As sellers hold their grip on the market, buyers are starting to understand what it’s going to take to stay in the game, according to responses in Redfin’s second-quarter Real-Time Home-Buyer Report.
After speaking at length with the buyers, it was determined that although their understandable frustration concerning the low amount of inventory continues to rise, there is an equal elevation in their individuals awareness and recognition of the seller’s market, as well as an overall willingness to actually pay more out of pocket for purchasing real estate.
The report goes on to predict that the prices of property will only continue to escalate, yet likewise finds that the majority consensus of the concern when it comes to an overall stability in the nation’s economy are actually lessening as times goes on.
The following represent the majority sentiment and perspectives of homebuyers questioned:
The consensus that is emerging is that the present market is most definitely shifting into a seller’s market with statistics showing that a scant 31 percent of homebuyers actually are of the opinion that it is a good time to buy in their local areas, this finding down from the recent 40 percent.
Further supporting this sentiment is the 67 percent of interviewees that consider this a prime time to sell (up from a previous 48 percent).
Although the market is showing itself as a seller market, an astounding amount of homebuyers interviewed are revealing their increasing willingness to pay more as the prices continue to rise, most of this eagerness or accommodation appears to be a direct result of the staggering low inventory that has presented on the market this quarter.
One percentage that remained static within this quarterly report was the amount of homebuyers who are already preparing for continued pricing increases on the market. It would appear that 23 percent (just up from 22 percent last quarter) are acutely aware and ready for continued hikes.
In light of this belief, therising prices in the market are not only becoming a topic of discussion, but are morphing into an increasingly common concern, with48 percent of homebuyers polled presenting great anxiety on this issue.
The bottom line of Redfin’s findings points to a few, clear conclusions: homebuyers are frustrated with the low inventory availability on the market, they are growing weary of the increasingly cutthroat competition within the market, and they are unhappy with the current rate and pace at which the homes themselves are selling.
The data for Redfin’s analysis was extracted from interviews conducted with over 1,350 actual homebuyers from 22 metropolitan markets in the U.S, all having recently toured Redfin homes for sale.
This is a big shift in underwriting policy – from thelatimes.com:
Here’s a heads-up for the growing ranks of seniors whose post-retirement monthly incomes aren’t sufficient to qualify for a mortgage under today’s tough underwriting standards: Thanks to a rule change by the largest players in the home loan business, you may be able to use imputed income from your 401(k), IRA and other retirement assets to qualify for the loan you want.
That, in turn, could open the door to a money-saving refinancing to a lower-rate loan or a downsizing purchase of a new house or condo.
Top credit officials at Freddie Mac, the giant federally controlled mortgage investment company, said recently that a little-known policy revision now allows seniors and others to use certain retirement account balances to supplement their incomes for underwriting purposes without actually tapping those balances or drawing down cash.
A frequent question is, “How long will it last?”. It depends on how long the demand lasts, which at this point appears to be deep and wide.
There are sectors of today’s buyer pool that are still waiting for their shot:
1. Low-Down-Payment buyers.
You can be well-qualified and have no trouble getting any mortgage you want – conventional or FHA/VA. But if your offers include a smaller down payment and you end up in a bidding war, you are going to lose.
Listing agents tell the sellers that it is safer to take a cash, or big down payment deal, even if it means taking less money overall.
As a result, the low-down buyers are still waiting in the wings.
Here are the percentages of detached-home sales each quarter that were financed using FHA/VA/CalVet loans in San Diego County, and NSDCC:
You can see how tough it is on those with low down payments!
2. Move-Up Buyers
Many move-up buyers are still waiting, but for different reasons.
If you want to use the equity in your current house to buy the next, good luck making an offer contingent on selling your home. Those offers go behind the low-down-payments, and you won’t even get a call back.
But if you can figure out how to finance the next purchase without selling, then you still have to find a home good enough to make it worth it, AND be willing to pay enough to win the bidding war.
My rule-of-thumb is that you have to spend 50% more on the new home to make it worth the hassle and expense of moving. A 50% bump causes these buyers to be pickier than those who don’t own locally yet, and whose desperation level is a tad higher – the “homeless” buyers are inclined to pay more than those who are somewhat comfortable with their current house.
According to the census, there are roughly 368,539 people in San Diego County over 67 years old. Today, there are 1,553 single-story homes for sale – in the county!
Every year that goes by, more baby boomers are thinking about down-sizing, and all deserve to be in a single level. But they will have to wait, and eventually many will give up and do the stay-in-place aging just because the supply is so limited.
4. Buyers Who Are Too Busy
You have to devote a major search effort to find the right home, and to make you comfortable enough to bid high enough to win. The speed at which homes are selling is increasing!
Here is the graph of national stats:
In San Diego it’s faster – 30% of April sales found a buyer in the first week, and 49% found a buyer in the first two weeks!
We will have a very active market place for some time to come – my guess is for at least 1-2 years, and probably longer. Prices will ebb and flow, but demand and sales should be very strong.
Zillow is reporting that San Diego prices are up 19.7% year-over-year, a trend that should continue for another couple of months. You can see here that prices started to increase last summer, which should put a statistical damper on the Y-O-Y percentage growth later this year:
If the 19% Y-O-Y trend continues on top of last year’s gains, it would mean 20% to 30% above 2011 pricing. If pricing stablizes over the next few months, the Y-O-Y percentages will show declines, to the delight of novice reporters in the media.
It is amazing how the market pyschology has changed throughout the west – even Stockton and Bakersfield are doing great!
The market is still cooking, just not boiling over. The 10%-plus increase in inventory since the beginning of the month (during the prime selling season), suggests that a pricing plateau could be forming:
The UNDER-$1,200,000 Market:
NSDCC Active Listings
The OVER-$1,200,000 Market:
NSDCC Active Listings
It is relative though, and the cheaper, the hotter!
We lost a great one on Monday – Ray Manzarek of the Doors, at age 74. Thankfully the latimes.com pointed the spotlight today on Ray’s relationship with the members of X:
The music that keyboardist Ray Manzarek made as part of the Doors helped define the 1960s, and also was a crucial part of the Southern California music scene in the latter half of that decade.
Two generations of L.A. music met in the late 1970s when Manzarek connected with punk band X to produce the group’s first four studio albums. The band’s songwriters and lead singers, Exene Cervenka and bassist John Doe, reflect on the music of the Doors and their relationship with Manzarek, who died Monday at 74 of cancer.
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