Wednesday, July 27, 2016

6 Trends Moving Real Estate in California This Summer

Here are a half-dozen things you should know about California’s housing market as the second half of 2016 starts ...
No. 1: Prices are still rising
The median selling price of a California home hit a nine-year high at $441,250, up 6.3 percent in a year, according to Property Radar. Gains are fairly widespread with prices in 18 of California’s 26 largest counties reaching similar heights. And for those who like pricey: San Mateo County hit $1.27 million, the highest median of any county in Property Radar records that date to 2001.
No. 2: Many buyers are still paying up
In June, 35 percent of sales sold at prices above the sellers’ asking price, says the California Association of Realtors. Those premium payments are down from May’s record 38 percent but above 33 percent in June 2015. That’s probably because 72 percent of the homes sold in June drew multiple offers in June vs. 65 percent a year earlier.
No. 3: Sales were down
Prices too high? The 41,291 California single-family homes and condominiums sold in June were down 4.5 percent in a year, Property Radar says. Year-to-date, sales are off 2.8 percent. Is it a shortage of shopper choices or are house hunters antsy about the economy?

No. 4: Even cash buyers are slowing down
Property Radar reports no-mortgage purchases were 19.7 percent of all June sales, but these all-cash deals were down 7.8 percent from June 2015. Purchases by shell companies, often investors using cash to buy, were down 2 percent from a year ago.
No. 5: All said, relatively solid
Freddie Mac has a curious index, the Mimi, that translates current real estate trends into a historical perspective measure where 100 equals “normal” and markets can be cool (well below) or overheated (well above.) For May, California's Mimi was 94, 3 percent better than a year earlier and “in range and improving.”
No. 6: The outlook is brighter
Look for higher levels of activity this summer. California Realtors’ Pending Home Sales Index for June was up 3.2 percent for the 12 months ended in June. This benchmark, based on signed deals going into escrow, is a good barometer of future closings.

Friday, July 22, 2016

What a GOP President Could Mean for Homeowners

The news coming out of the Republican National Convention in Cleveland has so far been dominated by whether Melania Trump intentionally ripped off a chunk of her speech from first lady Michelle Obama (blame the speechwriter), angry protests outside the event, and which celebrities and politicos showed up to support presidential nominee Donald Trump (and those who stayed away).
But here’s what the press hasn’t been focused on: what a Republican in the White House, especially a real estate mogul, would mean for the U.S. housing market. Surprised? After all, buying a home is the biggest purchase most Americans will make in their lifetime—and represents the kind of financial stability that many of Trump’s supporters say is impossible for them to achieve in the new economy. Trump has been pretty tight-lipped about what his potential presidency would mean for renters, buyers, and homeowners
But not anymore.
The Grand Old Party released its 66-page Republican Platform 2016 this week at the convention. And in it, finally, are at least some details of how the Republicans hope to define—and ultimately limit—the federal government’s role in the real estate market.
It’s still a bit vague—but hey, with the election just four short months away, it’s something.
“Homeownership expands personal liberty, builds communities, and helps Americans create wealth,” reads the platform. It later goes on, “We must scale back the federal role in the housing market, promote responsibility on the part of borrowers and lenders, and avoid future taxpayer bailouts.”
But real estate analysts were quick to point out that these reforms could, in some instances, potentially force buyers to plunk down larger down payments or pay higher interest rates.
“The heart of Republican support—blue-collar, middle-aged workers—are the people who will [be affected] the most,” says Bob Edelstein, co-chair of the Fisher Center for Real Estate and Urban Economics at the University of California, Berkeley. “It may be harder to get mortgages, and those that will be available will be less advantageous.”

Bye-bye, Fannie Mae and Freddie Mac?
The language in the platform is unclear, but it appears the party wants to do away with—or substantially shrink—both Fannie Mae and Freddie Mac. The platform referred to the business models of the pair as “corrupt” and allowing “shareholders and executives [to] reap huge profits while the taxpayers cover all losses.”

But calling the current system broken is the easy part, says Christopher Palmer, a real estate professor at the University of California, Berkeley.
“The platform doesn’t propose any replacement for the current mortgage-market system that we have, with its reliance on Fannie and Freddie and [the Federal Housing Administration],” he says.
The Republicans would also stop the FHA from providing taxpayer-guaranteed mortgages to wealthy home buyers. The FHA typically insures loans for low-income, first-time, and other buyers who don’t have enough for a 20% down payment.
Currently, the largest FHA-backed loan that borrowers can receive is $625,500—but that’s only in the country’s most expensive areas. The average FHA-backed mortgage so far this year is just over $194,000.
The GOP platform also calls for an end to the government-mandated number of loans that Fannie, Freddie, and federally insured banks are encouraged, if not required, to set aside for “specific groups.”
“Discrimination should have no place in the mortgage industry,” reads the platform.
It’s unclear which groups the party is referring to, but Fannie and Freddie currently have goals for at least 24% of their single-family mortgages to go to low-income borrowers.

Less federal oversight of local housing markets

The party also appears to want to end the Affirmatively Furthering Fair Housing rule, although the platform doesn’t explicitly say so. The rule requires communities getting federal housing dollars to take steps to overcome segregation in their areas—or pay fines.
“While the federal government has a legitimate role in enforcing non-discrimination laws, this regulation has nothing to do with proven or alleged discrimination and everything to do with hostility to the self-government of citizens,” according to the platform.
But doing away with the rule and leaving these issues in the hands of local leaders is risky, warns urban policy professor Rachel Meltzer of the New School in New York.
“There’s a long history of local governments using zoning essentially to discriminate against lower-income residents,” she says.

Hit the road, Dodd-Frank?

The Republicans also seem to want to repeal—or at the very least, limit—the Dodd-Frank Wall Street Reform and Consumer Protection Act. Now this is something that has been talked about—a lot. The act provides more oversight of financial institutions in the wake of the housing bust that plunged the nation into a recession.
“From start-ups forgone to home loans not made, Dodd-Frank’s excessive regulation and burdensome requirements have helped contribute to the slow economy we all endure today,” reads the platform.
The party also wants to get rid of the Consumer Financial Protection Bureau (or subject it to congressional appropriation). The bureau, created through Dodd-Frank, is charged with protecting consumers against predatory financial services companies, including those providing mortgages.
Republicans allege that its “regulatory harassment of local and regional banks, the source of most home mortgages and small business loans, advantages big banks and makes it harder for Americans to buy a home” in the platform.
But Dodd-Frank and agencies such as the CFPB are key to ensuring financial markets are kept in check and act fairly, says Berkeley’s Edelstein.
“The financial system needs to be protected,” he says.

Friday, July 15, 2016

Low Housing Inventory Blamed for Bidding Wars

Ask any agent in the major metro areas of California what the hardest part about the market is right now and every single agent will tell you the same thing – no inventory. Houses are flying off the market within days, with most receiving multiple offers pushing the prices higher than list price. Constant bidding wars are occurring across the state. What does this mean, and how can you manage to buy a home in CA in today’s market?
Nationwide, bidding wars are showing signs of losing steam, with 61% of offers being put into multiple offer situations, down from 63% in March 2014. However, in places like San Francisco and Sacramento, 94% and 81% (respectively) of homes are entering into multiple offer situations. What’s more is the scary fact that 72% of homes in San Francisco are selling for over asking price. In San Diego, the median home price of $4758k has surpassed the median from August 2007, $475k, still lower than the 2005 median price of $517k though.

Extremely low inventory seems to be the main cause of these bidding wars. This is apparent when considering that the total number of home sales is only increasing by about a couple percent, 2% in San Diego County over the past year. Prices climbing and inventory shrinking, coupled with interest rates continuing to remain at all-time lows, results in an extremely competitive buyers’ market. This means Agents need to stay creative and Buyers need to stay confident and patient.
Agents have had success winning over other offers through numerous methods, some of which include detailed cover letters (43%), waiving inspection (20%), waiving financing contingency (15%), or paying in all-cash (11%). These are tools that buyers need to be made aware of and get comfortable with when entering the CA real estate market. Buyers should remain confident though, as California has shown its resiliency with every increasing housing demands. With interest rates staying so low and the CA market keeping strong, it’s still a great investment when purchased correctly.

Friday, July 8, 2016

San Francisco Raked as #1 Top Perfoming Market for Rentals

BOSTON--()--All Property Management, a Buildium subsidiary and operator of the largest online network of property management services, today released findings from its inaugural Rental Ranking Report. This report features insights into the attractiveness of real estate investment in 75 major U.S. metropolitan areas, over all four quarters of 2015. The higher a metropolitan area’s ranking, the better ROI for rental housing within it. The report includes a breakdown of regional performance trends and a look into early indicators for Q1 2016 and the rest of the coming year.

The Rental Ranking Report is calculated with a combination of U.S. real estate, rental housing and jobs reports, along with property appreciation forecasts. A comparison of quarter-over-quarter and year-over-year data is analyzed to discover how rental markets are changing. The nine indicators that are used include: vacancy rate, rent variance, capitalization rate, property appreciation, job growth, days on market, future rental availability index, job availability index, and tax and insurance cost index.

With the U.S. homeownership rate falling to its lowest rate since 1967 in July 2015, this has been a banner year for many rental property owners, with vacancy rates at their lowest since 1993. The rental market in the U.S. reached $173B in 2016, and although rents rose significantly, they still increased at a lower rate than that of the median U.S. home price. In addition to these market statistics, some of the results from this year’s report include:

  • Top Performing Metros
    • The top five performing metros for the past year include: San Francisco (CA), Seattle (WA), San Jose (CA), Louisville (KY) and San Diego (CA).
  • Top Performing Region
    • The Western U.S. is currently the best region for rental property investment, thanks largely to the impressive rent increases and property value appreciation found there.
  • Vacancy Rate
    • Worcester (MA) had the lowest vacancy rate with 3.05%, and Birmingham (AL) came in the bottom spot with a 17.67% vacancy rate.
  • Rent Variance
    • The percent change in median rent was best in Buffalo (NY) at 16% and worst in Hartford (CT) at -6%
The report also looked at other factors pertaining to the quality of real estate investments. Some additional data points include the capitalization rate, or the comparison of median rental prices to median property values (Dayton (OH) had the highest percentage at 13.15%) and property appreciation, where San Francisco (CA) had the highest percentage at 7.34%. The report also looked into job growth (San Jose (CA) had the highest growth at 19.11%), days on the market (San Francisco (CA) had the lowest number of days at 33) and future rental availability, where Austin (TX) experienced the best percentage at -1.47%. Finally, the research also included data on job availability, where it compared population numbers to current job openings (San Jose (CA) had the highest availability at 36), and the cost of insurance premiums and property taxes, where Salt Lake City (UT) came in with the lowest cost.