Friday, December 27, 2013

California Short Sales Get Extended Relief

Distressed California homeowners can breathe a sigh of relief.
Those who decide to short sale their home — or sell it for less than is owed to the lender — don’t have to pay state tax on the mortgage debt.

In January, Congress extended the federal Mortgage Forgiveness Debt Relief Act of 2007 giving thousands of homeowners a break on having to pay taxes on the forgiven debt for a year. But California chose not to continue its state tax relief program.

Real estate organizations and state leaders have tried for months to get the program reinstated.
This week, the state Franchise Tax Board followed the Internal Revenue Service’s footsteps in declaring that homeowners are not responsible for paying the state tax.

“We are pleased with the recent clarifications issued by the IRS and the California Franchise Tax Board, which protect distressed homeowners from debt relief income tax associated with a short sale in California,” said Kevin Brown, president of the California Association of Realtors.

“Distressed California homeowners can now avoid foreclosure or bankruptcy and can opt for a short sale instead, without incurring federal and state tax liability.”  Short sale questions can be answered at (831) 454-6846 or visiting

Read more here:

Tuesday, December 17, 2013

Southern California November Real Estate Sales: "Underwhelming"

Southern California home sales plunged in November, falling with a 10.4 percent thud across Riverside County and by the same percentage in the entire six-county region, the latest report from San Diego-based DataQuick said.
DataQuick president John Walsh called the performance “underwhelming.”
The month was far from flamboyant by DataQuick president John Walsh’s standards because of two likely culprits: Low inventory and a pullback in home-buying and consumer confidence during the early-October fiasco on Capitol Hill over ways to resolve the debt ceiling.
Consumer confidence waned. FHA-backed mortgages that were not well into the escrow pipeline hit a few snags during the federal government shutdown. Investor and cash buys dissipated, too.
“There’s demand out there, but for a variety of reasons, Southern California did not see home selling that was commensurate with the level of demand,’’ said DataQuick analyst Andrew LePage.
Collectively, sales in Southern California fell below the seasonal average. Southland sales have shown a decline of 7.6 percent, on average, every October and November since 1988 when DataQuick statistics begin.
Every county in Southern California had a year-to-year drop in sales in November:
Faring the worst was Ventura County, with new and existing home sales plummeting 16.5 percent from November 2012. The smallest decline was reported in San Bernardino County with 2,130 sales in November, a 7.6 percent drop from the 2,304 sales in November 2012.
Riverside County, with a 10.4 percent drop in home sales in November, closed the books on 2,934 sales. That’s down from 3,274 sales in November 2012.
Gene Wunderlich, government affairs director with the Southwest Riverside County Association of Realtors, said he thinks the drop in sales is based on consumer skittishness.
There are still a lot of unresolved variables out there, he said, citing the unknown variables of the Affordable Care Act, rising mortgage rates and consternation over the new maximum Federal Housing Administration loan limits for Riverside and San Bernardino counties homebuyers that take effect on Jan. 1.
The FHA-loan limit will fall 29 percent from $500,000 to $355,350 on Jan. 1, a reduction of $144,650.
“The combination of all that has consumers still a bit rattled,’’ Wunderlich said. “The two entities that drove our market the hardest — investors and first-time buyers — are backing out of the market right now.”
Rich Simonin, owner of Westcoe Realtors in Riverside, sees a market that is clearly in transition.
“The market has transitioned from one in which the listing side — the ownership side of the equation — was once dominated by banks,’’ Simonin said. “This year, we’ve transitioned from repos and short sales back to regular home owners with equity. They’re now a big part of the equation.”
The dip is not unlike the lag between tides, he said.
“Naturally, you will have some slack as you see the banks get out of the market,’’ Simonin said. “The sellers are starting to return. But sellers don’t all jump in at once.”
The statistics from Riverside alone show how far the market has shifted, Simonin said. Out of 595 homes for sale, 502, or 84 percent of all listings, are standard sales. Only 26 properties have been taken back by a bank. Fifty-six units in the pool of 595 homes were listed as short sales.
“Banks are pretty much out of the equation,’’ he said.
While sales dropped noticeably in November, the blockbuster gains that Southern California has seen on median price did not wane.
Every county saw median sale prices rise by more than 15 percent year over year.
Riverside County’s November median on all existing, new and condo sales rose 20.1 percent to $275,000 from $229,000 in November 2012. The median price on all home sales in San Bernardino rose 19.4 percent to $218,500, up from $183,000 one year earlier.
Tight inventory continues to be the trump card on price. More keys are also being turned on sales of the newly built house.
“Price has come a long way, and it’s put a crimp in affordability for some people,’’ LePage said, prompting some buyers to take a pause and to push them into condo purchases. First-time homebuyers are down to the lowest level in eight years, Wunderlich said.
Out of Riverside County’s 2,934 total sales in November, 2,143 transactions involved existing homes -- some 16 percent fewer than November 2012. The 343 condo sales and 448 new home sales that closed escrow in November were up 11.7 percent and 7.4 percent, respectively from November 2012.
San Bernardino County’s 1,797 existing home sales were down 12 percent from November 2012, but the 144 condo sales and 189 new home sales reflected gains of 6.7 percent and 54.9 percent from the year earlier.
Foreclosure re-sales in Riverside County fell to 7.5 percent of the transactions, the lowest since April 2007. One year ago, roughly 18.3 percent of all sales involved bank-related properties. In San Bernardino County, 11.2 percent of all transactions involved distressed property. That was the lowest ratio the county has seen since the housing bubble burst.
Absentee buyer interest fell in November as well, LePage said.
The percentage of absentee and vacation home buyers in Riverside County was 27.8 percent, down from 33.3 percent of all buyers in November 2012. In San Bernardino County, the percentage of investor-type of purchases was 35.1 percent, down from the April peak of 40.2 percent.
The median price on condos rose 31 percent in November to $206,000 in Riverside County and 19 percent to $196,500 in San Bernardino County. The November new home median, at $337,000 in Riverside, is up 13.3 percent from the year earlier. In San Bernardino, the $387,500 median sale price on a new home reflects a 21.8 percent jump from November 2012.
Even with the improving market conditions on price, Wunderlich said many in the industry will pay close attention to what happens in January.
“The first quarter will tell the tale,’’ he said

Wednesday, December 11, 2013

5 Positive Trends for Bay Area Real Estate in 2014

The good feelings generated by many swollen bank accounts in Silicon Valley's real estate industry should spread to more markets next year, while the Bay Area continues to reap the benefits of a strong local economy.
That was one takeaway from this year's presentation of Emerging Trends in Real Estate 2014, the closely watched survey of real estate sentiment from PricewaterhouseCoopers and the Urban Land Institute. (You can download a copy of the report here.)
"All the markets are getting better — that's the general theme," said Andrew Warren, PwC's director of real estate research. Warren spoke to a gathering of industry professionals Dec. 4 at the Four Seasons hotel in East Palo Alto. The survey gathers responses from more than 1,000 professionals and includes rankings of markets by various industry sectors.
Some other key points:
1. The San Jose area remains in the top five markets nationally for investment, development and homebuilding. (It's No. 3 this year, where it also placed last year on the ranking of the survey's top 20 markets.) You've heard this before, but it's all about job growth. San Jose is now above its peak employment level before the recession, driving demand. Cities on the "most improved" list were Las Vegas, Sacramento, Atlanta, the Inland Empire, and Phoenix. Washington, D.C. dropped the most, and you can blame federal shutdowns for that.
2. Industrial booms: This year's survey found industrial property topping investment prospects for 2014, followed by hotels, apartments, office and retail. One sticking point: The vast majority of investors said they wanted to buy industrial properties this coming year, but less than 10 percent of industrial owners said they wanted to sell. "So the question is, will there be a stalemate, or will that entice people to sell?" Warren said.
3. Capital will continue to flow: Pension funds and regional banks are increasing their real estate exposure. Warren said pension funds that haven't invested in real estate are looking to dip their toes into the water. Meanwhile, regional banks — which all but stopped lending in commercial real estate during the downturn — have mostly worked through their bad portfolio and are looking to start lending again. "The mood is they want to start doing more. The dialogue has opened up. It's just not completely there yet."
4. Demographic trends are raising questions: Warren noted the jury is still out on how the younger generation will change demand for office space and residential. Fewer Americans are getting drivers licenses and cars, he noted, and young people are opting to live in urban locations. "The question is, are they going to stay there as they get older," he said. "The other question is with the higher rate of student debt, will they be able to buy a house? There's a lot of questions with this group, and it's going to be something that real estate is dealing with for years to come."
5. Locally, the business trends that have driven strong real estate activity in the past couple of years should continue, industry executives said in a response panel following the presentation. Deke Hunter of Hunter Properties said he is keeping a close eye on the supply of new office product coming onto the market, as well as other "bubble" signs. "But that said, I don't think we'll have outrageous growth," he said. "I think we'll have better-than-national-average growth, and we should do quite well."
Lisa Gillmor, a city of Santa Clara council member and real estate veteran, noted that the Levi's Stadium alone is driving tremendous investment activity in the area, with more than $4.5 billion from two major proposed mixed-use projects on city-owned land.
"We're looking at creating a population of thousands to stay in Santa Clara — to spend their money, to live and rent," she said. "We're trying to create this new city environment that our workforce is demanding of us now."

Tuesday, December 3, 2013

Home Prices Gained Less Than 1% in October

CoreLogic a leading residential property information, analytics and services provider, today released its October CoreLogic Home Price Index (HPI(®)) report. On a month-over-month basis, including distressed sales, home prices increased by only 0.2 percent in October 2013 compared to September 2013*. Year over year, home prices nationwide, including distressed sales, increased 12.5 percent in October 2013 compared to October 2012. This change represents the 20(th) consecutive monthly year-over-year increase in home prices nationally.

Excluding distressed sales, home prices increased 0.4 percent month over month in October 2013 compared to September 2013. On a year-over-year basis, excluding distressed sales, home prices increased by 11 percent in October 2013 compared to October 2012. Distressed sales include short sales and real-estate owned (REO) transactions.

The CoreLogic Pending HPI indicates that November 2013 home prices, including distressed sales, are expected to remain at the same level month over month as October 2013, with a projected increase of 12.2 percent on a year-over-year basis from November 2012. Excluding distressed sales, November 2013 home prices are poised to rise just 0.4 percent month over month from October 2013 and 11.3 percent year over year from November 2012. The CoreLogic Pending HPI is a proprietary and exclusive metric that provides the most current indication of trends in home prices. It is based on Multiple Listing Service (MLS) data that measure price changes for the most recent month.

"In October, the year-over-year appreciation rate remained strong, but the month-over-month appreciation rate was barely positive, indicating that house price appreciation has slowed as expected for the winter," said Dr. Mark Fleming, chief economist for CoreLogic. "Based on our pending HPI, the monthly growth rate is expected to moderate even further in November and December. The slowdown in price appreciation is positive for the housing market as almost half the states are now within 10 percent of their respective historical price peaks."

"In terms of home price appreciation, the housing market appears to be catching its breath as we head into the final months of 2013," said Anand Nallathambi, president and CEO of CoreLogic. "The deceleration in month-on-month trends was anticipated as strong gains in home prices over the spring and summer slow in line with normal seasonal patterns and the impact of higher mortgage interest rates."

Highlights as of October 2013:
    --  Including distressed sales, the five states with the highest home price
        appreciation were:  Nevada (+25.9 percent), California (+22.4 percent),
        Georgia (+14.2 percent), Michigan (+14.1 percent) and Arizona (+14
    --  Including distressed sales, the only state to show depreciation was New
        Mexico (-0.5 percent).
    --  Excluding distressed sales, the five states with the highest home price
        appreciation were: Nevada (+22.5 percent), California (+18.5 percent),
        Utah (+13.3 percent), Florida (+13 percent) and New York (+12.4
    --  Excluding distressed sales, no states posted home price depreciation in
    --  Including distressed transactions, the peak-to-current change in the
        national HPI (from April 2006 to October 2013) was -17.3 percent.
        Excluding distressed transactions, the peak-to-current change in the HPI
        for the same period was -13.1 percent.
    --  The five states with the largest peak-to-current declines, including
        distressed transactions, were Nevada (-40.7 percent), Florida (-37.4
        percent), Arizona (-31.5 percent), Rhode Island (-29.3 percent) and West
        Virginia (-28 percent).
    --  96 of the top 100 Core Based Statistical Areas (CBSAs)** measured by
        population showed year-over-year increases in October 2013.

Thursday, November 14, 2013

Looking Into The Crystal Ball: Top 10 Real Estate Trends for 2014

If the real estate recovery is a baseball game, we're in the fourth or fifth inning.

So what will the rest of the game look like?

Experts from the Urban Land Institute unveiled their view of how the rest of the recovery will play out in their Emerging Trends in Real Estate report, released this week at the land use and planning nonprofit's annual conference in Chicago.

The group highlighted a number of housing trends we can expect to see playing out over the next few years, based on surveys and interviews with real estate developers, investors, lenders, servicers and builders.

(1). Millennials are moving the market, but not as homeowners
Though the so-called Millennial generation has been much-maligned in the media, real estate movers and shakers are increasingly interested in where this generation is headed -- quite literally. A number of the cities have seen increased economic activity in the real estate sector led by this generation, particularly Austin, Seattle, Portland and the Twin Cities in Minneapolis.

Minneapolis' place as number nine on a list of the top 10 cities for developers came as a surprise to Andrew Warren, director of PwC, a research and advising firm that co-authored the report with ULI.

"This is a city that's attractive to younger generations," he said, adding that its diverse economic base is helping to bring in a lot of college grads that don't want to leave the Midwest.

However, this same group isn't forming new households, and they're not buying as many homes as their parents' generation were at their age.

(2). Second-tier cities will lead the recovery next year
Investors, developers and builders are losing some interest in the so-called 24-hour gateway cities -- San Francisco and New York City -- and have developed more interested in cities like Dallas and Portland, where there are more housing deals to be had.

For example, in 2011 only New York City and Washington, D.C. had good prospects for real estate investors and developers, according to the ULI report, but now Austin, Boston, Dallas, Houston, Miami, Orange County, Portland, San Francisco, San Jose and Seattle make that list -- and D.C. actually dropped out.

(3). Real estate recovery still hinges on job growth
The slow pace of job growth as well as income and wage growth is still holding back the real estate recovery and that's not likely to change quickly.

Many cities in the Bay Area and in Texas have seen strong housing recoveries based on the strength of their economy, said Stephen Blank, ULI senior resident fellow for finance, so places with low unemployment can expect better recoveries next year, while places still haunted by economic issues won't.

(4). The "smile investing" philosophy is back
Real estate developers are interested once again in a so-called smile investment philosophy, Warren said. According to the philosophy, developers and investors start looking at cities in the Northeast and moving south to cities along the Sun Belt -- Florida, Texas, Arizona -- and then coming back up to the Northwest -- Northern California, Oregon and Washington state. So expect to see more activity in those areas than in the Midwest.

(5). Multi-family apartment building will wane
With rapidly rising demand for apartments during the recession -- boosted by increased demand from homeowners-turned-renters -- multi-family building surged. But that's likely to quiet down in 2014, as supply and demand have swapped places -- and there may actually have been too much multi-family building in 2013, Blank said.

(6). Condo development is still on the back-burner
The recovery in the condo market hasn't matched that of the single-family market, and developers aren't willing to take the risk on putting up new condo buildings.

Instead, builders and developers are taking a dual-track option: They build a rental apartment building with an eye on switching it to condos in 12 to 16 months, depending on market conditions, Warren said.
High-end apartment buildings are also proving problematic for developers, as the interest from well-heeled potential renters simply hasn't been consistently strong.

(7). Inventory is coming back
The experts at ULI are predicting that 2014 will be the last year that low inventory will aid property prices. Distressed inventory is drying up and sellers are looking at better profits than they have in years.

(8). The buyer's market is long gone
Homes right now are priced to please sellers. "For buyers, they're priced to disappoint," Blank said.

Sellers now know they can squeeze buyers eager to buy before interest rates and home prices shoot up even further.

(9). Shadow banking is emerging
There's optimism among those surveyed by ULI that lending standards will loosen next year, but Blank isn't as sure.

To fill the void, a concept called "shadow banking" has started to emerge and may take on a larger role in the lending market next year. Shadow banking is similar to traditional bank lending, but it's done outside banks and can therefore get around bank regulations.
Borrowers going this route will find a hodge-podge of private funds, wealthy individuals, family offices, and refugees from other lending markets, according to the report.

(10). The suburban is going urban
There's not a lot of interest in developing suburban areas, Warren said. But where there is, it's surrounding more urban-minded projects located in spots where amenities and public transportation are easily accessible.

Thursday, November 7, 2013

2014 Real Estate Forecast: Experts Give Their Opinion

Christopher Thornberg, economist and founder of Beacon Economics:
Christopher Thornberg
Christopher Thornberg
“Fundamentals are improved. Corporations are making money. Income is rising at a better pace. Real estate is starting to turn the corner,” he said. “The biggest problem we have are with our leaders in Washingotn, D.C., who seem disparate to upset the apple cart at some level.”
Referring to the recent federal government shutdown that froze FHA-insured lending activities, small business lending and IRS-document checks to close deals, Thornberg said having the debate has been deferred to 2014 is somewhat unsettling.
“It’s not over,” he said.
Pushing aside the budget debate, Thornberg said there still is no full set of regulations from the banking industry. No one can agree on what a conventional mortgage looks like. Yet, solid fundamentals should keep real estate prices appreciating at a rate of 20 percent in 2014.
Sean O'Toole
Sean O’Toole
Sean O’Toole, founder and chief executive of PropertyRadar:
“For those who are still underwater, I don’t think this feels like much of a recover,” O’Toole said.
O’Toole described 2012 as the year of the short sales. “There were huge incentives for banks to push them through,” he said. Even with all that movement,  short sales and REOs today represent 25 percent of all home sales. “That’s a substantial percentage of the market.”
The very price appreciation that got the ball rolling now is starting have a different effect. Hedge fund investors are starting to make an exit. ”Prices have risen to a point the ROIs — return on investment — are no longer attractive.”
Mark Palim, vice president of Applied Economic and Housing Research with Fannie Mae:
Speaking to concerns mortgage rates will rise appreciably in 2014, Palim said the popular view that prices drop when lending rates rise isn’t the case, historically.
“Generally speaking, interest rates rise when the economy is doing better,” Palim said. When the economy is doing better, people have higher incomes and they can afford a larger payment. The exception is if there is a large increase in rates over a short period of time. ”In two instances, we saw a slow-down in sales and prices continued to appreciate, but not as fast as before.”
Mark Palim
Mark Palim
Debra Still
Debra Still
 Debra Still, chair of Mortgage Bankers Association:
Calling attention to rules on the Ability to Pay and servicing, Still said the total page count stands at 1,800.  The big concern is, If lenders aren’t ready on Jan. 10 to put the rules in motion, does all lending stop? There are a lot of provisions directed at small creditors.
“Get a good attorney to see if you can play in that space.”
Clearly, the pendulum has swung too far in one direction, Still said.
John Burns
John Burns
John Burns, president, John Burns Real Estate Consulting:
Builders, traditionally holding a big piece of the GDP, at the moment, are optimistic about where the real estate industry is headed.
“The problem is, they can’t grow business because zero dollars were devoted to land entitlement in the downturn,” Burns said.
One reason construction isn’t stronger here is because of the shortage of land, he said. In sub-markets, where builders wrote off 90 percent of what they paid when land was selling at premium rates, the deals brought back to corporate have to look smoking good. Land in Ontario and Rancho Cucamonga is closing at close to peak prices for lots in chief locations.
Leslie Appleton-Young
Leslie Appleton-Young
Leslie Appleton-Young, chief economist of California Association of Realtors:
Markets do turn on a dime, and 2013 has shown that the big changes that happen can be hard to forecast.
When I look backwards to February 2012, it changed dramatically from projections made in 2012 of 6 percent home price increases.
That said, Appleton-Young pointed out that  sustained improvement will take  stronger job growth than the region has now.
“It all circles back to where are the first-time home buyers going to come from? No where, if they can’t move out of the parents’ house and get a job with decent income.”
First-time home buyers, faced with challenges from a good paying job and lack funds to make a down payment to student loan debt, are also likely to be competing with investors, tight lending standards, higher FHA loan fees and lower loan limits.
“This issue of first-time buyers is absolutely critical,” she said. “We are gearing up for a huge affordability problem, and we need to reach out to first-time buyers to help them get into the ballpark.”

Tuesday, October 29, 2013

Bay Area Foreclosures Continue to Decline

Foreclosures and default notices, which deluged California and the Bay Area just a few years ago, have now slowed to a trickle as the economy and the housing market stabilize.
Rising home prices, increased job creation and government foreclosure-prevention efforts caused mortgage distress to plummet in the Bay Area and California in the third quarter, a real estate service reported Tuesday.

"We are getting close to normal, to the extent we can define normal in a boom-bust state," said Andrew LePage, an analyst with San Diego's DataQuick, which produced the report. "Assuming the economic recovery stays on track, this is the final mop-up stage of the foreclosure mess - with the caveat that there are still thousands of distressed cases in limbo."

In the nine-county Bay Area, a total of 1,035 homes and condos were sold at foreclosure auctions in July, August and September, about a third of the 3,224 foreclosures at the same time last year, according to DataQuick. At the height of the housing crisis, in the second quarter of 2008, the number of Bay Area foreclosures - 12,093 - was more than tenfold higher.
Statewide, the 8,030 foreclosures in the third quarter likewise were about a third of last year's number.

Default notices, the first step in the foreclosure process, also fell dramatically.
In the Bay Area, lenders sent 2,776 notices of default in the third quarter, down 62 percent from the same time last year. Default notices for the region peaked at 19,983 in the second quarter of 2009.
Statewide, the 20,314 default notices were down 59 percent from a year earlier.

Home price surge

While a range of factors are wiping out foreclosures, the robust surge in home prices has made the biggest difference this year, LePage said. "Far fewer people are underwater," he said. "That gives them options; they can sell, refinance or get some family help. Their situations don't seem as hopeless." Even people who still owe more than their home is worth aren't as deep in the hole, so it's less likely they will walk away from their homes. "If, a few years back, you were 40 percent underwater and now you're maybe 5 to 10 percent underwater, you are more likely to hang in there, as there's light at the end of the tunnel," LePage said.

There are still lingering concerns. Many distressed homeowners have mortgage modifications, in which lenders reduced their monthly payments. Whether they can meet those obligations, whether lenders will make the changes permanent and whether other struggling homeowners can get their payments reduced, are all factors that remain up in the air.

"We don't know what the outcome will be for those thousands of properties," LePage said. "But the shadow inventory (potential future foreclosures) is nowhere near what it was three or four years ago. Could we see a large wave of foreclosure activity reminiscent of the one we just went though? Even in the worst-case scenario, that does not seem likely."

Counselors' views

Counselors who help struggling homeowners said the change is palpable.
"We see about half as many" new clients this year compared with last, said Katrina Vizinau, coordinator of the Restoring Ownership Opportunities Together program at the Community Housing Development Corp. of North Richmond, which works in Contra Costa, Alameda and Solano counties.
The most common circumstances are either people who have been rejected by their servicer for a loan modification after several months of applying, or people who have a modification but can no longer afford even the reduced payment, she said.

Earl and Lorna Phillips of San Francisco are among homeowners still struggling to hang on. The couple have an adjustable-rate mortgage on their Richmond District home with escalating payments that they find unaffordable.

After Earl Phillips, a school bus driver, had two bouts of serious illness, they fell behind on the mortgage and property taxes. Separately, their loan servicer misplaced some payments when it merged with their previous bank and charged them late fees and penalties, he said.
While they caught up on payments, their efforts to get a loan modification have been fruitless, Phillips said. But their situation also crystallizes the change in types of distress.

Equity but bad credit

Their home is worth $950,000; they owe $650,000, meaning they have substantial equity. Phillips said they cannot refinance because their credit was so tarnished by the late payments.
"Everyone tells me, because you're not underwater and you have equity, the bank feels you should just sell your house," he said. The couple make ends meet by sharing their house with their son, his wife and three children.

Negative amortization

Gale Rosboro of San Francisco also has an adjustable-rate mortgage that allowed her to make minimum payments that didn't cover the interest due and instead increased her principal owed. Such negative amortization loans, which tripped up many homeowners, are no longer offered.
Rosboro said her mortgage debt started at $409,000 seven years ago but because she made the minimum payments, it now has hit $609,000, while her house is worth about $650,000. The monthly amount owed has risen continuously.

"I haven't missed a payment, but I'm always behind," she said. "I haven't sent the September payment yet, for instance, because you have 30 days. "She's been turned down for a loan modification numerous times, despite having stable income from her job teaching literacy and ESL at the San Bruno County Jail. Rosboro said she wants to hang on to the house for the sake of her three daughters. "I hope they won't have to struggle like I did," she said.

Friday, October 11, 2013

2014 California Real Estate Forecast: Larger Inventory, Higher Prices

It's not breaking news that the California housing market is heating up, but now the California Association of Realtors is confirming it on the record, predicting that the trend will continue upward into 2014.

In its latest forecast, CAR predicts primary home buyers will make a comeback after a period of tough competition with investors for what has been a limited supply of homes on the market. "We've come up against an exceptionally low-inventory situation in California for at least the last year and half, and it has started to take a bite out of sales" says Leslie Appleton-Young, the association's chief economist. She says the market is still "robust" but predicts a 2.1 percent drop in the number of homes sold this year over last year due to limited supply.

But two trends are changing that, says Appleton-Young. One is a rapid rise in home values. It's lifting many underwater homeowners — those who owed more in mortgage payments than their homes were worth — providing them with the opportunity to sell. Appleton-Young says that's beginning to boost the number of real estate listings.

The second is a shift in investor behavior. For the past three or four years, investors have bought homes and rented them out. Now, Appleton-Young says they're starting to "flip" the houses — buying, fixing and putting them back on the market — more frequently. The forecast projects home sales to reach 430,300 units in California this year and rise 3.2 percent next year to reach 444,000 units.

The median price of a California home will also increase, according to the forecast: 28 percent this year over last year to $408,600, and then another 6 percent in 2014 to $432,800. So is all of this heated activity sending California into a housing bubble of the kind that preceded the 2008 financial crisis? Appleton-Young's first answer is "never say never," but she believes the dynamics of today's housing market are very different from the bubbly times. For one, it's a lot harder to get a home loan. "The underwriting that goes into loan origination today does not look anything like the underwriting that we had in 2003-6, where you essentially had a pulse and got a loan," Appleton-Young said.

Friday, October 4, 2013

Tips on Selling Your Home in Today's Market

Understanding today's real estate market can make all the difference between making a solid profit or experiencing some of today's real estate doldrums. Getting the most from today's tight marketplace means sellers and buyers need to apply the most current techniques to get an edge on the competition. Here are some tips to gaining an edge in today's real estate sellers' market: Make a Good First Impression The first thing potential buyers will notice in a home for sale is the exterior. First impressions can make a huge difference in the chances of selling your property. Be sure to boost your curb appeal and help draw buyers to your property by presenting a clean, neatly landscaped lawn. Taking pride in your property inside and out can make a big difference. Attract Potential Buyers Having a joint open house with sellers is one way to attract potential buyers. This process is done by joining with two to three other real estate sellers in your area to combine your open house with theirs in an effort to bring more buyers into the neighborhood. One of the great plusses of joint open house days is that it gives buyers a chance to see how neighborhood residents interact. Write a Seller's Letter Another great tip for selling your property is promoting your home and neighborhood to potential buyers by writing a seller's letter that anticipates likely buyer questions and answers them. The seller's letter could include relevant information about the neighborhood, information on the home's history, improvements, or any other distinguishing features. Be Prepared and Flexible Be prepared to show your real estate property quickly since some buyers get interested in your house during their neighborhood visit to another property for sale. They may ask their agent to show them your property listing too. Flexibility with visitation hours may increase your chances of a sale and offer more opportunities to attract buyers. Keep Interior Colors Simple Once potential buyers begin to visit, remember to stick to a neutral color scheme such as beige or cream throughout the walls and accents. When walking through a home, potential buyers want to imagine living there and put their own vision into play. by avoiding extreme color schemes and keeping it simple, potential buyers can see the home as they would want it. Be Open to Feedback When working to sell your property, remember to ask for feedback after your open house. This will allow you to understand where improvements might be made before your next visit day and help you attract more potential buyers. You can gauge visitor feedback by talking directly with visitors during the open house or by using visitor comment cards on other viewings. Make the Price Right In today's market, buyers seem to be in the driver's seat when it comes to negotiating a purchase. They're also more savvy when it comes to knowing comparable sales in the area. It's important for sellers to price their home in the range of similar homes. Even discounting it perhaps up to 15% below the fair price could make the home look like a better deal to potential buyers. Market in the Right Season Real estate purchasing can be a seasonal issue. If you can wait until the high season to offer your property, you might want to consider doing so. This is because during the off season, buyers may be looking to make a deal and might put in a lower offer during the negotiation phase because of less demand. Take time to consider whether you are going to offer your property during the spring, summer, or winter months. Use Your Social Network Social media sites like Facebook, Twitter, or YouTube help information reach larger audiences. Sharing information about your property with your social media network helps spread the word about your listing to not just your friends, but your friends' friends. Use tools like photo galleries and video to share your home's best features. Make it personal. Talk about what you love about the house. Selling a home is never easy in a down market where inventory exceeds demand. By taking some of these steps and being proactive in creating the best experience for potential buyers you can improve your chances of selling your property and possibly make a potentially long and trying experience easier.

Thursday, September 26, 2013

California Real Estate Shows 4 Months Consecutive Cooling

The technology-powered real estate brokerage, Redfin has issued its Fastest Markets Report for August which shows home-selling speeds fell for the fourth month in a row.
In August, 27.9 percent of homes went under contract in less than two weeks, down from 29 percent in July and 33.7 percent in April.
As Redfin's latest Bidding War Report shows, the competitive landscape in the housing market has changed drastically since spring, due to elevated home prices and mortgage rates. This has led many buyers to slow or pause their buying plans over the past four months.
Overall Fastest/Slowest
* San Jose remains the fastest-moving market in August, with 43.6% of listings under contract within two weeks despite slowing slightly from 46.1% in July. Across 23 markets, San Jose has been the fastest every single month since December 2011. * The slowest-moving market was again Philadelphia, which saw 7.0% of homes under contract within two weeks, down from 7.3% in July.
Notable Speed Changes
* San Diego slowed the most from July to August. In San Diego, the rate of homes going under contract within two weeks slowed from 36.1% to 31.6%. Las Vegas sped up the most from July to August. In Las Vegas, 24.7% of homes went under contract within two weeks in August compared with 18.3% in July. * Compared to a year earlier, Atlanta sped up the most. The rate of homes going under contract in 14 days moved from 1.2% to 22.7% between August 2012 and August 2013. * Sacramento slowed the most in the year, dropping from 40% to 34.1%.
Despite the slowing trend throughout summer, market speed could see a slight increase in September as some buyers react to reduced mortgage rates. After surpassing 4.7 percent in mid-August, 30-year fixed mortgage rates eased to about 4.3 percent in September in reaction to the Federal Reserve's decision on September 18 to keep its stimulus program unchanged for now.
Although the rates have dropped only slightly, Redfin agents in Seattle, Washington, D.C. and Los Angeles in recent days have reported a boost in urgency among buyers to find a home.
"I have clients who were planning to move next year. They are now considering selling their condo this autumn because, with lower rates, they believe their money will go further on their next home," said Washington, D.C. Redfin Agent Lisa Greaves.

Tuesday, September 17, 2013

Bay Area Home Sales Cool Off

The sizzling Bay Area housing market cooled in August following one of the most dramatic run-ups in recent years, according to a report released Friday.

After months of increases, single-family home sales dropped 3.2 percent from a year ago, and were down 8.8 percent from July, according to real estate information service DataQuick. While the median single-family price of $588,000 extended several months of double-digit annual gains, it was 3.9 percent lower than it was in July, the first such drop in six months, DataQuick reported.

The market is stabilizing, said Arvin Paredes of Keller Williams in Campbell. "The competitive market made it super-exhausting for people," he said. "They're exhausted from looking for places, school's back in, and the market tends to slow down seasonally in the fall."

 Jim Kabel, a remodeling contractor in San Jose, might be a poster child for the new market conditions. He started looking for a home several months ago but lost out several times to higher bidders. Recently, though, he snagged a townhouse in San Jose.

 "Earlier in the season it was much busier with multiple offers, and people were bidding higher than what I was offering," Kabel said. "Now it's calmed down quite a bit. Places are staying on the market longer, prices are dropping and there's much less competition."

 That means shopping for a home is likely to be less of a challenge in the coming months, said DataQuick's Andrew LePage.

 "Compared to the last four to five months, the evidence is that it will be a pleasurable experience for home shoppers," he said. "There is more to choose from and prices aren't leaping any more."

 That's what Louis and Keelin Marcoux found after months of getting beaten out by higher bidders for homes in Pleasanton. Louis Marcoux, an executive with a Pleasanton medical electronics firm, said they lost out on three houses, only to win the fourth time around in August.

 "It was a blessing in disguise" to be beaten out on the other homes, he said. "It is a better house, a better location, and everything we were looking for. Prices started to cool down just a tiny bit by the time we came to it. It's definitely a little less competitive."

 The months-long trend of strong annual price gains is expected to taper in the fall with fewer buyers, a greater selection of homes to buy and rising mortgage rates.

 "There's not quite the frenzy there was before," said Lanny Baker, chief executive of Zip Realty. "Higher prices and higher interest rates are causing that."

 In Alameda County, the median price for existing single-family homes was $570,000, up 32.6 percent annually but unchanged from July; in Contra Costa County, $435,000, up 39.4 percent annually but down 3.3 percent from July; in Santa Clara County, $744,500, up 24.1 percent from last year but nearly unchanged from July, and in San Mateo County, $867,500, up 33.5 percent from last year and up 4.1 from July.

 Real estate agents report increasing supplies of homes for sale in some -- but not all -- parts of the Bay Area, giving buyers more choices and more time to make a decision to buy. There are still multiple offers and all-cash sales, but the number has dropped.

 The new market conditions mean Sagar Pandey, a civil engineer in Southern California, can take his time shopping for a home in San Ramon. "I have a lot of family members up there and it's time for me to slow down a little bit," he said.

 Pandey plans to look around for at least two months to find the right place.  It's taking longer to sell a home in Contra Costa County, especially homes priced around $700,000 to $800,000, said Marilyn Cunningham of Executive Brokers in Walnut Creek.

 "We have seen a slowdown in our pending sales" in August, she said, a change from six months ago when "in three days you had at least several offers. There's definitely been a shift in the market."

Nearly 10 percent of the homes listed last week in central Contra Costa County had price reductions, said Kevin Kieffer, a Danville real estate agent. He said some sellers overshot the market and had to pull back. "There's more of a selection for buyers, and more of an opportunity to come in at the asking price or even below it," he said.

 Even in Silicon Valley, where the number of homes for sale has dropped since August, the frenzy has eased because there are fewer buyers, said Carl San Miguel, president of the Santa Clara County Association of Realtors. "The pressure is off at this point," he said.
Caroline Miller, president of the Silicon Valley Association of Realtors, said a home that sold last week for $730,000 after a $5,000 price reduction fetched three offers. "Two months ago I would have had six or seven offers on this little house in Campbell as opposed to three or four," Miller said.

Condos, which made up about a fifth of all sales, are still going strong, with sales at an eight-year high for the month of August. The median price of a condo was $445,000, up 39 percent from a year ago.

Thursday, September 5, 2013

Top 10 Housing Markets for Year-Over-Year Price Gains

This list shows how single-family home prices changed from July 2012 to July 2013. These rankings are based on a repeat-sales index that tracks increases and decreases in sales prices and includes distressed sales.

1. Los Angeles-Long Beach-Glendale, CA +22.62%

The Southland housing market includes the cities of Los Angeles, Long Beach and Glendale, Calif. It’s also one of the hottest real estate markets in the country right now, with home prices rising more than 22% annually, according to CoreLogic.
It’s so hot, in fact, that some analysts are starting to use the “bubble” word. According to Jed Kolko, chief economist for the real estate website Trulia, Los Angeles is one of only two metropolitan areas in the U.S. where home prices are more than 10% overvalued (Orange County is the other).
To be clear, home prices in the Los Angeles area are still well below the 2006 peak that occurred during the housing bubble. So there’s no quantifiable cause for concern — yet.

2. Riverside-San Bernardino-Ontario, CA +22.53%

The Inland Empire housing market (which includes the cities of Riverside, San Bernardino and Ontario, Calif.) has also seen major home-price gains over the last year. Prices jumped 22.53% from July 2012 to July 2013, according to CoreLogic’s HPI report.
San Diego-based DataQuick also reports strong numbers for this region. The median sale price for the Riverside housing market rose nearly 26% in July, compared to the same month last year. San Bernardino’s MSP climbed 24.2% over the same period.
Just don’t expect these trends to continue. The number of homes for sale across this metro area is rising sharply. One of the reasons we are seeing such significant price gains in the Riverside and San Bernardino real estate markets (and across much of California) is because inventory plummeted over the last couple of years. But now it’s rising again. This will likely have a cooling effect on local home prices.

3. Phoenix-Mesa-Glendale, AZ +18.10%

Much can be said about the Phoenix real estate market. It was one of the cities hit hardest by the housing crisis. Home prices in the Phoenix-Mesa-Glendale metro area started to plummet in 2006 and didn’t find a solid bottom until the fall of 2011. Today, however, this is one of the fastest rising markets in the country.

4. Atlanta-Sandy Springs-Marietta, GA +15.61%

Atlanta’s housing market is leading the charge in the eastern half of the country. After falling longer and further than most east-coast metros, home prices in Atlanta are now rebounding strongly. Prices in this metro area rose by nearly 16% in July, compared to the same time last year.
Atlanta was also a standout in the latest S&P/Case-Shiller Home Price Index, posting the largest monthly gain of the 20 composite cities.
But here again, we are seeing a significant change with inventory trends. The number of homes for sale in and around Atlanta fell sharply toward the end of 2011, and into the first part of 2012. But the trend is reversing. According to’s monthly housing summary, the total number of active listings in Atlanta’s real estate market has risen by 17.85% in the last year.
Bottom line: Inventory is still tight in this market, but it probably won’t stay that way. Expect home-price appreciation to wane somewhat over the coming months.

5. Houston-Sugar Land-Baytown, TX +11.3%

Job gains and growing demand for housing have yielded strong numbers for the Houston real estate market. According to the Houston Association of Realtors (HAR), home sales rose by a whopping 26% in July, compared to a year earlier.
Listing volume has declined in this market as well, but the inventory crunch seems to be easing. “We are seeing more homes listed for sale, which should help bring the supply-and-demand scale into healthier balance,” said HAR chairman Danny Frank.
See: Texas real estate roundup for August 2013

6. Dallas-Plano-Irving, TX +10.03%

Call it the Texas two step. Like Houston, the Dallas metro area has also moved into the top ten for home-price gains, according to CoreLogic’s latest report.
The broader Texas economy is thriving right now. This is largely the result of oil and gas production, combined with brain drain from other states like California. Job growth in the major metros of Dallas, Houston and Austin has been strong and steady over the last year. When last measured in July, the unemployment rate for Dallas had fallen to 6.4%, below the national average of 7.7%.
But not everyone is happy about the price gains within Dallas’s real estate market. According to Steve Brown, housing writer for the Dallas Morning News: “The pace of home price increases in North Texas is unprecedented and unsustainable. And the quicker the market cools down, the better it will be for everyone.”

7. Washington-Arlington-Alexandria, DC-VA +9.07%

Washington, D.C. was one of the first U.S. housing markets to recover, after the nationwide crisis that began in 2008. We reported on this as far back as January 2011, when the first signs of a rebound were emerging.
The difference here, when compared to some of the cities listed above, is that home prices in Washington, D.C. have been rising steadily over a longer period of time. When viewed on a graph, it’s a gradual upward slope, as opposed to a sharp spike. This is a good thing.
According to Washington Post writers Sheree Curry and V. Dion Haynes, local real estate agents are reporting multiple offers on desirable properties, as buyers and investors compete for limited inventory. Talk about a blast from the past.

8. Chicago-Joliet-Naperville, IL +8.63%

We covered the Chicago real estate market in depth a few days ago (see: Winds of Change Blow Into Windy City). So I won’t rehash it all here. Suffice it to say the Chicago housing market has changed dramatically over the last year and a half. Inventory has declined and continues to fall. This is driving prices up, as evidenced by the CoreLogic numbers and also those reported by Zillow and
According to, the median list price for this market has climbed by nearly 20% over the last year or so. Meanwhile, Zillow reports a 16% jump in the median sale price. Whether listing or selling, the trend is the same. Values are rising.

9. New York-White Plains-Wayne, NY-NJ +7.82%

The housing recovery took longer to reach New England than, say, California and the Southwest. But it’s getting there. Home prices in the New York metro area have risen by nearly 8%, according to CoreLogic. The New York State Association of Realtors (NYSAR) reports a 16.4% increase in closed sales for the month of July, compared to last year.
It’s a good time to be a seller in this market. “The combination of strong buyer demand and constrained inventory levels continue to drive median price gains as sellers received nearly 96 percent of their asking price in July,” said Duncan MacKenzie, the chief executive at NYSAR.
The speed of recovery is mixed across this metro area. For instance, Zillow reports a 4.7% year-over-year increase in the median sale price for White Plains, N.Y.. In Newark, N.J., the MSP rose by 18.4% during the same period.

10. Philadelphia, PA +4.29%

I’m actually surprised to find Philadelphia on CoreLogic’s top-ten list for metro-level price gains. The median list price for the Philadelphia housing market has been mostly flat over the last year or so. Additionally, Philly’s unemployment rate is still higher than the national average. The jobless rate was 10.8% in July, according to the Bureau of Labor Statistics. This limits demand for housing.
As for the future of this market, much will depend on the inventory situation. For-sale inventory has declined a bit recently in the Philadelphia real estate market. If that continues, it could drive additional price gains. Otherwise, appreciation will level off.
Disclaimer: This story makes forward-looking statements about various housing markets across the country, as well as broader economic trends. Such statements should be viewed as matters of opinion, not as matters of fact. We make no guarantees or assertions about future economic conditions within the cities and metro areas listed above


Friday, August 30, 2013

Bay Area Housing Hits a Peak in July

The Bay Area's housing market staged a breakthrough in July, reaching the highest level of sales for any month in nearly seven years, according to a report Thursday. The housing recovery has been bogged down by a lack of inventory. This month's report indicates that is no longer the case, as sellers respond to double-digit price increases.
July's median sale price of $562,000 for all types of homes is up 33.5 percent across the nine-county Bay Area in 12 months, according to real estate information company DataQuick, meaning that homeowners who have been sitting on the sidelines for years can finally sell at a profit.
Jonathan and Breanna Everett just sold their Walnut Creek townhouse for $425,000, about $100,000 more than they paid for it 3 years ago. 
"It was a really big win we never anticipated," said Jonathan Everett. The money was enough for a 20 percent down payment on a single-family home in a desirable neighborhood in Portland, Ore., where the couple is relocating for new jobs in the health industry.

With 9,339 sales in July of all types of homes -- houses, condos and townhomes -- the nine-county region has topped sales for every month since July 2005, before the housing market slumped with the bursting of a home price bubble, DataQuick reported.

"The pendulum is swinging back to normalcy," said Andrew LePage of DataQuick.
Sellers are coming back into the market, said's president Errol Samuelson. "You're seeing the market start to stabilize, which is a really good thing. We didn't want a nice recovery to turn into an overheated market."

Sellers are benefiting from the large yearly gain in median sale prices. Single-family home prices were up 31.7 percent from July 2012 across the nine counties.

In the South Bay, Peninsula and East Bay, median sale prices for existing single-family homes were up double digits from a year ago to $570,000 in Alameda County, $450,000 in Contra Costa County, $740,000 in Santa Clara County and $833,000 in San Mateo County.

Single-family sales in those four counties were not at their highest in seven years for any month, but Santa Clara and Alameda counties had the strongest July in sales since 2005; San Mateo County topped any July since 2006, while Contra Costa had the best July since 2009.

There's good news for buyers, too. Some real estate agents are reporting fewer numbers of multiple offers and some sales for less than the asking price, making it easier for move-in buyers to get into the market. That may be partly because investors are bidding on fewer homes. Absentee buyers -- typically investors -- were 20.9 percent of the market in July, down from a peak of 28.7 percent in February.

"It seems like the investors have backed out of the market abruptly," said Kevin Kieffer of Keller Williams Realty in Danville. "There's enough owner-occupy buyers coming in to fill the gap, and they're getting a better price."

An investor himself, Kieffer said that lately people buying to move in "will beat me back every time."
Bryce Ellsworth of Windermere Ellsworth Associates in Brentwood said he is seeing fewer multiple offers. "Houses that two months ago would have gotten 20 offers are now getting six or seven," Ellsworth said. "One of my clients said he was surprised at the number of choices he had and how nice the homes were."

One of Kieffer's clients, patent lawyer David Chung, is buying a home in downtown Walnut Creek with money from the sale of homes in Sacramento and Santa Clara."We timed it well," Chung said. Even though interest rates have jumped above 4 percent, he's not complaining. "These are incredibly low rates. I couldn't be happier," Chung said.

While overall sales were up, they fell in the most affordable markets, said DataQuick. Sales of homes below $500,000 dropped 14.6 percent from a year earlier, and home sales above that price increased by 55.9 percent.

The median price reached a low of $290,000 for all types of homes in March 2009. It peaked at $665,000 in June and July 2007 -- and at $562,000 in July, the median price has recovered nearly 85 percent of that high.

The median price is partly affected by a decline in the sales of lower-cost homes and an increase in higher-priced homes, DataQuick noted.

Thursday, August 22, 2013

What You Can Expect From Housing In The Second Half of 2013

The U.S. housing recovery continues to make gains. New home sales have surged 38% since last year, hitting a five-year high in June, according to the newest figures from the Commerce Department. And despite a monthly drop in activity, sales of previously owned homes remain 15% higher than last year as well, according to the National Association of Realtors.

If housing in the first six months of 2013 could be summed up in one sentence, it would go something like this: Inventory is painfully tight, sales activity is surging and home prices have jumping.Now real estate experts are sounding off on the trends that will help shape the sector in the second half of 2013. Here’s what you need to know.

We Are Not Re-inflating A Bubble
Home prices have clocked double-digit price appreciation this year. Prices across the 20 major U.S. metro markets were 12% higher in April than they were a year before, according to the S&P/Case-Shiller Home Price Index. Other indexes have registered similarly dramatic gains. The last time prices appreciated by double digits were during the last housing bubble, motivating to question whether a new bubble is beginning to inflate.

It isn’t.  The current pace of growth, while certainly unsustainable for long term market health, is nothing to worry about just yet. “Prices are now rising as fast as they were during the bubble years, but they are still low relative to the levels where they were back then,” explains Jed Kolko, chief economist of Trulia TRLA -0.05%, a San Francisco, Calif.-based real estate site.

He says prices are actually undervalued across most of the country, lower not just than their bubble-era peaks but also lower than their historical norms when adjusted for inflation.
“You can sort of think of it as we overshot on the way down and this is sort of a correction back to something more normal,” adds Mark Fleming, chief economist of CoreLogic, an Irvine, Calif.-based real estate data firm.

Economists do believe home prices will continue to climb throughout the rest of this year. CoreLogic CLGX -0.26% projects 2013 will end with a 6% increase over 2012. And Altos Research, a Mountain View, Calif.-based firm that tracks real estate data in real time, believes 2013’s final tally will be even higher. “Based on the actual supply and demand data, we are looking at 12% year-over-year,” says Michael Simonsen, chief executive of Altos Research.

Still, it won’t last. They say several variables, including increased inventory and higher mortgage rates, will slow the pace growth, which to be clear, is expected to stay positive over the next several years.

More Homes Coming To Market
I’ve said it before. The abnormally tight inventory levels fueling the return of such frothy buyer practices as bidding wars and contingency-free offers will slowly begin to ease. Inventory – which hit a 12-year low earlier this year — is already starting to increase and economists believe that trend will continue despite the season.

In June, there were 7% less home for sale than a year earlier, according to, but the monthly numbers offer the forward-looking story. From May to June, inventory grew by 4%; last year that monthly increase was only 1%.“We think inventory levels on a year-over-year basis will probably flatten out by the end of this year. That will be the first time since 2007,” says Errol Samuelson, president of “I think you are actually going to see inventory growth on a year-on-year basis starting in the fall, but prices nonetheless will continue to appreciate.”
“Inventory started to expand very slowly maybe about four months ago,” echoes Kolko. “We will see that continue as rising prices help owners get back above water and help other sellers decide to take advantage of price appreciation.”

Still, some experts, like Simonsen, believe we could see housing shortages in the most sought after locales as far out as the next three years.

It will come down to new construction as more homebuilders continue to gain confidence and roll new developments. Kolko expects to see more construction commence in places like Texas, the Carolinas, Northern California and other parts of country where there’s strong housing demand, spurring job growth in both construction and housing-related industries.

Since an unusually large portion of new construction is multifamily, increased inventory won’t just help slow the rapid rate of home price growth but also quell rent prices. As many as six million more households will join the rental market ranks over the next decade, according to the National Association of Realtors;  more building in major cities will help keep rents from rising too much in response.

Mortgage Rates Will Keep Climbing
Mortgage rates have risen over the past two months. A recent Trulia survey found rising rates was the number one worry among prospective buyers right now.

Economists believe rates will continue to climb, though at a much less feverish pace than recently witnessed. But while the higher rates – the 30-year fixed loan is about a point higher than it was in early May – mean borrowing is getting more expensive, housing won’t become unaffordable anytime soon. “Prices are still low relative to rents, so at 4.5%, it’s still more than a third cheaper to buy than to rent on average across the U.S.,” notes Kolko. “Not every market will remain cheaper to buy but on average… buying will stay cheaper than renting until rates reach 10.5% — a level we haven’t seen since 1990.”

Still, in metro areas like San Francisco, San Jose, New York and Honolulu, markets that were always historically cheaper to rent than buy before the downturn, rates will begin to tip the scale back toward renting once they rise above 5%.“Our estimation is it would take a 6.5% interest rate to bring affordability just back up to the level of early 2000s, [meaning] neither too affordable nor unaffordable,” adds CoreLogic’s Fleming. “There’s plenty of room for appreciation and rate increases before that and we will probably get a little of both.”

Rising rates may help fuel another trend in the coming months: an easing of tight mortgage credit that has hampered the purchases of even qualified homebuyers. As rates rise, refinancing business dries up, pushing lenders to begin ramping up the mortgages they underwrite for prospective buyers.