The demand is so deep that it appears that buyers will be gobbling up the usual springtime surge of new inventory…..if there is a surge.
Who will be listing?
We can’t expect much from the banks, they quit foreclosing and will drip out whatever they have left.
Because the large investment firms got in so cheap and are enjoying the rising rents, they will be happy to hold long-term, rather than to cash out and pay capitals-gains tax (a big stumbling block for all investors).
The homeowners who are underwater will want to hold out and see if their previous equity might re-appear.
There are 77 million baby boomers, the oldest of which are heading into their retirement years. Can we expect more inventory from them?
From the AARP video below:
Only 9% of boomers are affluent (making over $150,000/year pre-tax)
25% of boomers have no savings
33% of boomers don’t have a retirement account
Only 11% plan to stop working
Won’t there be an exodus of baby boomers who are down-sizing, or have to cash out their equity to pay for living expenses for them and their kids/parents?
According to the survey:
Only 6% of boomers plan to downsize
76% of boomers plan to “age in place” (not move), or buy a larger home.
Will the only relief to this frenzy be affordability, or lack thereof?
This is the reality on the lower-end throughout the Southland:
Bill Sepe has gotten used to rejection.
The 28-year-old Rancho Cucamonga native has put in nearly 200 unsuccessful offers since August on Inland Empire homes, varying from typical suburban ranches to classic craftsman homes.
All this anguish comes in pursuit of a modest home in the exurb of San Bernardino County, the epicenter of the Southern California housing crash. Plummeting values here sparked a vicious wave of foreclosures.
But it’s precisely because prices fell so far here that Sepe can’t buy a house now. In a sharp irony, many would-be homeowners in hard-hit markets can’t compete with a flood of all-cash offers from investors, some backed by Wall Street war chests.
So they’re missing out on the only upside of the real estate crash: historically low prices and interest rates.
The repeated rejections come despite Sepe’s solid qualifications: a stable job as a cell tower technician and a pre-approved home loan. He watches as houses hit the market, then get scooped up within an hour. He offered a battle metaphor to describe his plight.
“I am this little country,” he said. “And it’s like this huge country is coming and attacking my country, and I can’t win.”
The Inland Empire has gone from bust to boom with a vigor few could have predicted, mirroring Western regions such as Phoenix and Las Vegas. Surging demand has tightened inventory, driving up median home prices in San Bernardino County by 18.3% and in Riverside County by 25.2% from the last year, according to real estate firm DataQuick.
The median, the point at which half the homes sold for more and half for less, hit $226,000 in Riverside and $177,500 in San Bernardino in January.
That’s great for the real estate industry and helps the local economy. It also boosts home equity, or, at least, decreases negative equity for the thousands of Inland Empire residents still mired in underwater mortgages.
But it’s bad for many buyers.
Now that housing is finally affordable, it’s unavailable.
“That’s really a missed opportunity for folks who have been playing by the rules, are doing the right thing, and trying to get a toehold into homeownership,” said Paul Leonard, California director of the Center for Responsible Lending.
Thank you Alex from the latimes.com – read full story here:
Amir and Mojgan Moghadam spent $1.4 million on their new home in Irvine, Calif. But to make it absolutely perfect, they spent a further $550,000 on builder upgrades—including $28,200 for a conservatory, $2,600 for a Sub-Zero ice maker and $495 for five exterior wall-light outlets.
Buying a newly built home is a lot like buying a new car at the dealership—optional features cost extra. Buyers will pay more for premium granite, a fancier fridge or an epoxy-coated garage floor. And upgrades can be a lucrative part of a builder’s business, with profit margins as high as 60%, depending on the option, according to John Burns Real Estate Consulting.
Indeed, buyers like the Moghadams are helping builders return to profitability after a long downturn. During the housing boom, homes were loaded with expensive features, and buyers snapped them up, regardless of price. These days, however, upscale buyers are choosier, selecting pricey options that are within their budgets and still practical for the resale market. An estimated 10% to 30% of a home’s base price is spent on upgrades. And companies say these optional features have been spurring growth in high-end home construction.
Record-low interest rates are driving much of this spending, with a 30-year, fixed-rate average of 3.68% for conforming loans, which are below $417,000 in most markets, or 4.13% for larger loans, according to HSH.com, a mortgage-research website.
Monica Kaiser, for instance, added nearly $70,000 worth of upgrades to the $1 million-plus San Diego home she and her husband purchased in December. The Kaisers decided to spend the money now—instead of later—for the upgrades they wanted. The Kaisers opted for a $10,000 staircase with wrought-iron balusters and nearly $4,500 for tile and stonework in the home’s 4½ bathrooms, along with other features from builder Standard Pacific.
“With interest rates so low, you’re not going to be able to get what you want any cheaper at any time,” says Ms. Kaiser, a mother of three who works for local media outlet. “To put a lot of these upgrades in down the line would have just been silly, because we’d be paying more to take out a loan or dipping into other assets.”
Some builders present buyers with thousands of choices that let them build a near-custom home that won’t resemble anything else in their community. Customizing a home can make a customer less likely to cancel the deal. “They’re emotionally attached to what they have designed,” says Joan Marcus-Colvin, senior vice president of sales, marketing and design for the New Home Co. “They have actually pictured themselves living in that surrounding.”
In the past decade, builders have increasingly been allowing buyers to pick favorite items through a website or app. Buyers can almost think of it like a game: They choose options to build their dream homes, then add or delete items as the budget permits.
“It was like I was going to the store,” says Ms. Moghadam, the Irvine, Calif., buyer of the New Home Co. house. “I would sit on my iPad and I would just pick out all the options I liked: cabinets, sinks, hardware, faucets. You could just do it at home and have fun with it.”
The most money is usually spent on kitchens, bathrooms and flooring, according to BDX, the marketing-services and technology company behind the Envision online design center that helps customers select options. Buyers upgrade flooring 73% of the time, cabinets 70% and appliances 63%, the company says.
One upgrade tends to hold its value: land. Former NFL player Michael Hamilton decided to build a new Standard Pacific home in San Diego after seeing a roughly half-acre lot with views of coastal sage shrub and other native plants near 1,600 acres of preserved open space.
Premium lots in the upscale Bellasario at Stonebridge Estates community cost up to $215,000 above the neighborhood’s $900,000 base price. The upgraded lot gave Mr. Hamilton room for another upgrade, a $100,000 backyard cottage for guests. “I wanted that lot and I wanted the casita,” he said, adding that “I wish I would have gotten a couple more upgrades.”
Hat tip to Profhoff for sending this in from wsj.com:
We received a cease-and-desist letter from the California Association of Realtors for having a blank copy of the purchase contract on the blog.
I speculated that they must have a lot of time on their hands, and asked if could they use some of it to pursue the rampant and unabated short-sale fraud by realtors.
Here is the response from a staff attorney:
Believe me, we have not enough time to be reviewing intellectual property violations, but your website came up at the top of a recent search that we did.
As to the latter point, short sale fraud and mortgage fraud have been a HUGE concern of C.A.R. over the last four to six years. The Legal Department has given a number of webinars, made in-person presentations, and created new Legal Q&As during the last several years addressing these issues, and also advises regarding the seriousness of these issues and the penalties associated with these types of fraud every day on the Legal Hotline. To illustrate, we have a link on our home page which takes users to the following portion of our website:
Unfortunately, C.A.R. is not an enforcement agency with the power to prosecute these matters, but we can refer any violations that you see to the FTC, the California DRE, and FBI who are taking these issues very seriously (even though they may be short on manpower). If you have any suggestions on what we can be doing further on this very important matter, please do not hesitate to let us know.
There you go! We have seen no efforts made by the local association of Realtors of the MLS system to curtail fraudulent activities by realtors, but the state association has a link!
I guess the realtors committing fraud didn’t get the memo about attending the webinar, or bothered to call the Hotline?
P.S. The last I heard, if you submit a complaint about a realtor to the California Department of Real Estate, they will get around to it in about 18 months.
If it wasn’t for the lousy comps that back up to the 56 freeway (two little ones sold last year in the $500,000s), this would look like a decent buy – though these sellers did get their tax-assessed value lowered to $590,000.
It’s in the Del Mar School District (Sycamore Ridge):
There are several articles out today commenting on the decline on foreclosure activity.
The ivory-tower types are quick to give credit to the CA Homeowners Bill of Rights, or to short sales being the preferred method of liquidation, instead of foreclosure.
Here are excerpts from this latimes.com article entitled, “California’s Housing Recovery May Gain Momentum, experts say”:
While dramatic, the drop is part of a general decline in foreclosure actions over the last year as banks look toward short sales and loan modifications as alternatives to seizing homes.
“You will see a continued decline in defaults from regulator activity, new laws and from the economy,” said Dustin Hobbs, a spokesman for the California Mortgage Bankers Assn. “As long as the economy, and especially the housing market, continues to slowly heal itself, you will see fewer and fewer defaults.”
Madeline Schnapp, director of economic research for ForeclosureRadar, believes the low levels of foreclosures will continue.
“The plethora of anti-foreclosure laws have been very effective in reducing foreclosure activity to what you are seeing today,” she said.
We are being led to believe that people have stopped defaulting, and anyone in trouble is taking the friendlier short-sale exit.
But short-sales and REO sales have both dropped off substantially:
NSDCC Detached-Home Closed Sales Jan 1 – Feb 7th
Year
Short-Sales
REO Sales
Non SS/REO
2011
29
18
133
2012
42
20
130
2013
23
4
180
Looking at this chart, it looks like the banks ramped up cancellations in September or everyone just started making their payments:
How can any of the “experts”, or the media look at the data and not wonder if lenders have deliberately stopped foreclosing? The banks have us right where they want us – feeling good about buying homes again, and the media is blindly pushing the new drug.
Bill Sepe has gotten used to rejection.
Some builders present buyers with thousands of choices that let them build a near-custom home that won’t resemble anything else in their community. Customizing a home can make a customer less likely to cancel the deal. “They’re emotionally attached to what they have designed,” says Joan Marcus-Colvin, senior vice president of sales, marketing and design for the New Home Co. “They have actually pictured themselves living in that surrounding.”
While dramatic, the drop is part of a general decline in foreclosure actions over the last year as banks look toward short sales and loan modifications as alternatives to seizing homes.
