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.                     

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.

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:

EXISTING HOMES

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.

NEW HOMES

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.

CONDOS/TOWNHOMES

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.

DISTRESSED PROPERTY

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.

LENDING

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.

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 http://www.authenticre.com

Read more here: http://www.fresnobee.com/2013/12/05/3650148/no-california-tax-penalty-on-short.html#storylink=cpy

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.

TIME-OUT

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.

MEDIAN PRICE

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.

BREAK-DOWN

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

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."

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
        percent).
    --  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
        percent).
    --  Excluding distressed sales, no states posted home price depreciation in
        October.
    --  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.