Southern California Home Sales Hit 7-year High

rising home pricesBuyers poured a record $4.65 billion in cash into Southern California’s housing market during May, driving the biggest price gain in nine years and putting sales at a seven-year high, a research firm said Tuesday. 

Last month, cash down payments and home purchases jumped 19.5 percent from $3.89 billion the year before and increased 1.8 percent from $4.57 million in April, the prior record, said La Jolla-based DataQuick.

The median price paid for all new and resale houses and condos in the six-county region increased 24.7 percent in May to $368,000 from $295,000 a year earlier and it was up 3.1 percent from $357,000 in April. 

Last month’s median was the highest for any month since May 2008, when it was $370,000, and the year-over-year increase was the largest since a 24.8 percent gain in October 2004. 

“We’re deep into uncharted territory: Amazingly low mortgage rates, a razor-thin inventory of homes for sale, and the release of years’ worth of pent-up demand. Plus there’s a seemingly endless stream of investors and non-investors who pay cash and thereby avoid the loan-qualification process. How this all plays out is educated guesswork at this point,” John Walsh, DataQuick president, said in a statement. 

“Understandably, speculation continues over whether another housing bubble is forming.” 

Price gains in the six county region ranged from 30.2 percent in Los Angeles County to 18.1 percent in Ventura County, DataQuick said. 

The median price has now increased on a year-over-year basis for 14 consecutive months, with those annual gains ranging between 10.8 percent and 24.7 percent over the past 10 months. But May’s median remained 27.1 percent below the record $505,000 median for the region in spring and summer of 2007. 

rising home prices2Michael Carney, executive director of the Real Estate Research Council at California State Polytechnic University, Pomona, believes that prices will eventually level out with the peak of the last boom remaining a distant target. 

“Those kind of increases can’t be sustained, 20 to 30 percent are enormous increases,” Carney said. “We’re not going back to the earlier (record price) levels. Not in my lifetime.” 

Prices are heating up now because of near record low inventory and because housing again is an attractive investment

“This has been going on for some time and it’s largely people chasing yield,” Carney said of the cash-flush market. “At this point, it’s looking pretty profitable to invest in housing.” 

Most of last month’s year-over-year gain in the median reflects rising home prices, while about a quarter of it reflects a change in market mix. Sales are increasing in more expensive markets and falling in low-cost areas, DataQuick said. 

Lack of inventory continued to pinch sales in May. 

Last month, sales across Southern California increased 3.8 percent to 23,034 properties from 22,192 a year earlier, DataQuick said. Last month’s sales total was the highest for the month of May since 30,303 sold in May 2006.

The spiking prices will likely shake loose some inventory, said DataQuick analyst Andrew LePage. 

“As prices continue to rise at this rate it’s almost a given. You will see what economists call a supply response and an increase in inventory,” he said. 

In addition, the housing market continues to wean itself of distressed properties. 

During May, foreclosure sales — homes foreclosed in the prior 12 months — accounted for 10.8 percent market share. That was down from 12.4 percent in April before and down from 26.9 percent a year earlier. Last month’s foreclosure resale rate was the lowest since it hit 0 percent in August 2007. In the current cycle, foreclosure resales hit a high of 56.7 percent in February 2009. 

Short sales — transactions where the sale price fell short of what was owed on the property — had 17.7 percent share last month, unchanged from April but down from 24.3 percent a year earlier. 

Absentee buyers — mostly investors and some second-home purchasers “” bought 29.5 percent of the homes sold last month. That was down from 30.6 percent in April and up from 27.5 percent a year earlier. 

The record was 32.4 percent in January this year. 

The number of cases of flipping properties for a quick profit remained low last month. 

During May, 5.9 percent of the homes sold had previously changed owners in the prior six months, down from 6 percent in April and up from 4.3 percent a year ago. 

Kimberly Ritter-Martinez, an economist at the Kyser Center for Economic Research in Los Angeles who has been tracking the market since its collapse in the Great Recession, said the housing market is finally healing. 

“It’s safe to say we are in recovery. It’s here and gaining momentum,” she said. “But my forecast for home prices is a lot of uncertainty.”

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Inventory Crunch Eases As Sellers Jump Back In The Market

inventory crunch easesAre the days of low housing inventory coming to a close?

There are definitely encouraging signs: the number of listings on realtor.com increased 2.36% in March,  a welcome change from the -15.22% inventory free fall the market has been in for the past year. Bolstering the positive news is a .05% increase in listing prices and a sizable 20% decrease in the median age of inventory since February.

The national average list price of $190,000 seems to have changed the calculus for homeowners  thinking of selling, tempting them off the sidelines with prices that may be break even – or even profit-making – depending on the structure of their current mortgage. As more homeowners are pulled out of the quicksand of negative equity by appreciating prices, a key roadblock to a widespread housing recovery could dissolve as the inventory crunch gives way to pent-up demand from sellers and buyers.

Some markets are already showing strong signs of life. California continues its rebound, and Denver, Detroit and Seattle are experiencing promising growth. The median age of inventory has dropped to 24 days in Denver, Detroit’s list prices have increased at a faster rate than San Diego and are just behind San Fransisco, and Seattle’s median list price has jumped 15.9% since last year.

National Data

■In March, the total number of single-family homes, condos, townhomes and co-ops for sale in the U.S. (1,529,432) increased by 2.36 percent month-over-month. On an annual basis, however, inventory decreased by 15.22 percent.
■The national median list price for single-family homes, condos, townhomes and co-ops ($190,000) increased by .05 percent both year-over-year and month-over-month in March.
■The median age of inventory of for sale listings fell to 78 days in March, down 20.41 percent from February and 12.35 percent below the median age one year ago (March 2012).
Local Data

■California continues to lead the list of the country’s top performing housing markets with largest year-over-year decline in for-sale inventories. Seattle is the only market outside of California in the top 10, and experienced a decline of 40.17 percent in for-sale inventories year-over-year. The 10 markets with the largest year-over-year declines in inventory include Stockton-Lodi, Sacramento, Orange County, Oakland, San Jose, Los Angeles-Long Beach, Ventura, San Diego, Riverside-San Bernardino and Seattle, WA. Out of the 146 markets realtor.com monitors, only nine experienced an increase in for-sale inventory.
■On an annual basis, March median list prices were up by 5 percent or more in 52 markets, while only six markets experienced a decline of more than 5 percent. California markets continue to experience the largest median list prices year-over-year, in addition to the Phoenix market. While Detroit and Fresno did not make the list of top 10 performers for median list price, both markets did see list prices increase more than 40 percent year-over-year.
■The 10 areas with the longest time on market continued to include the coastal areas of the Carolinas and the resort communities of Santa Fe, NM, and Asheville, NC. In addition, four older industrialized areas also appear on the list: Reading, PA, Portland, ME, Albany, NY, and Philadelphia. However, with the exceptions of Albany and Philadelphia, the average age of the inventory in the remaining areas is down compared to one year ago.

Related News:

Mortgage Rates Hit Historic Lows

International Buyers Bullish on U.S. Real Estate

Helping Sellers MOVE in a Low Inventory Market

With inventory levels at record lows, more homeowners are reluctant to List their home because they don’t want to get into escrow and be unable to find their replacement property in time.   It’s almost impossible to get a contingent offer accepted and even if you do, the Seller only has 45 days to find the right home in a market that does not provide much of a selection.  It can take 6 months or more to find the right home when selection is so low.  How do you advise Homeowners dealing with this challenge?  Is now really a good time to Buy if you have to Sell?   Here are some options.

1.  Rent Backs give the Seller a 45 day escrow plus another 30 days to find their new home.  This may be a solution for some, but still leaves some uncertainty and a narrow window to find the right home.

2.  Know why it’s important to move now.  The risk is worth the reward.  The reason to move now is because interest rates make your next home affordable.   As the interest rate rises, that dream home will become unfordable, not because of the price, but because of the payment.

3.  Pick your neighborhood.   If your Client can identify a specific neighborhood they want to live in,  you can mail or door knock that are and find a Homeowner who also needs time and arrange a Single Party Show.

4.  Show your client homes.  It’s hard to overcome the potential challenges of a move if the Seller has not yet fallen in love with other possible homes.   Eliminate as much uncertainty as possible by showing homes they could see themselves living in.  Nobody really wants to Sell their home, they want to move!  Focus on the need to move and and the joy a new home will bring.

4.  Make a double move.  A homeowner will be in the strongest position in a low inventory market if they stop fighting the idea of a double move, sell their home, and move into a rental.  This gives the Homeowner time to wait for the right home to come on the market and buy non-contingent.   The hassle is worth the reward.    Relocation clients frequently move this way because it actually allows them to make a more careful decision about where they want to live.

Contact Roy at RoyaltyAgent@gmail.com

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Six Reasons Housing Inventory Keeps Declining

Housing inventory decline

Home sales in December dropped by 1% from November, the National Association of Realtors reported on Tuesday, but still stood nearly 13% above the levels of one year ago. That means home sales have risen from the year-ago month for 18 straight months.  For 2012 as a whole, sales were up 9% to 4.65 million units, the highest annual total since 2007. Prices, meanwhile, are picking up because the number of homes for sale continues to drop despite the sales volume gains. The number of homes for sale fell to 1.82 million at the end of 2012, an 8.5% drop from November and a 21.6% decline from one year earlier, the Realtors’ group said on Tuesday. Here’s a breakdown of why inventory has continued to drop this year:

 

Many homeowners are underwater: More than 10 million homeowners owe more on their mortgage than their homes are worth, according to CoreLogic Inc. CLGX -1.03% That pencils out to around 22% of homeowners with a mortgage, or 15% of all homeowners (since not every homeowner has a mortgage). Underwater owners aren’t likely to sell unless they need to move due to changing life (marriage, divorce) or financial circumstances, and they’ll take a hit on their credit for pursuing a short sale, where the bank allows the home to sell for less than the amount owed.Data from CoreLogic show that inventory has been the most constrained in housing markets where there’s the largest concentration of underwater borrowers.

Others don’t have enough equity to “trade up”: Another 10 million homeowners have less than 20% equity in their current residence, meaning they can’t easily “trade up” to their next house. Traditionally, homeowners have relied on home equity to make the down payment on their next home, and to pay their real-estate agent to sell their current home and buy their next one. These “under-equitied” homeowners—meaning they don’t have enough equity to make a move to a more expensive home—have added to the drag on inventory.

Everyone wants to buy at the bottom, but few want to sell: Even those people who do have plenty of home equity are likely reluctant to sell if they think prices will be higher tomorrow. Would you sell your largest asset today if you thought it might be worth 5% more next year? This helps explain why markets such as Denver and Dallas, which didn’t have huge housing bubbles and thus had smaller shares of underwater borrowers, have also seen double-digit inventory declines.

More purchases from investors of all stripes: From the big institutional investors that have been grabbing all the headlines, to the mom-and-pop landlords that have traditionally played a much larger role renting out homes, investors have increasingly bought homes that can be rented out rather than flipped and resold for quick profits. This is further keeping inventory off the market in two ways: homes that are bought at courthouse foreclosure auctions never show up on multiple-listing services when they’re initially sold. They’re also held out of the for-sale pool because they’re being rented out.

Banks have been slower at foreclosing: Banks and other companies that process delinquent mortgages have had trouble proving that they’ve followed state law in taking title to homes ever since the “robo-signing” scandal surfaced in late 2010, and they’ve also had to meet a host of new state and federal rules governing loan modifications  and foreclosures from settlements spawned by the robo-scandal. Banks have also become better about approving short sales and loan modifications, which has curbed the flow of foreclosed properties onto the market.

Builders have been putting up fewer homes:
Housing starts were severely depressed from 2009 through 2011 and have only recently rebounded off of those low levels. Consequently, there’s been much less new home inventory being added to the market at a time when demand (boosted by increases in household formation) is picking up. If more homes are held off the market—for any of the five reasons above—you can bet that builders will move in to fill the void.

Many of these factors that have been dragging down inventory aren’t signs of “normal” or “healthy” housing markets—but then, we probably haven’t had a normal market for around a decade now. If anything, declining inventory shows that normal supply-and-demand dynamics are returning, which is an important step towards putting a floor under home prices and giving markets time to get back to health.

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5 Things Consumers Should Expect From Housing Market In 2013

   In 2012, the national housing market finally turned a corner. We’ve now experienced 13 straight months of home value appreciation. Sales were up significantly over 2011 as buyers returned to the market, boosting demand.

   So what will 2013 have in store? Here are five things consumers can expect to see in the housing market next year:

    Up, Up and Away

  • The national housing market hit bottom in October 2011, and home values have since risen 5.3 percent from that trough. The most recent Zillow Home Value Forecast calls for 2.5 percent appreciation nationwide from November 2012 to November 2013.
  • According to a recent Zillow survey of more than 100 economists and analysts, respondents predicted home values (based on the S&P/Case-Shiller U.S. National Home Price Index) to rise 3.1 percent in 2013, on average.
  • Most markets covered by Zillow’s Real Estate Market Reports have already bottomed out, with only 10 of 255 covered metro areas not projected to hit a bottom within the next year.

   Bottom Line: Homeowners looking to sell in 2013 can largely rest assured they won’t be selling at the bottom, and many will find themselves in a sellers’ market. Potential buyers in 2013 may be more motivated to get a deal done while affordability is still extremely high and mortgage rates continue to be historically low.

   Real Estate Is Local Again

  • According to the Zillow Breakeven Horizon, buying beats renting when staying in the home for three years or more in roughly 60 percent of U.S. metros. The areas where it might make more sense to buy (if you’re planning on staying for three-plus years) are clustered in the Southwest and Southeast. If you won’t be staying put for at least a few years, consider renting in the Northeast, where buying often doesn’t make more financial sense until five years or more.
  • The goal of Zillow’s Buyer/Seller Index is to determine where buyers have the most leverage in a sale, and where sellers might have the upper hand. In general, we determined that metro areas in the West and Southwest – including the Bay Area, Las Vegas and Phoenix – are strong for sellers. Metros in the Midwest and Mid-Atlantic – places such as Chicago, Cleveland and Philadelphia – are best for buyers.

   Bottom Line: The housing market recovery has remained true to the old real estate axiom of “location, location, location.” How your local market is faring today – and if it makes more sense to buy or rent, to sell now or to hold off if possible – is largely determined by unique, local factors and fundamentals. Arming yourself with timely and comprehensive local market information is good advice at any time, but will be even more important in 2013 as buyers continue to seek bargains and sellers look to maximize returns.

   Coming Up for Air

  • In the third quarter of 2012, the percentage of homeowners with a mortgage in negative equity – or “underwater,” owing more on their mortgage than their home was worth – fell below 30 percent for the first time since Zillow began tracking that data using an improved methodology in early 2011.
  • Still, 28.2 percent of homeowners with a mortgage remain underwater. Because underwater owners have a far more difficult time selling their home, a large number of homes that otherwise might end up on the market aren’t getting listed. As a result, inventory in many areas is incredibly tight, leaving buyers to fight it out amongst themselves, which in turn can help drive up prices. This, among other factors, has led to tight inventory in many of the hardest-hit cities around the country.

   Bottom Line: As home values continue their upward march in 2013, more homeowners currently trapped underwater will begin to surface. This will be good for buyers exhausted by limited inventory and intense competition in markets such as Phoenix and Miami, but it will also have the effect of cooling price increases. As a result, in 2013, we predict home value appreciation in many areas will look more like a series of steps, characterized by cycles of price spikes and plateaus. Price spikes will free some homeowners from negative equity, allowing them to sell, thereby easing supply constraints and dampening prices until the cycle is repeated.

   Historically Affordable

  • Mortgage interest rates have been hovering at or near historic lows for the past year, and the Federal Reserve has taken concrete steps to ensure they stay low for at least the foreseeable future.
  • At the same time, home values – while recovering nicely – still have a long way to go to reach their pre-bubble levels. Overall, national home values in November were still down 19.4 percent from their peak in May 2007, according to Zillow.

   Bottom Line: Between 1985 and 2000, Americans spent, on average, about 20 percent of their household income on mortgage payments. That percentage increased to more than 24 percent by 2006, before falling to just 13 percent by the second quarter of 2012. If you can qualify for a home loan, the combination of low rates and low prices means your home-buying dollar will continue to take you farther in 2013 than in recent years, even for buyers on modest budgets.
Mortgage Interest Deducted?

  • Changes to the mortgage interest deduction (MID) may be a key element of any “grand bargain” reached by politicians in order to avert the year-end fiscal cliff. If adopted, any measure to limit or repeal the MID will result in some home price impacts over time and by market segment.
  • Home values at the high end of the market will likely be more negatively impacted by MID changes than home values overall, according to a recent Zillow survey of economists. For example, in the event that the maximum MID-eligible mortgage amount is reduced from $1 million to $500,000 and the deduction allowance for second homes is eliminated, the majority of respondents said they expect high-end home prices to fall while U.S. home prices overall experience little or no price impact.

   Bottom Line: Real estate lobbying groups have long fought against changes to tax rules allowing for the deduction of mortgage interest, arguing that any changes will impact or eliminate some of the historic financial advantages of owning a home. But unless you’re buying a proportionally more expensive home or are buying in a more expensive area, the impacts of MID changes will likely be muted. The decision to buy or sell a home is highly personal and dependent on a number of factors, only one of which is potential tax implications. In 2013, make your decision to buy or sell based on your own informed opinion and your unique situation.

   Click here to contact Roy for more information or questions concerning your real estate goals.

538 Heather Ave., La Habra, CA.90631

Heather front

Agent Remarks

La Habra single level in Turnkey and Move-in condition. Completely remodeled inside and out! 3 beds/1.5 baths, new carpet, new paint inside and out, new windows, completely remodeled kitchen, new appliances, scraped ceilings, master bedroom w/fireplace, inside laundry room, large living room w/beautiful fireplace & pergo floors, new roof, new front landscaping, & 2 car detached garage. Tastefull color combinations w/lots of charm and emotional presence. This oversized lot offers plenty of building potential. The City of La Habra will allow you to build another house with 2 or 3 car garages. This move in condition home awaits it’s new homeowners!! For more information call listing agent. Thank you in advance for showing.

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Shedding a Little Light on Shadow Inventory

Last week, we posted a blog titled: The Impact of Distressed Properties on Neighboring Values. In the article, we said there would be more distressed properties coming to market in the next six months and that these properties would put added downward pressure on prices of other homes in the area. Some questioned our assumption that foreclosures were about to increase and others questioned our assertion that they would have a negative impact on values. We want to qualify both of our statements today.

Distressed properties are about to increase

We have been in the ‘eye of the storm’ regarding the shadow inventory of foreclosure properties for the last several months. Foreclosures have been delayed by court systems mandating that the banks have their paperwork in order. Just last week, Fannie Mae addressed this issue in a report:

“Our foreclosure rates remain high. However, foreclosure levels were lower than what they otherwise would have been in the first quarter of 2011 due to the delays caused by servicer foreclosure process deficiencies and the resulting foreclosure pause.”

In their First Quarter 2011 Financial Results Supplement, Freddie Mac, also addressed this issue last week:

“We expect the pace of our REO acquisitions to increase in the remainder of 2011, in part due to the resumption of foreclosure activity by servicers, as well as the transition of many seriously delinquent loans to REO.”

More foreclosures will be coming to the market throughout 2011.

Distressed properties impact prices of surrounding properties 

Clear Capital discussed this point in their May 2011 Market Report. In the report they used two graphs to emphasize the connection. In the first graph, they charted the national saturation rate of foreclosures (REOs) from 2008 until the present.

 

In the second graph they charted national home prices during the same time period.

 

We can see that as the saturation rate of foreclosures increase, prices decrease.

Bottom Line

More foreclosures will be coming to market and they will have an impact on values. How will your neighborhood be affected? Sit down with a local real estate expert to find out.

Where Have All the Foreclosures Gone?

The inventory of foreclosed homes for sale has been dwindling for almost six months. Everyone is wondering if the worst of our challenges with distressed properties are behind us. We are sorry to report that isn’t the case. We must realize that the problems banks have experienced with their paperwork on these properties has done nothing but delay them from coming onto the market.

The robo-signing blunders and then the MERS mess have caused the banks to slow down the foreclosure process dramatically.  Just last week, the Office of Thrift Supervision released their Mortgage Metrics Report covering the 4th Quarter of 2010. In that report, they showed how foreclosure completions fell sharply because of these paperwork complications. Here are the numbers:

 

Foreclosures are not disappearing. They are just being delayed.

Bottom Line

If you think that waiting to sell your home makes sense, you may not be correct. Check with a local real estate professional to see how this will impact your market.

Why the Housing Market is Three Times Worse Than You Think

Between the recent report that sales of new homes hit a record low in February and this week’s news that 19 of the 20 largest metro areas tracked by the Standard & Poor’s/Case-Shiller home price index saw a price slump in January, it hasn’t exactly been a stellar few weeks for the housing market. And yet another data dump tracking foreclosed and distressed homes that have yet to hit the markets – what’s known as “shadow inventory” – suggests things are not likely to get a whole lot better for a long time.

Supply Sigh Economics

More robust economic growth, a pickup in job creation (and wage growth), and a renewed desire by banks to actually write mortgages are all central pieces of any housing rebound. Job growth last month was indeed stronger than in past months, and a new survey of CEOs finds them increasingly upbeat about hiring. But even if those green shoots emerge, it may take a whole lot longer to see any pickup in home values given the alarming backlog of homes currently on the market, as well as homes that may soon be for sale.

Sign of the times in some markets

In terms of homes for sale, we have three inventorytracks to keep an eye on:

* The official inventory: 3.5 million homes. The National Association of Realtors says the current inventory of existing homes that are listed for sale would take 8.6 months to work down at the current sales pace. In “normal” times, the inventory backlog is more in the vicinity of six months.

* The unofficial shadow inventory: 1.8 million homes. According to research firm CoreLogic, there’s another 1.8 million homes sitting in shadow inventory. These are homes that don’t yet show up in NAR’s Multiple Listing Service as being for sale, but that are likely to hit the market at some point. They include homes that banks have already foreclosed on but have yet to put up for sale, homes that are somewhere in the foreclosure process, and homes in which owners are at least 90 days late on their mortgage payments. CoreLogic estimates that those 1.8 million homes represents an additional 9 months of potential supply given the pace of how bank-owned property and pending foreclosures make their way to market.

* The severely underwater inventory: 2 million. CoreLogic uses this category to refer to homeowners that are at least 50 percent underwater on their mortgages. Now there’s nothing that says homeowners with negative equity will in fact walk away from their mortgages. But it’s reasonable to presume that short of a quick turnaround in home values or a settlement between the state attorneys general and lenders that leads to substantial loan modifications, a significant chunk of these homes will end up on the market in the coming months or years.

Add it all up, and NAR’s 8.6 month official backlog triples to about two years or so.

Distress Points

To get a sense of where your housing market stands, take a look at CoreLogic’s comparison of each state’s tally of mortgages that are at least 90 days late to its current sales rate. The states with the most distressed housing inventory are New Jersey, Illinois, Maryland, and Florida, while those with the least distressed inventory are North Dakota, Alaska, Wyoming, and Montana.

Of course, even state-level data doesn’t capture what’s going on in your local area. If you’re looking to buy or sell, one important step at this juncture is to look beyond the official sales and inventory data, and try to get a sense of local shadow inventory. This is where a solid and straight-up real estate agent is going to be crucial. You don’t want sugarcoating; you need an honest assessment of what’s in your local pipeline.

The fact that your local market has a large shadow inventory doesn’t necessarily mean more steep price declines. But if there is indeed a big backlog of shadow inventory, it’s hard to make a case that home values will rebound any time soon given the large supply that needs to come to market and be absorbed.

If you’re looking to buy, a high shadow inventory is seemingly an argument to take your time looking, but keep all the moving pieces of this in mind. For example, even if you don’t have to worry about rising prices, what about mortgage rates? No one can predict where mortgage rates will be in six months or a year, but we do know that current rates are at historic lows. As for sellers, well, if you really want to sell and you find you are in an area with a lot of shadow inventory, waiting might not be in your best interests. Even if prices stabilize, working through that backlog could make it a while before prices start to climb again. 

States with the most distressed properties are expressed in red