7/10/15

Chief cites improving economy.

Federal Reserve Chair Janet Yellen yesterday said the Fed is on track to begin raising interest rates later this year, but economists say any decision still will depend on signals the economy is continuing its recovery from the Great Recession.

“The big deal is will growth continue at a good clip,” said Nariman Behravesh, chief economist at IHS Global Insight in Lexington. “The economy has shrugged off the weakness of the first quarter, but she still is worried about whether the labor market has fully healed from the wounds of the recession.”

Employers added 223,000 jobs in June, and the unemployment rate dipped to 
5.3 percent, but wages were stagnant.

“But the fall in the unemployment rate overstates the strength of the labor market,” said Peter Ireland, a Boston College economist.

Wage growth — a good indicator of whether the labor market is tightening — is a particular concern, Behravesh said. And there are external risks, namely the Greek debt crisis and China’s plunging stock market.

In a speech in Cleveland, Yellen outlined her concerns, from weak wage growth to a low labor participation rate to “disappointing” productivity. She reiterated that inflation is still well below the Fed’s 2 percent target and noted that cautious business owners “have not substantially increased their capital expenditures.”

Still, Yellen, who is scheduled to deliver the Fed’s mid-year economic report to Congress next week, saw reasons for encouragement. Consumer spending appears to be picking up, she said, and employment is likely to keep expanding.

“Based on my outlook, I expect that it will be appropriate at some point later this year to take the first step to raise the federal funds rate,” Yellen said, referring to the Fed’s key short-term interest rate, which has been at a record low near zero since December 2008.

Yellen said even when the Fed does start raising rates, the increases will be gradual.

The increase is not expected to exceed 0.25 percent, making any negative effects “negligible,” Behravesh said.

The housing market is unlikely to be hurt by such an increase, “especially given that home buyers are feeling more confident because of the improving job market,” Ireland said.

“(The Fed) wants to signal to everybody that the economy is getting back to normal,” he said, “but they’re not in a hurry to raise the rate significantly until next year at the earliest.”

From Boston Herald.

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July 8, 2015

 

Good Afternoon!

 The Spring Market is now in the rearview mirror, making way for a whole new season in selling: summer.

 

The Summer Shift: The expected market time has increased by two weeks longer since the prime Spring Market.

Housing tends to follow a similar cycle every year. This time of year is no different. It started a couple of weeks ago with graduation. The market slowed a bit; many houses were not selling as rapidly as they were in April and May. The explanation from the real estate trenches was that it was due to graduations and the end of the school year.

Then there is our national holiday, the Fourth of July. Not as many buyers tour homes as they turn their focus to playing in the sun, barbecues, and fireworks. In housing, the holiday turns into a distraction of grand proportions and the lingering effects can be felt for a week.

As Southern California experiences summer heat waves, many will turn to the oasis known as the community pool, and others will flock to cool off in the welcoming, crashing waves of the Pacific. The heat will also distract the real estate market from performing on all cylinders.

Finally, the slower housing scene will be blamed on the family vacation. From Hawaii, to the East Coast, to the ultimate family destination, Orlando, it is the season for summer vacations. Camping, airplanes, house boats, motor homes, and road trips, just about everybody has plans. It is hard to tour homes or conduct real estate transactions when you are checking in to a Hyatt and touring the Empire State Building.

Many will blame the slower housing market on graduation, the 4^th of July, hot summer days, and family vacations. It is, quite simply, the Summer Market. It happens every year. For sellers and buyers in the real estate trenches today, they are all experiencing the shift in the housing market already and we are just a couple of weeks into the official start of summer.

A Summer Approach for Sellers: with buyer traffic down and the expected market time rising, it is now more important than ever to NOT get too far ahead of the market by overpricing. Multiple offers can still be attained, but only for those homes that are priced at, or very close to, their Fair Market Values. Here’s a quick refresher for determining that value: take the most current closed and pending sale activity and carefully adjust for upgrades, location, amenities, and condition. The Fair Market Value is not determined by arbitrarily pricing a home out of thin air. Ignoring the fundamental shift in activity during the Summer Market will result in many homes being overpriced with absolutely no success; instead, they will waste valuable market time during the second best time of the year to sell.

A Summer Approach for Buyers: although competition dips a bit during the summer, buyers must respect the fact that it is still a seller’s market. Buyers are not able to call the shots. Sticking to paying the Fair Market Value determined by recent market activity is key. Also, knowing the local or neighborhood market conditions is extremely important as well. It may be the case that a certain neighborhood is a bit hotter than another and when a home comes on the market that is priced well and is in great condition, buyers must be willing to push the envelope a bit in terms of value. Paying a few thousand dollars more than the last comparable sale may be the winning strategy that will allow a buyer to beat out the competition. Grossly overpaying is not advised. Sometimes waiting for the next shift in housing, the Autumn Market, may be a wise approach as well.

For both buyers and sellers, the Summer Market shift means a new approach to the market is crucial in order to find success. Realistic, level headed, patient buyers and sellers will be rewarded from now through the first few weeks of August. From there, the housing market will experience another shift, the Autumn Market. Stay tuned…

Active Inventory:  The inventory increased by 2% in the last couple of weeks.

The active inventory increased by 113 homes in the past two weeks and now totals 6,647, a 2% gain. Since the end of March, the inventory has grown without pause, adding 1,218 homes to the active listing inventory, a 22% gain. While the underlying market is hot, a rise in the inventory means that homes are not flying off the market regardless of the price; instead, homes that are overpriced are staying on the market and not generating offers. These overpriced homes are accumulating and the inventory is rising. While pending activity is strong, more homes are coming on the market than are being placed into escrow. The rise will continue through the end of August; and, if homeowners ignore the slower Autumn Market and place their homes on the market despite the slower season, the inventory may continue to rise through October. That occurred in the autumn of 2013.

Last year the inventory totaled 7,550 homes, 903 more than today, with an expected market time of 3.05 months, or 90 days. It was the first time in 2013 that the housing market had reached balance, not favoring buyers or sellers. We probably will not reach a balance until the autumn, right after school starts.

 

Demand:  Demand decreased by 4% in the last couple of weeks.

Demand, the number of new pending sales over the prior month, decreased by 125 homes in the past two weeks and now totals 2,969 homes. This is quite typical for this time of the year as the market transitions into the summer. This is the season of distractions that place house shopping on the back burner for some. Kids are out of school, the smell of barbecue is in the air, dazzling firework shows light up the sky, and pools and beaches are bursting at the seams. It is still a fantastic time to sell a home and to tour neighborhoods in search for a home, just not as hot as the spring.

The expected market time for all of Orange County grew from 63 days to 67 days in the past couple of weeks. The hottest price ranges are homes priced below $1 million, with an expected market time of 52 days. The upper ranges, all homes priced above $1 million are really beginning to slow, with an expected market time of 154 days, over five months. The higher the price range, the slower the market.

Last year at this time there were 492 fewer pending sales, totaling 2,477.

 Distressed Breakdown: The distressed inventory decreased by one home in the past couple of weeks.

The distressed inventory, foreclosures and short sales combined, decreased by one home. Year over year, there are 20% fewer distressed homes today. In June, only 2.5% of all closed sales were short sales and only 1.2% were foreclosures, leaving 96.3% that were good ol’ fashioned healthy sellers with equity in their homes. With the market humming on all cylinders for the past several years, the distressed market in Orange County has become nothing more than a footnote to the current housing story.

In the past two weeks, the foreclosure inventory decreased by 15 homes and now totals 58. Less than 1% of the inventory is a foreclosure. The expected market time for foreclosures is 46 days. The short sale inventory increased by 14 homes in the past two weeks and now totals 153. The expected market time is 48 days. Short sales represent just 2% of the total active inventory.

Have a great week.

 

       Despite many promising factors leading in to 2015, the market got off to a relatively slow start to begin the year. Though the winter months are typically considered an “off season” for brokers and agents around the nation, there were still many who had hoped that the record low interest rates and slowing home appreciation would be enough to drive sales forward – I was one of them. This clearly wasn’t the case in January, when sales throughout California and most of the nation dropped from the month before, but not all hope should be lost. New research from the California Association of Realtors has found that existing home sales increased across California in February – likely a result of slowing home appreciation and increasing inventory, and the latest indicator of a stronger market ahead.

Closed escrow sales of existing, single-family detached homes in California totaled a seasonally adjusted annualized rate of 368,160 units in February, according to information collected by C.A.R. from more than 90 local REALTOR® associations and MLSs statewide.  Sales in February were up 4.7 percent from a revised 351,480 in January and up 2.4 percent from a revised 359,600 in February 2014.  The year-over-year increase was the largest observed since December 2012. The statewide sales figure represents what would be the total number of homes sold during 2015 if sales maintained the February pace throughout the year.  It is adjusted to account for seasonal factors that typically influence home sales.

“While February’s statewide improvement in the housing market was moderate, it’s an encouraging sign, nevertheless, as we head into the spring home-buying season,” said C.A.R. President Chris Kutzkey.  “On the supply side, housing inventory improved overall with active listings growing at a faster pace of 5.3 percent when compared to last February.  Regionally, both active listings in Southern California and Central Valley increased moderately from last year, while housing supply declined 10 percent in the Bay Area.”

The median price of an existing, single-family detached California home was essentially flat from January’s median price, inching up from $426,660 in January to $428,970 in February. February’s median price was 5.5 percent higher than the revised $406,460 recorded in February 2014.  While the statewide median home price is higher than a year ago, the rate of increase has narrowed significantly since early 2014. The median sales price is the point at which half of homes sold for more and half sold for less; it is influenced by the types of homes selling as well as a general change in values.

“The California housing market regained some traction in February as sales activity improved on a year-over-year basis for the second time in three months,” said C.A.R. Vice President and Chief Economist Leslie Appleton-Young.  “At the state level, the market is moving in the right direction as the growth of sales continues its upward trend and home prices start stabilizing.  At the regional level, however, the San Francisco Bay Area continued to be hampered by constrained inventory and low housing affordability.”

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Veteran agents know that buyers can make a “no” decision on a house before they even step in the door. It has nothing to do with the numbers. It’s the curb appeal that sets the tone, before they even see the inside of the listing.

That’s not just speculation. Studies confirm: Big, extensive renovations that functionally improve a home are net money losers, on average. They may enhance enjoyment of the home significantly – but they generally do not add as much in value as they cost to execute. Meanwhile, the projects and improvements that add the most value, according to the annual Cost vs. Value Study put out byRemodeling Magazine, are almost invariably cosmetic.

Looks count. You don’t want to be selling the neighborhood’s “ugly duckling.” If your listing is so ugly that it scares the crows away, here are some things you can do to boost its curb appeal – and get it sold for a good price – without busting the bank.

Provide Some Seasonal Decorations

Seasonal decorations are a great way to dress up a drab property or make a vacant house look “lived in.” Fall decorations are my favorite. Not everyone decorates their home and yard for autumn like they do for Christmas, so your efforts will be noted.

Try buying fall decorations cheap on clearance sales at craft and home goods stores. Late November is a good time, as managers will discount their fall stuff to make room for Christmas decorations. Keep them in your closet to help dress up fall listings.

Add an American Flag

Two quick screws and a flag holder, and you’re in business. But don’t settle for an old flag – faded flags won’t do the trick. It has got to be new and bright. Make sure the white stars and stripes are sparkling and the red stripes pop.

Apply Fresh Coats of Paint

A coat of paint and some nice trim is usually the number one value-enhancing, curb appeal-boosting modification that property owners can make immediately prior to listing.

Don’t just paint the house, though. Take the same care with mailboxes and numbers, if any. Make the colors pop, while still fitting in with the overall aesthetic of the neighborhood.

Invest in Landscaping

According to the 2012 HomeGain Home Improvement Survey, investing in landscaping generates an average return on investment of 215 percent. The same study found that over 90 percent of real estate agents recommend that clients invest in some professional landscaping prior to selling.

Not ready to invest 10 percent of the value of the home in landscaping, as the American Society of Landscaping Architects (www.asla.org) recommends? Then at least make sure the lawn is green, mowed and raked at all times.

A New Front Door

The aforementioned annual Cost vs. Value Report put out by Remodeling magazine identified a new steel front door as one of the top value-enhancing improvements sellers can make to a house thatactually adds value, above and beyond the cost of the repair, on average.

In fact, a new entry or door was the only renovation or improvement studied that did, in fact, earn its keep by generating about 101 percent of its cost in resale value. If the front door is old or unsightly, this is a no-brainer for boosting a home’s curb appeal.

Paint the Rocks

Military veterans may get a chuckle out of the old joke about “painting the rocks white and the grass green” immediately prior to a VIP visit or inspection. Maybe you won’t paint the grass green, but in the right spot, bright white rocks marking out the edge of a lawn, or lining a walkway, can look sharp. Plus, it’s easy to do and doesn’t cost much.

Spruce Up the Mailbox

Many people forget about the mailbox, even though it’s one of the first things your buyers will see up close when they arrive to look at the property!

Pressure Wash or Bleach the Driveway

Get rid of those oil stains on the concrete! For that matter, once you have the pressure washer out there, perhaps pressure wash the exterior of the house – especially anything visible from the curb.

Replace the Garage Door

Again, according to Remodeling magazine’s most recent Cost vs. Value report, many markets reported that swapping out an old, decrepit garage door for a new one was a property-value enhancer, net of costs. This wasn’t the case on average nationwide, but it’s certainly true of certain areas.

If the garage door is so old or unsightly that it depresses the value of the property all by itself, you may do well to replace it in any market. Other frequently-cited examples of curb-appeal-boosting improvements or repairs that pay for themselves in some markets include window replacement, vinyl siding replacement, and the addition of a deck.

Note that none of these are super costly repairs or renovations. The available data seem to show that smaller projects actually pay off. Larger projects won’t always pay for themselves – at least in the short run. So keep things simple and straightforward, and take your curb appeal to the next level without breaking the bank.

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Despite many promising factors leading into 2015, home sales in January fell sharply from December, a modest dip from a year earlier and the 14th month in the last 16 to post year-over-year declines. While a decline in sales is typical during the winter months, many experts were hopefully that the abnormally low mortgage rates would be enough to drive the market forward. Now many agents and brokers are left asking the question: If low mortgage rates aren’t enough to sell homes, what is?

A total of 13,560 new and resale houses and condos sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties in January 2015. That was down month over month 29.4 percent from 19,205 sold in December 2014, and down year over year 6.3 percent from 14,471 sold in January 2014, according to CoreLogic DataQuick data.

On average, Southern California sales have fallen 27.6 percent between December and January since 1988, when CoreLogic DataQuick data began.

January home sales have ranged from a low of 9,983 in 2008 to a high of 26,083 in 2004. January 2015 sales were 21.7 percent below the January average of 17,322 sales since 1988.

“The January and February statistics are always interesting, and sometimes a bit strange, but they’re not necessarily a good indication of what’s to come,” said Andrew LePage, data analyst for CoreLogic DataQuick. “That’s largely because many traditional buyers and sellers drop out of the housing market during the holidays and mid-winter, and therefore don’t close deals during those months. In recent years that’s led to somewhat higher concentrations of investor activity for January and February, and we saw that again last month. Heading into spring it will be interesting to see whether price appreciation and other factors will finally release a lot of the pent-up supply of homes out there. More owners have gained enough equity to sell and buy another home and more will be satisfied with how much their homes can fetch. At the same time, recent gains in job and income growth, coupled with low mortgage rates, could stoke demand and put significant pressure on prices unless we see a meaningful jump in inventory.”

The median price paid for all new and resale houses and condos sold in the six-county region in January 2015 was $409,000, down 1.4 percent month over month from $415,000 in December 2014 and up 7.6 percent year over year from $380,000 in January 2014. The median hasn’t changed significantly since September 2014, when it was $413,000. The median’s peak for 2014 was $420,000 in August.

Home prices in Southern California have been rising at different rates depending on price segment. In January 2015, the lowest-cost third of the region’s housing stock experienced a 9.0 percent year-over-year increase in the median price paid per square foot for resale single-family detached houses. The annual gain was 5.7 percent for the middle third of the market and 3.2 percent for the top, most-expensive third.

The number of homes that sold for $500,000 or more in January 2015 rose 2.0 percent compared with January 2014. Sales below $500,000 fell 13.8 percent year over year, and sales below $200,000 dropped 30.3 percent.

Do you think this lull was fully due to the winter “drop out” LePage was referring to? What will it take to get year-over-year gains?

View OC Home Sale Activity by City Here

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