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Category Archive: ‘Market Conditions’

Pent-Up Normal

A good description of the new normal, without asking too many questions, like: Why did foreclosures dry up?  Shouldn’t we accept 640 credit scores as a minimum standard?   Wouldn’t there be more sales if sellers were more reasonable on price?

http://www.mortgagenewsdaily.com/07182014_homeownership_homebuying.asp

While he has written about some of the elements in the past, Mark Fleming neatly summed up the current state of housing’s supply and demand constraints in the latest edition of CoreLogic’s Market Pulse. That issue, the company’s chief economist said, is one of the factors underlying the current faltering housing recovery and contributing to what he calls the new housing normal.

First there is a pent-up supply of housing – that is homes that might be but aren’t available for sale. The shadow inventory, homes in the process of foreclosure (some definitions include homes with the potential of foreclosure) has worried economists since the start of the foreclosure crisis. While the fear has been that these homes, once they become bank owned, might overwhelm the market they have instead come on the market at a fairly measured pace as foreclosure time-lines stretched into years and have provided a source of low-cost homes for both first-time buyers and investors. The inventory is now becoming concentrated in a few judicial foreclosure states and REO (bank-owned homes) are available for sale.

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Posted by on Jul 18, 2014 in Market Conditions | 0 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

Foreign Buyers

Wealthy Chinese home buyers boost suburban L.A. housing markets

For those wondering about the factors that have kept the market rolling, consider this article from the latimes.com – hat tip to daytrip:

http://www.latimes.com/business/realestate/la-fi-mo-foreign-homebuying-surges-20140708-story.html

Real estate sales to foreign buyers and new immigrants surged to new highs in the last year, according to a study released Tuesday by the National Assn. of Realtors, with the Southland being a prime destination.

Overseas buyers and newcomers to the U.S. accounted for $92 billion in home sales in the 12 months ending in March, NAR said. That’s up 35% from the prior 12-month period, and higher than the previous record of $82.5 billion set in 2012. These buyers made up roughly 7% of all U.S. home sales, by dollar value.

The increase was fueled by a 50% jump in activity from Chinese buyers, who bought $22 billion worth of U.S. real estate last year. Experts say many Chinese buyers see U.S. real estate as a better investment opportunity than is often available in China, and in some cases as a safe haven for cash. Many also buy homes here to put their children in U.S. schools.

And Chinese buyers, in particular, have an eye for Southern California. Los Angeles and Irvine were two of their top three destinations, according to the survey, with San Francisco ranking second. Chinese buyers have long been a factor in some parts of Southern California, particularly the San Gabriel Valley; as more come here, they’re spreading to new areas as well.

Los Angeles is the top choice for buyers of several other nationalities, too, according to data tracking searches of Realtor.com. Buyers from India, the United Kingdom, Australia, Ireland and Russia were also most likely to search here. For Mexican buyers, San Diego was the top choice.

The Realtors Assn. said it expects foreign interest in U.S. real estate will continue to grow as the economy grows ever more global.

“We live in an international marketplace, so while all real estate is local, that does not mean that all property buyers are,” said NAR president Steve Brown. “Foreign buyers are being enticed to U.S. real estate because of what they recognize as attractive prices, economic stability and an incredible opportunity for investment in their future.”

Posted by on Jul 9, 2014 in Market Conditions | 10 comments

Inventory Watch – Rising

We hear murmurs of higher or rising inventory, but rarely do you hear any rational explanations, let alone solutions. There have been 3% fewer NSDCC houses listed in the first half of this year, than in 2013 (2,697 vs. 2,790).

But the inventory of active listings is rising, which means one thing.  In spite of the avg. LP/sf being steady, more houses are not selling, than selling.

Sellers should sharpen their pencil if they want to sell in 2014.

SDinventory

North SD County’s Coastal Region (La Jolla-to-Carlsbad)

The UNDER-$800,000 Market:

Date
NSDCC Active Listings
Avg. LP/sf
DOM
Avg SF
November 25
95
$376/sf
47
1,988sf
December 2
79
$371/sf
50
2,047sf
December 9
72
$383/sf
43
1,954sf
December 16
81
$378/sf
42
1,948sf
December 23
77
$374/sf
49
1,937sf
December 30
76
$373/sf
51
1,950sf
January 6
74
$370/sf
49
1,995sf
January 13
71
$381/sf
44
1,921sf
January 20
72
$384/sf
41
1,877sf
January 27
75
$399/sf
40
1,891sf
February 3
78
$409/sf
41
1,876sf
February 10
82
$395/sf
38
1,927sf
February 17
85
$387/sf
35
1,929sf
February 24
90
$383/sf
37
2,008sf
March 3
82
$397/sf
39
1,942sf
March 10
88
$377/sf
37
2,008sf
March 17
89
$366/sf
34
2,038sf
March 24
79
$369/sf
34
2,031sf
March 31
78
$367/sf
39
2,069sf
April 7
87
$373/sf
32
2,054sf
April 14
97
$380/sf
31
2,000sf
April 21
87
$377/sf
32
2,062sf
April 28
107
$379/sf
29
2,044sf
May 5
114
$376/sf
27
2,046sf
May 12
108
$385/sf
31
2,012sf
May 19
107
$385/sf
0
0sf
May 26
105
$375/sf
34
0sf
Jun 2
102
$376/sf
36
0sf
Jun 9
102
$377/sf
37
0sf
Jun 16
104
$369/sf
35
0sf
Jun 23
111
$380/sf
34
0sf
Jun 30
119
$376/sf
36
0sf
Jul 7
122
$387/sf
36
0sf

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Posted by on Jul 7, 2014 in Inventory, Jim's Take on the Market, Market Conditions | 1 comment

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 | 6 comments

Sell Signs?

2014-06-27 14.38.15-2

A flipper checked in yesterday:

I’m getting really bearish. Nothing makes sense. There’s going to be some flippers without chairs when the music stops. Hopefully we have another 2-3 years in this run. Putting fixers in the MLS has really been eye opening. So many big groups writing offers just to tie them up, impossible for the small guy to pick one off. It used to be that the hard part was the rehab, now the hard part is finding the deal and the rehab seems to be the no brainer, and construction guys are getting cheaper. Hard money getting cheaper too, just paid 1.5 points and 7.99% to buy a house I’m closing on next week.

The market has been logic-free for a while now, and it will come to a halt one day without notice.  Keep an eye on the sales count – it will be the first sign of trouble.

But the June count for detached-homes sold in San Diego County still looks in-line with a healthy-ish market:

SD County Detached-Home Sales, June

2011: 2,061

2012: 2,367

2013: 2,328

2014: 1,980 (-15%)

The late-reporters will add enough to get close to last year’s count.  The final tally will probably be within 7% to 9% of the 2013 count, which is pretty good considering how hot it was last year.

But if you are thinking of selling, there isn’t enough extra upside potential to wait any longer.

Posted by on Jul 3, 2014 in Jim's Take on the Market, Market Conditions, Thinking of Selling? | 2 comments

Millennials

The millennials who have student-loan debt and low-paying jobs will have to stay home longer – and may never buy.  But there’s still plenty of demand – these guys spend so much time worrying about what might happen that they lose sight of what is happening.

If student loans end up being an issue, home sellers will have to adjust. There’s nothing price won’t fix!

Posted by on Jun 27, 2014 in Market Conditions | 3 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

Effect of Higher Mortgage Rates

From Fannie Mae:

http://www.fanniemae.com/portal/about-us/media/commentary/062314-palim.html

In July 2013, we wrote an FM Commentary about the impact of rising mortgage rates on the housing recovery.  At that point, rates had risen to 4.51 percent.

We examined the impact of rising rates on home prices and home sales during the two periods since 1990 when the market had experienced a sharp rise in mortgage rates.

The first instance was a 14-month period from October 1993 to December 1994, when mortgage rates increased by 237 basis points (from 6.83 percent to 9.20 percent).

The second instance of a meaningful rise in rates was longer and the rate rise was smaller – a 19-month period from October 1998 to May 2000, when mortgage rates increased by 180 basis points (from 6.71 percent to 8.51 percent).

Based on these past experiences, we suggested that rising rates were more likely to lead to a slowdown in home purchases rather than a decline in prices.

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Posted by on Jun 23, 2014 in Forecasts, Interest Rates/Loan Limits, Market Conditions | 4 comments

They Ran Out of Excuses

The ‘analysts’ can’t blame the housing market on the cold winter any more.

The numbers look weak because you are comparing them to last year’s frenzy era (one of the hottest of all-time) plus sellers are asking too much!

From: http://www.cnbc.com/id/101767459

Widely watched measures of existing home sales and new home sales this week, as well as the latest release of the S&P Case-Shiller Housing Price Index, are expected to shed fresh light on the state of the housing market in America. And with the housing market appearing to lag the rest of the economy, that could have a big effect on where equities are heading.

“These housing numbers are the granddaddy of all numbers, if you ask me,” said Anthony Grisanti of GRZ Energy. “If these numbers do not come out good this week, you’re going to look at an S&P that’s going to be a lot weaker. … I don’t think the market or economy can sustain a few more months of weak housing.”

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Posted by on Jun 23, 2014 in Jim's Take on the Market, Market Conditions, Why You Should List With Jim | 5 comments