average is 40 days on market.  Twenty-six of those were in the last 12 months, and their average is 23 days on market.  If the agent of your target listing has better numbers than that, you should not wait around.

C.  Does the presentation impress you?  Will it cause other buyers to come running with suitcases of money?  If not, your patience is more likely to be rewarded.  The listings with quality photos/video that are complimented with open houses offer maximum convenience to buyers, and are the ones that sell early.

D.  When at the house, are there business cards of other agents scattered around?  Have you heard of any of those agents?

If the house just listed and there are 10+ cards, then it might be hotly competitive but make sure it wasn’t a ‘refreshed’ old listing, or on broker preview that day.  If there aren’t any cards, maybe there isn’t any competition, and you can let it ride until the initial urgency is gone.

Last week I showed a house while it was on broker preview.  I got there a few minutes before it began, and what I saw told me plenty.  The listing agent showed up for the first two minutes, and once the goof assistant arrived, the LA left.  The house was priced at retail-plus, and had a 1960s floor plan and mostly-original kitchen.  I knew that most buyers would pass on that quickly, and the lime-green house across the street clinched it - no need to rush into anything here.

We know that the vast majority of houses that sell for top dollar are those that sell early in their listing period – usually in the first 5-10 days.

As a homebuyer, time is your best friend.  We know that if a house isn’t sold after the first two weeks, the showings dry up until the sellers start lowering the price.

So if you can be patient for 2-4 weeks before offering, you should catch the sellers, and listing agent, in a more-negotiable mood.

Posted by on May 14, 2013 in Frenzy, Why You Should Hire Jim as your Buyer's Agent, Why You Should List With Jim | 3 comments