It was a good week – as the best buys get snapped up, it makes the OPTs more obvious. But in the hottest areas, it makes them the only listings still standing:
Someone asked me if I thought the bubble will burst again. I said no.
Not in the same way that the previous two bubbles have ended – with foreclosures driving down prices across the board.
Why?
Because of these reasons:
1. The Foreclosure Process Has Been Compromised – Banks have been handing out loan mods like candy, and keeping defaulters in their houses at all costs. Of the 13,154 houses that have closed escrow this year in San Diego County, only 293 were bank-owned, or 2.2%. Only eight of those were in our La Jolla-to-Carlsbad coastal region, out of 1,730 closed sales YTD (0.5%).
How can banks reverse course, and start foreclosing again? They can’t, and instead the ‘loan-mod’ will become standard banking policy – though vague.
2. Recent Buyers Were Well-Qualified – No exotic financing this time around. Everyone who got a regular mortgage over the last six years had to qualify AND use a down payment. Thanks to recent prices increases, most have tacked on some extra equity too – they aren’t going to panic-sell now.
3. Those Who Do Panic-Sell – The kids who come to town to liquidate their parents estate will more likely sell to a flipper offering quick cash. There have always been investors working the obits, but it is a cottage industry now – and they will improve and flip for a retail price.
4. Boomer Liquidation Less Likely, and Multi-Generational is the Substitute – Many of us have discussed the fear of baby boomers needing to tap their equity, and wanting to downsize. Here is an article:
If they need money, the reverse mortgage is still around, and likely to stay. If aging boomers want to downsize, they need to leave town to have it pencil – because it’s virtually impossible to buy a smaller one-story house in the same area and still save big money.
Plus their kids – who could have afforded a decent house 2-3 years ago – are now left holding the bag. It’s better for the kids to move in with the folks and take care of them, then to buy the crapshack.
5. Sellers are Resilient – If they can’t get their price, they will wait – and agents will wait with them. It is typical for agents to take six to twelve month listings and hope that’s long enough for the sellers to eventually wear down if nobody comes along.
6. Higher Capital Gains Tax – The sweetheart 15% capital-gains tax went back up to 20% at the end of 2012 – a 33% increase! Even though they can sell for more now, investors are very reluctant – they hate paying tax! Especially when a spouse can “die correctly” and leave rental properties to the other spouse with a stepped-up tax basis.
I don’t think we’re going to see the roller-coaster ups and downs any more. It’s much more likely to feel likely a bloated, stagnant slush of goo than an exciting crash. Thankfully, agents work on commissions, otherwise sales could come to a halt!
Once crowdfunding for real estate catches on, we could see a whole new type of bubble – one that is less personal and investors can shrug off – From BI:
In the current environment of low interest rates, investors are scrambling for yield, and many have turned to real estate.
Typically investors buy and flip homes, or they invest in real estate investment trusts (REITs), which own different types of properties.
But Sharestates is offering both accredited investors and the public a real estate crowdfunding platform that lets them dip as little as $100 into a project. The idea is to bring real estate to the masses.
In 1991, the National Association of REALTORS® made an “office of the future” video predicting what kinds of space-age technologies would change the home buying and selling process by the year 2000.
Jon Coile, broker-owner of Champion Realty in Severna Park, Md., dug this gem of a video out of the NAR archives for his presentation Wednesday at the Broker Summit in Atlanta:
Did NAR get the fashion wrong? Yes. (Is NAR really known for its fashion sense?) But how far off was the video, really?
Today we have AT&T Digital Life (the home automation mentioned in the video), Skype (video calls), thumb drives (mini discs), MLS with photos (home tour line drawings), smart appliances (“Microsoft Maytag software”), Siri (talking cars), and GPS (car navigation systems). “And they’re still going to need an agent – they got that right, too,” Coile said.
So this video begs the question: What does the next decade hold for the real estate industry?
Sales got off to a slower start this year, and the average pricing around San Diego’s north coastal region (La Jolla to Carlsbad) is now looking for a foothold:
Yesterday’s search and rescue efforts were suspended because of darkness, but a second effort was launched today. The drone was recovered, though worse for wear, and the video of the last flight was corrupted, unfortunately:
The housing market has bounced back dramatically since the 2008 recession, but conditions have started to slow, a new survey says.
Veros reports 20 percent of homes are expected to lose value, while 80 percent are set to gain value.
Still, the housing market is yearning for a boost, instead of simply pent up demand from an unusually cold winter, which hampered economic growth and caused slightly stronger housing numbers toward the end of first quarter and the beginning of second quarter.
A slowdown in the pace of buying isn’t necessarily something to worry about when it comes to the health of the housing market, as this could bring price stabilization.
“We’ve been seeing major price swings over the last seven years and stabilization will be positive and will provide predictability to the market,” says Dani Babb, Broker/President of The Babb Group Real Estate Inc. “Some appraisers can’t even figure out how to value homes because of the swings.”
Unpredictable prices make conditions difficult for sellers who are trying to score the best price and buyers who may delay purchases if the market is telling them a significant price drop is on the horizon.
We’ve seen the local San Diego Case-Shiller Index rise from 144.43 in April, 2009 to the most recent reading of 201.85 in May, 2014.
A whopping 40% increase in just five years. What a ride!
Yet all we hear from the media is that the housing market is faltering, sales are down, and soon the sky will be falling. Here are the reasons why it won’t:
1. Even though prices are much higher, there hasn’t been a flood of inventory. Consider how many sources of inventory that you’d expect to be flooding the market; bank-owned properties, flippers, previously-underwater homeowners, the elderly, etc.
Not only has there not been a flood, but around NSDCC there have been 3% FEWER houses listed in the first seven months of this year than in 2013.
2. Rates are Holding. Though sales and prices would probably be affected if mortgage rates did go up, so far they are steady – in spite of wars, improved employment, ebola, etc. Buyers will live with rates in the fours, and I just had a 30-year jumbo rate quote in the high-3s.
3. There is lots of activity. The house in yesterday’s article whose broker said she is having no showings must be ridiculously over-priced, because the attractive buys are getting action. Any seller who could live with 5% to 10% less than the list prices of active (unsold) listings nearby won’t have any trouble selling today. If prices in general did pull back, it would stimulate a new round of sales – the buyers who feel priced out would love another chance.
4. No Frenzy Means More Caution. After prices go up 40%, it’s a lot easier to make a mistake, and buyers are being more selective. A smart market is a healthy market.
The next few months are going to be terrible for sellers who insist on tacking on another 10% or so on top of what we’ve already gained. But reasonable sellers will have no trouble selling – the market is fine.
