Monday, August 24, 2015

California Pending Home Sales Soared in July

Pending home sales in California soared in July compared to the previous year, posting the strongest year-over-year increase in more than six years, an industry trade group reported Monday.
But there are signs of a possible forthcoming decline in real estate activity after California Realtors, responding to CA’s July Market Pulse Survey, saw a reduction in floor calls, listing appointments, and open house traffic, compared with June.

The Market Pulse Survey is a monthly online survey of more than 300 California Realtors, which measures data about their last closed transaction and sentiment about business activity in their market area for the previous month and the last year.

The Pending Home Sales Index, meanwhile, climbed 17 percent on an annual basis to 122.4 in July, based on signed contracts, CAR said in a statement. The July 2015 index was up from the 104.5 index recorded a year ago and marked the eighth straight month of year-to-year gains and the sixth straight month of double-digit advances, it said.

Statewide pending home sales in July also reversed a three-month decline, rising 1.6 percent on a month-to-month basis.

Pending home sales in Southern California were essentially flat, dipping 0.3 percent from June to reach an index of 109.3 in July but up 16.8 percent from a year ago.

At the same time, the share of equity sales — non-distressed property s
ales — increased in California in July to post its highest level since late 2007. Equity sales made up 93 percent of all home sales in July, up from 92.4 percent in June and 90.2 percent in July 2014, according to CAR.

Conversely, the combined share of all distressed property sales fell in July to 7 percent of total sales, down from 7.6 percent in June and 9.8 percent a year ago.

CAR also reported today that the share of sales closing below asking price was unchanged in July, remaining at 43 percent. More than a third of homes — 34 percent — closed above asking price, and 24 percent closed at asking price, CAR said.

For the one in three homes that sold above asking price, the premium paid over asking price remained at an average of 11 percent, unchanged from June but up from 11 percent in July 2014, and the 43 percent of homes that sold below asking price sold for an average of 9.6 percent below asking price in July, down from 11 percent in May, according to CAR.

Tuesday, August 11, 2015

Bay Area Home Prices Seen Higher in 2016

Like many people in the Bay Area, Ken Ball and his wife would like to sell their home in Oakland and use the profit to buy a house without a mortgage somewhere cheaper. The problem is, they can’t do it for nine to 12 months, and Ball wonders where the market will be then.

“I think we are at some kind of peak” in the market, but “we are probably not ready” to sell, he said. “Is there a resource that offers Bay Area housing price forecasts out a year?

Many people forecast home prices for the state or U.S., but these are of limited use because real estate is hyper local. Most forecasters expect Bay Area prices will be higher a year from now, although the rate of appreciation will slow.

Zillow, the real estate website, forecasts home values all the way down to the ZIP code. It first looks at macroeconomic factors such as unemployment, mortgage rates, construction costs and land availability, then looks at what prices are likely to do based on what they are doing today. It updates its forecast every month.

It predicts that home values will be higher in June than they were this June in all nine Bay Area counties, with increases ranging from 1.5 percent in Sonoma to 6.8 percent in San Mateo. 

Readers can find Zillow’s forecast by going to Under Additional Data Products, click on Data next to the line labeled Zillow Home Value Forecast and you will get a spreadsheet with Zillow’s price forecast for every metro area, city and ZIP code.

Ken Rosen, chairman of the Fisher Center for Real Estate at UC Berkeley, said he thinks real estate prices will “slow substantially” in 2016, but will still be positive. In June, prices in Bay Area counties were up 10 to 20 percent over the previous year. “The three things that are causing this — the huge increase in jobs, the supply shortage and very low interest rates” will all begin to change in 2016.
He sees mortgage rates going up a half a percent, job growth slowing and inventory growing. 

“Because of the big price increases, people will start thinking maybe they can sell their house,” he said. “We might see a bigger supply next year than we have the last couple of years.”

A year from now, he predicts prices will be 7 percent higher in the East Bay and 9 percent higher in San Francisco. “I don’t see prices going down unless we have a big recession or mortgage rates going up much higher than a half a percent.

Mark Schniepp, director of the California Economic Forecast, also sees Bay Area prices going up. “Our forecast was made in April. We had 6 to 7 percent for this year,” which proved to be conservative. “In certain cases, (price increases) are off the charts.”

At the time of his forecast, he predicted that prices in San Francisco would be 6.1 percent higher in 2016, 4.4 percent higher in 2017 and 3.6 percent higher in 2018. His forecasts for other Bay Area counties are in the same ballpark. He considers the current rate of appreciation unsustainable.
“You are approaching another bubble-like condition,” he said. “At some point in time, you are going to see it level off or pare back so that the annual average for 2015 is going to be a little more rational. If it doesn’t, I would want to adjust 2016 so it might actually show a decline.”

Jerry Nickelsburg, an economics professor at the UCLA Anderson School of Management, predicts that Bay Area prices will be higher for a simple reason. “Home demand depends on household formation,” which includes people moving to the Bay Area, kids moving out of their parents’ house and roommates moving into their own homes. “You have had very rapid job and income growth. That has fueled demand for housing, but you have not had much increase in the stock of housing. That gives you better home prices.”

His forecast is for the Bay Area to experience job growth faster than the U.S. over the next 12 months. “That is going to mean higher home prices,” he said.

Dean Wehrli, a senior vice president with John Burns Real Estate Consulting, agreed. “There is no question that a year from now, prices will be higher,” he said. “Three years from now, that’s a harder question to answer.”

Nela Richardson, chief economist with Redfin, a real estate website and brokerage, does not forecast local prices. But she said homeowners can get a sense of where they are going by looking at statistics such as how many days a home is on the market before it sells, the percentage of homes selling above list price, and inventory, or how many months it would sell all of the homes on the market at the current pace of sales.

In June, homes in the San Francisco metro area stayed on the market for 19 days versus 15 days the previous June. Although 19 is very low, “it looks like it is slowing significantly,” she said. The fastest market was Denver, where homes lingered only five days. The nationwide average was 26 days, a record low since Redfin started keeping track in 2009.

As for inventory in the San Francisco metro area, it’s running around 2.3 months. “Anything over six months is considered a buyer’s market,” Richardson said. Below that is considered a seller’s market. Oakland has just 1 ½ months of supply. “It’s a more affordable market than San Francisco,” she said.
Although low inventory “generally” means higher prices, things may get so unaffordable that buyers move to the sidelines. “You don’t always have to buy. We are seeing in San Francisco, buyers are a little more hesitant. It used to be, anything upright can be sold.”

Sunday, August 2, 2015

Bay Area Median Home Price on the Rise

The median home value in San Jose is $783,100. San Jose home values have gone up 10.7% over the past year and Zillow predicts they will rise 4.5% within the next year. The median rent price in San Jose is $2,830, which is lower than the San Jose Metro median of $2,980.

Foreclosures will be a factor impacting home values in the next several years. In San Jose 0.8 homes are foreclosed (per 10,000). This is greater than the San Jose Metro value of 0.7 and also lower than the national value of 3.8

Mortgage delinquency is the first step in the foreclosure process. This is when a homeowner fails to make a mortgage payment. The percent of delinquent mortgages in San Jose is 3.9%, which is lower than the national value of 6.0%. With U.S. home values having fallen by more than 20% nationally from their peak in 2007 until their trough in late 2011, many homeowners are now underwater on their mortgages, meaning they owe more than their home is worth. The percent of San Jose homeowners underwater on their mortgage is 4.3%, which is higher than San Jose Metro at 3.8%.