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Category Archive: ‘Market Buzz’

McTeardowns

teardowns

From our friend Karen at BloombergBusinessweek:

http://www.businessweek.com/articles/2014-10-15/chinese-home-buying-binge-transforms-california-suburb-arcadia

“Oh, hey! How ya’ doin’?” Raleigh Ornelas hollers, leaning out the window of his spotless white pickup truck. He’s recognized the man across the street, a developer standing in front of a Tuscan-style mansion under construction. “Where have you been hiding at? I call you, you don’t call me.”

Ornelas is an informal broker in Arcadia, Calif., a Los Angeles suburb at the foot of the San Gabriel mountains. He’s been keeping an eye out for the builder, an Asian man with a slight comb-over who goes by Mark. Ornelas has found two older homeowners who’ve finally agreed to sell their properties, and he knows that Mark, like all developers here, needs land on which to build mansions for an influx of rich clients from mainland China.

Ornelas rattles off addresses on a nearby street. “Three-eleven, that guy, he’s wack,” he says, shaking his head. “He wants 2.8.” He means million dollars. “And then 354, they want $2 million.”

The lot is 17,000 square feet. “Seventeen for 2 mil?” Mark asks, incredulous.

“I know,” Ornelas says. “They’re going crazy.”

A year ago the property would have gone for $1.3 million, but Arcadia is booming. Residents have become used to postcards offering immediate, all-cash deals for their property and watching as 8,000-square-foot homes go up next door to their modest split levels. For buyers from mainland China, Arcadia offers excellent schools, large lots with lenient building codes, and a place to park their money beyond the reach of the Chinese government.

The city, population 57,600, projects that about 150 older homes—53 percent more than normal—will be torn down this year and replaced with mansions. The deals happen fast and are rarely listed publicly. Often, the first indication that a megahouse is coming next door is when the lawn turns brown. That means the neighbor has stopped watering and green construction netting is about to go up.

This flood of money, arriving from China despite strict currency controls, has helped the city build a $20 million high school performing arts center and the local Mercedes dealership expand. “Thank God for them coming over here,” says Peggy Fong Chen, a broker in Arcadia for many years. “They saved our recession.” The new residents are from China’s rising millionaire class—entrepreneurs who’ve made fortunes building railroads in Tibet, converting bioenergy in Beijing, and developing real estate in Chongqing. One co-owner of a $6.5 million house is a 19-year-old college student, the daughter of the chief executive of a company the state controls.

Read full story here:

http://www.businessweek.com/articles/2014-10-15/chinese-home-buying-binge-transforms-california-suburb-arcadia

Posted by on Oct 19, 2014 in Market Buzz, Market Conditions, The Future, This Is America | 4 comments

‘Best Rates Since June 2013′

Oct 14th rates

We should see a resurgence in buyer interest now that rates are under 4%.  They probably won’t pay a lot more, but if sellers can live with the same price as the last comp, they should be able to sell.

From MND:

http://www.mortgagenewsdaily.com/consumer_rates/398692.aspx

Mortgage rates continued living the dream today, falling decisively past last week’s lows to claim another instance of “best rates since June 2013.”  Today’s move was exceptional compared to last week’s (or just about any other move lower of 2014 for that matter).  After heading into the weekend in relatively conservative territory, the bond markets that underlie mortgages were greeted with massive movement in broader financial markets over the 3-day weekend.

Some of that movement took place late on Friday–too late for rate sheets to experience much benefit–but most of it occurred in global bond markets during Asian and European trading overnight.

Motivation varies depending who you ask, but the concept of “global growth concerns” is the common thread running through most of the reasons offered for the drop in rates.

Last week’s best moments saw the most prevalently-quoted conforming 30yr fixed rates hover between 4.0 and 4.125% for top tier borrowers.  Today’s rates all but eliminated 4.125% from that list.  In fact, 3.875% would now be more common than 4.125% (assuming a flawless loan file, 75% or lower Loan-to-Value, and a competitive lender).  Rates haven’t been any lower since the first half of June 2013.

Posted by on Oct 14, 2014 in Interest Rates/Loan Limits, Market Buzz, Market Conditions | 0 comments

The Market is Great

SD Case Shiller graph

We’ve seen the local San Diego Case-Shiller Index rise from 144.43 in April, 2009 to the most recent reading of 201.85 in May, 2014.

A whopping 40% increase in just five years.  What a ride!

Yet all we hear from the media is that the housing market is faltering, sales are down, and soon the sky will be falling.  Here are the reasons why it won’t:

1. Even though prices are much higher, there hasn’t been a flood of inventory.  Consider how many sources of inventory that you’d expect to be flooding the market; bank-owned properties, flippers, previously-underwater homeowners, the elderly, etc.

Not only has there not been a flood, but around NSDCC there have been 3% FEWER houses listed in the first seven months of this year than in 2013.

2.  Rates are Holding.  Though sales and prices would probably be affected if mortgage rates did go up, so far they are steady – in spite of wars, improved employment, ebola, etc.  Buyers will live with rates in the fours, and I just had a 30-year jumbo rate quote in the high-3s.

3.  There is lots of activity. The house in yesterday’s article whose broker said she is having no showings must be ridiculously over-priced, because the attractive buys are getting action.  Any seller who could live with 5% to 10% less than the list prices of active (unsold) listings nearby won’t have any trouble selling today.  If prices in general did pull back, it would stimulate a new round of sales – the buyers who feel priced out would love another chance.

4.  No Frenzy Means More Caution.  After prices go up 40%, it’s a lot easier to make a mistake, and buyers are being more selective. A smart market is a healthy market.

The next few months are going to be terrible for sellers who insist on tacking on another 10% or so on top of what we’ve already gained.  But reasonable sellers will have no trouble selling – the market is fine.

Posted by on Aug 6, 2014 in Jim's Take on the Market, Market Buzz, Market Conditions, North County Coastal | 5 comments

San Diego in June

Rich does a great job every month documenting our local market trends:

http://piggington.com/june_2014_housing_data_rodeo

Here is one of his 16 graphs for June, showing how the San Diego active inventory is 55% above last year’s pace:

jun_2014_housing_data-10

He also noted that pricing increased but sales dropped, which is natural when every seller is asking more, but fewer get/deserve it.

Another interesting point is how the active inventory didn’t drop off the second half of last year, when normally it does. Will more sellers hang around longer this year hoping for the lucky sale?  Probably.

It will look and feel like a stagnant or waning market, unless sellers and their agents reduce expectations.  You may not be far off!  Just keep lowering the price until showings and offers start happening!

See all of Rich’s great analysis here:

http://piggington.com/june_2014_housing_data_rodeo

Posted by on Jul 17, 2014 in Market Buzz, Market Conditions | 12 comments

Student Loans vs. Homeownership

A more-detailed investigation into comparing student debt and homeownership among young people.  If you don’t have a lot of extra debt, the student-loan payment – which would be like having an extra car payment – wouldn’t prevent you from qualifying.

http://www.nytimes.com/2014/07/06/realestate/college-debt-and-home-buying.html?_r=0

An excerpt:

But Beth Akers, a fellow at the Brookings Institution’s Brown Center on Education Policy, says these findings do not prove a causal relationship. In fact, they could be misleading.

She said she has looked at young-adult homeownership rates over a longer period, and found that the reversal cited by the Fed is “a return to a longstanding trend that existed prior to 2004.” For most of the last 20 years, homeownership rates among young households with student loan debt have been lower, not higher, than rates among households with no debt, she said.

Her research, co-authored with Matthew M. Chingos, a senior fellow at the Brown Center, also disputes the notion that the payment burden is higher on today’s young adults. While the level of education debt has risen over all among young households (ages 20 to 40), the monthly burden of student loan repayment has not increased greatly over the last two decades. From 1988 to 2010, the typical household spent 3 to 4 percent of its monthly income on student loan payments. The monthly burden has remained fairly flat because of offsetting increases in income and longer repayment terms.

Extremely high burdens are still rare. In 2010, about 75 percent of households with people ages 20 to 40 who have education debt owed $20,000 or less, Ms. Akers said. Only 2 percent were carrying more than $100,000.

Perhaps the declining number of young homeowners has more to do with the weak economy and tight lending conditions. Mr. Dyer predicts that mortgage lenders will gradually ease credit standards over the next five years to open up the “buy box” to more young adults.

But what and when they will buy will likely be different from the choices of generations past. “This generation has what some would label a fear of debt,” he said. “They try to be very conscious and pragmatic about what they buy and how much they agree to borrow.”

studentdebt

Posted by on Jul 5, 2014 in Market Buzz, Market Conditions | 7 comments

Zillow Is Everywhere

zillow

Last week I thought that Zillow will probably have preferred agents by the end of the year. Yesterday they rolled out a partnership with Douglas Elliman, which could be a prototype of things to come:

http://www.bloomberg.com/video/u-s-home-sales-growth-is-sustainable-herman-says-HWfqFzrkTOCihNmt9NFIwQ.html

http://zillow.mediaroom.com/2014-06-24-Zillow-and-Douglas-Elliman-Real-Estate-Company-Launch-Strategic-Marketing-Partnership

P.S. Realtors are done fighting it, and instead are jumping on the Zillow train. With direct uploads from realtors to Zillow, who needs the MLS?

P.S.S. Did she say ‘substaining’?

Posted by on Jun 25, 2014 in Jim's Take on the Market, Market Buzz, Market Conditions | 0 comments

Chinese and CA Real Estate

An article discussing the Chinese demand in San Francisco, which has also been seen in other desirable areas of California:

http://sanfrancisco.cbslocal.com/2014/06/01/real-estate-expert-says-china-cash-driving-up-san-francisco-housing/

MATIER: What is driving the capital here … what’s [causing] people from China to invest this kind of money in San Francisco?

McLAUGHLIN: I think we’re seeing three different phenomena. One is asset diversification, people trying to move money out of China. Two would be education for their families. And three would be lifestyle, this is a beautiful place to live.

MATIER: Are they actually living here or are they just buying houses here the way we might be puttting money in a safety deposit box — it would be safe here, it’s free from any government moves in China and the value would be appreciating?

McLAUGHLIN: It’s difficult to generalize on that but I’d say that probably fifty percent of them are living here. Whether they’re living here to get their education or whether they’re living here for a change in lifestyle.

MATIER: And they’re able to amass this much cash in China, get it to Hong Kong and get it to San Francisco before [other] people can get their loan papers in?

McLAUGHLIN: Well, yeah. A lot of all-cash. We’ve seen tremendous wealth created in China in the last 20 years through the diversification of their government into private industry. At Pacific Union we’re seeing an awful lot of that capital generated put into [the] purchase [of] homes here in the San Francisco Bay Area.

MATIER: And how has it affected the market?

McLAUGHLIN: Well, in certain areas like Silicon Valley — Palo Alto, Menlo Park and the city of San Francisco — it’s added a demographic of buyers who, generally, take a long-term view. They’re not sellers in the next five to seven years. So it is going to drive housing prices up.

http://sanfrancisco.cbslocal.com/2014/06/01/real-estate-expert-says-china-cash-driving-up-san-francisco-housing/

chinese buyers

NAR’s ranking of the cities that international buyers are considering:

from realtor.org

http://www.realtor.org/articles/where-are-global-buyers-searching-in-the-united-states

Posted by on Jun 2, 2014 in Market Buzz, Market Conditions | 3 comments

Move-Up Tips

not for sale

Hat tip to Susie for sending this in from CNNMoney:

http://money.cnn.com/2014/05/20/real_estate/home-sales-fear/index.html?iid=s_mpm

An excerpt:

Tim Trampedach, a 36-year-old business owner who lives in San Francisco, has seen his home’s value soar from $1.2 million to $1.6 million in the past three years. He and his wife want to move into a bigger place, but there are simply no homes within their price range in their Portrero Hill neighborhood.

“My wife and I are effectively locked into the house,” he said. “We can’t sell because we can’t afford anything else nearby.”

They would probably struggle to buy their existing home at its current value of $1.6 million, let alone buy a more-expensive home that would make it worth it to move.  If you just bought at $1.2M, jumping up to $2,000,000 or more is a big stretch.

But if you can make the jump financially, then how do you pull it off?

Here are more excerpts from the article:

In fact, demand is so high that real estate agents are actively seeking people who are willing to sell. “You get letters in the mail asking if you’re interested in selling,” said Jackson. “People knock on your doors.”

In mid-April she got an enticing, unsolicited offer on the house, which Zillow estimates to be worth $420,000.

“My husband and I talked it over,” she said. “We hemmed and hawed. It was too good to be true, but we worried: Would we find a house we wanted?”

The buyer agreed to give the couple until October to find a new place, so they took the offer.

One way sellers can protect themselves is to make the sale of their home contingent upon their ability to find another one to move into.

Patrick Matson and his fiance, Margarita Munoz, insisted on such a clause when they put their Anaheim, Calif. home up for sale. Up until last Friday they had an offer on their home, but their own search did not go well.

The couple had made offers on two homes in La Mirada, where they liked the school district for their four-year-old son. But both offers were rejected.

The homes they looked at were between $430,000 and $480,000, but were no bigger or better than their current place, which they listed for $415,000.

Discouraged, the couple decided to reject the offer and take their home off the market.

“It was not an easy decision to make, provided that we knew the folks who had an offer in on our home were going to be disappointed and it wasn’t what we wanted either,” said Matson.

The couple plans to make some upgrades to their current place and will try again in a year or two, he said. “Hopefully the market won’t be so competitive by then.”

You have to be able to buy high enough to make it worth it – my rule of thumb is 50% higher than the old house - AND be able to convince the seller that you aren’t submitting an offer contingent upon finding a buyer for your old house.  Having your buyers do their inspection and appraisal and then release their contingencies would go a long way to making your offer look non-contingent.

You may have to help your buyer with some costs to get to that stage, but to pull it off the move-up, you have to make bold and decisive moves, work with a great agent, and hope for some luck!

Posted by on May 20, 2014 in Jim's Take on the Market, Market Buzz, Market Conditions, Tips, Advice & Links, Why You Should List With Jim | 2 comments