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Category Archive: ‘Market Conditions’

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.

Read More

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.”

Read More

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

More on NSDCC May Sales

sales drop first

Here’s more data on last month’s detached-home sales around North SD County’s coastal region.

The new MLS doesn’t have the same statistics available, but for some reason it is crazy about reporting the sales volume everywhere, for which the average realtor has no use.

But comparing the sales volume does help show why this year feels so much different than last year for realtors, and others in the business whose income is based on a percentage.  Even though yesterday’s average pricing was up 13% year-over-year, the overall sales volume was down 33% from May, 2013:

NSDCC May Sales:

Year
# of Sales
Median SP
Total Sales Volume
2010
249
$800,000
$254,103,668
2011
243
$850,000
$276,818,522
2012
289
$821,000
$320,086,154
2013
362
$943,500
$441,162,967
2014
251
$950,000
$296,845,249

The market has shifted from distressed properties to a Make-Me-Move environment, which buyers were willing to endure last year when prices AND rates were substantially less.

The number of new listings this year is about 4% fewer than last year, but as you can tell by the drop in sales – it is different now.  Only the sellers who are willing to offer an attractive value are selling. Get good help!

Posted by on Jun 6, 2014 in Jim's Take on the Market, Market Conditions, North County Coastal, Sales and Price Check, Why You Should List With Jim | 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

Remodeling Instead Of Moving

louisville

A real-life example that epitomizes the struggle of many to move up.

http://www.bloomberg.com/news/2014-05-28/homeseller-reluctance-worsens-u-s-inventory-shortage.html

Excerpts:

Jaimie Adler said it’s getting cramped in the Lexington, Massachusetts, house she shares with her husband, two daughters and an au pair who occupies the former office. They’d sell, Adler said, if more homes were on the market in the Boston suburb.

Adler is staying put — and she’s not alone. The dearth of residential listings nationwide is now feeding on itself, with homeowners such as Adler reluctant to sell because of the difficulty in finding a place to buy. For others who refinanced into historically low interest rates, the prospect of rising borrowing costs makes selling less appealing.

Adler and her husband, Jeffrey Palter, are planning to expand or rebuild their 1,250-square-foot (116-square-meter) home after talking to an agent about listing it last year. Selling would be too risky, Adler said, because they might get stuck renting an apartment like a friend whose house hunt in the area lasted a year.

“We’ve decided to stay and work with what we have,” said Adler, 42, who runs a public-relations company from her guest bedroom. “We found some bigger homes in the neighborhoods we liked, but they’re more money and they’re still 25 years old, so they need the same amount of work.”

Mark Fleming, chief economist of property-data firm CoreLogic Inc., said the inventory is even tighter than it seems. Some properties are not desirable because they’re in unpopular locations or lack the amenities that buyers want, he said in a report last week.

The “inventory of homes for sale that buyers actually want to purchase is even less than what’s on the market now, and many people who are looking (and qualified) to buy a home are holding off because they can’t find the right one,” Fleming wrote. These “buyers waiting in the wings are the new ‘shadow demand.’”

About half of mortgaged homes have below-market loan rates, Fleming said. Some 3.57 million likely sellers may be discouraged from listing their properties because the cost of financing their next home will be higher, he said.

Adler, the homeowner, said a local builder approached her a few months ago and said his client wanted to buy her house, built in the 1940s, and renovate it.

She and her husband instead decided to improve the house themselves because they like the quiet neighborhood and the area’s schools, she said. Adler said she’d prefer to have at least 2,000 square feet of living space, an open floor plan, a finished basement and a “fantastic kitchen.”

“There are gorgeous homes in this town, but they start at a million dollars,” she said. “It makes more sense to stay and renovate so you get exactly what you want.”

Adler said the chances of her putting her house on the market are minuscule. An agent suggested last year that she list the property for $725,000, she said.

“The only way I would list this house is if I could buy something first,” Adler said. “It would take me inheriting a million dollars to buy something first — or winning the lottery. And I don’t play the lottery.”

http://www.bloomberg.com/news/2014-05-28/homeseller-reluctance-worsens-u-s-inventory-shortage.html

Posted by on May 28, 2014 in Market Conditions | 0 comments

Second Least Affordable

SD salaries

From the UT:

http://www.utsandiego.com/news/2014/may/22/hsh-home-affordability-median-income-mortgage/

An excerpt:

A San Diegan has to earn nearly double the county’s median income to afford a median-priced home here, says a study released this week by mortgage information company HSH.

The findings make San Diego the nation’s second least affordable city for buying a home behind San Francisco. The report says a person in San Diego would need to earn $98,534 a year to buy a $483,000 home, the county’s median price in the first quarter.

“It’s a very expensive part of the world to live in,” said Keith Gumbinger, vice president of HSH. “It’s a matter of compromise and adjusting your expectations and looking for things that fit your budget.”

The median household income in the county for an individual is $50,900, according to the U.S. Department of Housing and Urban Development. For its price calculation, HSH assumed a 20 percent down payment, 28 percent debt-to-income ratio, a 4.56 percent mortgage rate and included insurance costs and property taxes.

Gumbinger noted that the median price is the middle point of all homes sold, meaning that half of the transactions in the first quarter were below $483,000. Still, home prices rose 17 percent over the last year, which priced out the typical middle-class family of four that would want a three-bedroom, two-bathroom house.

“The thing that’s getting scary is you used to be able to buy for between $225,000 and $285,000,” said K.J. Koljonen, associate vice president of the nonprofit Community HousingWorks. “It’s almost not there anymore. The amount of houses that are at or under $250,000 has gone down by a ton.”

In April, the number of homes for sale for $250,000 or less in San Diego County was down 54 percent in the last year, the San Diego Association of Realtors reports.

http://www.utsandiego.com/news/2014/may/22/hsh-home-affordability-median-income-mortgage/

Posted by on May 23, 2014 in Market Conditions | 8 comments

Dealing With A Global Market

The Brooklyn borough of New York, seen with the Manhattan skyline in the distance. (AP Photo/Mark Lennihan, File)

From the WaPo:

http://www.washingtonpost.com/blogs/wonkblog/wp/2014/05/20/foreign-home-buyers-are-making-housing-more-expensive-should-cities-tax-them-for-it/?wprss=rss_business&clsrd

The globalization of real estate upends some of our basic assumptions about housing prices. We expect them to reflect local fundamentals — above all, how much people earn.

In a truly global market, that may not be the case. If there are enough rich people in China who want property in Vancouver, prices can float out of reach of the people who actually live and work there.

So just because prices look out of whack doesn’t necessarily mean there’s a bubble. Instead, wealthy foreigners are rationally overpaying, in order to protect themselves against risk at home. And the possibility of losing a little money if prices subside won’t deter them.

In effect, this means that absentee homeowners can price out people who are actually living in the area.

It means that empty housing can drive up the cost of occupied housing (this parallels a concern about investors who would buy up housing to turn it into short-term rentals on platforms like Airbnb).

It means that cities may be short on housing that locals can afford even as a non-trivial share of their housing sits vacant. From there, the economic consequences ripple out: Empty homes are good business for security firms; they’re bad business for nearby retailers who rely on actual people to buy their goods and services.

So, what’s the solution to this new reality, if we want to keep neighborhoods occupied and cities affordable for the people who have jobs there? Writer Kyle Chayka at Pacific Standard has proposed an updated take on rent control: residency requirements. Make people occupy (or rent out) the housing they own.

Urban Planner Andy Yan suggests to Surowiecki a less draconian idea: Make foreigners pay a premium to buy up local housing.

Read more here:

http://www.washingtonpost.com/blogs/wonkblog/wp/2014/05/20/foreign-home-buyers-are-making-housing-more-expensive-should-cities-tax-them-for-it/?wprss=rss_business&clsrd

Posted by on May 21, 2014 in Market Conditions | 2 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

Not Much Negative Equity

Zillow’s Negative Equity Report for the first quarter was released today, and it adds to why we aren’t seeing many short sales or REOs around NSDCC.

The upper tier homes have the most equity, and in San Diego only 5.2% of the higher-end homes are underwater:

SD neg equity

With very little pressure on sellers, we will probably just settle into a real estate malaise for the rest of the year – with occasional bursts of activity caused by well-priced homes or price reductions.

http://zillow.mediaroom.com/index.php?s=159&item=437

Posted by on May 20, 2014 in Jim's Take on the Market, Market Conditions, North County Coastal | 4 comments