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Category Archive: ‘Market Conditions’

No Inventory?

lotsahouses

In the video below, the economist reiterates that the inventory is so low that there aren’t any houses to buy – that the ‘shelves are bare’.

It is the view of the casual bystander.

This is the new normal – a market for serious participants only.

Buyers have to be grinding day in and day out, and be willing to kiss a few frogs before finding the right house.  Sellers have to be sharp on price, and smartly tune up the house prior to listing in order to make a good first impression.

The confluence of those two groups make for a very active marketplace.  We’ve already closed more NSDCC sales this year than last year, and the 2015 total will easily end up well over 3,000 sales:

Year
# of NSDCC Detached-Home Sales
Avg. Days on Market
2011
2,562
85
2012
3,154
80
2013
3,218
50
2014
2,849
51
2015
2,934
49

Why does it appear that there is no inventory?  Because sales are happening at a rapid pace – 38% of the NSDCC houses sold this year found a buyer in the first two weeks.

An example: A new listing hit the market at the end of last week, and our ready, willing, and able buyer with a 20% down payment made an offer. By Monday the listing agent had received four offers – two were all-cash, and one of those was over list price!

During the week of Christmas!!

The potential buyers who only check in occasionally will miss the hot buys – they don’t have their chops up enough to recognize them, and instead just see the over-priced turkeys that have been picked over by everyone else.  Casual seller-candidates will see the same, and think adding the extra 10% is a good idea – just in case.

Get Good Help!

Posted by on Dec 23, 2015 in Jim's Take on the Market, Market Buzz, Market Conditions | 3 comments

LA Mega-Condos

LA

Hat tip to Eddie89 for sending in this article from scpr.com:

http://www.scpr.org/news/2015/12/15/56174/who-will-be-living-in-downtown-la-s-new-mega-condo

An excerpt:

Construction workers in downtown Los Angeles are racing to finish Metropolis, the biggest mixed-use development on the West Coast.

When its three towers are completed sometime in 2018 – if all goes according to schedule – more than 1,500 condos will be added to Los Angeles’ scarce housing market, but some of the buyers probably won’t be spending much time living there.

Other developers have tried for decades to raise enough financing to turn the six-acre Metropolis site into something other than parking lots. The only one to pull it off has been Greenland Holding Group, a Chinese state-owned real estate behemoth. Bankers and real estate lawyers say a big reason why it has succeeded where so many others have failed is because Greenland has a big advantage: a direct line to millions of potential buyers in mainland China.

“It’s relatively easy for them to bring to their Chinese customers’ attention that they have this exciting project in Los Angeles,” said Mike Margolis, a partner at the Century City-based law firm, Blank Rome, who frequently advises Chinese companies doing business in the U.S. “That’s a ready made market for them.”

“They have been very successful at selling to Chinese buyers,” said Pin Tai, President of Cathay Bank.

Chinese buyers are attractive because about 70 percent of them pay all-cash, according to a 2015 National Association of Realtors survey.

Tai says it’s especially important to lock in those buyers first, because after the financial crisis, most banks require up to half a building to be under contract before they’ll approve a mortgage.

“It’s like building the foundation first,” said Tai. “It’s low hanging fruit.”

Read full article here:

http://www.scpr.org/news/2015/12/15/56174/who-will-be-living-in-downtown-la-s-new-mega-condo

Posted by on Dec 18, 2015 in Market Conditions | 0 comments

Affordability Exodus?

plano

Hat tip to Richard for sending in this article about California workers encouraging their employer to leave the state in order to achieve the American dream – affordable home ownership:

http://www.bizjournals.com/dallas/blog/2015/12/heres-the-main-reason-toyota-is-moving-from.html

An excerpt:

Sure, the low taxes, relaxed regulatory environment and Central Time Zone are nice. But none of those factors tops the list of reasons Toyota decided to plant its North American headquarters in Plano, bringing in more than 3,000 jobs, mostly from California.

The main driver of Toyota’s move from Torrance, California, was housing costs, according to Albert Niemi Jr., dean of the Cox School of Business at Southern Methodist University, who has inside knowledge about the move. Niemi shared the anecdote at an SMU Cox Economic Outlook Panel on Friday morning.

“It wasn’t so much that we don’t tax income,” he said. “It was really about affordable housing. That’s what started the conversation. They had focus groups with their employees. Their people said, ‘We’re willing to move. We just want to live the American Dream.’”

Toyota did the math and found that housing costs in Los Angeles County, where Torrance is located, are three times per square foot the cost of a house in Dallas-Fort Worth.

“They’re paying the same salary,” Niemi said. “So in real terms, they’re going to triple the affordability of housing they can buy if they move to Texas.”

Posted by on Dec 15, 2015 in Jim's Take on the Market, Market Conditions | 14 comments

Perils of Seller Occupancy After Closing

market insanity

A family member in a hot market is trying to move up.

They have lost out a couple of deals, so the right kind of frustration is starting to set in, but they keep coming across the same tactic – sellers who want to occupy after closing.

It’s not enough for these sellers and listing agents to get a premium price. On top of that, they make more outrageous demands that gives you the feeling that you’re being toyed with – just to see how high you will jump.

In this case, the sellers are wanting to rent the house after the close of escrow for 90 days at $2,000 per month UNDER the current market rate.  There are multiple offers, so they’re figuring one of them will bite.

What are the pitfalls?

  1. The loan documents require owner occupancy within 30 days.  Most lenders do random checking by having a fraud detector knock on your door to see if you live there yet.  If not, the bank could call your loan due.
  2. Buyers are now landlords, and bill collectors.  Try to collect the total rent due at the close of escrow, and a deposit if possible.  Most sellers reject the thought of a deposit, so make sure all of the rental terms are clear before signing the purchase deal.
  3. The insurance policy should be for a rental property.  If the sellers/tenants fall down and break a leg, you could be sued, and you need the proper coverage.
  4. Sellers asking for 90 days must not have found their next home yet – how do you know that they will move out?  Make a provision that any holdover rent will be double the current rate – sellers usually object, but it doesn’t cost them a penny extra as long as they move out as agreed.
  5. Damages? Hopefully a deposit was tendered, but either way, make sure to conduct a Pre-Move-Out inspection so any damages caused by the sellers are acknowledged and remedied.

I told the family member that if they have any major objections to seller rentbacks, then they aren’t desperate enough yet – because it’s likely that one of the bidders will comply with the demands, and you’ll lose another one.

As long as you have a solid agreement in the beginning, you’ll forget all about it six months from now.

If these types of demands are too uncomfortable, there is an alternative.  Buy an inferior house – they don’t have nearly as much competition.

Posted by on Dec 13, 2015 in Bidding Wars, Jim's Take on the Market, Listing Agent Practices, Market Conditions, Real Estate Investing | 0 comments

Rich Says No Bubble

zsurvey

After the recent article by Zillow on whether the San Diego market is in a bubble, the UT conducted their own investigation. Thankfully, they talked to our old friend Rich Toscano:

An excerpt:

The San Diego man who predicted the housing crash on his blog Professor Piggington’s Econo-Almanac, Rich Toscano, agrees that San Diego is not in a housing bubble, although he was not part of the Zillow survey.

Toscano, a partner at Pacific Capital Associates, said overvaluation can best be tracked by looking at rent, income and home prices together. In mid-2005, home prices shot up 75 percent over historic median levels. Today, they are 19 percent over those historic median levels.

“Valuations (now) are like prior cyclical peaks but nothing like the bubble,” he said. “A lot of people say prices are like the bubble so that means it’s just like the bubble. So they kind of ignore we’ve had 10 years of rents and incomes going up.”

He said the mood back in 2005 was “you’re a complete idiot if you don’t buy” because housing can only ever go up. An example of the psychology changing is that people are asking all of the time if housing is in a bubble.

“What you really care about is if you are way overpaying,” Toscano said. “Sure, housing is expensive but it is nothing like it was during the bubble.”

The Zillow survey, conducted by Massachusetts-based Pulsenomics, listed the St. Louis market as the least likely to face a bubble with 34 out of 36 analysts saying there was no significant risk in the next five years.

Pulsenomics interviews more than 100 economists, investment strategists and housing market analysts in quarterly surveys. Not all respondents answer every question so the number of analysts responding to the bubble question varies.

Read full article here:

http://www.sandiegouniontribune.com/news/2015/dec/10/housing-bubble-zillow-study/

sdpricetrend

Posted by on Dec 11, 2015 in Jim's Take on the Market, Market Conditions, Thinking of Buying?, Thinking of Selling? | 5 comments

More Crowdfunding

wtc

Crowdfunding is getting bigger and more diverse, and it gives an investment vehicle  to those who can’t – or don’t want to – put all their eggs in one basket and buy properties individually.  This company opened an eREIT, did an interview with Forbes, and, in one day, took in all the money it could handle:

Just one day after announcing plans to open its next investment opportunity, Fundrise debuted what’s dubbed as the world’s first eREIT.

The crowdfunding platform shared:

“Commercial real estate has historically been one of the best performing investment assets. Investors whose portfolios have up to 20% allocated to real estate have outperformed those with only stocks and bonds. Until now, investing in commercial real estate has been restricted by either very large minimum investments or the need to go through middlemen who charge high fees, negatively impacting returns. The Fundrise eREIT has a minimum investment of $1,000 with approximately one-tenth the average fees of similar traditional channels.”

Fundrise noted that the eREIT uses the latest technology to offer investments directly, online. This increased efficiency allows us to reduce overall costs, and provide greater transparency. It is similar to an ETF or mutual fund but instead of investing in stocks, you are investing in what is intended to be a diversified pool of commercial real estate assets.

It was also revealed that the eREIT’s primary objective is to provide investors with a low-volatility income stream of consistent, attractive cash distributions generated from commercial real estate investments. Cash distributions are expected to be paid every quarter.

Update: Fundrise’s initial $1 million processing window has exceeded the subscription amount by 503%. As a result, the platform are currently restricting available investment while it complete the initial processing.

Read full article here:

http://www.crowdfundinsider.com/2015/12/78224-fundrise-makes-investment-history-by-opening-worlds-first-ereit/

Posted by on Dec 4, 2015 in Jim's Take on the Market, Market Buzz, Market Conditions | 0 comments

San Diego #3 Hottest Market

This guy doesn’t come off any better than Yunnie, and you get the feeling they both are just talking their book.

He doesn’t go detail about his rankings, but he has the San Diego-Carlsbad region rated #3 in the Top 10 of the hottest markets in the country!

From cnbc.com:

http://www.cnbc.com/2015/12/02/2016-home-sales-to-be-best-since-2006-realtorcom.html

Importantly, those new homes are becoming more affordable, realtor.com Chief Economist Jonathan Smoke said Wednesday.

“What you’ve seen in the last couple of years is that builders have been avoiding that more affordable entry-level price point,” he told CNBC’s “Squawk Box.”

“We’re already seeing movement. Last week’s report on new home sales showed that the median new home price is finally coming down, and that’s a good sign that builders are positioning communities and product for a more affordable price.”

That is helping to draw in millennials, who are often viewed as absent from the housing market.

Americans ages 24 to 35 accounted for 30 percent of the existing home sales market in 2015, according to National Association of Realtors data cited by Smoke.

“That’s higher than it has been the last couple of years and trending towards normal, which is more around 36, 37 percent,” he said.

Smoke noted that realtor.com’s top 10 hottest housing markets for 2016 contained other surprises, in addition to top-ranked Providence: St. Louis; New Orleans and Virginia Beach, Virginia.

While all the areas on the list have strong economies or improving prospects, those four areas are about four years behind other markets in the recovery, and their economic outlook for 2016 is particularly strong, Smoke said.

Realtor.com hottest markets for 2016:

1. Providence, R.I., and Warwick, Mass.
2. St. Louis
3. San Diego-Carlsbad
4. Sacramento-Roseville-Arden-Arcade, Calif.
5. Atlanta-Sandy Springs-Roswell
6. New Orleans-Metairie
7. Memphis, Tenn.
8. Charlotte-Concord-Gastonia, N.C.
9. Virginia Beach-Norfolk-Newport News, Va.
10. Boston-Cambridge-Newton

Posted by on Dec 3, 2015 in Jim's Take on the Market, Market Buzz, Market Conditions | 2 comments

New Listings Up

Below is an interactive chart showing the active listings – each data point is three months of activity. Currently the inventory is lower than in previous years, in spite of the higher prices – a trend we have been experiencing lately:

However, this chart shows that lately the number of new listings has been higher than in previous years – suggesting that sellers are sensing an opportunity, and that next year we could finally see some market balancing:

‘North Coastal’ excludes La Jolla and includes Oceanside – but starting at $800,000 should limit any skewing of our regular NSDCC trends.

Posted by on Dec 2, 2015 in Inventory, Jim's Take on the Market, Market Conditions, North County Coastal | 2 comments

Best Days for Online Home Looking

home lokking days

Sundays are the favorite day to look at homes online.  From realtor.com:

So what is the true Black Friday of the housing business? Here’s a holiday shocker: Dec. 28 was actually one of the busiest days for real estate searches in the entire year, despite the fact that Dec. 24 was the single slowest.

The reason: When we’re over the holiday hump but still on break, it’s a great time to look for our dream home. The same reason explains the surge of activity on New Year’s Day. And, perhaps buying a house is a popular New Year’s resolution?

Another surprising, best-performing day on a holiday weekend: the other side of the year, July 6. Instead of traveling, many buyers apparently use the long weekend in the height of the buying season to search for homes and go to open houses.

Overall, the spring market typically has the best combination of inventory and value—more homes go onto the market, but prices have not yet thawed. If you miss out on that sweet spot, the second-best opportunity is in fall. Sept. 1, on Labor Day weekend, was another top performer—it’s all part of a seasonal pattern that buyers and sellers can use to their advantage if they are not constrained by school schedules or job transfers.

Besides family-oriented holidays, there’s one more holiday that significantly slows down home-searching activity. Nope, not Mother’s Day, not Father’s Day, but … Valentine’s Day. Think about it: Your significant other wants to take you out for a romantic dinner. Are you gonna say no because you want to stay at home to browse photos of fixer-uppers?

Posted by on Nov 30, 2015 in Jim's Take on the Market, Market Conditions, Thinking of Buying?, Thinking of Selling? | 1 comment