Wednesday, December 17, 2014

2015 Real Estate Market Predictions: Normal

As housing recovers, prices in many markets across the U.S. have shot up. In fact, RealtyTrac reported that the median sale price of U.S. single-family homes and condos in October had reached its highest level since September 2008. Price appreciation and the lure of foreclosures created a feeding frenzy for real estate investors willing to pay cash and made it harder for traditional buyers to compete.


But experts say that 2015 will be marked by a return to normalcy and balance for real estate markets across the country. Stan Humphries, chief economist for Zillow.com, predicts that home value growth will slow to around 3 percent per year instead of the 6 percent seen recently, and that will make real estate less attractive to many investors. “It's been a tough market for buyers," he says. "I think it's going to get easier in 2015. Negotiating power will move back to buyers and away from sellers. It will be a much more balanced market." (Too many buyers and too little inventory, or the opposite, contribute to an unbalanced market.)

Redfin.com's chief economist Nela Richardson agrees. "It's been a clear pattern that the investor activity has been shrinking over time," she says. "Investors like to go in where they can buy low and sell high. Price growth is starting to slow dramatically, so they can't sell much higher than what they buy. Investment property is less compelling in 2014 going into 2015."

More inventory and less competition from investors means even traditional buyers are becoming “more picky, and they're willing to let a home go if they don't think it's a good fit for them," Richardson adds. "Buyers are less worried that they'll miss out on something. Houses are more like buses now. If you miss one, another one will come along." Whereas buyers might waive contingencies in the recent past to make their offer more attractive to sellers, they're now more likely to insist on contingencies for financing and inspections.

That said, foreign investors may still find high-end American real estate appealing because of economic turbulence in their home countries. For instance, the U.K. is toying with a so-called "mansion tax" that would apply to those who own properties worth more than 2 million British pounds (or over $3 million), and China has placed restrictions on homebuying in large cities. Some foreign investors also worry about currency fluctuations devaluing money they hold in their home countries. "That section of the market is still all cash – people buying up these huge places because it's safer here than in their own countries," says Herman Chan, real estate broker with Bay Sotheby's International Realty in San Francisco.

Buyers from outside the U.S. may use their properties as a rental, a pied-à-terre (a secondary residence used for travel) or a residence for children studying at American colleges. But for buyers looking for more moderately priced homes, 2015 could offer a respite from bidding wars and all-cash offers. "People who've been on the fence about selling are finally going to pull the trigger, which is great for buyers [because it creates more inventory]," Chan says. "Now people with regular jobs and 20 percent down finally have a chance to get into the market."

For years, many millennials have postponed homeownership in favor of renting, but that may also change next year as a growing number of Gen Yers start families and seek more stability. "By the end of 2015, millennial buyers will represent the largest group of homebuyers, taking over from Generation X," Humphries says. "They prefer smaller units closer to the urban core, so it will be interesting to see whether they follow the time-honored path towards the periphery of the metro."
Baby boomers are also likely to make a move in 2015. Chan says he's "gotten so many calls from baby boomers recently saying, 'We’re downsizing, and we're moving to be closer to our grandkids or our son or daughter.'" With fewer homes underwater, they're finally in a position to sell.

While mortgage rates may not remain at the historic lows seen recently, more people may qualify for home loans as issues like foreclosures or short sales age out of their credit reports and Freddy Mac and Fannie Mae ease mortgage eligibility. Freddy and Fannie recently announced a new mortgage program for buyers with a down payment as low as 3 percent. "Freddy and Fannie have always been the industry leaders, and they're saying, 'It's OK to lend to people who don't have 5 percent down. It's OK to extend credit in a reasonable and safe manner," Richardson says.

Wednesday, December 3, 2014

9 Red Flags to Watch When Choosing a Real Estate Agent



The proliferation of online real estate information makes it easier than ever to be an informed consumer when buying or selling a home. Yet the digital revolution has done little to lessen the importance of choosing the right real estate agent to work with you.

The right agent can help you buy your dream house or sell your existing home quickly. The wrong agent can botch the transaction, leaving you with egg on your face and nowhere to call home.
Despite the high stakes, many buyers and sellers give little thought to choosing an agent, whether they’re buying or selling.

Get recommendations from friends and relatives, and see which agents are buying and selling the most homes in your neighborhood. Read online reviews, but realize they don’t tell the whole story, since most clients, satisfied or dissatisfied, don’t write reviews. Interview three or four agents to find the one who is the best fit for you.

Most real estate agents are independent contractors who are paid a commission based on the number of homes they sell. The commission, paid from the sales proceeds, is usually split equally between the listing agent and the selling agent. Once the deal is closed, each of those agents usually has to pay a share to the broker who owns the office where he or she is affiliated.

Here are nine red flags to watch for when choosing a real estate agent:

The agent suggests the highest price for your house. If you’re selling your house, get listing presentations from at least three agents, who will tell you what comparable homes have sold for and how long they take to sell. The agents are all looking at the same data, so the suggested listing price should be close. Pricing a home too high at the start often means it takes longer to sell and ultimately sells for less. “If you’re too high for the market, buyers will not even look at it because they know you’re not realistic,” says Lee, the author of eight books and a frequent speaker at real estate conferences. “The longer your property sits on the market, the more people are going to think there’s something wrong with it.”

The agent does real estate on the side, part time: Whether you’re a buyer or seller, you want to choose an agent who is actively following the market every day. If you’re buying, you want an agent who can jump on new listings and show them to you immediately. If you’re the seller, you want an agent who is always available to show your home to prospective buyers.

The agent is a relative: Unless your relative is a crackerjack full-time agent who specializes in your neighborhood, he or she is unlikely to do as good of a job as another agent. That can breed resentment, as well as derail your transaction.

The agent doesn’t know know the real estate market in your area:  Finding a neighborhood expert is especially important in areas where moving a block can raise or lower the value of a home by $100,000. An agent who specializes in a neighborhood may also be in touch with buyers who are looking for a home just like yours or sellers who haven’t put their home on the market yet. “It’s really a very local business,” Lee says.

The agent charges a lower commission: In most areas, commissions are traditionally 5 to 7 percent, split between the buying and selling agent. If the commission on your house is lower, fewer agents will show it. This doesn’t mean you can’t negotiate a slightly lower commission if one agent ends up both listing and selling the house. Some newer companies rebate part of the commission to the buyer or seller, but don’t use that as the sole reason to choose an agent. That’s only a bargain if the agent is otherwise a good fit.

The agent’s face shows up with online listings: The agents’ faces are there because they paid to be there. They may or may not be the best choice for you. Don’t accept the online portal’s assertion that the agent is a neighborhood expert. Interview him or her yourself and find out.

The agent doesn’t usually deal with your type of property: If you’re buying or selling a condominium, don’t pick an agent who rarely sells condos. If you’re looking for investment property, find an agent who traditionally works with investors. Many agents have multiple specialties, but you want to make sure the agent is well-versed in the type of transaction you’re doing.

The agent doesn’t usually work with buyers in your price range: Some agents specialize in homes of all types in a specific area. But if you’re a first-time buyer looking for a $200,000 entry-level home, you are unlikely to get much attention from an agent who mostly handles $10 million luxury listings.

The agent is a poor negotiator or fails to keep up with details of the transaction: In many cases, the most important work of an agent is not to find the home but to make sure the sale closes. That includes making sure the buyer is preapproved for a mortgage, the home is free of liens before it goes on the market, the appraisal is accurate and issues raised by the home inspection are resolved.

Saturday, November 22, 2014

15 Questions You Should Ask Your Real Estate Agent Before Working With Them


Not all real estate agents can help you get the home you want. When it comes to finding a good agent, you need to ask the right questions upfront to save yourself the trouble later. Real estate brokerage Redfin recommends that you ask every potential agent the 15 questions below before committing yourself to an agent.

1. Is real estate your full-time job? How many clients have you had in the past year?

Okay, that's two questions, but they're actually the same. An active, full-time agent is much more likely to be up to date on the market and the local real estate laws than a part-time agent.

2. How many homes have you sold in my target neighborhoods? 

Don't expect every agent to have an in-depth knowledge of the places you want to live. You want someone who knows those precise markets, with a few recent deals in your target neighborhoods to ensure their expertise.

3. When clients are dissatisfied with your service, what went wrong?

There's not a single agent out there that hasn't dealt with an unhappy customer, but knowing why others were dissatisfied can help you anticipate and prepare for the bumps ahead, or whether or not they'll be a good fit for you.

4. Has a client ever filed a complaint against you?

If you're not comfortable asking this, you can always check with your state's licensing board. Some state boards will even list disciplinary actions and education credits associated with the agent.

5. What's your fee?

While you pay no fee at all as the buyer, the fee is built into the price of the home. When the house is sold, the seller pays the agent their fee using the money you paid for the house, typically 2 to 3 percent of the sales price. Since the commission amount is set by the seller and can vary from home to home, you should inquire what their share would be. After all, you don't want an agent who may pressure you into a home just because they'll land a bigger commission.

6. What are all the services you're willing to provide me?

Negotiations, escrow, paperwork and contingencies are the minimum additional services an agent can provide, though some are willing to go the extra mile. Make a list of what you'll be paying for so there are no surprises later.

7. When am I committed to working with you?

Buyer beware: If you start touring homes the agent sends you, this may obligate you to work with them despite not having signed a contract.

8. How many foreclosure or short-sale transactions have you handled in the past?

While you can buy distressed properties at a great price, the paperwork is complicated, and your liability is greater. If you choose to go down this road, you'll want an agent with experience closing deals with banks.

9. Who else will be working with me?

A real estate agent agent is often supported by a team, but the person you hire should being doing most of the work.

10. Am I obligated to work with the lender, inspector or other service providers you recommend?

If they answer "yes" here, it's a big red flag. Good agents may have solid recommendations for lenders or inspectors and other service providers, but you should never feel pressured to use their recommendations. In fact, it's illegal for an agent to force you to use their recommended providers.

11. How quickly can you get me into a home?

 Hot homes move fast, so how does your agent compete? Ask the agent how they handle tours on short notice.

12. Do you represent buyers and sellers on the same house?

This is not a good thing for a buyer. When one agent represents both the buyer and seller, this is known as dual agency. If the agent is trying to get the most money for the seller's home, how can he also be trying to get the best deal for the buyer? Redfin recommends to just avoid dual agency altogether.

13. What sets you apart from other agents?

Listen to how they answer this question. You're looking for expertise, not just enthusiasm. You want an agent who's experienced in your favorite neighborhoods, with a proven track record, and in-depth knowledge of any special requirements that you want in your next home.

14. What if I'm unhappy with your service?

If you have any complaints after you've purchased your new home, it may be too late to do anything about it. Most agents don't get paid until you buy a house, so there's incentive for them to close the deal even if you still have doubts. You want an agent that will guarantee your satisfaction, so ask about what recourse you'll have if you have a bad experience.

15. Can I see reviews of your past deals?

A good real estate agent should have nothing to hide; that's why Redfin posts reviews for all agents after every deal. While an agent may provide you their hand-picked endorsements of those clients they kept happy, you want to get the full list of reviews, especially those from the dissatisfied customers. A few success stories does not necessarily define a good agent, but only those who consistently deliver excellent service. Not every real estate agency will provide this list, but you can use sites like Yelp.com to see what feedback others had to give.

Monday, October 20, 2014

Bay Area Home Sales See More Upside in 2015


California overall

  • Year-over-year sales of new and existing houses and condos increased year-over-year for the FIRST time in a year.
  • This year delivered the strongest September in 5 years.
  • September delivered the 31st straight month of a year-over-year increase in the median sales price. This is still 19.6% below the all-time peak in 2007.
  • Indicators of distress continue to decline: "Foreclosure activity remains well below year-ago and peak levels reached in the last five years." A report released three days later declared: "Lending institutions initiated formal foreclosure proceedings last quarter on the lowest number of California homes in more than eight years."

SF Bay Area

  • This year also delivered the highest sales of new and existing houses and condos for a September since 2009.
  • The median price was up 14% year-over-year, 9.2% below the all-time peak in 2007.
  • Absentee buyers and all-cash buyers - most likely investors - had a smaller share of sales from last September, 2013 levels. From 20.9% and 23.% respectively in September, 2013 to 19.1% and 20.9% this past September.
Even the amount spent on housing in California terms remains favorable compared to historic norms. In California: "Adjusted for inflation, last month's [average mortgage] payment was 36.0 percent below the typical payment in spring 1989, the peak of the prior real estate cycle. It was 48.1 percent below the current cycle's peak in June 2006. It was 60.5 percent above the January 2012 bottom of the current cycle."

Ditto for the SF Bay Area: "Adjusted for inflation, last month's payment was 19.4 percent below the typical payment in spring 1989, the peak of the prior real estate cycle. It was 39.1 percent below the current cycle's peak in July 2007. It was 82.4 percent above the February 2012 bottom of the current cycle."

Even with the encouraging numbers, California has a ways to go before reaching anything close to normal levels of sales. For example, September's "sales were 15.5 percent below the average of 42,996 sales for all the months of September since 1988…California sales haven't been above average for any particular month in more than eight years." So, there remains plenty of upside potential as the market continues to normalize. 

Tuesday, October 7, 2014

2015: Good News for Home Buyers in California



It may get easier to find the home of your dreams. A 2015 California housing market forecast out Tuesday points to more homes on sale and fewer investors competing with families. It also has some good news regarding home prices, at least for those looking to purchase.

“Next year, home price gains will slow, allowing would-be buyers who have been saving for a down payment to be in a better financial position to make a home purchase,” said Kevin Brown, president of the California Assn. of Realtors, which released the forecast.

The report follows a continued trend in the California housing market. After robust price gains in 2012 and 2013, prices increases tapered off this year. Even though more homes came on the market, sales dropped as would-be buyers struggled to afford a house.

But next year an improving economy and still-low interest rates will make affordability less of a problem, said Leslie Appleton-Young, chief economist for the Realtors group. The trade organization predicts sales of previously owned single-family homes will rise 5.8% next year after an 8.2% projected decline in 2014.

 The state median home price will rise 5.2% next year to $478,700, the Realtors group projects. That would be the smallest increase in four years and would follow an estimated 11.8% increase for 2014.

Sunday, September 28, 2014

2015: Continued Upward Projections Seen for California Real Estate



The harder they fall, the higher they bounce. Local real estate markets in California were among those hit hardest by the national housing crisis and recession. Entire neighborhoods were emptied by foreclosure. House values dropped like a rock. Would-be home buyers retreated back to renting, sending the entire real estate market to a screeching halt.

But that was then, and this is now. In 2015, California housing markets could experience some of the biggest price gains in the country. This is according to an analysis and forecast by the economists at Zillow.

Earlier this year, the real estate information service Zillow published home-value predictions for hundreds of cities and metro areas across the U.S. It was meant to show where home prices “are headed over the next 12 months, from May 2014 through May 2015.”

The projections came in the form of an interactive (and highly addictive) tool that allows you to scale the projections up and down. In other words, you can “zoom in” to see which housing markets are predicted to appreciate the most in 2015. And guess what? They’re all in California and Nevada.

Sunday, September 7, 2014

Mortgage Rates Hover At Their Lowest Levels Of The Year



Mortgage rates hovered at their lowest levels of the year for the third straight week this week, according to a survey published Thursday by Freddie Mac FMCC +1.14%.

The average 30-year fixed-rate mortgage stood at 4.1% for the week ending Wednesday, according to Freddie’s survey. To get that rate, borrowers had to pay fees equal to around 0.5% of the loan amount.

Mortgage rates have drifted down in recent weeks as bond yields on 10-year Treasury notes have fallen. Investors have bought government debt amid rising concerns over geopolitical instability.
Few expected rates would be this low at the beginning of the year. Indeed, one of the biggest surprises of 2013 came in the spring, when mortgage rates jumped suddenly as anxious investors sold off Treasury securities amid signs that the Federal Reserve was thinking about slowing down its bond-buying program.


By contrast, one of the bigger surprises of 2014 may be that mortgage rates might end the year lower than they began, at around 4.5%, even as the Federal Reserve has gradually pared back its purchases of mortgage-backed securities.