Okay, I admit to being a total wimp when it comes to cold weather. Waking-up to frost on the roofs and going out for a walk with gloves and a hat is not my favorite part of living in San Diego in January. But I have to tell you that my heart is warmed as soon as I turn on my computer, look at my emails, my transactions, and the MLS and realize that the San Diego real estate market is hot, hot, hot!

This is due to 4 primary factors:

1) Employment in the County in October was up by 1.9% over October 2011*
2) Consumer confidence (Pacific West) is up by 36%*
3) Interest rates remain at record lows
4) Inventory is approximately 50% of what it was a year ago*

The lack of homes to sell in San Diego County is clearly illustrated in these two graphs, which show unsold inventory at lowest point since 2005, and that homes in the $750 – $1000K range are the most scarce. However, as there are fewer people able to buy in that range the impact is less dramatic. The price range where we are feeling the greatest impact is the $300 – $500K range. If you’re a seller, you love it as you will likely have multiple offers within days of listing. If you’re a buyer, not so much, as it’s likely you’ll be in a bidding war with several cash buyers.

unsold inventory 10.12 sm

unsold inventory 2 10.12 sm

This of course has driven down the length of time homes stay on the market from approximately 60 days in January of last year to just 40 days in October.

time on market10.12 hero 2

The net result of all these factors is that prices in the San Diego real estate market are increasing at a steady rate, up 10.7% this October, over October 2011.

Median price 12

So is it a good time to buy or sell in San Diego? Absolutely! Barring any economic catastrophe I believe we’ll continue to see a strengthening real estate market throughout 2013. So if you’ve been considering a real estate investment, best to get in the game now as I predict prices will continue to rise. Please give me a call to discuss the opportunities available in America’s Finest City!

* Graphs and statistics courtesy of the California Association of Realtors®. All statistics reflect sales activity for detached homes.

La Mesa, CA Real Estate Market Update – November 2011

 

                                                 

 

 

 

La Mesa,CA is a great place to call home!  From the quaint downtown filled with restaurants and antique shops, to the views from Mt.Helix, there are many wonderful neighborhoods with their own distinctive vibe.  But like most everywhere throughout the county, real estate values continue to slip, as noted in this real estate market update.

La Mesa, CA Single Family Home Sales – November 2011

Total number of sales                       51

            Short sales                                 9

            REO sales                                   8

Average price                                     $381,197

Average days on market                 71

Average price 2010                          $417,252

Average price YTD 2011                 $387,727

Prices for single family homes have not showed a significant decline throughout the year, which may be a sign that the market is starting to level out.

La Mesa, CA Attached Home Sales – November 2011

Total number of sales                    14

            Short sales                             3

            REO sales                                2

Average price                                  $190,807

Average days on market              51

Average price 2010                        $190,580

Average price YTD 2011               $167,587

The average price for November for attached homes is surprisingly high when compared to the preceding months.  As we enter 2012 we will have to see if this is a trend, or merely a month with more sales of higher priced units.

To learn more about the La Mesa, CA real estate market, just give me a call!  I’ve lived in the area for over 20 years and would love to show you why this is such a great place to call home.

Check out the latest San Diego County home sale and value statistics. How well has your neighborhood fared in 2011? Just give me a call for specific information about your home.

Anyone who knows me would probably say that I’m a fairly optimistic person, but lately it seems as though the real estate market is developing into a vicious cycle with no way to correct itself.   In a report released on Monday, the researchers at Capital Economics said that we could expect nationwide home prices to fall an additional 3% this year, bringing the year’s total decline to about 5%.  So, despite the fact that some markets inSan DiegoCountyhave seen modest gains in home prices over last year, overall, the picture is less than rosy.

So what are the driving forces behind this downward spiral?  Well, the obvious answer is that there are many complicated factors at play, but the cycle we’re seeing is really pretty simple:   Housing prices are falling due to low demand and too much inventory. Normally after a recession, home sales start to pick-up, but that’s not what we’re seeing.  Instead, demand is being strangled by increasingly stringent lending requirements which restrict buying power.  So instead of more buyers coming into the market to take advantage of the low interest rates, we’re seeing fewer that are able to qualify because of high credit score and/or high down payment requirements.   Even existing homeowners looking to sell and buy up or down are caught in a stalemate as most have limited or no equity to leverage against a new property. 

The cycle picks up momentum every time prices drop.  Lower prices, mean less equity for existing homeowners and for those with a mortgage, an increasing number of borrowers are choosing strategic default.  These voluntary defaults are adding to the foreclosure inventory already on the market and the estimated 5 million foreclosed homes lurking in the shadows.  And so the cycle continues; more foreclosures create a bloated inventory.  With an insufficient number of buyers able to buy, sales drop and prices fall, which breeds more foreclosures, and on, and on.

As I’ve noted before, I’m no economist and certainly don’t have all the answers, but there are clearly two actions that could put the brakes on falling prices and encourage increased sales:

  1. Congress should oppose the Quality Residential Mortgage (QRM) requirements being proposed.   The QRM would require an unnecessarily high down payment of 20% and impose a very stringent debt-to-income ratio for conventional loans.  The result would be that more borrowers would seek FHA loans, which in turn would likely raise qualification standards and insurance requirements.  The bottom line result will be fewer qualified buyers and fewer sales.
  2. Banks need to address the issue of negative equity by offering programs that provide principal reductions.  When a borrower feels that he/she is paying on lost equity that they will never recoup they are more likely to choose to default, adding to the inventory glut.

Do you have any ideas about breaking the cycle of falling prices?  I’d love to hear from you!

 

May got off to an interesting start with the release of several foreclosure reports that frankly, seem a bit contradictory.  There was good news.  There was bad news.  And I’m not quite sure analysts have a handle on what it all really means to the housing market.

Let’s start with the good news:  Mortgage delinquencies are down.  According to data from Lender Processing Services (LPS), delinquencies are down by 20% compared to this time last year.  At the end of March there were 6,333,040 loans nationwide that were past due or in foreclosure.  Sounds like a lot, but that is the lowest level since 2008.  The report would seem to indicate that modifications are helping as 23% of loans that were 90 days past due a year ago are current today.

Now here is where it gets confusing.  The same report showed that at the end of March foreclosure inventory was at an all time high – 2.2 million loans.  This inventory represents loans that have been referred to a foreclosure attorney but have not yet reached foreclosure sale.  The number of new foreclosure actions was 270,681 in March which is a 33% increase over the previous month.  So foreclosures are up but delinquencies are down?

Another piece of bad news was delivered in a HUD report detailing sales of FHA foreclosed homes.  HUD manages the disposition of homes that had FHA loans that were repossessed.  At the end of February there were 68,801 homes in the HUD inventory.  That is a 50% increase over the previous year.  The monthly sale of HUD homes has dropped from ahigh pointof 8,893 last June to a low of just 2,632 in January.  Thus new foreclosures are entering the market at an increased rate while sales have significantly stalled.

One factor not considered in the LPS report was the increase in the number of short sales over the last year.  In addition to loan modifications, which have not been very effective, short sales are presumably impacting the decreased delinquency rate as more homeowners are opting to sell short earlier in the delinquency cycle versus riding out the foreclosure timeline.    If you are a homeowner that owes more than your home is worth and are struggling to make your payments, the bright spot on the horizon might just be a short sale should a loan modification not provide the relief you need.

For the real estate industry overall, this jumble of numbers would seem to indicate that we’re still a long way from recovery.  With foreclosures increasing and sales decreasing, a bloated inventory of homes on the market will likely keep prices fairly stagnant in most markets.

A survey released on Monday shows that nationally, nearly half of all home sales in March involved distressed properties; either foreclosed homes or short sales.  This is the second highest level seen in the past 12 months.   And while this might not seem like good news, the statistics actually provide a glimmer of hope. 

The Housing Pulse Tracking Survey reported that short sales rose from 17.0% of total sales in February to 19.6% in March, and at the same time REO sales fell from 14.9% to 12.0%.  this is an all-time high for short sales.

So why is this a good thing?   Short sales, though not as speedy as we would like, are resolved much more quickly than foreclosures.  An REO can sit empty on the market for months, often falling into disrepair.  REOs are used as comparables by appraisers and thus drag down neighborhood property values.  Smaller numbers of REOs would be a positive sign for improved home values in the months ahead.

Additionally, from the point of view of an individual, a short sale is usually preferable in terms of both short and long-term impact.    A few of the advantages include the fact that a short sale does not have near the negative impact on a borrower’s credit score as a foreclosure;  there is no set time limit that disallows a borrower from buying again, and a short sale is not reported on a credit report for 7 years, as is a foreclosure.

If you have any questions about short sales, or any other real estate questions, please don’t hesitate to give me a call at 619-846-9249.

I’m almost feeling like we can breathe again.  We’re not out of the woods, but here in San Diego, we’re headed in the right direction.  And surprisingly, the next generation of home buyers is not running screaming into the night frightened by the plague of foreclosures, but rather embraces the idea of one day owning a home.  Check the numbers.  What do you think?

According to a January 2011 Harris poll conducted on behalf of Trulia, the American Dream of home ownership is alive and well.  70% of those surveyed say that home ownership is still part of their dream, and 78% of homeowners surveyed say that their home is the best investment they ever made.  Well, those are probably folks who didn’t buy in 2004-2006.  Buyers during those years are probably the 20% who feel trapped in an underwater equity home or the 14% who are considering just walking away.  Like I said, we’re not out of the woods.

But what I found very refreshing is that 88% of 18-34 year olds aspire to be homeowners, and overall  in the west 70% of renters plan to become homeowners.  In my estimation, this group will drive the long-term recovery, and drive the next real estate bump in value. Only 10% plan on buying in the next 24 months, but they will help prime the pump.  By 2015 we could be in the midst of the next upswing.

So when to buy?  Consult with your accountants and money managers, but my bet is now….just as we turn the corner and start to head up.

In a survey of the 50 largest U.S. cities, Trulia found that it is still more affordable to buy than rent, even in San Diego.  But does this survey tell the whole story?

According to the guidelines the company used, a price-to-rent ratio of 1-15 means that it is more affordable to buy than rent, a ratio of 16 – 20 indicates it is more expensive, but still might make financial sense, and a ratio of 21+ means that it is definitely much more expensive to buy than rent.  San Diego scored a 15, and only 4 cities were over 21, including San Francisco, Seattle, New York, and a surprise, Kansas City, MO.

That all sounds well and good, but it should be pointed out that the survey compared the cost of buying versus renting 2 bedroom apartments, condos and townhomes, not single family residences.  The company arrived at the numbers by comparing the median list price of homes offered on their website for 2 bedroom units to the median rent for a comparable home.  Also, I’m not sure that looking at list price is an accurate indicator as most homes do not sell at list price.

The other problem I have with the survey is that it doesn’t take into account the level of demand for apartments or townhomes versus single family homes.  In New York or San Francisco, there is a much higher demand for condo living than there is here in San Diego.  I believe a more accurate survey for our market would be the comparison of buying versus renting a 3 bedroom 2 bath single family home analyzing sales price and actual rent paid.

The survey results did however indicate an interesting shift in the demographics of who is buying and renting.  According to Tara-Nicholle Nelson, consumer educator for Trulia, “Lifelong renters are seizing the opportunity to become homeowners while affordability is high. At the same time, a growing number of long-time homeowners are finding themselves tenants – some by choice and others by necessity.”

In the end, I don’t really believe that renting or buying a home is just about the numbers, and who is under the roof with you is much more important than the cost.

In an underwhelming report issued this week by Field Asset Services, the company revealed that people would rather buy a foreclosure that has new paint, carpet and appliances than a foreclosed home that has not been spruced-up.  Really?

Field Asset Services is a Texas based company that provides cleaning and rehab services to banks and companies holding REO properties.  In an independent study during the first half of 2010, 17,252 properties were tracked across 13 states.  The homes that were not rehabilitated were on the market for an average of 222 days while those that were rehabbed sold in 69 days.

The benefits are obvious.  Not only do banks cut their expenses associated with holding a property but neighborhood values are also improved by reducing the number of vacant homes.  It is also more likely that the home will be sold for more and bought by someone who is going to live in it versus an investor looking for a flip.  Everyone wins.

So at a cost of only $4000 – $8000 for the average rehab, why aren’t more banks willing to put some lipstick on the pig?  I wish I knew the answer to that one!  I was assigned a foreclosure listing back in September.  In early December, the bank finally got around to asking me for quotes to rehab the place.  I supplied 2 quotes at roughly $4200 each…..and I’m still waiting.   They won’t let me list the condo in the MLS, and won’t let me sell it to an investor…..because they’re still trying to decide if fixing the place is worth it!  Crazy!  And people wonder why there is a glut of REOs on the market?  I say slap on the make-up and get ‘em movin’!

Once again, Santa forgot to bring me a crystal ball.  So this look into the future of the housing market is based on trends from the past year, projections from those that crunch the numbers, and my gut feelings based on life in the real estate trenches.

Foreclosures continued to be the top story in 2010 with robo-signing and questionable practices making headlines.  In 2011 so-called shadow inventory will be making news as it grows and clogs the pipeline.  This includes borrowers that are 90 days or more delinquent, homes in foreclosure, and bank-owned properties not yet on the market.  S & P estimates that it will take 41 months to clear the backlog, continuing to slow the recovery.

Short sales will increase as the government and lenders try to stem the deluge of foreclosures that add to the shadow inventory.   Right now about 35% of defaults end in a cure or short sale.  I see that number growing as banks and the government iron out the problems with HAFA (Home Affordable Foreclosure Alternatives), and the processing of short sales is streamlined.

Loan modifications will continue to be largely unsuccessful.   There is some hope for small improvement in the numbers if the FHA principal reduction program can be expanded.

Mortgage interest rates jumped this last month, but are gradually heading down.   Frank Nothaft, chief economist for Freddie Mac foresees rates staying below 5.00% throughout the year.  Let’s hope he’s right.

Home sales will increase, especially for first-time buyers, provided interest rates remain low and the economy continues to improve.  If unemployment continues to decrease and incomes increase we should see an increase in home sales over 2010 by the 2nd half of the New Year.

Home values throughout most of the country will reach the bottom by mid-year and many areas, such as San Diego County will see modest gains of 2.00 – 4.00%.  The exception continues to be the luxury home market where home prices in locations such as La Jolla and Rancho Santa Fe will continue to decline.

My advice?  If you own a home and are not terribly upside-down, hang tight.  Looking to buy?  Do it now!  This is a great time to purchase your first home or pick-up an investment property.  Struggling with your payments?  Let’s explore your options, before it’s too late.  Overall, I’m cautiously optimistic.

Best wishes for a happy, healthy and prosperous New Year!