Low Inventory and Rising Demand Result in Higher Home Prices

Reports out today suggest there is an air of optimisim in the housing sector, pointing to a strengthening real estate market.

"U.S. home prices rose 6.3 percent in October compared with a year ago, the largest yearly gain since July 2006. The jump adds to signs of a comeback in the once-battered housing market."

 

Steady price increases are helping fuel a housing recovery because they encourage homeowners to sell and buyers to purchase while the price is right.

The California Association of Realtors also reported that pending homes sales in California posted gains from both the previous month and year in October for the first time in 7 months. 
  
Even hard hit home builders are optimistic about the future with builder confidence up and in October, they broke ground on new homes and apartments at the fastest pace in more than 4 years.

With continuing record low mortgage rates and the fact that there are fewer homes available, the real estate market continues to show signs of a sustained recovery.
According to the National Association of Realtors, inventory numbers are at their lowest level in 10 years. And low inventory and increased demand equals an uptick in prices.

(Sources: Monterey County Herald, 12/5/12; San Jose Mercury News, 12/3/12)
 
 

Home Ownership is Staging A Comeback

According to a recent national survey by FindLaw.com more Americans are taking an optimistic view of the housing market in today's economy. Back in 2010, 63 percent of Americans said they were less likely to buy a house because of the state of the economy. This recent survey shows that number has fallen to 30 percent.

Meanwhile, because of low housing prices and mortgage rates, the percentage of people who say that the current economic situation now makes them more likely to buy a house has risen from eight percent to 11 percent.

Forty-nine percent of people surveyed said the economy is making them neither more likely nor less likely to buy a house.

For more information, visit www.findlaw.com or Click here to read the full article: http://rismedia.com/2012-11-07/survey-shows-people-becoming-more-likely-to-participate-in-the-housing-market/

Five Rules for Buying a Foreclosure or Short Sale

Buyers are still clamoring for real estate deals in this market. Foreclosures and short sales still offer some of the best bargains, but also have a higher risk level because you are no longer dealing with the seller but with the banks. Still, more than four in five adults think foreclosures and short sales can be good deals, according to a recent survey by the American Society of Home Inspectors (ASHI).

Some analysts say the rebound has begun and home prices may rise by the end of 2012. We’re already seeing that to some degree around here.  This means now may be buyers' last chance to take advantage of affordable properties and low interest rates. But if you want to score a bargain before the housing market recovers, you'll need to follow a few rules to invest with certainty.

 

Rule 1: Position yourself for success
Before starting your search, get preapproved for a mortgage so when a good deal presents itself, you're positioned to submit a bid right away to be the first offer on the bank's desk. Work with an experienced real estate agent who can help guide you through the process.  Bidding can be complicated and time-consuming, especially when working with a home sale needing bank approval. A good agent will know how to navigate through the paperwork and red tape.

Rule 2: Do your researchAre there any undisclosed liens on the property? Is the seller behind on his property taxes? What permit records does the city have on file? This information will be critical during decision-making. Work with your agent to ensure the contract requires that any delinquent taxes, liens or assessments will be paid prior to you taking ownership of the property.

Rule 3: Always get a home inspection
84% percent of adults surveyed by ASHI said they would be more likely to purchase a distressed property after a home inspection has determined its condition. A home inspection gives you the confidence to move forward with your purchase because you'll have as much knowledge as possible about the condition of the property. An inspector will visually examine the condition of the home's roof, attic and insulation, foundation, basement and structural components, as well as interior plumbing and electrical systems. Be sure to find an ASHI-Certified Inspector (ACI) to ensure your inspector is experienced, as many states have minimal licensing requirements. To find a local ACI, use ASHI's "Find an Inspector" tool on www.ASHI.org. 

Rule 4: Budget for repairs
When looking at short sales and foreclosures, remember price is only one aspect to consider. A home will almost always require some type of repair. After receiving your inspection report, you can estimate costs associated with necessary repairs, maintenance or energy-efficient improvements.  Keep in mind that in a short sale or bank owned property there is usually no money for credits toward repairs so you actually have to figure the costs in to your bottom line.

Rule 5: Assess the neighborhood
Location should be a top consideration when purchasing real estate, and in a tough housing market, it's even more important. A home has limited worth if it's located in a less desirable neighborhood. High foreclosure rates can turn a once-desirable neighborhood into one many might likely avoid. These locations are likely to see a slower recovery than more populated or favorable areas less affected by the economy. Make location as important as price when making a purchase decision.  This is especially true here on the Monterey Peninsula.  Even the difference of a few blocks in Carmel can make a huge difference in value so always work with an agent who knows the neighborhoods.

You need to protect yourself with knowledge and expert advice to make a confident, smart decision about your largest investment, perhaps ever.

FYI, in Monterey County (minus Salinas) there are 21 bank owned and 24 short sales out of 532 listings at the present moment.  That number quite a bit down from the last few years. Let’s take a look at a new listing short sale in Carmel ..

© Patty Ross, KRXA Radio Show #235  November 2012
 

Have Home Prices Have Hit Bottom?

Nationally, home prices in July were up by 3.8% from one year ago, the largest year-over-year jump in six years. Moreover, prices have shot up by 9.6% from February, when they registered their lowest levels of the housing downturn, according to CoreLogic data released last week.

This adds evidence to the case that U.S. home prices may have hit bottom earlier this year. Even though prices will soften in the autumn, Mark Fleming, chief economist at CoreLogic, said “we have a much better supply and demand dynamic” than in previous years.

So when people say they believe home prices haven’t reached a bottom—that this year’s seasonal gains will be wiped away by January or February of next year—here’s the relevant question: Will home prices fall by 9.6% in the next six months?

Anything, of course, is possible. Home prices fell in the winter—what Mr. Fleming calls the “offseason”—in each of the last three years to record a new low. But they have not fallen by 9.6% in any six-month span since March 2009, which was when the U.S. economy was still in recession.

That’s the good news.
 
Here’s the bad news: While the year-over-year comparisons look good right now, the economy—and workers’ wages—aren’t growing fast enough to justify this kind of increase on a sustained basis.

Instead, the snapback in home prices in the last six months is more an indication of how prices “over-shot” over the past year. Investors, sensing deals, began buying up homes. The most likely scenario for home prices over the next year is that they may rise, but not at the breakneck pace of the past few months.

There are other serious headwinds. It’s still hard to get a mortgage, and many households have too much debt. Millions of homeowners owe more than their homes are worth. Millions more have enough equity to sell their house but not enough to make a down payment on their next house and pay a real-estate broker’s commission.

As I’ve said many times before, the strong rise in home prices this year owes as much to sharp declines in inventory as it does to demand-side improvement. Banks have been much slower to take back and list foreclosed properties, easing pressure on home prices but leaving a bloated “shadow inventory” of potential foreclosures.

These homes will weigh on markets for years, though there’s less evidence that they will be dumped on the market all at once. While the shadow inventory may not lead to a big drop in prices that some have feared, it will probably keep a lid on future home-price gains.

Finally, lower mortgage rates have dramatically increased the purchasing power of today’s home buyers when compared to one year ago. Some real-estate executives are nervous that demand isn’t stronger given today’s low mortgage rates, and they’re worried about what will happen if rates rise.

The bottom line: Don’t be surprised if the all-time low in home prices is in the rearview mirror. But this doesn’t mean a full-on recovery is here, and there’s little evidence that the current pace of improvement can continue. For now, home prices appear to be bumping along a bottom.

So taking a look at the local market..  Low inventory and high demand are pushing the Monterey Peninsula real estate markets into multiple offers leaving the losing bidders frustrated.

Inventory, or lack thereof, is at ten year lows. Prices have yet to respond to the situation. We expect prices to start showing some strength in the coming months.

The high end of the market, however that’s defined in a particular city, is solid. 

The low end of the market is being driven by investors with cash and is seeing the most activity. The middle market, the move-up market is soft because the entry-level homeowners are still underwater.
 
So what’s next?
 
That’s hard to tell because inventory is so low and is putting constraints on the market breaking out. We don’t see that changing much in the near future for several reasons.
 
First, there is not a lot of new home building going on, which is necessary to relieve the pressure.

Second, many existing homeowners aren’t going anywhere. Many of them are still underwater and can’t sell without taking a big loss.

Lastly, forget about shadow inventory around here. As of March, the banks owned 816 properties in the county. That number includes homes and condos. There are currently 697 homes and condos actively listed for sale. Even if the banks put all of their inventory on the market, it’s less than 4 weeks’ worth!

The median price for single-family, Monterey County re-sale homes rose 8% last month compared to the year before. The median price has been up, year-over-year, in Monterey County for the past 6 months in a row. Home sales for Monterey County were up 0.8% year-over-year. Pending home sales were up 30% year-over-year. Usually, this bodes well for the future. Unfortunately, in this multiple offer environment, many of these pending sales are not closing because the properties don’t appraise, the buyers can’t qualify for a loan, or they get cold feet.
 
This can be a tough market for buyers. It’s important to be calm and realistic. If you don’t know what to do or where to begin, give me a call and let’s discuss your situation and your options.

© Patty Ross, KRXA Radio Show #234  October 5, 2012
  
  
 
 

Million Dollar Home Sales on the Rise in California

According to DataQuick and as reported in the September issue of Dream Home Magazine, California's million dollar home market is looking up...way up! In fact, the numbers for the 2nd quarter of 2012 (April - June) showed that sales of high end properties in California were at their highest level in five years.

In fact, home sales for properties over $1 million outpaced overall home sales by a healthy margin. Overall home sales also saw an increase in year over year for the second quarter, up a little more than 10% from last year at this time. But for the same period, luxury homes saw an increase of 18.5% as well as an increase of near 80 from the first quarter of 2012.

In the California luxury real estate market, 7,763 homes were sold from April to June of 2012. Of these high end sales ($1 million and above), more than 1,500 homes were in excess of $2 million. And for many markets in the Golden State, including many communities around the Monterey Peninsula, that is good news.

Feeding Frenzy: Today’s Low-Inventory, Multiple-Bid Real Estate Environment

The term “feeding frenzy” happens when there is not enough _____________ (fill in the blank) and there is frenzy among those who want it, whatever it is.



This is one characterization of the San Francisco market and other hot markets throughout the country. Some properties are garnering three, five, ten, or even 15+ offers. Very often, this results in the property going 10%+ over the list price.

Feeding frenzies happen because there is not enough inventory to satisfy the many buyers in a particular real estate market place. This leads to multiple offers and the sale price over asking. Duh!

Here’s the rub. Most sellers, if they bought in 2004-05 during the run up to the 2007-08 peak, are not able to get out with a whole skin, even if there are multiple offers and the price goes over by 10%!

I don’t like to see my clients pay one dollar more than they need to. I trust my negotiating skills to get them the best deal. Like other real estate agents, I have been party to multiple offer situations in the last several months. Initially, I thought that buyers making offers at 10% to 20% over list price were crazy. Now, I’m not so sure. Maybe they aren’t so crazy.

Buyers who are paying 10% to 20% over the listing price are often paying prices that we saw at the peak. This is not so bad if they plan to hold for the long-term. I believe that the market will bail them out so long as they don’t NEED to sell in the next several years.

This reminds me of the psychology of Facebook stock buyers who bought when the stock dipped to $25.52 after its IPO ($38.00), a decline of 23%. It is now hovering around $18.00+. Facebook buyers on the way down were thinking long term with the hope that it would eventually reach and surpass its IPO price. I think they may be right. After all, Facebook is one of a kind, just like select real estate in select locations like the Monterey Peninsula for example.

With mortgage rates at an all-time low and inflation muted, buyers paying 10% over list probably will have the last laugh.

Taking a look at local prices using Carmel by the Sea as an example, the last 6 months has shown a 93% sale to list price ratio.  Compared to 2009 when the average was 90%.  This is a comparison between what a house lists for and when it ends up selling for.  Using Monterey homes, 2009 had an 86% sale to list ratio and first part of 2012 shows 99%.  This shows a couple of factors, 1:  the market is clearly picking up and 2: sellers are understanding that if they price their house close to actual value it will sell faster.  Hence the multiple offers that are popping up here on the peninsula creating our very own feeding frenzy.

Give me a call to find out what homes are priced right and creating their own frenzy in your area.

To listen to the broadcast on KRXA regarding this topic, click here.

© Patty Ross, KRXA Radio Show #233, Recorded Sept. 7, 2012

Future of U.S. Housing Markets Depends Largely on Echo Boomers

The next two decades in housing markets depends largely on the Echo Boomers. That’s according to panelists at the “Shifting Demographics and Housing Choice: A Whole New World?” session held recently during the REALTORS 2012 Midyear Legislative Meetings & Trade Expo.

So who are the "Echo Boomers?" There are approximately 62 million echo boomers in the U.S. Also called “millennials,” echo boomers are currently ages 17-31. According to the 2011 National Association of Realtors Profile of Home Buyers and Sellers, younger home buyers—those ages 18-34—represent 31% of all recent home purchases.

During the session, economists at NAR, the University of Washington, and Florida State University presented various research and data that illustrate the future of homeownership from a generational standpoint.

NAR Chief Economist Lawrence Yun said “Demography is destiny."  In that vein, demographics can provide very useful insights into the future of housing and home-ownership, and the results of these reports indicate that certain generational shifts will have a significant impact on the real estate industry over the next two decades.

NAR Economist Selma Hepp identified several key demographic trends on both ends of the housing age spectrum. The demand for affordable, accessible housing will increase as the 65-and-over population grows; at the same time, as seniors leave their homes and move into assisted living and other arrangements, they will add to the current supply of housing. Because of their sheer size, however, echo boomers will significantly impact the next two decades in housing.

Echo boomers represent a long-term opportunity for a housing market recovery, but they are struggling in the current economic crisis, consequently, demand for rental housing is likely to climb in the near term.  And we’re seeing that happen slightly here on the Peninsula as rents are up about 3% over last year.

As a group, the echo boomers are more racially and ethnically diverse than their baby boomer parents. While 65% of baby boomers are Caucasian, only 55% of echo boomers are Caucasian. Echo boomers are also more likely to be college educated than previous generations, and are remaining single longer.

Glenn E. Crenlin from the Runstad Center for Real Estate Studies at the University of Washington shared his insights into recent declines in homeownership and whether those declines indicate possible generational trends.

He said, “It is worrying that the homeownership rate for those under 35 has fallen more sharply than the rate for older Americans, but I think we need to examine homeownership rates by generation in a more balanced way. Although the Millennial generation does not own homes at the same percentages of those in other generations, many of them are still in the early stages of household formation — in fact, some of them are still in high school.”

Crenlin presented data from the American Community Survey that shows a significant increase in homeownership among millennials when compared to baby boomers at the same age. While 900,000 households in the millennial generation own their own home, only 500,000 baby boomer households owned their own homes at the same point in their lives.  Interesting.

Given this information and these statistics, what we’re looking at in terms of the millennial generation is likely only a delay in homeownership of three to five years, not a long-term trend away from homeownership itself.

© Patty Ross, KRXA Radio Show #232  - July 27, 2012

Top 10 Home Improvement Myths

Not all home improvements are created equal. Even in a seller’s market, it’s important that homeowners make the right investments that will yield higher returns. 

1. Any remodeling project will add value to your home.
While many remodeling projects will add value to a home, some can be seen as a negative by future buyers. For instance, combining two smaller bedrooms to create one larger bedroom may better fit one homeowner’s lifestyle today, but it may cause the home to lose value in the eyes of a future buyer who needs the two separate rooms.

2. Buying the highest-quality materials attracts more buyers.
Installing high-end materials may seem like a wise decision, but it can backfire. For instance, using the most expensive tile in a bathroom may create an impressive appearance, but value-conscious buyers may opt for a more affordable home if the seller has over-improved compared to others in the neighborhood.

3. Adding square footage always adds value.
A better way to think about this statement is to insert the word useable into the sentence. Finished attics and basements – even if considered livable by local standards – may not be attractive to a buyer if they are not finished to the same standards as the rest of the home.

4. Colors and textures – safe and simple is better.
Keeping a home “vanilla” so buyers can choose their own style and décor might be a safe bet, but it ignores the fact that most buyers just don’t have the ability to visualize the home differently. Without splashes of color and mixtures of texture, sellers can lose value to others that have taken the time to consult with an interior designer. This is where staging comes in and can really make the difference between selling and not selling.

5. Inside improvements are better than outside improvements.
Not necessarily. If a home’s exterior has been neglected or doesn’t offer a good curb appeal, a buyer might stop there – and then the seller’s efforts on the inside may not net them any more dollars. To get the biggest bang for their remodeling buck, sellers should start from the outside and work their way in.

6. Adding a bedroom is better than adding a bathroom.
It depends on the starting point. If a seller only has one or two bedrooms to start with, adding a bedroom before adding a second bath is probably a wise choice since most buyers are more attracted to three-bedroom homes. On the other hand, if the home already has three bedrooms and only one bath, the sellers’s next investment should probably be in a new bathroom. And of course with our constant water issues, more bathrooms will definitely add value here.

7. Paint hides a multitude of sins.
Dry rot? Fungus damage? Mold problems? Carpenter ants? Termite issues? Nothing a can of paint can’t fix, right? Wrong! Not only does this practice violate disclosure laws in most states, it can set sellers up for liability after the sale, as most buyers will want the sellers to foot the bill for these hidden issues.

8. Converting a garage to living space is a great trade-off.
Nope. A garage conversion is almost always viewed negatively by future home buyers unless the sellers replace the lost garage with another parking and storage space of equal size.

9. Sellers can save money by doing improvements themselves.
For some homeowners, wiring a new lighting fixture or plumbing a new dishwasher is a no-brainer, but for others it may end up costing more later if they have to have the work redone by a professional. Another consideration is local and state laws regarding remodeling work: In many states if a buyer has purchased a home to remodel and resell, they must either hold a contractor’s license or hire a contractor to do the work for them.

10. Pools add value to your home.
This is only true in areas where pools are must-have amenities. In most areas of the country, pools have more limited appeal – and the idea of maintaining a pool for ten months out of the year when it can’t be enjoyed won’t appeal to most buyers. Considering the weather here I would say that except in Carmel Valley a pool does not add value here.

© Patty Ross, KRXA Radio Show #231 July 6, 2012

Housing Market C-C-C-hanges...Is It Finally Poised for Recovery?

The US housing market seems poised to recover, at least that's the latest forecast from Harvard's Joint Center for Housing Studies.

Predicting the housing market's twists and turns can be a daunting task. And the predictions are not always, well, right.  However,  the Center noted in 2011 that the market would remain sluggish through 2011 and that's been the case so far as we are midway through the year.

The 2012 report, released earlier this month, sited a number of positive factors -- the recent increase in home sales, coupled with low ­inventories of available properties and rising rents and found that these factors point to a turnaround in housing prices. The report also noted that increased home sales could give the construction market a jump start which would in turn give the economy a much needed boost.

But "caveat emptor" (buyer beware), because the recovery, will not be the same all across the nation. Real estate is very localized and each local market will experience a recovery at a different pace. But the signs are promising...only time will tell!

And while your real estate agent may not have a crystal ball, but their experience and knowledge of your local maker can keep you up to date and give you the information you need when buying or selling is in your future.

Foreign Buyers Drawn to Today's American Housing Market

The Wall Street Journal recently reported (June 11, 2012) that while Americans may still be leery of jumping back into the fray, foreigners are looking at the U.S. housing market with a keen eye toward investing.


 

Nation's Rental Market Heats Up

According to DSNews.com and Moody's Analytics (Rental Marketing Still Tightening, Esther Cho, June 12, 2012), with rental vacancies on the decline and an uptick in rental rates, the housing industry is starting to see an increase in rental activity and there are several factors that are pushing this trend: 


According to Moody’s Analytics, “weak income gains, favorable demographics, and the foreclosure crises” are all causing people to choose renting over buying, and demand for rent will remain solid over the next two years.


A survey released by Integra Realty Resources reported 31 percent of respondents said a lack of a down payment was the main reason holding them back from making a purchase, 24 percent said it was the fear of making a bad investment, and 21 percent said the uncertainty of the economy was the main reason.

In Today's Changing Real Estate Market the Competition is Heating Up

According to an article in the June 10th edition of the Los Angeles Times, as the current inventory of homes continues to drop, real estate agents, as well as prospective buyers and sellers are beginning to see the "new" real estate market -- multiple offers, bidding wars and decreased time on the market, as the competition for homes in some areas of the country started to heart up. Some buyers are even trying to find and make offers on homes before they are even listed!

The newest problem for the slowly improving housing market isn't a shortage of serious buyers, it's a shortage of good homes. 

Would-be buyers are packing open houses and scrambling to make offers on properties before they are even listed. Bidding wars are erupting. And real estate agents are vying fiercely to represent the few sellers that do exist.  

Housing inventory has sunk to levels not seen since the bubble years. The number of American homes with a "for sale" sign hit 2.5 million in April, the lowest number for an April since 2006, according to the National Assn. of Realtors.

The sharp drop in inventory along with rock-bottom interest rates have helped stabilize even some of the hardest-hit markets, including the Southland, Las Vegas, Phoenix and Miami. Some real estate professionals are concerned that the lack of inventory might turn off potential buyers, stifling the recent recovery in home sales.

The much-predicted foreclosure wave that was expected to dump more homes onto the market has not materialized. Fewer borrowers are entering default, and banks are better managing the properties they do have on their books.

In addition, professional investors bankrolled by private equity firms and hedge funds are pouncing on bank-owned homes, often turning them into rentals.

A dearth of new construction also is constraining supply. In April — the most recent month for which figures are available — the number of completed new single-family homes available for sale stood at 46,000, the lowest level since the Census Bureau began keeping track in 1973. Some 70,000 were under construction, also near historic lows.

The inventory problem has been exacerbated by the plunge in home prices since the go-go years. Many people who bought at the top of the cycle are so deeply underwater, they can't get the price they need to sell and are therefore not bothering to put their homes on the market. 

(Source: Shortage of homes for sale creates fierce competition By Alejandro Lazo, Los Angeles Times; June 10, 2012) 

So what's this mean to you as a potential seller? If you're looking to list your home, then pricing your home correctly is going to be a key factor in getting buyers' attention. And if your looking to buy? Make sure you have an agent who will work with you to find what you need at a price you can afford.

Housing Affordability Indexes Reach Records in First Quarter

When the real estate market suffered (along with many real estate agents) in 2007 and 2008, the thing that got me through was being able to help so many folks in the education and service industries buy their first homes when most of them never thought they would ever be able to buy here on the Peninsula.  

I helped teachers, firemen, police officers and nurses buy homes in Seaside, Monterey and even Carmel and those folks are still really happy today because they’re sitting on a long term investment unlike any other.

Housing affordability conditions for all buyers reached a milestone in the first quarter, according to the National Association of Realtors.

NAR’s composite quarterly Housing Affordability Index rose to a record high of 205.9 in first quarter, based on the relationship between median home price, median family income and average mortgage interest rate. The higher the index, the greater the household purchasing power. 

This is the first time the quarterly index broke the 200 mark; recordkeeping began in 1970.

NAR President Moe Veissi believes market conditions are optimal for homebuyers and says “For those with good credit, we’ve never seen better housing affordability conditions or market opportunities than we see at present.” Although home prices are stabilizing and sales are rising, some buyers still have to jump through a lot of hoops to convince a lender that they are creditworthy, even for a mortgage that would be well within their means.

This is especially true for self-employed buyers.

Actually, home sales would be much higher if lending standards would return to normal.

The index shows the median income family, earning just under $61,000, could afford a home costing $325,500 in the first quarter, which is more than double the national median existing single-family home price of $158,100. The median monthly mortgage principal and interest payment for a median-priced home would take only 13.5 % of gross income.

A companion index measuring the ability of first-time buyers to purchase a home also set a record, with the first-time buyer index reaching 135.8 in the first quarter.

Assumptions for the first-time buyer index include a lower income, at 65% of median family income, a starter home costing 85% of the median price, and a down payment of 10%. 

This index means the typical entry-level buyer could afford a home costing $182,500, which is well above the overall median price. (not locally of course, as the median price home in Seaside for example is $276,450 and  $533,361 for the peninsula)

It’s never been easy to buy a first home because of the cash required for down payment and closing costs, but conditions for first-time buyers who are able to get a mortgage have never been better. 

Most first-time buyers choose a loan with a lower down payment, often an FHA-insured loan with 3.5 % down, and some use the VA program with no down payment.

Both home prices and mortgage interest rates are expected to edge up modestly as the year progresses, but housing affordability will remain very favorable with the median-income household well positioned to afford a median-priced home. For all of 2012 the index is projected to set an annual record, averaging 191 for the year.  Keep in mind this is national numbers not local. 

So remember, whether you're a first-time homebuyer or a current home owner looking to downsize there are properties available in the Carmel/Monterey Peninsula market.

© Patty Ross, KRXA Radio Show - June 1, 2012

Housing Is Healing: Good news on Two Fronts

Change is good, as it turns out, as I have made a change in companies after 8 years to Sotheby’s International Realty providing me (and my sellers) the unique opportunity of global marketing, very important in this resort and largely 2nd home market here on the peninsula.  So I look forward to being able to offer my clients additional services.

Asking Prices Showing Gains in 2012

For the first time in six years, sellers’ asking prices tracked by the Department of Numbers Website have gone positive on a year-to-year basis, another sign that the housing economy is slowly healing itself.

Sellers’ asking prices nationally first showed a positive year-over-year gain in December, and increased to 3.9 % as of March 5.  Locally, average sales prices are up 24% since 2010.

I wanted to see January’s data follow suit lest I prematurely announce a sign change only to have it reverse direction the following month. Of course there’s nothing that precludes that even with two months of positive year over year numbers, but it does tell me that the housing market is slowly healing itself.

As of March 5, 2012 there were about 858,688 single family and condo homes listed for sale in the 54 metro areas. The median asking price of these homes was estimated to be $224,322. Since this time last year, the inventory of homes for sale has decreased by 20.5 % and the median price has increased by 3.9 %.  Locally, our inventory is down 21% year to year.

The year to year inventory decline of roughly 15 % (which puts it at an all-time low for the series) offers additional supporting evidence. That’s not to say that we’ll be returning to rapid price appreciation any time soon; I certainly don’t foresee that.

The median asking price for homes in the U.S. peaked in June 2006 at $319,459 and is now $95,137 (29.8 %) lower. From a low of $211,844 in January 2011, the median asking price in the US has increased by $12,477 (5.9 %). 

In its January data, REALTOR.com, the massive listings site which also tracks asking prices, reported list prices were up 3.69 % on the year in the 146 metros it covers. The site reported the top four markets in terms of year over year increases were all in Florida.  Inventory was down 23.20 % there for the year.

Banks Loosen Credit Standards

Top of FormCapital Economics expects the housing crisis to end this year, according to a report released Tuesday. One of the reasons: loosening credit.  The analytics firm notes the average credit score required to attain a mortgage loan is 700. While this is higher than scores required prior to the crisis, it is constant with requirements one year ago.  Additionally, a Fed Senior Loan Officer Survey found credit requirements in the fourth quarter were consistent with the past three quarters.

However, other market indicators point not just to a stabilization of mortgage lending standards, but also a loosening of credit availability.

Banks are now lending amounts up to 3.5 times borrower earnings. This is up from a low during the crisis of 3.2 times borrower earnings.  Banks are also loosening loan-to-value ratios (LTV), which Capital Economics denotes “the clearest sign yet of an improvement in mortgage credit conditions.” In contrast to a low of 74 % reached in mid-2010, banks are now lending at 82 % LTV.  While credit conditions may have loosened slightly, some potential homebuyers are still struggling with credit requirements.

In fact, Capital Economics points out that in November 8% of contract cancellations were the result of a potential buyer not qualifying for a loan.

 

© 2012 - Patty Ross.  KRXA Radio Show (Originally aired May 4th, 2012)

Renters Outspend Owners on Housing

Renters now spend 5 % more of their household budgets on housing costs than do homeowners, and the difference is growing as rents rise.

Since 2005, homeowners’ expenditures for housing have risen from 31.9% of their household budget to 33.2 %, but renters’ costs have risen even more, from 35.6% to 38.4%, according to the October CoreLogic U.S. Housing and Mortgage Trends.

Since 1985, homeowners have increased their housing expenditure allocation by 12%, while renters increased by 22%.

As consumers allocate more of their expenditures toward housing, they have less money to spend on non-housing consumption. The largest decline in a household’s budget occurred in transportation expenditures which fell by 17% and 22% since 1985 for homeowners and renters, respectively.

The increased spending allocation for housing, which is largely due to the stagnation of incomes among Americans of home buying age beginning in the 1990s, has actually contributed to the decrease in homeownership by making buying a home more difficult.

Demographics have also contributed to the decline in homeownership. 

For the 25 to 34 age group, the homeownership rate fell from 51.6% in 1980 to 42.0% in 2010.  For 35 to 44 yr. olds, homeownership rates fell from 71.2% to 62.3% over the same time period.

The CoreLogic report also found that a significant number of foreclosures are remaining on the market for as long as four years or more. One out of five REO foreclosures (21%) are taking more than a year to sell. Nearly 10%, or 23,200 properties that were auctioned in 2006, remained in REO as of Q2 2010.  In other words, these properties have been in REO continuously since 2006.

January Zillow Real Estate Market Reports nationwide 70% of markets see increase in rents, while just 7% report home value increases.  Median rents rose 3 % from January 2011 to January 2012, but home values continued to fall, declining 4.6 % during that same period.

While it seems that rents are rising at the expense of home values, the opposite is true. A thriving rental market will stimulate home sales as investors snap up low-priced inventory to convert to rentals. That, in turn, will lower the number of homes on the market, which will eventually help put a floor under the value of all homes.

Moreover, rising rents increase demand as buying becomes more attractive than renting because of low purchase prices and higher rents.

So how do you decide whether you should rent or buy?  There are handy tools online, just Google “rent vs. buy Monterey Peninsula” and there is a survey you fill out with pertinent questions regarding your own personal situation.  It will calculate your answers and come up with a recommendation of whether you are in a position to buy or whether you should be renting. 

Occasionally with houses on the market a long time there may be a ‘lease option to buy’ option however in a declining market you need to be careful that you don’t lock yourself in to a price which might be valued less in 2 or so years when your option is up.  Always have a Realtor®  help you with this as they can guide you with market analytics in that area.

© Patty Ross, KRXA Radio Show # 227 (originally aired April 6, 2012)

Luxury Home Sales on the Rise in Pebble Beach

According the the Monterey County Association of Realtors, 17 homes were sold in the first two months of 2012 with many of them selling far quicker than the previous year, with the average days on market running at about 112 days in February. The average sale price for the properties that sold in January was just over $2.7 million and just under 2.1 million in February. That's up from the $1.852 million average for all of 2011 during which time a total of 82 homes sold. Many local agents agree that the luxury market is experiencing a resurgence, and that prices for higher end homes in our market seem to be stabilizing and continuing to hold steady, which is a good sign for sellers and buyers alike.

Positivity on the upswing when it comes to housing

According to the Fannie Mae February 2012 National Housing Survey, the results found that nationally, concerns about  housing are beginning to lessen. 

The survey found that on average,  28% of respondents expected home prices to increase over the next 12 months.

In numbers that seem to confirm a more positive outlook on homeownership, the number of those who thought it was a good time to sell rose 3%, to its highest level in over a year. In addition 65% of those polled said that if they were going to move up they would buy rather than rent.

All signs seem to point to a market that still has plenty of options for both buyers and sellers alike and that is always positive news!

Can You Afford A Second Home?

Did you know that here in Carmel by the Sea, as of 2010 we have 48% of our homes that are owner occupied?  That leaves over half that are either rented out or left vacant a good part of the time.  A great place to find a second home, right?

Most of us have dreamt of having a vacation home. It could be on the beach in New England, somewhere tropical, or even somewhere foreign. Many consumers don’t realize that with the proper research, their dream vacation home might actually be in reach. Instead of visualizing how relaxing vacations and weekend getaways could be, why not try to make your second home a reality?

The first step to purchasing a second home is organizing your finances to make sure you can afford it without compromising the security of your other assets.

These tips can help you assess whether or not you are ready to invest in a second home.

• Figure out what you can reasonably afford by looking closely at your income, savings, and spending habits. Future expenses need to be factored into your budget, such as the likelihood of replacing a car or adding to your family.
• Check each of your three credit reports well before you start looking at houses or shopping for lenders. If your credit score needs improvement contact a credit counseling agency or ask your mortgage company for advice.
• Create a budget. A budget not only clarifies your current financial situation, but it also helps you identify places where you might cut back to save for a down payment.
• Consider tax implications.  Purchasing a second home has its benefits, but you should make sure you consider funds for property taxes on the second home as well as additional income tax if your home will be rented out. You should research the area’s property taxes because some locations have significantly higher or lower property taxes.  Ours here are approx. 1.1% of the purchase price.

If your research proves you are not quite ready to start looking for your vacation home, try not to get discouraged. It’s better to wait than to put your financial security at risk. If you feel that you are financially stable enough to take on a second mortgage, now is a better time than ever because interest rates are extremely low.

One of the most sought after areas for 2^nd home purchases is the Monterey Peninsula.  Carmel, Pebble Beach, Monterey, and Pacific Grove, all for somewhat different reasons.  Each has their own separate personality. This is considered one of the most beautiful spots on earth, and we have a mild, Mediterranean climate, never too hot or cold. 


A lot of second-, third- and fourth-home owners come here from Arizona or Texas for the summer. The population is small, but for a community this size we have a disproportionate amount of restaurants and cultural events. The most important collector-car show in the world is here, the Bach Festival, Big Sur Marathon — there is always something going on. The Pebble Beach Resort hosts a famed food and wine festival and an annual PGA tournament, in addition to huge events such as the U.S. Open.

Carmel has upscale beach-town flair and the most restaurants; it attracts those who want to be on or near the beach and walk to shops and eateries. Monterey is the biggest city; it has more full-time residents and a "mini-San Francisco” feel.  It also is the least expensive; second homes start around a half-million. Pacific Grove, on the northerly tip of the peninsula, is kind of a quaint Victorian town. It's the last 'dry' town in California, and priced between Carmel and Monterey. 

Carmel Valley is completely different, agricultural and rural, with a few wineries. People go there for the sun. We get this coastal fog and 'June gloom,' and there you don't.

Pebble Beach has the highest prices. The limited number of ocean front lots on the famed golf course are among the most desirable pieces of real estate anywhere, the choice of second-home owners like Charles Schwab. It is a very small universe — there are only 28 such properties and the tear-down value is $10-20 million just for the lots. Four years ago, you couldn't find anything in Pebble Beach under a million. Now there are 18 properties in the $500,000’s to $900,000’s."

The peninsula has long been popular with artists and actors, and more recently with second-home owners from Silicon Valley. We have a lot of international buyers, but the bulk has always been Silicon Valley, San Jose and San Francisco.   And it looks like we’ll be getting a new wave of millionaires soon with the Facebook kids! 

A look at three Monterey Peninsula neighborhoods:

• Pebble Beach Resort: The Pebble Beach Co. owns 5,300 acres that contain three hotels, four golf courses, spas, an equestrian center, beach club, tennis and a variety of residences. While the handful of ocean view lots are the province of the ultra-rich, there is a range of single-family homes, condos and townhomes all throughout the resort, and just last month a home sold for only $555,000!  There are several listings under $1 million. Of 90 properties now for sale, more than half are priced over $2.5 million, and more than third are over $4 million. Properties near the two large resort hotels also command a high premium: Condos behind the Inn at Spanish Bay run from $2 to $3 million, and townhomes at the Lodge at Pebble Beach are $3 million to $4 million.

• Carmel-by-the-Sea: It long has been home to famed visual and performing artists and writers. Carmel has the most dining options on the peninsula. The desirable second-home area is downtown, where you can walk to shops and the beach. You can get a nice cottage in that prime area for $1.3 to $2 million. Of the 100 or so properties for sale, most are in the $1-5 million range.  Only five true oceanfront homes exist; there’s one on the market now for $19.2 million.

• Golf Communities: While Pebble Beach Golf Links and Cypress Point are not part of true golf communities, several other courses are. Tehama and The Preserve are upscale, inland developments with members-only courses. Carmel Valley Ranch is a golf resort with homes and townhomes for sale. It is in the midst of an upgrade. Former Fort Ord is being redeveloped, eventually, into a 400-acre community with a hotel and spa, 125 homes and 175 condos. The project already has two highly regarded golf courses, Bayonet and Black Horse, open to the public. The first residential neighborhood, The Enclave at Cypress Grove, just began selling 29 lots in a gated development with views of Monterey Bay. Unlike Pebble Beach, residents can get golf memberships. Lots go for $380,000-$500,000.

This month's pick property: 

1131 ARROWHEAD ROAD, Pebble Beach $740,000 Beds: 4 Baths: 2.5

Move-in condition in this price range in Pebble Beach is hard to find. But, here it is, and it features an eat-in kitchen as well as a separate formal dining room. To supplement the spacious kitchen is an adjacent inside laundry with lots of additional cabinet space. The home is located on a quiet lane in the PG school district.  SqFt: 2,025 Lot: 10,600 Sqft lot  Check out my website for photos.  Pretty.

® Patty Ross, KRXA Radio Show #226  3/2/12

Five Issues for Housing in 2012

Trying to figure out where the housing market is headed in 2012 offers a strong sense of déjà vu: The market feels just as it did at the beginning of 2011, when many pundits optimistically predicted that housing would finally hit bottom.

The housing market didn’t deteriorate in 2011, but it didn’t firm up either amid an economic recovery that struggled to find its footing.

So what does 2012 hold? For one, the story will be local. While many housing markets rose together during the boom and fell together during the bust, they’re exiting the downturn at different speeds, and so it’s not very useful to talk about a “national” housing market.

With that caveat in mind, here’s a look at five key issues that will help determine whether prices stabilize and sales improve in the coming year:

1. Confidence and jobs: The housing market badly needs the economy to add more jobs to stimulate demand for home purchases and to prevent mortgage delinquencies from rising. The good news is that with prices down by 30% from their peak and mortgage rates at their lowest recorded levels, housing is more affordable than it has been in decades. But many would-be buyers are worried about buying today if prices are going to be lower tomorrow. Others don’t want to buy a house until they have more evidence that they’re not going to get laid off or see their hours cut back.

2. Foreclosures: Whether home prices hit a floor this year also relies on how banks manage a huge overhang of foreclosed homes that they haven’t yet taken back and resold. Banks and other mortgage investors own around 440,000 foreclosed properties, but there’s another 3.4 million loans in foreclosure or serious delinquency, according to estimates by Barclays Capital. Because banks are faster to cut prices to unload inventory than are mom-and-pop sellers, home values can fall further as the share of distressed sales rises.

This is one by reason why policymakers at the Federal Reserve and elsewhere are talking about converting some of those foreclosed homes into rental properties. Look for some pilot programs where government entities test the concept this year.

3. Rents: Apartment rents are rising as vacancy rates drop to levels that are already lower than the low point in 2006 during the previous economic cycle. If low mortgage rates aren’t enough to give urgency to would-be buyers, rent hikes could accelerate buyers’ decisions to take the plunge.

4. Mortgage credit and rates: Federal policymakers have taken extraordinary steps to keep mortgage rates low and federal-backed entities are responsible for backing nearly 9 in 10 new mortgages. But it’s still hard for many buyers to get a loan because banks are demanding lots of documentation of borrowers’ incomes, and appraisals are tanking some deals. When appraisals come in below agreed upon sales prices, sellers must drop prices or buyers must put down more cash. Banks will need to put their legacy-loan problems behind them before there’s much easing in lending standards.

Other wildcards remain on the lending and rates front: will the Federal Reserve initiate another round of buying mortgage-backed securities—a step known to some as “quantitative easing”—to lift the economy? Will continued litigation and demands that banks buy back defaulted loans from mortgage titans Fannie Mae and Freddie Mac lead them to be more stingy with mortgage credit? And will other lenders move in to fill that void? Will the government do more to juice up refinancing programs? Will rates rise as the government attempts to draw back private capital by raising the fees that Fannie and Freddie charge to lenders?  Whew!  Lots of questions!

5. Regulation: Many analysts don’t expect Congress to make major changes to Fannie Mae and Freddie Mac during the election year, but several major regulatory changes could significantly reshape the future of the lending landscape in 2012. Dodd-Frank Act lending rules that have yet to be spelled out by regulators will influence how banks price loans that are bundled and sold into securities. Another set of rules will determine how banks must satisfy provisions for them to determine that a borrower has the ability to repay a mortgage.

Meanwhile, the regulator that oversees Fannie and Freddie is revamping the way that mortgage companies are paid for collecting loan payments. This could lead to a broader shakeup in the mortgage industry that ultimately influences how much borrowers are charged for mortgages and how banks handle loans that fall into delinquency.

So what does all this point to?  Now is the time to buy a home!

©  Patty Ross, KRXA Radio Show # 223 February 3, 2012

Carmel home sales and prices end 2011 on a high note as sales across the Peninsula were on the rise

Overall, 2011 brought us more home sales and slightly lower home prices according to a recent article in The Monterey Herald. (Monterey Herald, Lance Wallace, January 20, 2012).  In fact, prices, interest rates and inventory are all lower than they were a year ago, which has many people feeling a little more optimistic about the market.

Carmel experiences the sharpest increase in both sales and prices, which were up for the year. 

Sales jumped from 167 a year ago to 204 in 2011. The average sale price rose $30,000 to $1,356,000.and that's good news! Here are some of the other highlights of the article:

Sales increased in Carmel, Monterey, Pacific Grove and Pebble Beach, the Multiple Listing Service reported. 

There were slight decreases in Carmel Valley and Marina.

At the end of 2011, there were 1,293 homes on the market, down from 1,574 a year earlier.

What agents call distressed properties — short sales, where the lender accepts a discounted payoff — and foreclosures accounted for 43 percent of the sales last year, said the Association of Realtors. 

In Salinas and the Salinas Valley, 72 percent of the sales last year were foreclosures or short sales.