Yesterday these comments were made a few posts back by potential buyers:
So, for me this translates into “not going to overpay, no way no how.” I guess the issue is how long I can hold out, eh?
Qualified and ready to go, but extremely frustrated and not going to drop $800K just to get into something…
Looking for past 3 years in Coastal Carlsbad 92011. Anything decent is either already picked up or gets priced out with multiple bids. Anything under 800K and within the reasonable parameters is just an illusion … its just not out there.
I’d be very happy to overpay a little. The reality now is buyers are expected to overpay a lot.
Thank you for participating, I appreciate your candor.
Their thoughts reflect what most buyers are feeling. The frustrations fall into two categories; the lack of reasonably-priced quality inventory, and seeing properties sell for amounts that far exceed expectations.
How do buyers cope?
I think you can divide buyers into three categories:
Trophy Properties – Many who have waited this long aren’t going to settle for any old house now – they are going to buy a cream puff. These are mostly determined by location and condition, then price – because there is intense competition for the trophies, you can’t get hung up on price if you expect to win. The house on Glaucus was listed for $949,000, and of the six offers submitted, three were all-cash offers over $1,000,000.
Value Buys – For buyers who can live with some warts, and just want to get a house at a decent price, there is still an intense tug-of-war. The sellers (and listing agents) price their home as if they are selling a trophy, and usually they don’t have to sell, they aren’t giving it away. etc. How can you get those at the right price? Waiting is the only solution – the sellers are extremely over-confident the first week of the listing, and your only choice is to wait a month or two, and hope they wear down.
It listed for $1,395,000 in March, 2010. We offered $1,350,000 a couple of days into the listing, and they responded with a $1.385 counter. We thought our offer was good enough, so we waited, and 71 days later we finally entered into a contract to purchase at $1,265,000, the eventual sales price.
Not Playing – For those who refuse to battle it out, and are comfortable on the sidelines in one form or another, no problem. These include those who are looking and are making offers, but only on their terms. The lucky sale still happens, but these days it’s usually the seller, not the buyer, who gets lucky. Hang in there, but if you see one you really like, consider adding a little extra mustard to your offer, just to get it over with! If you don’t, chances are someone else will.
What are the biggest fears?
Higher rates might cause prices to come down, a flood of foreclosures could change the game, and a natural disaster would certainly impact the market.
But for now, the market for quality buys is blistering hot on the street.
Hat tip to Ross and Local Boy, who sent this in fromCNN/Money.com:
NEW YORK (CNNMoney) — Renters beware: Double-digit rent hikes may be coming soon.
Already, rental vacancy rates have dipped below the 10% mark, where they had been lodged for most of the past three years.
“The demand for rental housing has already started to increase,” said Peggy Alford, president of Rent.com. “Young people are starting to get rid of their roommates and move out of their parent’s basements.”
By 2012, she predicts the vacancy rate will hover at a mere 5%. And with fewer units on the market, prices will explode.
Rent hikes have averaged less than 1% a year over the past decade, according to Commerce Department statistics, adjusted for inflation. Now, Alford expects rents to spike 7% or so in each of the next two years — to a national average that will top $800 per month.
In the hottest rental markets, the increases will likely top the 10% mark annually for the next couple of years.
In San Diego, Alford anticipates rents will rise more than 31% by 2015. In Seattle rents will climb 29% over that period; and in Boston, they may jump between 25% and 30%.
This is a sharp change from the recession, when many Americans couldn’t afford to live on their own. More than 1.2 million young adults moved back in with their parents from 2005 to 2010, said Lesley Deutch of John Burns Real Estate Consulting. Many others doubled up together.
As a result, landlords had to reduce prices and offer big incentives to snag renters.
Now that the recession is easing, many of these young people are ready to find new digs, mostly as renters, not owners. Plus, the foreclosure crisis continues unabated, and the millions losing their homes are looking for new places to live.
Apartment developers many not be able to keep up with this heightened demand, which will force prices upwards, according to Chris Macke, a real estate analyst with CoStar, which tracks multi-family housing trends.
“There will be an envelope of two or three years,” said Macke, “when the rise in demand for rentals will exceed the industry’s ability to meet it.”
Plus, Alford added, “there’s been a shift in the American Dream. We’re learning from our surveys that a huge proportion of people are choosing to rent.”
They’ve experienced the downsides of homeownership — or seen friends and family suffer — and don’t want to take the risks or pay the higher costs of homeownership.
Southern California’s housing market couldn’t shake off the doldrums in February despite record demand from investors and all-cash buyers.
The median home price increased 1.9% in February from January to $275,000. That was unchanged from the same month a year earlier, according to DataQuick Information Systems of San Diego.
Sales remained weak, declining 0.6% from January and down 6.4% from February 2010.
With the spring selling season approaching, many real estate professionals found little reason for optimism.
“I don’t see any basis for prices to climb at this point,” said Glenn Kelman, chief executive for the online brokerage site Redfin. “I am not one of those people who think they are going to fall much further. What I am mostly worried about is just the stalemate. The buyers we are talking to are just frustrated. They feel that there is nothing good to buy.”
Robert Kleinhenz, deputy chief economist with the California Assn. of Realtors, said that aside from their concerns over the direction of the economy, potential buyers face difficulties getting a mortgage.
“When they finally get around to looking seriously at a home and wanting to make an offer, they have difficulty finding financing,” Kleinhenz said. “The trouble with trade-up buyers — they may have lost equity because home prices have fallen.”
Although the sales pace remains sluggish, it would not take much to see an improvement, DataQuick analyst Andrew LePage said.
“There is a lot of pent-up demand,” LePage said. “If the economy can improve and people begin to feel more confident about their employment situations, then sales could increase significantly. It’s easy to go up from here.”
The foreclosure numbers aren’t growing yet – we’re all convinced that they’ll be dripped out for years to come, right? The push towards loan mods and short sales enables all participants to drag out the inevitable, and it’s probably not going to change.
In San Diego County, there has been an average of 1,053 properties per month get foreclosed over the last 13 months – with an average of 764 per month going back-to-bene, and an average of 289 per month being bought by third parties:
Over the same 13 months, there has been an average of 2,716 properties per month sell on the MLS, so there has been an appetite for more than just the bank-owneds.
In North SD County Coastal, the recent detached pendings are starting to wane slightly, though the battles for the high-quality buys continue – there were six written offers on the Glaucus listing in Leucadia over the weekend, with many more interested. Here are the recent weekly new pendings from La Jolla to Carlsbad:
Week
New Pendings
LP Avg $/sf
# Already Closed
SP Avg $/sf
Feb 7-13
64
$352/sf
24
$403/sf
Feb 14-20
58
$432/sf
9
$482/sf
Feb 21-27
63
$361/sf
5
$412/sf
Feb 28-6
56
$437/sf
1
$791/sf
Mar 7-13
56
$388/sf
0
$0/sf
While there isn’t obvious evidence that prices are on the rise, it looks like last year’s $380/sf average for detached homes sold in North SD County Coastal is holding up for now.
There have been 69 detached closings in NSDCC since February 1st; their average LP-per-sf was $417/sf, and the sold average was $391/sf.
One viable option, however, is the FHA 203(k) rehab mortgage.
This is the Federal Housing Administration’s rehabilitation mortgage. It has been a hot ticket for investors who are picking up distressed properties because it allows them to roll both the price of the house and the cost to make it habitable or marketable into a single loan. And some foreclosures are in woefully bad shape.
But regular buyers also can use the 203(k), especially if they want to do some work before moving in. And more important, current owners can use it as a refinancing tool to incorporate the cost of their home improvements into a brand-new first mortgage.
You’ll have to search for a lender in your neck of the woods who is familiar with the product. But once you find one, you’ll discover that the guidelines are extremely liberal.
For example, there is no limit on how much you can spend on your improvements. As long as the total loan amount does not exceed the FHA maximum ($697,500 in SD), you are good to go.
As long as the “as improved” appraised value of your property — that is, the value of the house plus the value of the improvements — does not exceed the maximum loan amount, almost anything goes. Only luxury items are verboten, says Jim Ragan, who manages the 203(k) program for Bank of America Home Loans.
“You can’t build Bobby Flay’s outdoor kitchen or a swimming pool,” Ragan says. “But other than that, practically anything else is permitted.”
Actually, the extent of the project can range from something relatively modest to a virtual reconstruction. The cost must exceed $5,000. But as long as the existing foundation remains in place, you can tear down the house and rebuild it if you so choose. Even such “soft” costs as inspection fees, architectural fees, closing costs and permits can be included.
The formula for how much you can borrow is fairly straightforward. The maximum loan amount (subject to the aforementioned ceilings) is 97.75% of the improved value of the property. If the appraiser says your project will add $125,000 in value to your $300,000 home, then you can borrow $415,438.
Better yet, there is no requirement for a reappraisal once the work is finished. Only a single up-front valuation is necessary.
More than one in five borrowers in the U.S. are underwater; collectively the shortfall is about $751 billion. Nationally, homeowners whose mortgages have been modified without a principal reduction are up to twice as likely to re-default as those with some forgiveness, according to Atlanta-based Ocwen Financial, a subprime servicer that reduced principal in almost 20 percent of its loan modifications in the last year. “The reason so many homeowners give up is because there is absolutely no hope,” says Brent T. White, a law professor at the University of Arizona who studies underwater borrowers. “They want someone to meet them halfway.”
Banks worry that if they reduce principal, the losses they’d have to take would erode capital cushions. Mortgage servicers don’t like principal reductions because they lower the fees they collect and cut into profits. Some Republican lawmakers call the idea a bailout that will encourage more borrowers to default. Mike Trailor, the director of Arizona’s housing finance agency, says that as he tried to get a write-down program going, most banks and servicers told him it would only encourage more defaults. “I learned a new word for ‘no,’ and it’s ‘moral hazard,'” Trailor says.
While House Republicans are moving to end the Home Affordable Modification Program, the Obama Administration’s flagship loan modification effort, the year-old Hardest Hit Fund would not be defunded under the GOP plan. So far the smaller program has awarded $7.6 billion to 18 states.
About 20 percent of the money is going to principal write-downs in nine states, with California, Nevada, and Arizona getting the bulk of it. Nevada and Arizona have signed up Bank of America, and California is in talks to do so.
Brian T. Moynihan, the BofA chief executive officer, told investors at a Mar. 8 conference that the bank resists calls by federal and state officials for nationwide principal write-downs, preferring more targeted efforts. “Our duty is to have a fair modification process,” Moynihan said. The bank was set to announce Mar. 10 a principal forgiveness program for military service members leaving active duty and behind on their mortgages. To have an impact, though, the states must attract other large mortgage servicers.
The three states are trying to avoid helping owners who used their homes as ATMs during the housing boom. All three held focus groups or public hearings to help them define what is a deserving borrower. The programs will only help lower- and middle-class homeowners who can document financial difficulties. They will not trim a loan’s balance all at once. Instead, they forgive some of the principal over three to five years, depending on the state.
Trailor says it took the better part of a year to address BofA’s procedural issues to win its participation. Lisa Joyce, policy and communications manager at Oregon Housing and Communication Services, which is starting one of the nine principal-reduction programs, says the states must take care to design plans so that participants pass “the front-page test.”
If you want to be south of the 56 freeway in Carmel Valley, 92130, and don’t want to back to power lines, this is a fairly typical million-dollar offering these days:
Their thoughts reflect what most buyers are feeling. The frustrations fall into two categories; the lack of reasonably-priced quality inventory, and seeing properties sell for amounts that far exceed expectations.
