Thursday, March 5, 2015

FAST FACTS

Calif. median home price: January 2015:
     • California: $426,790

     • Calif. highest median home price by region/county January 2015: San Mateo, $1,012,500
     • Calif. lowest median home price by region/county January 2015: Del Norte, $152,260

Calif. Pending Home Sales Index: 

January 2015: Increased 26.7 percent from 70.9 in December to 89.8 in January.

Calif. Traditional Housing Affordability Index: 

Fourth Quarter 2014: 30 percent (Source: C.A.R.)

Mortgage rates: Week ending 2/26/2015 (Source: Freddie Mac)

     • 30-yr. fixed: 3.80% fees/points: 0.6%
     • 15-yr. fixed: 3.07% fees/points: 0.6%
     • 1-yr. adjustable: 2.99% Fees/points: 0.5%

*Info provided by the California Association of Realtors

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Sunday, March 1, 2015

LOW INVENTORY MAY TAKE BLOOM OFF SPRING HOME SALES

Home prices are beginning to grow at a faster pace again, which is not good for the spring market.

Sticker shock was behind weak sales in 2014, but as price gains began to ease, buyers came back. Now prices are heating up again due to severely weak supply.

There were nearly 9 percent fewer homes for sale in January of this year than there were a year ago, according to Realtor.com.

"January's inventory data suggest a continuation of the tightening trend we identified last month in the December data, and with a shortage of inventory typically comes increased home prices," said Jonathan Smoke, chief economist at Realtor.com. "Half of the 200 markets Realtor.com tracks experienced year-over-year price increases of at least 6 percent in January."

Higher prices, coupled with weak supply, caused an unexpectedly large drop in January home sales, down nearly 5 percent from January of 2014, according to the National Association of Realtors.

"This is a notable speed bump," said NAR's chief economist, Lawrence Yun, who deemed the phenomenon, "puzzling," given a stronger economy and rising rents.

There is strong demand, but it is hitting a roadblock in supply. Listings are down significantly in parts of California and in formerly strong markets like Las Vegas and Denver, according to Realtor.com. Texas is also seeing a very tight market as well as Chicago and Boston.

According to running surveys by Realtor.com, potential buyers are saying they can't find a home that meets their needs and/or budget. Usually inventory drags are more localized, but today's market is behaving more nationally than in the past.

"Typically for a home seller in the past, they live in their home for seven years and then make a move," said Yun. "Now we're seeing home sellers are living in their home for 10 years."

Yun blames what he calls a "lock-in" effect—that homeowners today have such good mortgage rates that they don't want to lose that rate by moving. Others disagree.

"I think of the lock-in effect as mattering if rates are rising from low levels, so that the rate someone would get on their next home would be higher than the rate they've had on the home they're selling," said Jed Kolko, chief economist at Trulia. "However, rates didn't start their recent rise until February, and these inventory and sales data are for January."

More likely, people aren't selling because they can't afford a move up, or because they still owe more on their current mortgages than their homes are worth. Somewhere between 7 million and 10 million borrowers are underwater, and millions more don't have enough equity in their homes to afford to sell and move up.

As for first-time buyers, their share dropped in January to just 28 percent of homebuyers; this after a slight improvement in their activity last fall. Rents continue to rise, and ironically keep renters from seeking what is often more affordable homeownership.

"Widespread and rapid growth in rents, combined with stagnant wages, are keeping many would-be buyers stuck in rental housing, writing ever-larger checks to their landlords instead of saving for a down payment. Today's renters are tomorrow's buyers, and the longer these would-be buyers stay on the sidelines, the longer full recovery will take," said Stan Humphries, chief economist at Zillow.

Bethesda, Maryland, real estate agent Jane Fairweather expects to see a strong spring.

"Judging by my desk, we will be putting a boatload of homes on the market in March and April," she said, but admitted: "I think demand will be greater than supply again this year. Low inventory keeps prices propped up."

Now, as home prices begin rising ever more quickly, homeownership lurches further out of reach. New supply would certainly help, but even the builders are still operating at an anemic pace. Newly built homes come at a significant price premium to existing homes, and therefore sales have not been as robust for the builders.

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JANUARY PENDING SALES AND MARKET PULSE SURVEY

Fewer multiple offers and more homes sold below asking price point to less competitive buyers’ market

LOS ANGELES (Feb. 25) – Pending home sales rose from December’s extreme lows and posted month-to-month and year-to-year increases in January, the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) said today. 

Additionally, California REALTORS® responding to C.A.R.’s January Market Pulse Survey saw more price reductions and an increase in open house traffic, compared to a year ago.  The Market Pulse Survey is a new monthly online survey of more than 300 California REALTORS® to measure sentiment about their last closed transaction and business activity for the previous month and the last year.

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STUDY: HOUSEHOLD FORMATIONS HAVE RETURNED TO PRE-RECESSION LEVELS

New household formation in the United States has recovered from the widespread job losses that came with the recession, according to a new studyfrom the Lusk Center for Real Estate at the University of Southern California.

The study was conducted authored by Gary Painter, director of the Lusk Center, and doctoral candidate Jung Hyun Choi, to determine how long declines in household formation would last following a major economic shock such as a drop in employment that occurred during the recession.

The study found that household formations consistently return to their previous levels in about three years regardless of whether employment has recovered at the same rate during that time.

"This shows us that even a permanent increase in the unemployment rate will not have a permanent impact on housing formation," Painter said. "As a result, policymakers and industry practitioners have a new level of predictability when it comes to how economic crises impact the rate of new households."

The researchers found in their study that household formations in the U.S. fell to almost zero during the recession's peak years of 2008 to 2010, but then played three years of catch-up and have now recovered to pre-recession levels of about one million per year. Quarterly data from 1975 to 2011 showed that household recoveries typically lasted three years following periods of unemployment.

"The freeze in formations is over and people are again moving out and forming households. This means that real estate professionals and policy makers should not keep waiting for pent-up demand," Painter said. "So while a number of factors will continue to influence the housing recovery, household formation is no longer one of them."

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Wednesday, February 11, 2015

THE NUMBERS ARE IN FOR 2014--PRICES WERE UP, VOLUME DOWN--BUT DON'T EXPRECT THAT TREND TO CONTINUE IN 2015

The New Year, that is 2015, has started with a much bigger bang than 2014 did.  In fact, it started to pick up at the end of 2014.  The total number of sales for November, 2014 (condos, single-family resale and new homes) totaled 15,643 for all of So Cal. (This includes Ventura, LA, OC, San Bernardino, Riverside, and San Diego.)  That number jumped an astonishing amount to 19,205 for December 2014, a 22.8% jump.  So you can imagine how anemic  the numbers were all year as the total for Orange County for 2014 was 33,844, down 8.2% from 2013's total.  That number was for all homes as stated above.  The median price, meanwhile, hit $585,000 and that was up 9.3% from 2013.  This completed two back to back years of fairly rapid appreciation gains, and experts rightly predicted a heavy slowdown, which actually started last winter, with appreciation steadily dropping all last year.  There was a total of 20,496 single-family resale, 9,166 condos sold and 4,182 new homes.  This year already is showing strong signs of volume recovery as interest rates promise to stay down...for now.  But many buyers are getting the message loud and clear from the Fed, that rates will probably rise sometime this summer.  This is a strong motivating factor for "fence sitters", who are waiting for that perfect time to buy.  The perfect time to buy is when you are financially and emotionally motivated, don't worry about the market,  but in particular, inventory is expected to strengthen this spring as more and more sellers are able and willing to sell, having enjoyed two strong years of equity growth.  You can expect to see our strongest "move up" market in over 7 years as people who want to do something, as well as those who have to do something, all enter the market.

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FOREIGN BUYING POWER FOR HOMES HITS INTERESTING HICCUP

Most of us have read about or if you were selling a higher end home, may have experienced, the foreign nationals who have been snapping up properties in the US, particularly in So Cal, especially the OC.  Now listing inventory of the higher priced homes are starting to pile up as these buyers grapple with the stronger dollar.  It is a conundrum.  On the one hand, their money doesn't go nearly as far.  On the other hand, compared to many foreign currencies, the dollar is the safest haven and hedge against inflation.  Even said, listing agents might be compelled to obtain price reductions to move their high end properties.  Be patient and be realistic are the watch words for this market.  Even with this being the case, these off shore buyers will still bring competition to the high end.

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AFFORDABILITY--A GLOBAL CHALLENGE

So read the headline of a recent OC Register article.  But there was a great chart from Demographia that listed the top 10 cities with the least affordable homes, in terms of the ration of an area's median home price to local median household incomes, from a study of 86 cities.  The good news is that greater OC isn't on the list, the bad news LA is, but the good news is that at least it's #10.  The cities you ask?: 1) Hong Kong  2) Vancouver, BC  3) Sydney  4) San Francisco  4) tied- San Jose  6) Melbourne  7) London  8) San Diego  9) Auckland, New Zealand  10) Los Angeles

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