Tuesday, August 23, 2016

Top 7 Bay Area Zip Codes for Real Estate Investment

According to data released by RealtyTrac, 7 Bay Area Zip Codes rise to the top in terms of investment opportunities.

The Bay Area's most promising, up-and-coming neighborhoods are in the East Bay, according to an analysis by RealtyTrac.

That's not a coincidence, said Daren Blomquist, senior vice president at real estate research firm RealtyTrac. The East Bay still has neighborhoods that are on the mend but often overlooked by real estate investors and home buyers.

The East Bay's strong showing comes as little surprise as that part of the Bay Area finds itself increasingly in the national limelight. The New York Times told its readers that the East Bay is among the 52 places around the globe that they need to visit in 2016.

"While the Bay Area's identity is dominated by beautiful, booming San Francisco, its soul increasingly seems to reside in the East Bay," the New York Times said, noting "Alameda County's glorious inland climate, thriving arts scene and a vibrant culinary culture."

RealtyTrac looked at several factors in more than 3,500 zip codes nationally, including the number of construction loans, which finance both residential and commercial projects; the profitability of house flipping; the percentage of millennials in the neighborhood; and the quality of a neighborhood's best school. (In this case, the researchers focused on finding neighborhoods where the best school was ranked below the state average. Improving schools are often a lagging indicator of an improving neighborhood.)

"Real estate investors and first-time homebuyers are looking for the best up-and-coming neighborhoods that might be bad but are recovering," Blomquist told the San Francisco Business Times.

"Many down-and-out neighborhood housing markets across the country are on the rebound thanks to a confluence of market forces working in their favor," Blomquist said in a RealtyTrac blog. "Tight inventory of homes for sale combined with a dearth of new home building is convincing buyers and investors to reconsider buying in what they once might have considered 'bad' neighborhoods."
Investors and home buyers still need to determine for themselves whether a troubled neighborhood has what Blomquist calls the "it" factor.

"This is a starting point," Blomquist said, saying that it's still necessary to drive through neighborhoods, talk to people and assess the restaurants and other amenities a neighborhood offers.

Thursday, August 18, 2016

US Home Buyer Demand Showing First Sign of Weakness

In its July monthly survey of real estate agents from around the US – and regional analysis from 40 markets – shows that buyers are generally becoming tepid if not cautious amid historically low interest rates. After a June pull-back in home buyer traffic, July failed to provide a bounce as those actively looking to purchase a house dropped. There are numerous concerns – home prices are too high, for instance – but the real concern for some agents is how quickly demand disappeared.

Regionally, the report shows a mixed bag. The Pacific Northwest slowed, coming in-line with national averages, while certain regions inside Texas and the Southwest improved, but the Northeast, Midwest and California all worsened.

Macro real estate concerns across the country

In July seven of the 40 markets Credit Suisse real estate analysts Michael Dahl, Matthew Bouley and Anthony Trainor witnessed lighter than expected traffic.
“Incrementally, buyers seemed more resistant to higher home prices with some willing to move to the sidelines,” they noted, citing hesitation due to economic concerns. “Quite a few agents were surprised how quickly demand faded through the Summer, suggesting some payback following stronger Spring trends.”
The macro trends were not entirely negative. “Many agents noted that favorable mortgage rates continue to support demand, though still not much of an urgency factor.”
Trends were mixed in geography as well as among different demographic groups. Traffic trends among “high-end” properties, which had seen strong up markets during the periods of quantitative easing, are starting to slow. But traffic patterns point to “healthy demand” at lower price points.
Factors can vary greatly depending on regional differences as well

Regional pockets of strength and weakness in previously hot Portland, Seattle, New York and California
The super hot, hip markets of Portland, Seattle and New York experienced sharp traffic declines, the report noted. California also experienced declines in the southern part of the state.
In Portland home inventories rose with agents reporting comments such as “Seems like the whole city went on vacation as far as showings. Traffic is just beginning to pick up.”
Nearly 174 miles north in Seattle a lack of motivation is heard among buyers as “prices (are) too high,” the report said, noting “Buyers see no reason to hurry due to steady interest rates. Also unwilling to accept older homes that are not fully updated.”
Further south along the coast, California traffic was pulled lower by readings in Los Angeles and San Diego, while the northern part of the state in tech-heavy San Francisco moved higher.
In New York City and Northern New Jersey, the problems heard among real estate agents include “Lack of quality inventory,” or “Higher asking prices are causing buyer hesitation as inventory builds.”

Buyer weaker on Flordia coast than in Orlando, Las Vegas and Minneapolis

Within the “Lone Star” state, Austin, Texas traffic was down with Houston remaining “challenged.” These rough patches were offset by improvement in San Antonio and Dallas. “Tremendous demand. Low interest rates. Fantastic local economy,” was the buzz among San Antonio real estate agents.
Florida markets remain depressed, the report noted, led by weakness in key metropolitan areas such as Miami, Fort Meyers and Sarasota. Off the coast in Orlando demand held steady. “Sales activity is down partly due to time of year, many on vacation, and less inventory on the market,” the report noted, pointing to people currently selling homes “up north.”
Two notable winners include Las Vegas and Minneapolis, where real estate demand continues to power ahead.
In Las Vegas, a previously hot real estate market leading up the to the financial crisis, agents noted an air of urgency among buyers. “Low interest rates won’t last forever, and some are beginning to figure this out,” the report noted, pointing to an influx of buyers form California.
Likewise, Minneapolis saw surprising increases in buyer traffic with “serious buyers out looking” amid “still steady traffic.”

Wednesday, July 27, 2016

6 Trends Moving Real Estate in California This Summer

Here are a half-dozen things you should know about California’s housing market as the second half of 2016 starts ...
No. 1: Prices are still rising
The median selling price of a California home hit a nine-year high at $441,250, up 6.3 percent in a year, according to Property Radar. Gains are fairly widespread with prices in 18 of California’s 26 largest counties reaching similar heights. And for those who like pricey: San Mateo County hit $1.27 million, the highest median of any county in Property Radar records that date to 2001.
No. 2: Many buyers are still paying up
In June, 35 percent of sales sold at prices above the sellers’ asking price, says the California Association of Realtors. Those premium payments are down from May’s record 38 percent but above 33 percent in June 2015. That’s probably because 72 percent of the homes sold in June drew multiple offers in June vs. 65 percent a year earlier.
No. 3: Sales were down
Prices too high? The 41,291 California single-family homes and condominiums sold in June were down 4.5 percent in a year, Property Radar says. Year-to-date, sales are off 2.8 percent. Is it a shortage of shopper choices or are house hunters antsy about the economy?

No. 4: Even cash buyers are slowing down
Property Radar reports no-mortgage purchases were 19.7 percent of all June sales, but these all-cash deals were down 7.8 percent from June 2015. Purchases by shell companies, often investors using cash to buy, were down 2 percent from a year ago.
No. 5: All said, relatively solid
Freddie Mac has a curious index, the Mimi, that translates current real estate trends into a historical perspective measure where 100 equals “normal” and markets can be cool (well below) or overheated (well above.) For May, California's Mimi was 94, 3 percent better than a year earlier and “in range and improving.”
No. 6: The outlook is brighter
Look for higher levels of activity this summer. California Realtors’ Pending Home Sales Index for June was up 3.2 percent for the 12 months ended in June. This benchmark, based on signed deals going into escrow, is a good barometer of future closings.

Friday, July 22, 2016

What a GOP President Could Mean for Homeowners

The news coming out of the Republican National Convention in Cleveland has so far been dominated by whether Melania Trump intentionally ripped off a chunk of her speech from first lady Michelle Obama (blame the speechwriter), angry protests outside the event, and which celebrities and politicos showed up to support presidential nominee Donald Trump (and those who stayed away).
But here’s what the press hasn’t been focused on: what a Republican in the White House, especially a real estate mogul, would mean for the U.S. housing market. Surprised? After all, buying a home is the biggest purchase most Americans will make in their lifetime—and represents the kind of financial stability that many of Trump’s supporters say is impossible for them to achieve in the new economy. Trump has been pretty tight-lipped about what his potential presidency would mean for renters, buyers, and homeowners
But not anymore.
The Grand Old Party released its 66-page Republican Platform 2016 this week at the convention. And in it, finally, are at least some details of how the Republicans hope to define—and ultimately limit—the federal government’s role in the real estate market.
It’s still a bit vague—but hey, with the election just four short months away, it’s something.
“Homeownership expands personal liberty, builds communities, and helps Americans create wealth,” reads the platform. It later goes on, “We must scale back the federal role in the housing market, promote responsibility on the part of borrowers and lenders, and avoid future taxpayer bailouts.”
But real estate analysts were quick to point out that these reforms could, in some instances, potentially force buyers to plunk down larger down payments or pay higher interest rates.
“The heart of Republican support—blue-collar, middle-aged workers—are the people who will [be affected] the most,” says Bob Edelstein, co-chair of the Fisher Center for Real Estate and Urban Economics at the University of California, Berkeley. “It may be harder to get mortgages, and those that will be available will be less advantageous.”

Bye-bye, Fannie Mae and Freddie Mac?
The language in the platform is unclear, but it appears the party wants to do away with—or substantially shrink—both Fannie Mae and Freddie Mac. The platform referred to the business models of the pair as “corrupt” and allowing “shareholders and executives [to] reap huge profits while the taxpayers cover all losses.”

But calling the current system broken is the easy part, says Christopher Palmer, a real estate professor at the University of California, Berkeley.
“The platform doesn’t propose any replacement for the current mortgage-market system that we have, with its reliance on Fannie and Freddie and [the Federal Housing Administration],” he says.
The Republicans would also stop the FHA from providing taxpayer-guaranteed mortgages to wealthy home buyers. The FHA typically insures loans for low-income, first-time, and other buyers who don’t have enough for a 20% down payment.
Currently, the largest FHA-backed loan that borrowers can receive is $625,500—but that’s only in the country’s most expensive areas. The average FHA-backed mortgage so far this year is just over $194,000.
The GOP platform also calls for an end to the government-mandated number of loans that Fannie, Freddie, and federally insured banks are encouraged, if not required, to set aside for “specific groups.”
“Discrimination should have no place in the mortgage industry,” reads the platform.
It’s unclear which groups the party is referring to, but Fannie and Freddie currently have goals for at least 24% of their single-family mortgages to go to low-income borrowers.

Less federal oversight of local housing markets

The party also appears to want to end the Affirmatively Furthering Fair Housing rule, although the platform doesn’t explicitly say so. The rule requires communities getting federal housing dollars to take steps to overcome segregation in their areas—or pay fines.
“While the federal government has a legitimate role in enforcing non-discrimination laws, this regulation has nothing to do with proven or alleged discrimination and everything to do with hostility to the self-government of citizens,” according to the platform.
But doing away with the rule and leaving these issues in the hands of local leaders is risky, warns urban policy professor Rachel Meltzer of the New School in New York.
“There’s a long history of local governments using zoning essentially to discriminate against lower-income residents,” she says.

Hit the road, Dodd-Frank?

The Republicans also seem to want to repeal—or at the very least, limit—the Dodd-Frank Wall Street Reform and Consumer Protection Act. Now this is something that has been talked about—a lot. The act provides more oversight of financial institutions in the wake of the housing bust that plunged the nation into a recession.
“From start-ups forgone to home loans not made, Dodd-Frank’s excessive regulation and burdensome requirements have helped contribute to the slow economy we all endure today,” reads the platform.
The party also wants to get rid of the Consumer Financial Protection Bureau (or subject it to congressional appropriation). The bureau, created through Dodd-Frank, is charged with protecting consumers against predatory financial services companies, including those providing mortgages.
Republicans allege that its “regulatory harassment of local and regional banks, the source of most home mortgages and small business loans, advantages big banks and makes it harder for Americans to buy a home” in the platform.
But Dodd-Frank and agencies such as the CFPB are key to ensuring financial markets are kept in check and act fairly, says Berkeley’s Edelstein.
“The financial system needs to be protected,” he says.

Friday, July 15, 2016

Low Housing Inventory Blamed for Bidding Wars

Ask any agent in the major metro areas of California what the hardest part about the market is right now and every single agent will tell you the same thing – no inventory. Houses are flying off the market within days, with most receiving multiple offers pushing the prices higher than list price. Constant bidding wars are occurring across the state. What does this mean, and how can you manage to buy a home in CA in today’s market?
Nationwide, bidding wars are showing signs of losing steam, with 61% of offers being put into multiple offer situations, down from 63% in March 2014. However, in places like San Francisco and Sacramento, 94% and 81% (respectively) of homes are entering into multiple offer situations. What’s more is the scary fact that 72% of homes in San Francisco are selling for over asking price. In San Diego, the median home price of $4758k has surpassed the median from August 2007, $475k, still lower than the 2005 median price of $517k though.

Extremely low inventory seems to be the main cause of these bidding wars. This is apparent when considering that the total number of home sales is only increasing by about a couple percent, 2% in San Diego County over the past year. Prices climbing and inventory shrinking, coupled with interest rates continuing to remain at all-time lows, results in an extremely competitive buyers’ market. This means Agents need to stay creative and Buyers need to stay confident and patient.
Agents have had success winning over other offers through numerous methods, some of which include detailed cover letters (43%), waiving inspection (20%), waiving financing contingency (15%), or paying in all-cash (11%). These are tools that buyers need to be made aware of and get comfortable with when entering the CA real estate market. Buyers should remain confident though, as California has shown its resiliency with every increasing housing demands. With interest rates staying so low and the CA market keeping strong, it’s still a great investment when purchased correctly.

Friday, July 8, 2016

San Francisco Raked as #1 Top Perfoming Market for Rentals

BOSTON--()--All Property Management, a Buildium subsidiary and operator of the largest online network of property management services, today released findings from its inaugural Rental Ranking Report. This report features insights into the attractiveness of real estate investment in 75 major U.S. metropolitan areas, over all four quarters of 2015. The higher a metropolitan area’s ranking, the better ROI for rental housing within it. The report includes a breakdown of regional performance trends and a look into early indicators for Q1 2016 and the rest of the coming year.

The Rental Ranking Report is calculated with a combination of U.S. real estate, rental housing and jobs reports, along with property appreciation forecasts. A comparison of quarter-over-quarter and year-over-year data is analyzed to discover how rental markets are changing. The nine indicators that are used include: vacancy rate, rent variance, capitalization rate, property appreciation, job growth, days on market, future rental availability index, job availability index, and tax and insurance cost index.

With the U.S. homeownership rate falling to its lowest rate since 1967 in July 2015, this has been a banner year for many rental property owners, with vacancy rates at their lowest since 1993. The rental market in the U.S. reached $173B in 2016, and although rents rose significantly, they still increased at a lower rate than that of the median U.S. home price. In addition to these market statistics, some of the results from this year’s report include:

  • Top Performing Metros
    • The top five performing metros for the past year include: San Francisco (CA), Seattle (WA), San Jose (CA), Louisville (KY) and San Diego (CA).
  • Top Performing Region
    • The Western U.S. is currently the best region for rental property investment, thanks largely to the impressive rent increases and property value appreciation found there.
  • Vacancy Rate
    • Worcester (MA) had the lowest vacancy rate with 3.05%, and Birmingham (AL) came in the bottom spot with a 17.67% vacancy rate.
  • Rent Variance
    • The percent change in median rent was best in Buffalo (NY) at 16% and worst in Hartford (CT) at -6%
The report also looked at other factors pertaining to the quality of real estate investments. Some additional data points include the capitalization rate, or the comparison of median rental prices to median property values (Dayton (OH) had the highest percentage at 13.15%) and property appreciation, where San Francisco (CA) had the highest percentage at 7.34%. The report also looked into job growth (San Jose (CA) had the highest growth at 19.11%), days on the market (San Francisco (CA) had the lowest number of days at 33) and future rental availability, where Austin (TX) experienced the best percentage at -1.47%. Finally, the research also included data on job availability, where it compared population numbers to current job openings (San Jose (CA) had the highest availability at 36), and the cost of insurance premiums and property taxes, where Salt Lake City (UT) came in with the lowest cost.

Thursday, June 30, 2016

Real Estate Bubble in SOCAL? Not Likely

The chance of a widespread drop in local or statewide home prices in the next two years is practically nil, according to a new forecast from a private mortgage insurer.

Arch MI’s quarterly housing reports pegs the risk of a price drop based on a host of real estate trends, credit market factors and economic patterns. Recent economic turbulence has raised questions about the durability of housing’s rebound from its collapse and the Great Recession.

Based on first-quarter data, Arch calculated the risk of price drops in all of California – as well as in Orange, Los Angeles, Riverside or San Bernardino counties – at a “minimal” 2 percent vs. 5 percent nationwide. A year ago, California’s price-drop risk was 8 percent, equal to the national risk level in 2015’s first quarter.

“We see no housing bubble in Southern California,” says Ralph DeFranco, chief economist for Arch MI’s owner, Arch Capital. “Even though homes feel expensive, they are supported by the amount of income people have.”

Here’s how Arch sees the region:

In Orange County, risk of a price decline was 2 percent in the first quarter, down from 8 percent a year ago and its historically high risk of 27 percent dating to 1980.

Price momentum is solid, with O.C. home values up 6.3 percent in the 12 months ended in the first quarter vs. 4.8 percent in the previous year. By Arch’s estimates, Orange County homes were 3 percent overvalued in the first quarter compared with its economic fundamentals. At the last decade’s bubble peak, Orange County homes were 40 percent overvalued.

Those price gains came despite continued problems with financial affordability among buyers. Arch’s math shows O.C. house hunters in the first quarter had 30 percent less buying power than the average national shopper. O.C. affordability ran 17 percent below its historical trend vs. national averages.

Arch’s estimated 2 percent chance of housing depreciation in Los Angeles County was down from 5 percent a year ago and the county’s historical risk of 28 percent since 1980. L.A. County home prices rose 7.7 percent in the past year vs. 6.5 percent in the previous year. Arch saw L.A. homes as 4 percent undervalued in the first quarter vs. 50 percent overvalued in the previous decade’s buying frenzy.

L.A.’s market strength comes despite affordability 24 percent below the national average at the start of 2016, and 13 percent lower than historic affordability dating to 1980.

The Inland Empire’s 2 percent price-drop risk was down from 4 percent a year ago and below its historical average risk level of 28 percent.

Home prices in the Inland Empire rose 6.7 percent in the last year vs. 6.4 percent in the previous year. Arch saw Inland homes 2 percent undervalued in the first quarter vs. 60 percent overvalued in 2006.

The Inland Empire’s first-quarter affordability was 21 percent less than the national average and 12 percent under its historical levels.

Don’t think Arch is easy on real estate.

Its economists see plenty of risk in states with energy-dependent economies. North Dakota, with a 52 percent risk of price drops, is in the most precarious shape, followed by “elevated” risk in Wyoming (46 percent chance of a drop) and West Virginia (35 percent).

Arch found “moderate” risk in Alaska, New Mexico, Louisiana, Oklahoma and Texas – home to five of the seven diciest metro areas including Houston (national worst at 39 percent chance of price drop) and Fort Worth (16 percent chance).

“The risk of future price declines over the next two years is limited to mining and drilling areas hardest-hit by lower energy prices. Of course, for the nation as a whole, cheaper energy is a strong positive,” Arch’s report states. “Apart from some weakness in several energy-extraction states, home prices should rise faster than inflation over the next few years due to strong fundamentals.”