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Category Archive: ‘Market Conditions’

Tipping Point?

LOS ANGELES (Sept. 26) – Even with a strong performance in August closed escrow sales, California pending home sales stalled for the second consecutive month, which suggests a softening in the housing market in the upcoming months, the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) said today.

As August marks the end of the peak home-buying season, the housing market is showing signs of slowing as REALTORS® reported fewer floor calls, listing appointments, and client presentations. Open house traffic, however, remained strong in August, C.A.R.’s August Market Pulse Survey found.

Pending home sales data:

• Based on signed contracts, year-over-year statewide pending home sales fell in August on a seasonally adjusted basis, with the Pending Home Sales Index (PHSI)* declining 3.5 percent from 121.3 in August 2016 to 117.0 in August 2017. California pending home sales also declined down on a monthly basis, decreasing 2.0 percent from the July index of 119.4.

• Pending home sales have declined on an annual basis for seven of the last eight months so far this year. After a solid run-up of pending sales growth in April, May, and July, continued housing inventory issues and affordability constraints may have pushed the market to a tipping point, suggesting the pace of growth will begin to slow in the fall.

• Pending home sales were down 3.8 percent from the previous year in Southern California. Only Orange (1.8 percent) and San Bernardino (2.8 percent) counties posted a year-to-year increase. Los Angeles, Riverside, and San Diego counties registered lower annual pending sales of 1.7 percent, 10.3 percent, and 12.7 percent, respectively.

• C.A.R.’s Market Velocity Index – home sales relative to the number of new listings coming on line each month to replenish that sold inventory, or market indicator of future price appreciation – indicates that home prices should continue to stay strong as home sales continue to outstrip new listings, putting upward pressure on home prices through the fall.

• The Market Velocity Index increased from 59 to 69, indicating that there were 69 percent more homes sold than there were new listings. In other words, the supply of homes available for sale continued to drop, which will make the remaining units more competitive as net supply has deteriorated by roughly 45,000 units this year.

http://www.car.org/aboutus/mediacenter/newsreleases/2017releases/aug2017pending

Posted by on Oct 6, 2017 in Jim's Take on the Market, Market Conditions, Sales and Price Check | 0 comments

New Affordable-Housing Laws

The 15 new housing laws were signed by Jerry Brown on Friday, and it sure seems like the politicians were intent on throwing everything and the kitchen sink at the so-called housing crisis.  But as you read through the bills, and listen to the Governor above, how confident are you that anything will change?

http://www.sacbee.com/news/politics-government/capitol-alert/article176152771.html

“This package has everything from A to Z – affordability to zoning,” Assembly Speaker Anthony Rendon said in a statement. “It’s not a magic wand, but it is going to put a lot of drafting tools, backhoes, hammers and door keys to work.”

State Sen. Toni Atkins, D-San Diego, an author of one of the major bills in the package, said the state has only begun to address its housing challenges.

“This is a necessary and critical first start,” she said.

State Sen. Scott Wiener, D-San Francisco, pledged to do more next year.

“Today, California begins a pivot … I am happy to hear my colleagues (say) this is the beginning, not the end, because I have some bills for you next year,” Wiener said.

The housing bills provide new funding for low-income housing development, seek to lower the cost of construction, fast-track building, and restrict the ability of cities and counties to block new development. Here’s a rundown of the bills in the package:

Senate Bill 2, Sen. Toni Atkins, D-San Diego: Imposes a new $75 to $225 fee on real estate transactions. Estimated to generate $250 to $300 million per year to fund affordable housing development, programs to assist homeless people and long-range development planning in cities and counties. For 2018, revenue would be split equally between the state and local government. The state share is specifically aimed at combating homelessness. It’s available for rental assistance, homeless navigation centers and development of housing for homeless people.

Senate Bill 3, Sen. Jim Beall, D-San Jose: Will put a $4 billion housing bond before voters in November 2018. If approved, $1 billion would go to the CalVet home loan program, established in 1921 to help military veterans purchase homes. The remaining $3 billion would help fund low-income housing projects and development near jobs and public transportation.

Senate Bill 35, Sen. Scott Wiener, D-San Francisco: Lets developers bypass the lengthy and often expensive review process for new housing development, which includes extensive environmental analysis and public hearings. If a community has not built enough housing – state law outlines the housing needs, at all income levels, for each city and county in California – developers can bring forth a project without undergoing the process. It mandates higher construction worker pay and benefits on projects with 10 units or more.

Read summaries of all 15 bills here:

http://www.sacbee.com/news/politics-government/capitol-alert/article176152771.html

Posted by on Oct 1, 2017 in Jim's Take on the Market, Local Government, Market Conditions | 4 comments

Getting Hotter?

From realtor.com:

In such a tight market, buyers are running out of options, said realtor.com Chief Economist Danielle Hale.

“Days on market and the number of new listings coming to market are lower than we typically see in the fall season, while listing views per property continue to move higher,” she said in a statement.

We saw here that the inventory usually surges at this time of year.  But compared to previous Septembers, our selection is sparse at best:

NSDCC September New Listings:

2012: 320

2013: 406

2014: 365

2015: 405

2016: 413

2017: 311 (with a couple of days to go)

Look at the similarity – it was in the fall of 2012 that the Frenzy of 2013 began.  Will the selling season of 2018 be just as crazy?

Posted by on Sep 29, 2017 in Frenzy, Jim's Take on the Market, Market Conditions | 0 comments

2017 Housing Survey

There’s a wealth of data on home buyers, sellers and renters in this year’s Zillow Group Report on Consumer Housing Trends – a self-administered study that gathered information between May 17 and June 5, 2017 from a total of 13,125 key household decision-makers.

Zillow’s 15 favorites:

Homeowners

  • Thirty-nine percent of Baby Boomer and 25 percent of Silent Generation homeowners* still live in the first home they bought. There are likely several million homes that will hit the market over the next two decades for the first time since the 1950s or 1960s. What state will they be in? This is potentially a pool of “affordable” entry-level homes.
  • Forty percent of U.S. homeowners share their home with a pet. The data on Americans and their pets is so sparse, it’s a socio-economic research black hole. It was great to finally put a number on the phenomenon. And the number is impressive: Four in 10 American homeowners have a pet (mostly dogs).
  • Fourteen percent of U.S. homeowners say their home needs serious updating; 61 percent say their home could use “a little updating.” This speaks to the enormous potential demand in the American economy for home improvement labor and materials, and to an often-overlooked cost (both financial and emotional) of homeownership.

Renters

  • When renters* decide to relocate, it’s often prefaced by an increase in rent. Seventy-nine percent of renters who moved from a previous rental experienced a rent increase before moving, with more than half (57 percent) indicating that their decision to move was directly influenced by that increase, including 26 percent who state they were greatly affected by a rent increase previously. Only 21 percent experienced no rent increase in their prior home before moving.
  • Today’s renters cast a wide net to find a new place, contacting a variety of property managers and landlords, all while hoping for a timely response back. On average, a renter contacts 4.5 landlords or property managers and submits 2.6 applications. Almost a third (32 percent) submit three or more applications, demonstrating that for renters in competitive and fast-moving markets, disappointment and competition are now an unfortunate part of the rental process.
  • African-American/black renters submit 3.1 and Hispanic/Latino renters submit 2.9 applications for a rental home, on average, compared with just 2.3 for Caucasian/white renters.
  • When renters move, most stay in the same city (53 percent), and 12 percent even stay in the same neighborhood. Only 30 percent move to a different city (but stay in the same state), and 15 percent move to a different state. When it comes down to it, moving can be a heavy lift, and many renters may end up becoming comfortable with their neighborhood and its offerings.

Buyers

  • Nearly a third (29 percent) of buyers* go over budget. More than a third of Millennial buyers (37 percent) go over budget, compared with 27 percent of Generation X buyers, 19 percent of Baby Boomers and 25 percent of the Silent Generation. Perhaps due to their inexperience, first-time buyers (many of them Millennials) are more likely to exceed their budget (32 percent) than repeat buyers (27 percent). Blowing the budget could also be tied to the fact that more than half of homes available to buy are valued in the top one-third of all homes. More than 40 percent of home buyers are first-time buyers, compounding the intense competition for less expensive homes.
  • Fifty-seven percent of first-time buyers also considered renting, with Millennials most likely to consider that path (62 percent). Given the state of the market for first-time and younger buyers noted above, it’s no wonder. Owning a home can have a lot of financial advantages over the long haul compared to renting, but renting offers flexibility for many would-be buyers who are not quite ready to make a jump.

Sellers

  • Millennials make up almost one-third (32 percent) of sellers*. For all the talk about Millennials having trouble saving down payments and getting into their first homes, a fair share of them have both done that and are turning around to sell.
  • While 36 percent of sellers attempt to sell their homes on their own, although only 11 percent actually do. Many sellers who attempt to or do sell their homes on their own believe it saves time (36 percent) and money (57 percent). Some feel they’re their own best agents because they know their homes better than any agent could (27 percent), or they’ve had negative experiences with an agent (14 percent). Almost a third of these sellers already have a potential buyer in mind (29 percent), eliminating the need for an agent’s help with marketing.
  • One in two sellers (50 percent) sell their home below its list price. Millennial (30 percent) and Generation X sellers (24 percent) are more likely to sell their homes above list price than older generations (11 percent of Baby Boomer and 19 percent of Silent Generation sellers). This trend is attributable in part to location: Younger sellers are more likely to be selling a home in an urban area, where homes sell above their listing prices 29 percent of the time (compared with 20 percent in the suburbs and 13 percent in rural areas).

Posted by on Sep 27, 2017 in Jim's Take on the Market, Market Conditions, Zillow | 1 comment

Build More….3x More!

This article adds the numbers.  We need to build at least three times as many homes as we’ve been building to keep up with the growth – and no telling what that would do to prices, if anything:

http://www.cbs8.com/story/36420282/report-changes-needed-to-meet-san-diego-housing-demand

SAN DIEGO (CNS) – As the homeless population grows and rents balloon in San Diego, city officials Thursday announced a series of proposals to help alleviate the housing shortage over the next 10 years.

Numerous changes to city codes and procedures are required to meet the housing demand, according to a report presented to the City Council’s Smart Growth and Land Use Committee.

Some of those changes include rezoning areas around transit hubs to increase density, converting unused industrial zones into residential areas and encouraging smaller unit sizes. Making use of vacant lots and easing some onerous parking requirements are also among the ideas identified in the report.

“This is an exciting step because it gives the city goals for the future, and it gives the city goals to be measured by,” San Diego Housing Commission President Richard Gentry said.

To meet the housing need in San Diego, as many as 220,000 new housing units will need to be built by 2028, the report said. The top annual production rate within the last 5 years has been of 6,400 units. Even with the solutions identified in the report, San Diego would have to bolster its production rate.

“To meet the projected needs for the city for the next 10 years, we will need to produce between 17,000 and 24,000 housing units per year — a dawning task but a worthy goal to be set,” Gentry said.

After the presentation, City Councilwoman Georgette Gomez worried that more units may not necessarily fix the housing crisis facing the region.

“I would love to work with the housing commission to look at the affordability of housing,” Gomez said. “I’m not a firm believer that just creating units is going to get to the actual issues that are in front of us.”

According to a staff report, the annual rate of housing construction has been well under half that of population growth over the past decade, creating a warped supply-and-demand situation that has prompted costs to skyrocket. The result is that half of San Diegans can’t find rental units they can afford and 60 percent can’t afford to purchase a home, according to the report.

“What we are doing is driving our kids and grandkids right out of town,” Councilman Scott Sherman said.

The report identified the communities of Skyline-Paradise Hills, Linda Vista, Otay Mesa, Clairemont Mesa and Navajo as the areas with the largest housing growth potential. As many as 74,000 units could be built all together in those five communities.

If all the suggestions in the report are carried out, that 10-year housing goal could be met or exceeded. Then hope later one is to keep that same production rate through 2028 to keep up with the expected population growth.

http://www.cbs8.com/story/36420282/report-changes-needed-to-meet-san-diego-housing-demand

Posted by on Sep 26, 2017 in Boomers, Builders, Jim's Take on the Market, Local Government, Market Conditions, The Future, Thinking of Building? | 1 comment

More Insanity

Hat tip to Richard for sending this in…..how much more can buyers take?

A house in Sunnyvale just sold for close to $800,000 over its listing price.

Your eyes do not deceive you: The four-bed, two-bath house — less than 2,000 square feet — listed for $1,688,000 and sold for $2,470,000.

“I think it’s the most anything has ever gone for over asking in Sunnyvale — a record for Sunnyvale,” said Dave Clark, the Keller Williams agent who represented the sellers in the deal. “We anticipated it would go for $2 million, or over $2 million. But we had no idea it would ever go for what it went for.”

This kind of over-bidding is known to happen farther north in cities including Palo Alto, Los Altos and Mountain View. But as those places have grown far too expensive for most buyers, future homeowners have migrated south to Sunnyvale, a once modest community that now finds itself among the Bay Area’s real estate hot spots.

Close to tech employment centers, it makes for a convenient commute — and prices there, too, are now pushing the limits of middle-class buyers. The house that sold for $782,000 over asking in Sunnyvale — it’s on Prunelle Court — is about a mile from Apple’s new spaceship campus.

The buyers, who work in tech, had been hunting for a home for a while — but kept getting out-bid, said Mini Kalkat, the Intero agent who represented them: “They lost two before they bid on this one, so we kind of knew what the numbers would be. It’s a crazy market, but there’s a way to maneuver the market.”

The property is one of more than 50 South Bay homes that sold in the last month for at least $200,000 above the listing price. More than half of those deals were made in Sunnyvale. Others were made in Cupertino, Saratoga and West San Jose, according to Alain Pinel agent Mark Wong. He compiles a monthly list of such “over-asking” transactions.

Over-asking sales are at least partly the result of agents’ sleight of hand. It’s become common strategy to list homes under their market value in order to entice Silicon Valley buyers; they are all too willing to fight over the few houses available in this chronically tight market.

Read full article here:

http://www.mercurynews.com/2017/09/12/now-this-is-ridiculous-782000-over-asking-for-a-house-in-sunnyvale/

Posted by on Sep 13, 2017 in Frenzy, Interesting Houses, Jim's Take on the Market, Market Conditions | 8 comments

Tightest Markets

Wondering why you can drive for blocks and not see a for-sale sign?

1 out of 172!

http://nypost.com/2017/09/02/are-we-headed-for-another-housing-collapse/

An excerpt:

NAR’s Fears points to a number of trends: First, homeowners are staying in place longer, limiting the number of existing homes for sale. Low unemployment rates are keeping them from leaving town in search of work. High home prices are inspiring them to remodel rather than relocate within their communities, if they want a different kind of house. First-time buyers who can afford it might buy a home that can accommodate two kids instead of one, precluding a move a couple years after their purchase. Grandparents are staying put to live near their kids, rather than fly off to retirement far away.

Second, new construction is still springing back from the 2008 recession. Home builders have had a hard time keeping up with population growth since then, in most cities. “There was a high cost for dealing with regulation, a high lumber tax on Canadian framing lumber, a decline in the labor pool,” says Fears. But the construction industry has shown signs of life. In July, according to US Census Bureau and Department of Housing and Urban Development data, housing completions were 8.2 percent higher than they were one year ago, though 6.2 percent lower than they were in June.

Even when they do build, developers are restricted by urban planning and geography, in certain states more than others. In Portland, Ore., cities are required by state law to form an urban growth boundary around its perimeter, controlling expansion onto farm and forest lands.

“Since about 2009, a lot of areas inside the boundary have been dormant,” says Victor Bulbes, broker with Keller Williams. “Builders have been reluctant to get back in the game.”

Read More

Posted by on Sep 5, 2017 in Jim's Take on the Market, Market Conditions | 3 comments

The Big Stagnation

 

On the Facebook bubbleinfo, in response to the idea that the bubble won’t be bursting, Matt asked ‘what constitutes the big stagnation when it happens’.

My response:

The Big Stagnation? You’ll know it when you see it.

We used to consider 6 months’ of inventory to be normal, but the new norm is probably 3 months with most of San Diego being 1-2 months today. Rancho Santa Fe is our exception, and has 8 months’ of inventory currently (only because there was a slew of sales last month). I think we can consider stagnation being any market with more than 6 months’ worth of inventory, and/or 100+ average days on market (Avg. DOM in RSF now 129 days).

When the market slows, most of the homes not selling can be explained – bad locations, inferior condition, etc.  Start worrying when you see houses that have it all, including a decent price, not selling.

Other outside influences that might cause the market to stagnate include:

  1. Mortgage rates get back into the 5s. Rates have been under 5% since the end of 2009, which seems like a million miles ago.  Buyers would want to stall their plans for at least six months to see if sellers would compensate by lowering their price.
  2. An occasional bad comp.  This happens today when a lowball sale occurs (usually an inside job), and buyers and sellers wonder if it is real.  Because there is usually scant information about it, the bad comp ends up being a mystery, and we forget after a few months, but another seller has to go first to prove it was an anomaly.
  3. Immigration is halted.  This would have seemed impossible up until a few months ago, but if it happened, we could feel a significant impact on the demand side.
  4. Recession hits locally.  An economic slowdown may not bring more supply right away because those out of work would wait 1-2 years before they believed they couldn’t get another job, and decide to move.  A more immediate impact would be felt on the demand side – we’d be losing buyers right away.

The prime reason for a market stagnation is the resistance that sellers and agents have about lowering their price – they would rather wait and see if it will be different tomorrow.

We might see a 5% or 10% drop without much fanfare, because most every seller around here has gained more than 30% appreciation since 2009 and wouldn’t feel it much.  They might give up a couple of bucks, but if a heavy discount is needed to sell, they will dig in.  It is very likely that the only reason they are selling is to hit the big-money jackpot.

A stagnant market could last for months or years – they tend to last until people subscribe to the fact that price will fix anything!

Save

Posted by on Sep 2, 2017 in Jim's Take on the Market, Market Conditions, Thinking of Buying?, Thinking of Selling?, Tips, Advice & Links, Why You Should Hire Jim as your Buyer's Agent, Why You Should List With Jim | 2 comments

CA Realtor Survey

On Your Last Transaction……

The percentage of properties selling below asking price remained flat from last year at 36%. The percentage of properties selling above asking price increased from 34% last year to 35%. The percentage of properties selling at asking price increased to 29%.

This is incredible:  For the 35% of properties selling above asking price, the average premium paid over the asking price increased to 9.3% from 6.8% last month and 7.8% last year:

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

The share of properties that received multiple offers was 64%, down from 74% last month and 66% last year.  Also, the proportion of properties with three or more offers decreased to 40%. The average number of offers per property remain at 2.8 offers from a year ago:

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Throughout California, the majority of homes sold are being purchased by people who intend to live in them:

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Owners like being owners – and the rich get richer:

Posted by on Sep 1, 2017 in Jim's Take on the Market, Market Conditions, Realtor, Realtors Talking Shop, Survey | 3 comments

One-Story vs. Two-Story

The other day, an appraiser mentioned to me that he had just completed a study comparing the prices of one-story houses vs. two-story.

He had done a similar study ten years ago, and found that the premium being paid for a one-story then was about 5%.

Today, he found that the premium is about 14% – more than double!

We speculated whether it would double again over the next ten years.  When you consider how short the existing supply of one-story homes is today, and that builders are still addicted to the two-story model, it is pretty easy to guess the premium will increase further!

Here’s a sample of houses sold between La Jolla and Carlsbad this year.

NSDCC Houses Between 2,500sf and 3,500sf Sold 2017 YTD

# of Stories
# of Sales
Avg SF
Avg $$/SF
Median SP
One-Story
104
2,918sf
$623/sf
$1,450,000
Two-Story
532
2,973sf
$450/sf
$1,163,173

You can get a better ‘deal’ on a two-story home, but as boomers get older and unload two-story houses, that market could get glutty, and the quality one-story houses be even more sought-after.

Posted by on Aug 28, 2017 in Jim's Take on the Market, Market Conditions, One-Story, Thinking of Buying?, Why You Should Hire Jim as your Buyer's Agent | 7 comments