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Category Archive: ‘Market Conditions’

Love Letter Deluxe

An excerpt from Quartz:

http://qz.com/486677/buying-a-home-in-san-francisco-love-letter-now-required/

Balog has seen what she calls “love letters” written from buyers to sellers since she started in the business 15 years ago. But in the tech savvy environment, letters might not be enough anymore. In fact, her clients John and Kate Fenwick who work for Google and Liftopia, decided to set themselves apart by making a video. Well, they made the video, but their dog Cooper does the talking.

Posted by on Aug 26, 2015 in Jim's Take on the Market, Market Buzz, Market Conditions, Thinking of Buying? | 4 comments

‘Housing Shortage’

Realtor Conference Lawrence Yun 007

From the WSJ:

http://www.wsj.com/articles/u-s-existing-home-sales-rise-to-pre-recession-pace-1440079684

WASHINGTON—Sales of existing homes climbed in July to their prerecession pace, but low inventory and higher prices threaten to curtail those gains heading into the fall.

Existing-home sales rose 2% last month from June to a seasonally adjusted rate of 5.59 million, the National Association of Realtors said Thursday. Last month’s sales pace was the highest since February 2007 and 10.3% higher than a year earlier.

Despite relatively steady gains in home sales in the past year, thinning supply and high prices loom as headwinds that could slow the recovery. As well, mortgage rates could be poised to rise when the Federal Reserve raises short-term interest rates, potentially as soon as next month.

Total housing inventory fell 0.4% at the end of July to 2.24 million existing homes available for sale, 4.7% lower than a year ago. At the current pace of sales it would take 4.8 months to exhaust the supply of homes on the market, down from 5.6 months a year ago, the NAR said Thursday.

Jim Klinge, a real-estate agent in San Diego, said inventory is low in his area because residents are reluctant to move to another town or state. In prior years, high prices would encourage some people to sell and leave town, he said.

He said every new listing generates intense interest from buyers, such as a three-bedroom home he listed Saturday night at $579,000 for which he had already received 30 queries by Thursday.

“We have to recognize that we have a broad-based housing shortage,” said Lawrence Yun, the NAR’s chief economist. “Home builders have been essentially out of the game or underproducing” since the crash.

The median sale price for a previously owned home slipped slightly to $234,000 from June’s $236,300, but is still 5.6% higher than a year earlier. July’s prices mark the 41st straight month of year-over-year price gains.

Posted by on Aug 21, 2015 in About the author, Jim's Take on the Market, Market Buzz, Market Conditions | 1 comment

Fall 2015 Reality Check

LA

We can talk, can’t we?

Houses that have been on the market for more than 60 days (which includes 507/1,079 = 47% of NSDCC active listings) missed the hot season.

Buyers presume,

“If it hasn’t sold by now, something is wrong with the house, or the price.”

Some people use the days-on-market statistic has a primary search feature. Even if the list price has been reduced, just the longer market time can cause buyers and agents to miss the longer-listed properties.

So not only are those listings easier to pass up, the buyer pool in general is shrinking due to the time of year.  It’s too easy for them to pack it in.

It’s going to get tougher for the older listings to find a buyer, unless they get aggressive on price.  But how many sellers will knock 5% to 10% off their price?  Not many.

Hypothesis:

1.  The list price has to be at least 10% wrong if not selling for months.

2.  Most unsold listings aren’t that far off.  Buyers would be interested in many of the active listings at 10% to 15% under list.

3.  Sellers are reluctant to chop that much off their price.

4.  Buyers have to take the initiative.

My game plan here:

Posted by on Aug 20, 2015 in Bubbleinfo TV, Listing Agent Practices, Market Conditions, North County Coastal, Thinking of Buying?, Thinking of Selling?, Why You Should Hire Jim as your Buyer's Agent, Why You Should List With Jim | 2 comments

Bubble Talk

fhfa

This is what you get when a college professor looks at today’s real estate market – faulty assumptions.  1) The graph he included shows the two years (2012-2013) of rapid appreciation; and 2) the building-permit numbers are skewed by the lack of land available, plus 3) rapidly rising rents help to reduce the home-price-to-rent ratio.

From the latimes.com:

http://www.latimes.com/opinion/op-ed/la-oe-0818-yu-la-housing-bubble-20150819-story.html

If history is any guide, the L.A. housing price cycle seems to last about 12 years on average, of which seven years is spent in the bull market with at least 65% real price appreciation, and five years is spent in the bear market. We are three years into the housing recovery that started in 2012, with 27% appreciation so far. On average, there will be four more years or 38% more price growth before we reach the turning point.

Of course, it’s possible the bear market could come earlier or later than four years, but that is quite unlikely to happen in the very near future.

How can I be so sure? Often, during a bubble-making period, we see an accelerating rate of home price appreciation, as in 1988-89 and 2004-06. In the last two years, we haven’t seen that kind of rapid appreciation in Los Angeles.

Another way to understand housing price cycles is by looking at building permit numbers. Speaking roughly, if developers are investing in new properties, that’s a good sign that demand, and prices, are rising or keeping steady. If developers are holding back, that suggests demand, and prices, will soon fall.

L.A. housing permit units peaked in 1977, 1988 (50,500 units) and 2004 (26,900 units), one to three years ahead of the real housing price peaks in 1980, 1989 and 2006. Permits bottomed in 1982, 1993 (7,300 units) and 2009 (5,700 units), a few years before the housing price troughs in 1984, 1997 and 2012.

Over the last three years, we have seen L.A. building permits increase from 11,200 units in 2012 to 18,200 units in 2014. The 2015 number will most likely be higher than 2014. Therefore, we can predict the next home price peak is at least two years away.

Yet another measure of rational housing value is a simple price-to-rent ratio. The ratio is calculated by taking the median home price over the annual median rent in L.A. If the ratio is high — meaning that home prices are beyond their fundamental value based on expected rental revenues — that points to a bubble. Again, let’s look at history.

Two previous peaks were in December 1989, with a ratio of 14.8 to 1, and in February 2006, with a ratio of 24.4. According to Zillow, the current price-to-rent ratio in L.A. was 17.1 in May, which is far below the 2006 bubble level but still higher than any time before 2003.

That doesn’t worry me, though. A high ratio doesn’t spell danger for Los Angeles because, similar to New York (ratio: Manhattan 25, Brooklyn 23) and San Francisco (ratio: 21), it’s now a “superstar” city. L.A.’s size, amenities, weather and geography make its houses an investment target for the global elite. Wealthy individuals from all over the world don’t care that it might make more financial sense to rent, because they’re not simply buying Los Angeles houses to live in them, they’re also trying to diversify their financial portfolios.

Even though Los Angeles is one of the least affordable cities in the U.S., all factors indicate that it is not in a housing bubble. Of course the bull market will end eventually, but that doesn’t mean we’re heading for a devastating crash, like in 1990 or 2007. Whether you should put up a million bucks for that bungalow is another story.

Posted by on Aug 20, 2015 in Forecasts, Jim's Take on the Market, Market Buzz, Market Conditions | 2 comments

Chinese Home-Buying Concerns

rem

From John Burns Real Estate Consulting, a company that is very thorough in their research:

http://realestateconsulting.com/betting-on-chinese-home-buyers-in-the-us/

I live and work in Irvine, California, which many consider to be ground zero for Chinese new home investment in the United States. In addition to everything else great about living in America, Irvine has fantastic schools, many new homes (Chinese have a huge preference for new over resale), a very well established Chinese culture, and is within one hour of Los Angeles International Airport. Some of the new home communities we have worked on in Irvine have sold more than half of their homes to Chinese buyers, and I am being conservative here. Prices often exceed $1 million, and frequently there is no mortgage.

Chinese interest in US housing is not confined to California, as our consulting team has noticed Chinese home buying in areas served by all of the major airport hubs. In South Florida, agents have been flying directly to China to compensate for declining demand from South America.

While the recent Chinese stock market correction has caused a decline in sales (one of my builder clients has noticed a sharp pullback, another just told me about a home sale cancellation specifically due to the buyer’s stock market losses, and one publicly traded home builder even mentioned the pullback on their earnings call.), our research has convinced us of tremendous Chinese demand to buy US real estate for their families and as investments.

Nonetheless, we remain very uncertain about the level of future Chinese home buying:

1.  Is the number of people who can no longer afford to purchase a home after the stock market correction and currency devaluation greater or less than the number of people who will be encouraged to buy here by the stock market and currency instability?

2.  How real is the economic growth, and is there underlying debt (as reported by the Wall Street Journal in December) that could cause Chinese wealth to unravel?

3.  Will the government lift the $50,000 annual overseas investment cap later this year as anticipated, which could cause a flood of Chinese investment in US housing?

We don’t know the answer to any of these questions, but the future success of many new home communities depends on the answer. If you have some particular insight based on your knowledge of China, please let us know. We are constantly in search of new and better information.

Full article here:

http://realestateconsulting.com/betting-on-chinese-home-buyers-in-the-us/

Posted by on Aug 19, 2015 in Jim's Take on the Market, Market Buzz, Market Conditions | 13 comments

Rest of 2015

This summer’s 3-mo moving averages look quite different from last year.

In 2014, the list-pricing started to falter as summer approached, and stumbled along until this spring.  But since then, we’ve been on a tear!

summer 2015 avg LP vs avg SP

How can it be explained?  The lower-end buyers are more affected by rising rates, so maybe they are scrambling to buy anything affordable while they can?

According to the MLS, the San Diego County detached-home sales are 7% higher for the first seven months of 2015, compared to last year!  Summer sales this year are hotter than the 2013 frenzy levels in the graph below.

summer 2015 actives vs solds

Any decent houses-for-sale have been gobbled up so quickly that the inventory appears bleak to casual observers who only see low numbers and lousy offerings left behind by the more-motivated buyers.

The casual buyers and sellers will check out once school starts – leaving the rest of this year to the motivated players on both sides.

When is the best time to buy?  When everyone else isn’t!

Posted by on Aug 3, 2015 in Jim's Take on the Market, Market Buzz, Market Conditions, Sales and Price Check | 1 comment

House-Price Torpedos

Their agents are telling buyers to wait…but wait for what? Wait how long? Wait for who?  It’s irresponsible to make such casual comments.

Not mentioned in this article is that a good agent can overcome all these obstacles, and a bad agent makes them worse:

http://money.usnews.com/money/personal-finance/articles/2015/07/30/9-factors-that-can-torpedo-your-homes-selling-price

Posted by on Aug 1, 2015 in Jim's Take on the Market, Market Conditions, Thinking of Selling?, Why You Should List With Jim | 2 comments

Pending Sales Drop

Realtor Conference Lawrence Yun 007

It seems the inventory is so picked over that the remaining would-be sellers need to lower their price to get in the game – but Yunnie won’t ever say it outright.  At least he didn’t blame it on tight credit this time.  From HW:

Pending-home-sales-drop-for-the-first-time-in-2015

An excerpt:

Lawrence Yun, NAR chief economist, says although pending sales decreased in June, the overall trend in recent months supports a solid pace of home sales this summer.

“Competition for existing houses on the market remained stiff last month, as low inventories in many markets reduced choices and pushed prices above some buyers’ comfort level,” he said. “The demand is there for more sales, but the determining factor will be whether or not some of these buyers decide to hold off even longer until supply improves and price growth slows.”

According to Yun, existing-home sales are up considerably compared to a year ago despite the share of first-time buyers only modestly improving. The reason is that the boost in sales is mostly coming from pent-up sellers realizing their equity gains from recent years.

“Strong price appreciation and an improving economy is finally giving some homeowners the incentive and financial capability to sell and trade up or down,” Yun said. “Unfortunately, because nearly all of these sellers are likely buying another home, there isn’t a net increase in inventory. A combination of homebuilders ramping up construction and even more homeowners listing their properties on the market is needed to tame price growth and give all buyers more options.”

Posted by on Jul 29, 2015 in Jim's Take on the Market, Market Conditions | 0 comments

Entry-Level

Recently we’ve wondered how many first-timers are participating, but actual data has been scant. D.R. Horton says that 41% of their buyers are first-timers, which is probably similar to the resale market and sounds fairly healthy:

firsttimers

Here are the current market conditions through the eyes of D.R. Horton:

LINK HERE.

Check their #3 point. Entry-level sales are growing because the builders are getting better at devising new products for first-timers.

Posted by on Jul 28, 2015 in Graphs of Market Indicators, Jim's Take on the Market, Market Conditions | 0 comments