Western Cities Lead the Pack In Home Price Recovery

If you’re looking for the source of this year’s home price recovery, look West.

Western cities are recovering strongly after being hit hardest during the real estate bust. The trend was confirmed Tuesday with the release of the Standard & Poor's/Case-Shiller index of 20 large cities. The index was down 0.1% in October from September but up 4.3% compared with October 2011.

San Francisco and Phoenix have both rebounded from their most recent lows. The two cities are up 22.5% and 22.1%, respectively. The improvement in those two cities illustrates distinct real estate trends on the West Coast.

The San Francisco example shows how coastal markets in California are rising sharply even as inland areas lag behind. The San Francisco metro area is one of the most desirable housing markets in the nation.

The Bay Area’s economy, and the housing market there, have also been boosted by the strength of the technology industry.

Phoenix, on the other hand, has recovered sharply as investors have poured into that market looking for homes to buy on the cheap, renovate and then either rent out or sell.

Investors in the Phoenix area made about 37.2% of all home purchases last month, according to research firm DataQuick, that number has declined as buyers intending to find a place to live have been lured back to the market. The peak for absentee-buyer purchases in the Phoenix area was March of last year, with investors snapping up 47.1% of all homes that month.

According to the Case-Shiller data released Wednesday, prices in the Los Angeles metro area are up 10.5% from their bottom and up 12.2% in San Diego.

In terms of month-over-month gains, Las Vegas posted the strongest increase up 2.8% in October over September. That city also hit an important benchmark in October, rising above its January 2000 index level for the first time in 22 months.

Of all the cities, Chicago was the weakest with prices dropping 1.5% month over month, while Boston was a close second, falling 1.4%.

Bay Area Median Home Price Hits $550,000

Citing increased demand, strained inventory, record-low mortgage rates and robust investor interest, a real estate information service reported this month that Santa Clara County continued its rise in this fall.

DataQuick reported that the median home price in Santa Clara County rose to $550,000 in November, up 21.7 percent from $452,000 a year earlier. A total of 1,478 homes were sold in November, up 15.5 percent from 1,707 in November 2011.

The rise of the median home price in Santa Clara County had some individual cities showing remarkable spikes, according to DataQuick's city data for October. In Palo Alto, for instance, the median home price jumped from $1,058,000 in October 2011 to $1,605,000 in October 2012, a more than 51 percent increase.

Los Gatos, Gilroy, Milpitas, Saratoga and Mountain View all had double-digit, year-over-year percentage increases in their median home price.

The month of strong sales and rising sale prices in Santa Clara County was on part with most of the Bay Area housing market, which "continued its march toward normalcy in November," DataQuick reported.

A total of 7,296 new and resale homes were sold in the nine-county Bay Area last month. That was up 15.5 percent from 6,317 for November 2011, according to DataQuick.

“Current trends are likely to stay with us well into spring, at least,” John Walsh, DataQuick president, said in a statement. "One of the variables that could really impact the market would be supply—how many homes are put up for sale. There are still mortgage finance issues. Some loan categories are not active. But right now, low mortgage interest rates make up for that."

The median price paid for a home in the Bay Area was $438,000 in November. That was up 5.3 percent from $416,000 in October and up 20.5 percent from $363,500 in November a year ago. Last month’s median was the highest since August 2008, when it was $447,000.

Here's a Bay Area breakdown of home sales and median price: 

All Homes	#Sold	#Sold	% Change	Median	Median	% Change
	Nov. 2011	Nov. 2012		Nov. 2011	Nov. 2012
Marin	239	272	13.8%	$629,000	$682,000	8.4%
Alameda	1,334	1,525	23.7%	$340,000	$415,000	22.1%
Contra Costa	1,225	1,394	13.8%	$255,000	$322,000	26.3%
Napa	99	133	34.3%	$297,000	$360,000	21.2%
Santa Clara	1,478	1,707	15.5%	$452,000	$550,000	13%
San Francisco	422	524	24.2%	$644,500	$728,000	25.1%
San Mateo	513	612	19.3%	$542,500	$618,000	13.9%
Solano	522	584	11.9%	$190,000	$221,500	16.6%
Sonoma	485	545	12.4%	$285,000	$349,000	22.5%
Bay Area	6,317	7,296	15.5%	$363,500	$438,000	20.5%

Last month distressed property sales—the combination of foreclosure resales and “short sales”—made up 35.0 percent of the resale market. Foreclosure resales—homes that had been foreclosed on in the prior 12 months—accounted for 11.5 percent of resales in November.

Absentee buyers, mostly investors, purchased 24.4 percent of all Bay Area homes in November, up from 23.7 percent in October, and up from 21.7 percent a year ago.

Here's a breakdown of Los Gatos home sales and median price:

Palo Alto Zip Code	Homes sold Oct.  2012	% Change from Oct. 2011	Median Price Oct. 2012
94301	15	168.3%	$2,415,000
94303	36	205.3%	$870,000
94306	26	41.2%	$1,624,000

Home Prices Predicted to Rise Through 2013

U.S. home prices will likely continue rising in 2013, according to the latest round of predictions from Freddie Mac. The government-controlled mortgage giant expects the U.S. house price index to rise by 2% to 3% in 2013.

On December 11, 2012, Freddie Mac published the latest installment of their U.S. Economic and Housing Market Outlook. The monthly report compiles economic data from a variety of sources and makes forecasts based on that information. According to the latest report, all major house price indexes (HPIs) are now showing year-over-year price gains. They cited 4.5% appreciation reported by the Federal Housing Finance Agency as one example.

But it was their housing market predictions for 2013 that made headlines. The economists at Freddie Mac expect U.S. home prices to climb by up to 3% next year.

Price Trends Vary Widely at Local Level

It should be noted, this was a national prediction that averages home prices across the country. We have seen a significant amount of price variation at the local level in recent years, and this will likely continue through 2013. Some cities (like many in California) will appreciate steadily over the coming months. In fact, some may see double-digit gains in home prices. Others will remain stagnant or experience only modest gains.

Inventory was a key factor for the cities that fared well in 2012. For instance, the number of homes for sale in Sacramento, California dropped by 60% over the last year or so. That was the largest reduction of any of the 146 metro areas tracked by Realtor.com. As a result, the median list price in Sacramento shot up by 31% over the last year (another national record).

But here again, there is much variation in local housing markets. While the median list price was skyrocketing in Sacramento, it was plummeting in Peoria, Illinois. This is why it’s so hard to define ‘the’ housing market in national terms.

Since the housing crisis began, we have seen increased regionalization of home prices. Local housing markets move to the pulse of their own economies, with less influence from national trends. As an example, home prices in Phoenix rose by 20% over the last year or so, while dropping by -2.3% in New York City. Different markets, different pricing trends.

How to Research Home Values in Your Area

Home buyers should research housing conditions at the local level, before plunging into the market. National news is interesting, but it’s not very useful for someone concerned with home prices in, say, Boise or Tallahassee. So where does one turn for local market information? Here are some tips.

If you happen to live in or near one of the cities tracked by the S&P/Case-Shiller Home Price Index, you’ll find it useful. The Case-Shiller 20-city composite monitors home values in the following metropolitan cities: Atlanta, Boston, Charlotte, Chicago, Cleveland, Dallas, Denver, Detroit, Las Vegas, Los Angeles, Miami, Minneapolis, New York, Phoenix, Portland, San Diego, San Francisco, Seattle, Tampa, and Washington, D.C. It shows month-to-month changes in home prices, with a two-month lag time.

But what if you don’t live in one of those 20 cities? There are other ways to research local real estate trends.

The National Association of Realtors (NAR) publishes median home price information for 149 metropolitan areas in the U.S. It takes the form of an interactive Google map with clickable icons. Just Google “NAR median area prices” to find it, or use the URL below.


The full URL for the map:
http://www.realtor.org/topics/metropolitan-median-area-prices-and-affordability/data

http://www.santacruzlocalrealestate.com

The California Real Estate Landscape for 2013

Up-trending home prices are seen as a great sign by most people involved in real estate, because they instill a sense of comfort that, financially speaking, the market can return to the glory days prior to its collapse. But the sad truth is, there are more factors than home prices that affect real estate’s health, no matter how encouraging the rise may be.

 Still, the trend doesn’t keep sellers and property owners from wishfully believing that they’ve regained some form of control as if the balance has shifted back toward their favor.
Unfortunately for them, the main reason for price increases has nothing to do with buyers eagerly purchasing new properties; rather, it hinges upon a more balanced proportion of supply and demand as fewer houses were built this year. Although predictions for 2013 include an increase in overall supply, the amount of new houses estimated for the upcoming year will still be way under the 2.5 million output of 2005.

This slow growth is good for the market’s recovery long-term, though. As more Americans secure employment – and those who are employed see increases in income – the time will soon be rife for increased home buying. Until then, those potential buyers are doing exactly what they should: establishing a firm financial foundation that will facilitate a home purchase. And that’s exactly what the market needs: serious buyers who have the financial means to avoid upside down mortgages.

Is real estate back in the hands of sellers? Absolutely not, but markets will see trends that seem to reflect otherwise. As vacancies fall for commercial properties into 2013, owners look to pad their profits by increasing rents. As such potential occupants should protect their bottom lines now by locking in lower rates with long-term occupancy plans. Private property owners and landlords, too, may try to capitalize off of increased property values, so renters beware.

Increasing monthly rent payments might just be enough to turn some renters into buyers as they look to invest in their own property. “There comes a point when you have to evaluate how much you’re wasting on rent and how much you could be putting into equity,” says Erika Snider, credit consultant for rent to own website, HomeStarSearch.com. He suggests that low interest rates, an abundance of available properties, and a wealth of leasing options make for a real estate atmosphere that is still largely in favor of consumers.

Take, for example, California, which is experiencing a gain in sales as homebuyers jump on historically low interest rates and reasonable prices. This is good for new homeowners, but for how long? Statistics show that 30% of current California homeowners are underwater on their mortgages and will affect the market as they decide whether to stick it out or to list their properties. And California is but a portion of the national picture; Zillow reports that 31.4% of U.S. homeowners are currently upside-down on their mortgages as the fed frantically scrambles for a way to help them out and boost the economy.

So while increasing home prices seems, on the surface, like a positive step, the real estate market is far from a full recovery. The upcoming year will see more increases in property values and low interest rates, but it will be far from a housing boom. It will be interesting to see if government-backed refinancing options – which aim to free up income for underwater mortgage holders – are the cure for a sluggish economy. Will homeowners take their excess funds straight into the marketplace or will they stash it away for the next financial doomsday? Stay tuned…