Tuesday, January 14, 2014

2014 Will Be the Year to Sell Your Home!

Patience seems to have paid off for those who’ve postponed putting their homes on the market until this year, real estate analysts say. They stand to pocket the kind of profits not seen since the housing boom.
Prices surged more than 10% in many markets last year, bidding wars are once again common, and homes are routinely going for well over the asking price in some cities. These trends make it seem like a return to the go-go days of the housing boom.

Single-family homes were selling at an average price of $244,300 in November, up 7.2% from a year prior and the highest price since August 2008, according to the latest data from the National Association of Realtors. Homes in major cities are experiencing big jumps in prices: In the 20 largest metro areas, prices in October increased at the highest year-over-year rate since February 2006, according to data released last month by the S&P/Case-Shiller Home Price Indices. “All in all, it’s a good time for people to put their home up for sale,” says Celia Chen, senior director with Moody’s Analytics.

The turnaround comes roughly seven years after the housing bust and amid signs that the economic recovery is picking up. As the unemployment rate drops and consumer confidence increases, more buyers are entering the housing market and sellers are finding that they have more leverage in negotiating the going prices of their homes.

Fueling this seller’s market are several factors that have unexpectedly converged: For-sale listings are limited, which is pushing prices up at the same time that mortgage rates are rising. That’s created a sense of urgency among buyers, many of whom fear that the door to affordable real estate in their market may be closing.

Rachael DeRoche, a pilot in the U.S. Air Force, says she recently started looking for a two-bedroom, two-bath condo in Charleston, S.C. and is frustrated by the lack of for-sale properties. DeRoche, 28, says she has expanded her search beyond the city’s center in the hopes of finding the property she wants. “Rates are rising and with limited listings out there, it puts people in a position to kind of accept something that they may not truly want…I worry that may happen to me,” she says.

In fact, data suggests that buyers are snatching up properties faster now. Homes in November 2013 were selling 11% faster than they were a year prior, according to the latest data from Realtor.com, which tracks for-sale listings. In several cities, that rate is even higher: Homes were selling 20% faster in New York and Miami, for instance, and 18% faster in Chicago and Dallas.

To be sure, the recovery to date hasn’t been enough to get every homeowner out of the red. In the third quarter of 2013, according to real-estate analytics firm CoreLogic, nearly 6.4 million homes were underwater, meaning borrowers’ mortgages were greater than value of their homes. These homeowners for the most part cannot sell their home unless their lender agrees to a short sale, in which the home is sold for less than the debt owed on it.

Still, homeowners with enough equity can benefit from current housing conditions. Inventory remains limited, which allows sellers to ask for higher prices. There were just shy of 2.1 million existing homes for sale in November, which equals a 5.1-month supply, according to the latest data from the NAR, a figure indicative of a seller’s market. A balanced market, in contrast, would have about six to 6.5 months of supply.

Separately, the Federal Reserve’s announcement in December that it’s tapering its bond purchases (from $85 billion to $75 billion per month) suggests that the era of historically low mortgage rates is coming to an end. While rates were rising before the Fed’s tapering decision — for instance, average rates for 30-year fixed-rate mortgages increased by more than one percentage point from May until September 2013, according to mortgage-info website HSH.com — mortgage experts say they’re likely to rise further as the government unwinds its bond-buying program. The impact on buyers will be twofold: Some will likely pick up the pace of their home search so that they can lock in a mortgage before rates get too much higher.

Separately, as rates rise, they won’t be able to qualify for as large of a mortgage as they can now since higher rates will result in larger monthly payments that they may not be able to afford. “The expectation is that costs to buy later will be higher than they are now,” says Keith Gumbinger, vice president at HSH.com.
Of course, a buyer’s problem is often a seller’s upside, which might incline homeowners to hold off selling even longer for the possibility of even higher prices. While sales prices could rise, waiting comes with several risks, which could slow or even reverse recent price gains. Should the economic recovery — in particular, job growth — stall, home sales and prices could drop. And if mortgage rates spike suddenly by one full percentage point or more, demand could dampen.

But the biggest risk is from the supply side. It’s expected that the number of for-sale homes will rise this year, with much of the extra supply coming from home builders. Moody’s Analytics projects that construction will begin on 1.43 million new homes this year, up from slightly under 1 million that were expected for last year. This event alone could stall price gains. “Going forward this year, the level of price appreciation will likely be nowhere near what we witnessed in 2013,” says Stuart Gabriel, director of the Ziman Center for Real Estate at the University of California, Los Angeles.

Beyond 2014, more homes are expected to hit the market. Since the recession, investment firms, including private-equity firms and hedge funds, have been purchasing large numbers of single-family homes and turning them into rentals. Some analysts say that the supply-demand imbalance that has helped create this seller’s market is largely due to this trend. Those companies will likely put a large number of those properties for sale at the same time in a few years — which would put downward price pressure on nearby listings, says Jack McCabe, an independent housing analyst in Deerfield Beach, Fla.                     

Thursday, January 9, 2014

Is Now A Good Time to Sell?

The housing market’s recovery has been shoring up the U.S. economy, but it is still challenging for homebuyers, according to real estate market trends tracked by a new survey conducted by real estate brokerage Redfin.

Now is an advantageous time to sell, say two-thirds (65 percent) of 468 Redfin agents surveyed in the fourth quarter. This is down from 72 percent in the third quarter and 86 percent, a 2013 benchmark, in the second. Just over half (56 percent) of surveyed agents said that it was a good time to buy a home in their area.

Nearly nine-in-ten respondents (87 percent) said that low inventory is the primary challenge for potential homebuyers, which is necessitating more aggressive strategies. While nearly half (45 percent) of agents said that buyers delayed their search during the holidays, more than one-third of buyers (35 percent) are willing to pay more than the seller’s asking price, while just over three-in-ten (31 percent each) are willing to either be flexible on the features they want or are lowering their expectations.

Almost two-thirds (63 percent) of sellers consider “unrealistic expectations” as their primary challenge, the survey finds. Higher mortgage rates could seriously impact real estate market trends, agents fear. Almost four-in-ten (39 percent) said that mortgage rates of 5.5 percent would significantly limit sales and price gains, while one-third said mortgage rates of 6 percent would have the same effect.

Industry analysts project that mortgage rates could exceed 5 percent later this year. Rates for a 30-year fixed-rate mortgages hit 4.69 percent last week, according to Bankrate.com.

The most recent National Association of Realtors report showed that sales of previously-owned homes in November dipped 1.2 percent to an annual rate of 4.9 million sold. This was the third consecutive month of sales decline, which NAR attributes in part to the higher mortgage rates. Tight credit and limited inventory are other factors.

There are, though, encouraging real estate market trends. The bottleneck in new home construction may be easing, CNN reports. A December government report showed housing starts were up 19 percent of the first 11 months of 2013 compared to a year ago. However, the pace of home building is 25 percent below long-term averages.

The median home price of homes sold in November was $244,500, up 7.3 percent from a year ago, the government report found.

The NAR’s Pending Home Sales Index, an indicator based on contract signings (but not closings), ticked upward 0.2 percent in November. The National Association of Home Builders also reported that, except for October 2013, sales of newly-built, single-family homes in November enjoyed their strongest paces since July of 2008.

Friday, January 3, 2014

Looking Into The 2014 Crystal Ball

Home prices got off dead center as early as February, and climbed like the California Screamin’ roller coaster ride at Disney California Adventure Park. Unpredicted price escalation took hold for the rest of the year.

Foreclosure filings took a steep fall. The market rumbled toward recovery, despite pinched inventory and hairpin turns.

Thanks to the national debt ceiling talks, there was even an OMG moment as the year wound to a close. Economists wagged their fingers at Washington politics. Consumers took a deep gulp. And, for a spell, it seemed the Car Land sign that reads, “Dang Near Fainted,” had popped up on our road to recovery to throw a wrench in the works.

But, it didn’t happen.
As the year rolled to a close, and everyone caught their breath, seat belts should remain buckled. For 2014, more of the same, perhaps a milder ride, is predicted. But, still, it’s a conundrum as we make our way toward a full recovery.

Here’s why:
Take-Away: The economics of supply and demand played out. Most expected median price gains of 6 percent. Come February, an 18 percent median price jump in a region battered by foreclosure and short sales was a big wake-up call.

The year didn’t disappoint on price. The Inland had its strongest gains in six years. Home prices rose nearly 30 percent in some places. The crescendo, keeping demand sharp, did not abate.

Around-the-Corner: Price increases helped restore equity to many homes, and it put sellers back in the ballgame. That will help bolster supply. But it’s not a seller’s market, yet. Homeowners who get too aggressive could be left in the dust. Buyers are still bottom-feeding when it comes to price.
The hunch is, home prices will continue to rise in 2014, but at a more moderate pace. Buyers who’ve been hoping to catch a slice of California real estate need to be nimble, and run the risk of losing out. Affordability will become an issue for some wage earners here.

Take-Away: There’s nothing like that new-home smell. And, with existing home prices on the rise, there’s been a gravitational pull toward the new-home market. As construction costs penciled out, Inland region builders called a pool of long-idled craftsman to the labor force.
But the new-home market was hobbled so badly, it will take time to see a bumper crop of rooftops on the skyline. Building permits rose by the hundreds in 2013, not the thousands, as they did in the go-go years.

Around the Corner: This will be another building-block year. With Eastvale nearly built out, Jurupa Valley and commuter areas farther from the coast and work centers — think Banning/Beaumont, Calimesa, Menifee and the Coachella Valley as spots that ripen for new-home prospecting. We’re going to start to see more projects in the pipeline for 2015 and 2016.

Take-Away: Buyers follow price. So, with limited single-family detached homes coming into the market at prices under $200,000, attention turned to townhomes and condos. Young adults who are finally back on their feet, and can no longer deal with living at mom and dad’s or in shared apartments, got antsy.

Around-the-Corner: Demand will intensify for multifamily and condo-style housing, now that job growth is going in the right direction. Condo buyers in this realm are putting a premium on mobility; a lock-and-go lifestyle.

Take-Away: The much ballyhooed shadow inventory didn’t materialize in 2013, as some suspected it would. There was a lackluster start to foreclosure filings in the first part of the year — filings clocking in at a rate of about 4,750 notices of default, trustee’s auctions and take-backs were down about 54 percent from 2012.

By year’s end, filings were just shy of pre-recession levels.
Short-sale activity hit the skids. Buyers in the midst of protracted short-sale purchases exposed the hand of lenders who, as assessments rose, put off close of escrow with demands for more money. By year’s end, Realtors reported that 80 percent of all sales involved homes with equity.

Around the Corner: With home equity rising, and some GDP growth, foreclosure activity could return to a normal pace. The pool of mortgaged homes that are under water, meaning the loan is higher than the house is worth, could fall below 25 percent. A year ago, more than 50 percent of the mortgaged property was under water.
Keep an eye on the horizon, though: Some analysts see a final blip in foreclosure filings as the last of the distressed property is flushed out. They believe lenders took a bit of a hiatus as they acclimated to provisions of the California Homeowner’s Bill of Rights Act.

Take-Away: Interest rates ticked up. Mortgage lending jumped to a five-year high, driven by a sharp spike in refinancing as borrowers rushed in to lock down some of the lowest rates in 60 years before beginning a predicted climb out of the trenches. Any rise from historic lows was not unexpected. Neither was the Federal Reserve’s announcement it would start to taper its bond-buying program to $75 billion a month beginning in January, and lower its long-term Treasury bond and mortgage-backed securities purchases by $5 billion each.

Around the Corner: New mortgage rules, with tighter standards, take effect this year. And, the FHA maximum loan limit has also dropped 29 percent to $355,350 from $500,000. These two variables, along with a predicted rise in lending rates, will make this the year to watch how the housing market gyrates in response. Money finds a way, so lenders will likely get creative about how to put buyers into home loans. Watch closely, as modified lending products come into the marketplace.