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More Waiting Until Spring, 2021

I wonder if the rest of America looks at the homes in the bottom half of this photo above and correctly guesses that they are selling in the mid-millions…..Excerpts from article linked at bottom (hat tip Ray!):

Would-be home sellers have numerous reasons for staying out of the market, say real-estate agents. Some are worried about potential virus exposure by letting strangers tour their homes. Others have canceled or delayed their plans to move due to the pandemic, or they are worried about finding a new home in a competitive market.

KC Hart has experienced the inventory shortage firsthand as a real-estate broker in Missoula, Mont., where demand is high from buyers moving from other states. He’s also contributed to the problem. Mr. Hart and his wife were planning to sell their house this summer after their youngest went to college, but they delayed their move because their son is staying at home this fall while taking classes locally.

“That’s one more house not on the market,” Mr. Hart said.

In some cases, sellers are waiting until the spring, traditionally the busiest home-selling season, said Quentin Dane, chief executive of Dash Realty Group in Raleigh, N.C.

“We hear this all the time: ‘They might get a vaccine for Covid coming at the end of the year, and the spring market is right around the corner,’” Mr. Dane said. “Sellers [are] saying, ‘If I don’t need to sell, why go through the risk of selling right now?’”

Another obstacle for sellers is the high demand for contractors, painters and other workers who can perform repairs or upgrades to houses to prepare them for sale, said Beth Traverso, managing broker at Re/Max Northwest Realtors. Once houses in her area of the Seattle suburbs go on the market, they are usually sold within days, she said.

Jeff and Jill Borgida wanted to sell their house in Bothell, Wash., this spring now that their children were grown. But with inventory so low, they struggled to find a new house in their area and budget that met their needs.

“We were getting nervous, because we were along a path to list our house and we’re not finding any really suitable options,” Mr. Borgida said. Finally, they widened their search parameters and found a house farther out than they had originally looked.

Link to WSJ Article

Eviction Moratoriums & Landlords

California is known for being a tenant-friendly state, and now the eviction moratoriums make it feel like it’s Free Rent For All!  It is particularly hard on the mom-and-pop landlords who live on their rental income and who are conflict-adverse, which puts them in a position where they just have to eat it.

Tenants are required to detail in writing why they can’t pay the rent, but is that all you can do?

From the AAOA:

While the recent CDC moratorium on evictions requires that tenants sign a declaration under penalty of perjury, detailing why they can’t keep up with rent payments and their efforts to seek assistance, the reality is that many tenants will still falsify their declarations. Even without tenant declarations, or with lawful reasons under the CDC mandate, many courts are refusing to enforce evictions across the board. What is a landlord to do?

Tenants who are taking advantage of CDC’s COVID mandate simply should not get a free pass. With credit reporting their account, they won’t. There is no moratorium on accurately reporting the state of a tenant’s account.

By credit-reporting tenant accounts, renters can’t put off the consequences of non-payment.

Where a tenant is truly impacted by COVID, and the landlord wants to work with that tenant, then the tenant can be reported positively. Where the tenant is taking advantage of the CDC mandate, the power is back in the hands of the landlord to let the Credit Bureaus know that the account holder is not living up to their financial obligation.

There are companies that will help landlords with reporting to credit bureaus:

Link to AAOA article

Mortgage Underwriting is Loosening

We know that the ultra-low mortgage rates and tight inventory have been driving the market wild.

But here’s an extra boost – the strict mortgage underwriting that began in April is being relaxed:

Credit Loosening: According to the NFCI credit index, a composite measure of credit conditions, credit tightened dramatically in mid-April to its most conservative level since 2009 due to the increased economic uncertainty driven by impacts from the pandemic. Since then, credit availability has loosened, even reaching pre-pandemic levels in August. This credit composite takes into consideration many different credit indicators, giving a comprehensive picture of credit conditions in the U.S. When lending standards are tight, fewer people can qualify for a mortgage to buy a home. Likewise, when standards are loose, more people can qualify for a mortgage and buy a home. Credit loosening in August compared with last month increased housing market potential by 266,640 potential home sales.

https://blog.firstam.com/economics/housing-market-potential-reaches-highest-level-since-2007

The graph above is somewhat misleading because they are only reflecting the month-over-month differences.  The improvement of ‘house-buying power’ due to low rates has already been in place for months now, so the increase from July isn’t that dramatic.

I’ve heard that the qualify-using-bank-statements mortgage is back, so that will add a few self-employed buyers who can’t qualify using their tax returns. More competition!

Doom?

After another weekend of multiple-offer situations where the listing agents made no attempt whatsoever to create a bidding war, and instead just shut down the showings, it’s hard to believe there is any downturn coming our way. When you can get a mortgage rate in the twos, the demand is unyielding.

But some authors still want you to believe that doom is around the corner – they should talk to realtors on the street!  An excerpt:

The price of low-tier housing in San Diego County skyrocketed after the latter half of 2012. 2015 experienced another price increase, due to the boost given by decreased mortgage rates throughout 2015 and 2016. Lower mortgage rates free up more of a buyer’s monthly mortgage payment to put towards a bigger principal. Thus, San Diego’s high home prices continued to find fuel from increased buyer purchasing power.

But in 2018, home price increases sharply declined in reaction to slowing sales and rising interest rates, which began in late-2017. Home prices have since turned back up, but today lack the fundamental support of home sales volume to continue.  The annual pace of increase is now just 5%, lower than in recent years when the annual rise averaged around 10%.

Accurate home price reports run about two months behind current events. Even when caught up, sticky prices tend to persist several months beyond the moment when home sales volume begins to slow. Starting in March 2020, economic volatility and shelter-in-place orders caused home sales volume to decline dramatically. However, historically low interest rates have provided a boost for buyer purchasing power, which has propped up home prices thus far.

Later in 2020, the impact of record job losses will see downward pressure on home prices. The overall home price trend for the next couple of years will be down, the result of job losses and plummeting sales volume. As during the 2008 recession, the drop in sales volume and prices will first be most volatile on the coast, before rippling outward to inland areas.

Link to Article

Sales and pricing should be directly connected to inventory.

When there is hardly anything to buy, sales may decline, but pricing would stay the same or go higher because only the quality homes would be selling.  A surge of homes-for-sale in 2021 would fuel the demand and energize the marketplace…..to a point.

There will be a fine line between frenzy and glut!

Get Good Help!

The Selling Season, 2020

It was on April 15th that I drew up the calendar above, and then I added the additional red box around June when it was becoming obvious by the end of May that the market was taking off.

June, July, and August were all dead-red-full-tilt-boogie, then we had a blip around Labor Day/heat stroke/schooling, and we’re back to a healthy-hot market. The green = good description (at the top of chart) is about right – but it could be red hot if we just had more inventory.

While we’re due for a cooling off, but the October market could be better than expected if sellers get the memo that there are buyers starved for quality homes to purchase.  I’m sticking with the November flurry right after election day too, figuring that realtors will want to get in one more sale before Christmas.

Max Appreciation

We are hitting peak performance when the median sales price is going up around 2% per month.  With the wicked combination of low inventory and rates, it could continue – and after a year we could be up +24%!

It reminds me of my first blog post from 2005, which was the last time these types of conditions were in play.  Our 15th anniversary is next week!  Hat tip Susie!

20-25% appreciation per year – how can that happen?

Boise Report

Are you thinking of a move out of California?

Cashing in your home-equity lottery ticket and escape the tract homes of SoCal?  Move to a quieter, more laid-back area and get yourself a smaller yet comfortable home with an ADU on some land, all for $300,000 to $400,000 and bank the rest to live on?

You may want to get going.

Long-time reader Susie is a former Californian who has lived in Boise, Idaho for 10+ years and has watched it grow tremendously. She sent in this latest listing as an example of what people can expect:

I called this one earlier today! Saw it as brand-new listing 4 hours ago. Never heard of $487/sf for the upscale North End but here’s a cute remodel. Now more will follow! Notice small sq. footage and tiny lot. So many folks want to live near Hyde Park (restaurants) and the park. See agent remarks. Yep, signed $800/mo lease in back for ADU.

TEN HOURS and it goes pending!

Take a look at the ADU thing in the backyard too:

Link to listing with photos

Susie – how is the anti-Californian sentiment?

A guy who just moved to Oregon from here grew a full beard to help with the assimilation.

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