No economic recovery is perfect, in any sector; jobs, manufacturing, import/export, tourism, restaurants/services, and housing. There will be recovery and sputter, ebb and flow. Let’s concentrate on housing. There has been much positive news that relates to housing, primarily jobs and construction. New homes are still off a full 50% from a “normal” market, but the housing projects and construction starts by America’s biggest builders are definitely making a comeback. In fact, they are the highest they’ve been since 2008. In fact, new home sales jumped 18.6% last month, even as sales for single-family resale slowed. The volume of sales for existing homes fell for 8 consecutive months. Before anyone starts screaming that the sky is falling again, must remember that we are reporting a decline in sales for 2014 compared with 2013, which had been the hottest year since 2006 with double digit appreciation. For the volume to flatten out and prices to stabilize, southern California needed inventory. It appears that at last this is happening. The problem now...watch out sellers. You cannot simply tack on an extra fifty or one hundred thousand to your sales price, because that’s what your neighbor did last year. Prices have softened, you have more competition, and buyers are taking their time. With interest rates staying so low, there is no real outer motivating factor to drive a rapid market. Classic economics would tell you we are far from a neutral market, we still don’t have enough inventory. But it certainly feels that way, as buyers peruse through open houses and are reluctant to make offers. If you are a seller who has a location or floor plan and no competition, you no doubt may still field multiple offers. But don’t expect necessarily an all out bidding war. Part of the reason is that more of the buyers are now millenials. They won’t overspend to get exactly what they want, as the baby boomers did when they were the driving force behind the market. Millenials are pickier, they are conservative about their debt, and a deal must make sense for them. Plus, many have been living in multi-generational family situations, and they are in no hurry to move.
Thursday, July 10, 2014
The big statistic is that 3 of 4, or roughly 75%, plan on buying a home in the next 5 years. As far as student debt goes, it’s not as bad as you think; 58% owe $10,000 or less and 18% owe between $10,000 and $20,000. The biggest mitigating factor will be what the Fed does with interest rates in 2015 through 2016. By 2017, one would fully expect interest rates to be floating in an organic economic system once again. We’ll see.
The total number of homes sold, all categories, was 2,981. (This for May, the last complete month available.) That was off 18.3% compared with May of 2013. Resale homes hit 1,855. a decline of 21%. Condos sold at a pace of 786 and lost 22.4% year over year. New homes hit that high of 340 and rose in volume by 18.1%. The median price of all types blended was $595,000 and that was up 10% year over year. Prices are definitely diving back down. Appreciation overall is expected to stay around 4% to 6% for 2014. Single-family resale rose 8.3% and condos 11%. Foreclosures continue to hover near an 8 year low. All of So Cal had 10,010 Notices of Default, or NOD’s, for the first quarter of 2014. Orange County had a paltry 1,244 NOD’s.
Looking at real estate as an investment, putting aside the considerations that it also provides shelter, and a tax write off, here is the breakdown of return on in vestment, by age group: 1) 18-29 Real Estate - 25% / Mutual Funds - 21% 2) 30-49 RE - 34% / MF 23% 3) 50-64 RE - 30% / MF 28% 4) Over 65 RE - 31% / MF - 28% Hopefully, you have found some good information with which to evaluate your own situation in regards to the real estate market.
Wednesday, February 12, 2014
Please don't misunderstand, buyers that took action, still bought 20% below the high of2007, but due to tight inventory, sellers enjoyed many multiple offer opportunities and bids were sometimes over list price. As a result, the 2013 housing market had its biggest gains since 2004. Increase demand coupled with limited supply resulted in a 19.7% jump in home prices. Having reported that, December was still a very slow month for sales for the resale home in Sothern California. In fact, they were at a 6 year low in volume, according to Data Quick, even as prices jumped, for precisely that reason, low inventory, more demand on the housing that was available. (More on the exact numbers later). What is the outlook after one month of 2014? Decidedly, it is a mixed bag: 1) Inventory remains tight, although listings are already starting to hit the post-Super Bowl market pick up. Sellers who list early without waiting until the official spring season will be rewarded with a brisk and busy market. The O.C. jobless rate dropped to 5.2% reportedly at the end of January. The Fed has trimmed back another 10 billion a month in its commitment to buy bonds. The response overall has been favorable which means expect interest rates to continue to inch upwards. If you are a buyer looking to keep as much purchasing power as possible, pay more attention to interest rates than housing prices, because therein lies your true north. You qualify for a loan based on what you can pay, so be cost sensitive more than price sensitive. There has been some solid economic news reported, such our 4th quarter 3.2% annual rate of growth, based largely on consumer spending which is usually a signal that people are feeling better about their own personal economic outlook. Consumer confidence is a key to any serious turnaround coupled with hiring trends and housing. But the strength of the report also came from the type of spending; durable goods such as cars, technology, and appliances. Spending on services also rose significantly meaning traveling, dining out, and other non-essentials are also coming back. There is a ways to go yet, hiring being the key and still lagging behind the high of 2006. Expect as those numbers increase, so will the housing market continue to heat up.
The total number of houses sold in Orange County for December, (the last full month available), was 3,089. That number shows a .6% increase in sales volume, but is very deceptive. The number of single-family resale homes was 1,730 which was a 13.9% decrease from December of 2012. Condos came in at 777 which was down 2.4%. It was not hit nearly as hard because entry level buyers often find themselves in a condo, and that market segment has been very steady. Million dollar plus homes have also seen record numbers, as reported here last month. The missing segment has been the move up buyer or move down buyer. As more and more homeowners get their equity position back, and new construction ramps up, giving those specific buyers a new place to go to, expect to see the middle price range come into its own in 2014. Speaking of new homes, the number of sales for December was 582, a 120% increase year over year. Distressed sales accounted for 24% of the December 2012 market, while in 2013, distressed sales numbered only 14%. The median price for all house rose 21.3% to $570,000. Separating out the condos, the median price was $372,000 a 22% rise and single-family resale was $639,000, rising 21%. All figures are comparing December 2012 to December 2013. More information is available at www.dqnews.com.