Understanding the current market.

Much like the beginning of 2014, this year has started with a lot of uncertainty in the housing market. January sales dropped to the lowest annualized level since the housing collapse despite positive housing fundamentals and bustling economy. Disappointing January sales largely reflect noteworthy slowdown in sales in the Bay area, which despite having one of the best job markets in the country continues to struggle with very limited supply of inventory of homes for sale. Low supply has constrained sales for several years now and has certainly contributed to low activity in 2014 in general.

January sales in the Bay Area dropped almost 15 percent from the year before, which is double the drop seen in the Los Angeles metro area where sales decreased 7 percent. Inland Empire performed relatively better with only a 4 percent decrease in sales and also the strongest increase in pending activity in January over the year before, 11 percent. Based on the pending numbers, the Bay Area sales will remain soft in February while Southern California will improve slightly.

At the state level, median home prices appear to have decreased as well. Again, however, median home prices at the state level are affected by the sales mix. Since fewer homes were sold in the Bay Area, the most expensive market in the state, the sales mix was largely repressed by homes at lower price levels. Consequently, median prices were pulled down. But are home prices coming down? No. Home prices are still rising throughout the state though the increase has slowed down on an annual basis. While home prices were increasing rapidly in 2012 and 2013, often at double digit year-over-year rates, the increase in prices has slowed down in 2014.

California Association of Realtors show median prices have slowed to 3.4 percent annual increase in January. While again, median prices are affected by mix of sales, other price indices which measure price changes on a same home show prices growth at about 5-9 percent. Highest price growth does remain in the Bay area, while somewhat slower growth is reflected in the Southern California.

What can we expect going forward?

Well, most recent pending sales along with Market Pulse survey of Realtor members suggest that there are some positives on the horizon. Pending sales index for January showed a monthly increase of almost 27 percent from January, which is much larger than monthly increase of 16 percent between the two months observed in the last six years. National pending sales index showed similar numbers. Also, there has been a pickup in open house traffic when compared to last year. As for housing prices, the appreciation rates will stabilize. Existing listings have already had to adjust to slower price growth and now over 50 percent of transactions are closing below the asking price. The discount on asking prices varies but it has averaged about 11 percent. Taken all together, we are seeing a market that is more buyer-friendly and should lend itself to more market activity over next year.

 

 

If you really want to make your home attention-grabbing, it’s time to up your game…..

You may think you know the basics when it comes to getting your home ready to sell: remove any clutter or personal effects, fix what’s broken, and stage your rooms. But buyers are a fickle lot, and they can fall in — or out — of love with a home for any number of reasons, some so subtle that the buyers themselves aren’t fully aware of their logic.

If you really want to make your home attention-grabbing for all the right reasons, it’s time to up your game with these outside-the-box tricks:

1. Set the mood (lighting)

Swap out your bright white light bulbs for a soft and flattering wattage that invokes a cozy, yet welcoming feel and hides any tiny imperfections. Opt for bulbs that emit yellow-toned and red-toned hues.

2. Wash your windows

Have your windows professionally washed, or devote an afternoon to washing them yourself from both inside and out. Even on gray days, clean windows will let in more light and make your rooms sparkle — and buyers will definitely notice if it isn’t done.

3. Mind the details

Small details can make your home look dumpy without you even realizing it. Freshen up rooms with new switch plates and outlet covers if yours are grubby from fingerprints or yellowed from aging. Polish handles and hardware and use a Mr. Clean Magic Eraser to remove minor spots and scuffs on walls.

4. Make it welcoming

You’ve got the curb appeal, but what about “walking up to the door” appeal? Invest in a new doormat and take the time to scrub down your front door since it’s probably covered with dust, dirt, and oils. Better yet, repaint it and add some new house numbers and a new porch light.

5. Don’t forget your side yard

Turn that dead space into a selling point by creating a potting station or kitchen garden, or even set up breakfast nook with a café table and chairs.

6. Get creative with color

Paint two adjacent rooms the same color to give the appearance of an open floor plan. Paint your walls to match your drapery (or buy drapery to match the walls). Use the same colors and patterns in the master bedroom and bath to create an “ en suite” feel.

7. Update your own furniture

Empty rooms show poorly. “Stage” a spare bedroom with an air mattress and bed frame. Create a living room arrangement by throwing matching slipcovers over clashing chairs and sofas.

8. Brighten up trim

Walls aren’t the only things that need a fresh coat of paint. Dingy door and window frames will drag down the prettiest of rooms. Repainting wood-toned trim white will also make your space brighter.

9. Employ scents

The old tried and true: bake a fresh batch of cookies to create a homey feel (or fake it with a scented candle). Employ soothing, spa-like scents like vanilla and lavender in bathrooms and bedrooms.

10. Make your space look bigger

Hang floor-length curtains above your windows to give the illusion of higher ceilings. Lay down a striped rug to make your floor seem more expansive. Use a clear shower curtain to open up a small bathroom.

11. Fake a closet organization system

Make your storage look custom with DIY shelves, hangers, and bins. Organize clothes by type and color for added impact.

12. Dress up your laundry area

Whether it’s a separate room or a corner of your basement, make your laundry area look welcoming by adding a folding surface, bins, and baskets for storage, and a designer element like a fun rug or temporary wallpaper.

13. Tidy up the garage

Install overhead or wall shelves to store bikes and sporting equipment. Create a workshop area in one corner — show buyers it’s more than just a place to park cars.

14. Prepare for snoopers

Buyers will open your fridge, peek in your medicine cabinet, and check under your sinks. Make these areas so tidy Martha Stewart would be proud.

15. Don’t knock feng shui

Many of its teachings can help make your rooms more attractive: avoid having the backs of furniture facing entryways, close the toilet lid, and don’t place anchor pieces like beds or sofas against a window.

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In recent weeks, Fannie Mae and Freddie Mac agreed to return of mortgages with as little as a 3% down payment – but for those struggling with affordability, the good news doesn’t end here. Just recently, mortgage rates dropped to a new low for 2014 – giving agents, brokers and the clients they serve one more reason to celebrate this holiday season.

The average rate for a 30-year fixed-rate loan now stands at 3.8%, a rate not seen since May 2013, according to Freddie Mac.

The average 15-year fixed loan, which is popular among those looking to refinance, fell to 3.1%. That rate is about where the 15-year stood in October.

Rates have been falling in tandem with 10-year Treasury yields, which have also fallen to their lowest level since May 2013, noted Frank Nothaft the chief economist at Freddie Mac.

Plunging oil prices, due to a slowdown in Russia and other global economies, have been sending investors into safe havens like U.S. Treasuries, said Keith Gumbinger, vice president of mortgage information firm, HSH.com.

“This is again driving down yields and pulling mortgage rates right along with them,” he said.

Another factor weighing on rates: few people are seeking loans, said Gumbinger.

Despite the bargain rates, the Mortgage Bankers Association reported a 3.3% decline in the number of people applying for mortgages last week.

If buyers and existing homeowners seeking to refinance do strike while rates are this low, they can save a lot of money. This week’s 0.13 percentage point drop alone results in a $15 a month savings on a $200,000 mortgage balance, or $180 a year.

That’s not such a bad Christmas bonus.

In a move designed to bring more first-time homebuyers into the housing market, President Barack Obama said Wednesday the Federal Housing Administration (FHA), the government insurer of home loans, will lower its annual insurance premiums from 1.35 percent to 0.85 percent.

In a statement, the White House said the move was part of the president’s efforts `”to expand responsible lending to creditworthy borrowers.” The president is scheduled to talk about improvements in the housing market at a speech on Thursday in Phoenix, one of the hardest-hit markets of the housing crash.

Stocks of the nation’s home builders rose on the news Wednesday, while those of mortgage insurers fell.

“This action will make home ownership more affordable for over two million Americans in the next three years,” said Julián Castro, U.S. Department of Housing and Urban Development Secretary. “Since 2009, the Obama administration has taken bold steps to reduce risks in the mortgage market and to protect consumers. These efforts have made it possible to take this prudent measure while also ensuring FHA remains on a positive financial trajectory. By bringing our premiums down, we’re helping folks lift themselves up so they can open new doors of opportunity and strengthen their financial futures.”

Mortgage bankers praised the decision. “It couldn’t come at a better time,” said David Stevens, CEO of the Mortgage Bankers Association. “February is the beginning of the spring market. I think it will have a definitive impact particularly in the first-time homebuyer market.”

For the typical FHA applicant, the reduction in premiums means a savings of about $80 on their monthly payment, according to CoreLogic’s chief economist, Sam Khater. “So it’s positive news from a consumer welfare perspective, especially for first-time homebuyers, which account for the majority of FHA’s business,” he said, adding, “However, I think the marginal impact on sales will be small because potential buyers make the decision to purchase based on trigger events, such as a new job, marriage, kids, etc. Changes in affordability only impact how much home they can buy.”

The FHA had been the only low down payment product available, with a minimum 3.5 percent down, but recently Fannie Mae and Freddie Mac announced a new 3 percent down payment product that would require private mortgage insurance. The product would compete directly with the FHA and could have offered some borrowers a cheaper option if they had a good credit score.

Read MoreWeekly mortgage applications fall sharply over holidays

“We believe the cut is strategic. Our view is that FHA was at risk of losing enough market share—especially of higher-quality borrowers—to the GSE 97 percent down mortgage that it could have put at risk the ability of the FHA fund to reach its 200 basis point reserve requirement this year as it had forecast. By cutting the premium, FHA would increase its share of the market and should be back on track to meeting the reserve requirement despite the cut in revenue,” wrote Jaret Seiberg, an analyst at Guggenheim Partners.

The reduction will likely come under scrutiny by some on Capitol Hill, as the FHA is still building its capital reserves and is not yet above the mandatory 2 percent minimum. It is back in the black, after having bled cash for two years.

The FHA’s volume had soared at the beginning of the housing crash, making up for the lack of credit in the private market, but that came at a price. In order to rebuild its fund, it more than doubled its annual insurance premium and raised average credit scores. That made it harder for borrowers today to afford an FHA loan.

Lowering the premium will bring volume back to the FHA, but it will also bring back risk.

“That is clearly the tension with any lending program that encourages low down payment,” said Stevens. “But we are in a different position. We are clearly in an environment where home prices are very stable with steady growth. You don’t have the dynamics to create any type of housing bubble.”

Mortgage volume has been lagging, even with interest rates falling to near record lows. The Obama administration is clearly looking for new ways to boost homeownership, as investor activity wanes and the market is left to mortgage-dependent buyers.

“Now that we’ve made it harder for reckless buyers to buy homes that they can’t afford, let’s make it a little bit easier for qualified buyers to buy the homes that they can afford,” said Obama in an August 2013 speech, also in Phoenix. At the time he did not make mention of the FHA, which was still in the red, but instead touted refinance programs and less red tape for lenders.Obama is also expected to address the issue of putbacks at the FHA, which is when lenders are forced to buy back bad loans. The regulator of Fannie Mae and Freddie Mac, the Federal Housing Finance Agency, has already sought to clarify these rules, which have created huge costs for lenders and consequently higher costs for borrowers.