Friday, June 27, 2014

The Growing Use of Social Media in Home Searches



Reflecting the proliferating use of social media in today’s society, more home buyers are turning to social media in the home-buying process than ever, according to the CALIFORNIA ASSOCIATION OF REALTORS®’ (C.A.R.) “2014 Survey of California Home Buyers.”

More than three-fourths of home buyers used social media in their home search, up from 52 percent who used it in 2011.  Buyers said they primarily used social media to obtain buying tips and suggestions from friends (44 percent), neighborhood information (44 percent), and to view their agents’ Facebook pages (42 percent).

Mobile technology and the Internet continued to be important tools in the home-buying process, with 91 percent saying they used a mobile device to access the Internet during the course of their home purchase.  Buyers used their mobile devices to look for comparable home prices (78 percent), search for homes (45 percent), and take photos of neighborhoods, homes, and amenities (43 percent).   Conversely, with the increased use of social media, fewer buyers “Googled” their agent (50 percent in 2014, down from 68 percent in 2013), turning to agents’ Facebook pages instead.

In another sign of recent market competitiveness, more than nine in 10 buyers (91 percent) made one or more other offer, with an average of 3.6 offers in 2014, up from three offers in 2013.  Additionally, buyers viewed a median of 20 homes in 2014, up from 10 last year.  Given the limited supply of homes available for sale, fewer buyers were satisfied with their home purchase than last year.  Only about half of the buyers were satisfied with their purchase in 2014, down from two-thirds (66 percent) in 2013.  Nearly half (46 percent) of buyers felt they “settled” on their home purchase in 2014, up from 34 percent.

Additional findings from C.A.R.’s “2014 Survey of California Home Buyers” include:

• Buyers cited price decreases (54 percent), receiving a promotion or raise (34 percent), low interest rates (29 percent), and favorable prices/financing (17 percent) as the top reasons for purchasing a home.

• Echoing a recovering housing market over recent years, buyer optimism of home prices also continued to improve, with the vast majority of buyers (81 percent) believing that home prices will rise in five years and 60 percent believing that prices will rise in one year.  This is an improvement since 2009, when only 35 percent of buyers believed that prices would rise in five years, and only 8 percent who believed prices would rise in one year.

• Higher down payments are still the norm in this market, with buyers putting an average of 28 percent down on their purchases.  The average down payment has been higher than the traditional 20 percent since 2009.

• More than nine in 10 buyers (92 percent) obtained a fixed-rate loan, a 23 percent increase from 2009, when only 69 percent obtained a fixed-rate loan, reflecting low rates and the desire for certainty as the market gets back to basics.

• Nearly all surveyed buyers (88 percent) used a real estate agent in 2014, down slightly from 91 percent in 2013. Reflecting a growing use of the Internet, nearly two-thirds (65 percent) of those who used an agent found their agent online, compared to only 38 percent who found their agent online in 2003.

Wednesday, June 4, 2014

Profits Return to California Home Owners


Rising home prices have hiked more California homes into positive equity and increased the percentage of home owners making a profit from home sales, according to California Association of Realtors' data.
The association reported 88.4% of home sellers left closing tables with money in their pockets in April. This is the highest percentage of money making sales on a monthly basis since 2007, CAR added.

The April percentage was slightly higher than the 87.4% of California real estate sales that made money in March and 13 points higher than April of last year, the association said. April was the tenth straight month that saw a rising percentage of home sales make money for sellers, CAR said.

The CAR figures put the most recent spotlight on a trend that has been percolating since the beginning of 2014.An April study conducted by economists for real estate website Trulia reported seven of the 10 fastest moving real estate markets – markets where a high percentage of homes for sale find buyers within 60 days – are located in California.

The association reported a corresponding shrinking number of foreclosed property sales by financial institutions or short sales by economically distressed homeowners. Trulia attributed the speed and rising demand in many California markets to a combination of stronger local economies that helped fuel demand, and a lack of new home construction that helped keep supply tight. For example, many of the fastest moving real estate markets have been ones where the locality has added only 10 new homes per year for every 1,000 existing homes, the organization said.

Tuesday, May 20, 2014

Underwater Mortgages Still Haunt US Households


Nearly 10 million U.S. households remain stuck in homes worth less than their mortgage and a similar number have so little equity they can't meet the expenses of selling a home, trends that help explain recent sluggishness in the housing recovery.
At the end of the first quarter, some 18.8% of U.S. homeowners with a mortgage—9.7 million households—were "underwater" on their mortgage, according to a report scheduled for release Tuesday by real-estate information site Zillow. While that is an improvement from 19.4% at the end of last year and a peak of 31.4% 2012, those figures understate the problem.
In addition to the homeowners who are underwater, roughly 10 million households have 20% or less equity in their homes, which makes it difficult for them to sell their homes without dipping into their savings. Most move-up homeowners typically use their home equity to cover broker fees, closing costs and a down payment for their next home. Without those funds, many homeowners can't sell.
It's a sobering appreciation that negative equity is going to be with us for a while to come," said Stan Humphries, Zillow's chief economist. "Negative equity is central to understanding a lot of the distortions in the marketplace right now."
Those distortions include the inventory of homes for sale, which, while rising, is low by historical standards. It also helps explain why first-time home buyers are having such a hard time cracking the market. Real estate is in some ways like a ladder, Mr. Humphries notes, so when underwater homeowners don't trade up it makes it harder for newcomers to get in.
At the same time, prices have risen about 11% over the past two years, and several times that in rebounding markets like Las Vegas, Phoenix and much of California. Rising prices, combined with higher mortgage rates, have given sticker shock to buyers looking for a deal. This has been particularly hard on first-time home buyers who are usually in the market for a lower-priced home.
In the report, Zillow notes that the least expensive homes—those in the lower third of the price spectrum, which first-time home buyers are most likely to be shopping for—are much more likely to be underwater than higher-priced homes. Nationwide, about 30% of homes in the bottom third of the price range were underwater in the first quarter, compared to 18% of homes in the middle third and 11% of homes in the top third. (Zillow derives its underwater data by matching its database of estimated home values with loan balances from TransUnion, the credit reporting agency.)
Regionally, underwater homes are concentrated in areas where the real-estate bust hit hardest. Among major metropolitan areas, Las Vegas had the nation's highest share of underwater mortgages, followed by Atlanta and Orlando, Fla.
Many underwater homeowners have gone into foreclosure or executed a short sale, where they sell the home for a loss. But many aren't budging. "There are people who still have their jobs and they're not late on their payment, but they can't move," said Vita Deveaux, a real-estate agent at Keller Williams Realty First Atlanta.
Take Patricia McCutcheon, 50 years old, who lives in the Clayton County area near Atlanta. Ms. McCutcheon and her husband owe $119,000 on their home, but figure it could sell for about $70,000 based on recent sales in the area. The debt hasn't kept them from moving up: In July, they are leaving their home for a new place in Paulding County. But instead of selling their underwater home, they are going to rent the place out. "It seems to be the only option that we have," she said.
Ms. McCutcheon, who is a full-time student working on a bachelor's in psychology, says she and her husband, who works in information technology, considered a short sale, but didn't want their credit rating to suffer.

Tuesday, May 13, 2014

China's Real Estate Bubble Begins to Bursts



Late yesterday China released its April economic data and here’s the tale it tells of the property sector is of concern. New starts contracted 15% year on year (vs. -21.9% in March), property sales fell 14.3% year on year (vs. -7.5% in March); and land sales (by area) fell 20.5% year on year (vs. -16.9% in March). This chart is from Society Generale:



The greater risk to China lies in the pervasive consequences of any property bust. Property investment has grown to account for about 13 per cent of gross domestic product, roughly double the US share at the height of the bubble in 2007. Add related sectors, such as steel, cement and other construction materials, and the figure is closer to 16 per cent. The broadly defined property sector accounts for about a third of fixed-asset investment, which Beijing is supposed to be subordinating to the target of economic rebalancing in favour of household consumption.

…The reason things look different today is the realisation of chronic oversupply. As the property slowdown has kicked in, housing starts, completions and sales have turned markedly lower, especially outside the principal cities. Inventories of unsold homes in Beijing are reported to have risen from seven to 12 months’ supply in the year to April. But when it comes to homes under construction and total sales, the bulk is in “tier two” cities, where the overhang of unsold homes has risen to about 15 months; and in tier three and four cities, where it is about 24 months.

…If activity levels and prices weaken further, Beijing’s resolve not to respond with traditional stimulus programmes is unlikely to hold. We should expect a potpourri that might include: extra spending on infrastructure and environment programmes; faster urbanisation in inland and western provinces; some relaxation on restraints on homebuying, such as mortgage deposits; and, ultimately, new monetary easing.

Thursday, May 8, 2014

Cash Is King In Today's Real Estate Market




One in three buyers of U.S. homes is paying cash, a record high number, according to data made available to McClatchy. The trend is being driven by retiring baby boomers and rich investors, who unlike most first-time buyers can bypass tighter lending requirements to pay cash. They now rule the roost, composing record percentages of residential home sales.


It’s meant the field is closed off for conventional purchasers in some hot markets, but in others it’s meant forward momentum for the struggling housing sector. All-cash sales as a percentage of residential real estate sales stood at 33 percent from January to March this year. That’s up from 31 percent for all of 2013 and 2011 and 29 percent for 2012. These are the highest percentages since the National Association of Realtors started collecting the data in 2008. Before that, it estimated that cash buyers historically represented less than 10 percent of all sales.


The group analyzed state-level numbers on behalf of McClatchy, and it found that states such as Florida, South Carolina and Wyoming had outsized cash sales during the first quarter of 2014.
The rising cash sales come despite a drop in one of the main draws for cash purchases: financially distressed properties sold through foreclosures or at a loss to the banks.


“What is surprising is how cash continued to remain high even though distressed property sales are declining. Distress sales invited all the cash purchases,” said Lawrence Yun, the chief economist for the Realtors’ group. Distressed home sales declined from 26 percent of the national market in 2012 to 17 percent in 2013 to 15 percent over the first three months of 2014. It means that even as the housing market heals and conventional sales return, all-cash purchases remain a big chunk of residential sales.


Yun points to a couple of trends that are driving the boom in cash purchases, trends that fall into the broader debate about rising income inequality in the United States. One driver appears to be wealthy investors, foreign and domestic, diversifying into real estate. Another is baby boomers selling homes that were paid off and retiring elsewhere with the proceeds, purchasing homes.


“Trade-downs are certainly a reason,” Yun said. “The five-year bull run on the stock market is also helping the upper-end households,” he added, noting many are diversifying out of stocks after several years of big gains. That’s in line with what 41-year veteran Sandra Schede has been seeing.
“The rates (of return) are so low for putting their money into the bank or investments at this time that it makes much more sense to purchase real estate using cash,” said Schede, the incoming president of the Connecticut Association of Realtors.


“The rental market is really strong right now, so it gives them a better return over a short period of time.”Boomers are buying the higher-priced properties with cash, while investors tend to buy below the midpoint price.

Read more here: http://www.newsobserver.com/2014/05/08/3843062/now-more-than-ever-cash-is-king.html?sp=/99/104/#storylink=cpy

Wednesday, April 30, 2014

California Real Estate Bubble Watch on High Alert



An influx of foreign buyers and Internet money could be creating conditions for another bubble in California's housing market, says one real estate expert.

Kathy Fettke, CEO and co-founder of The Real Wealth Network, told J.D. Hayworth and John Bachman on "America's Forum" on Newsmax TV that she is "concerned" by what she is seeing in California's real estate market.

"In California, for sure, Chinese buyers have been active," Fettke said. "We see that they have been looking for a safe place to put their money because they're seeing that they're in a bubble actually in China and are trying to get their money out.

"It's dangerous because this kind of 'I'll take it as is, top dollar, over asking price, bidding war,' is back in California full-on. We just saw people make an offer on a tear-down. Literally the foundation was completely rotted, the home was rotted, and the buyers came in as is, all cash.

"There is [also] massive job growth in California. We have bounced back, and as a result we've got these young Internet millionaires who are buying real estate and it looks cheap to them and they don't understand the investment," she said Tuesday.

Fettke said that with the exception of pockets like Modesto and Stockton, "the California market is now above the average population's ability to buy."

"It's very sad," she said.

Fettke added that the three factors to monitor when investing in real estate are the strength of the job market, the level of population growth, and affordability.

"More important than ever, you've got to know what you're doing," Fettke said. "I, of course, am a firm believer that you can build tremendous wealth in real estate if you do it right, if you buy right. We should have learned by now that you can also lose your fortune if you do it wrong."



Friday, March 28, 2014

Investing in Real Estate: Risks VS Rewards


With limited knowledge that the real estate market has tanked over the last several years, you might be hesitant to pull the trigger to make what should be an excellent investment today. With some fortitude and patience, today is likely the best opportunity you’ll have in your lifetime to make a hefty profit from a real estate investment.

Generally, your options are to either rent out your investment or flip it. This article focuses on flipping properties. Consider Your Risks Adjustable rate mortgages were a huge problem in the real estate melt down a few years ago. Still, today some investors are going back to adjustable mortgages as a less expensive source of finances for flipping properties. Adjustable rate mortgages are being advertised as low as 2.6%.

However, the national average for adjustable mortgages is hovering around 4.2% at this time. There are two general categories of adjustable mortgages. Each comes with its own risk and reward. Each adjustable mortgage is attached to a third party index that determines the current interest rate. Also, each adjustable mortgage has a margin above the index that must also be paid.

One general category is tied to an index that moves slowly, meaning your interest rate will go up or down slowly. However, the margin that you pay above the index will be higher. The other general category attaches the adjustable mortgage to an index that fluctuates much more often, commonly on a monthly basis. The reward is that the margin paid above the index is less. The risk is that your payment fluctuates much more.

Because your reward is reflected in the risk you take, be aware of some of the traps these adjustable rate mortgages come with:
·         Your payment could go up (a lot) even if interest rates don’t go up very much.
·         Your payment may not go down much even when interest rates go down.
·         There are several scenarios built into these loans where you end up owing more than you borrowed even when you make all of the payments on time.
·         Adjustable mortgages often have a built in penalty if you pay them off early – not good when you are flipping houses.

Consider a 15 Year Fixed I think you can be sure that the super low adjustable mortgage rate will have built in advantages for the lender. They will make their money one way or another. Your financing decision needs to be made based on how much you can afford to pay each month. Besides an adjustable mortgage, you want to consider a 30 year fixed mortgage and a 15 year fixed mortgage. The 30 year fixed mortgage will have lower payment because it is spread out over a longer time period.

However, 15 year fixed mortgages have a lower interest rate than both adjustable mortgage rates and 30 year mortgages. This makes the 15 year mortgage the most attractive if you can afford the higher monthly payment. Today’s 30 year mortgages are averaging around 4.85%. Your monthly payment will be around $528 (not including insurance and property tax). If you can complete the flip in six months, the total interest you’ll pay is $2,417.48. Today, the national average for 15 year fixed mortgages is about 3.98%. Going with this loan gives you a monthly payment of about $739 (not including insurance and property tax).

If you complete this flip in six months, the total interest you pay is $1,969.66. That’s a $ 447.82 savings over the 30 year mortgage. Flipping houses is a business and you should be looking to cut expenses anywhere you can. With average 15 year mortgages lower than the average adjustable mortgage and with a lower risk, the 15 year mortgage looks the most attractive today. However, read the fine print of any mortgage carefully so you understand the risk to reward equation.