Thursday, July 9, 2015


The latest figures are in, through the month of May, and it all continues in a positive direction, as housing continues its recovery mode, and to be a bright spot in the U.S. economy.  At what point interest rates will be raised, and what impact that will cause, because it will have consequences, remains to be seen. The Fed has indicated later this year, although the recent job report and unemployment stats did disappoint in the area of wages, and the amount of people leaving the job search market.  That aside, the jobs that have been added and the wages that were predicted to increase last year and this, apparently have brought about the desired effect.  Overall, the U.S. gained in total sales volume from May of 2014, (all following figures based on the same time period for 2014), to rise 9.2% for May of 2015.  The Midwest led the charge with 12.4%, the Northeast was next with 11.3%, the West was next at 9% and the South straggled a bit behind at 6%.  Prices were up overall in the U.S. 7.9%.  This time, predictably, the West led at a rise of 10.2%, the Midwest with 9.4%, the South at 8.2% and the Northeast struggling at 4.8%.  (How much due to an abnormally long winter of snow and ice?)  Finally, the sales volume by price range probably addresses the health of income wage earners for the foreseeable future.  Since loans applicants are being properly vetted and there is no real stated income product out there, these purchase price quadrants warrant some belief that we have had a true recovery not just in real estate but in jobs, since real estate ultimately reflects job stability.  For the U.S. the increases in volume by price range are as follows (numbers are per $1,000): 1) 100-250=3.6%  2) 250-500=17.4%  3) 500-750=14.5%  4) 750-1 million=12.5%  5) 1 Million + =8%.  It is debatable whether we will continue to see a run up in both prices and volume as Americans anticipate the rise in interest rates.  Although the Fed has made it clear that any such rises will be gradual so as not to disrupt the economic revival.  Some economists feel the price increase has already been factored in as 30 year rates already rose the first week of July to their highest for the year, in the low 4 percentile range.  One thing is for sure, and that is that home ownership is alive and well, and as this column predicted months ago, the Millennium  Generation will continue to be a large part of the engine that drives it.


Realty-Trac, a  research firm that tracks national and regional data, has reported that fewer than 25% of single-family home and condominium purchases were all-cash for May, national figures,  the lowest level since November 2009, and down from a peak of 42% of purchases in February 2011. These figures drive home the point that the housing market is standing on its own, with traditional buyers, as investors back away from the "flip" market, of buying, rehabbing and quickly reselling properties for a profit.  This does not mean that there are not some "buy and hold" investors still trolling the market, but for now, the predominant purchaser appears to be the owner occupant, or single investors exchanging and building their investment portfolio.


A recent study by analyst firm IPSOS revealed that borrowers still have 2 strong misnomers in the area of loan qualification; how large a down payment in necessary, and what your FICO scores must be to qualify.  Happily, this column is happy to spread the truth.  More than 36% surveyed still believed a 20% down payment was necessary.  Nothing could be further from the truth.  Many people qualify at 10%, but in fact, March of this year saw 29% of all loan qualifications with a 3% down payment (FHA products mainly).  The survey on FICO scores revealed that 45% believed you must have a score over 780.  The truth about FICO scores, which can be a little like a black hole, is that FHA requires 688 and conventional, generally speaking, comes in at 757.  It always saves you time and headache to speak to a lender before you look for a home, ensuring that you are looking in your correct price range.  Another interesting note is that interest-only mortgages are making a slight comeback. United Wholesale Mortgage plans, according to an article in the OC Register,  "to expand access to the mortgages to borrowers beyond the wealthiest Americans who use so-called jumbo loans.  Interest-only mortgages carry higher risks because they can leave homeowners facing a jump in their bills down the road."  Additionally, these loans can leave homeowners upside down when there is an unexpected downshift in the market as witnessed by the Great Recession.  But the lender promises to properly vet the qualifiers for this type of mortgage.  It does have its attractions for homeowners who have liquidity in other areas of their finances.  On a $300,000 loan, the monthly output is $1,31 versus $1,326.  However, note that these loans can climb as much as 2% annually and 5% total--causing payments to jump to $1,838 after 10 years.  Clearly this is a product that may have use for a well qualified borrower who KNOWS they will be exiting the property in less than 3 years, for example, and who feels the market appreciation will be positive during that timeframe.


The surge is actually slightly less than last year.  But it is an interesting statistic because it reflects the strength in the market because remember, thanks to Prop 13, taxes may only increase 2% per year.  But it reflects strength because that surge is due in part to reassessments as a result of sales, and properties that have had massive improvements, such as  property flip have, remodels, add on property improvements, all of which result from a stronger market and economy.  There is never a bad time to invest in real estate, particularly your primary residence, as history continues to prove... but right now, may be the best time in years.  

Wednesday, February 11, 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.


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.


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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