There is a lot going on in the Real Estate world these days. For a more complete look, check out Pacific Union’s blog today:
CAR’s February home sales report shows that pending home sales rose 14.2% over January. This is the second straight increase. Meanwhile, distressed home sales dropped across the state except in Solano County.
Home builders are increasingly looking toward infill projects rather than suburban tract homes. According to the Wall Street Journal, this is driving land prices up and is getting in the way of new-home sales, along with a lack of first-time home buyers and rising prices (although the latter two go hand in hand).
Also, last week Trulia released a report suggesting that Coastal California Markets (i.e. the Bay Area) may be headed for a bubble. The report argues that the Coastal CA market is overvalued: San Jose, San Francisco and the Oakland markets are all between 4-8% over what Trulia deems the current market value.
Quick recap of the Real Estate Market from over the weekend. For a complete recap, go to the Pacific Union blog:
- Citing a recent Zillow report, Pacific Union expects the real estate market to be hot this spring. San Jose and San Francisco should lead the way. Zillow’s report also shows that San Jose and San Francisco also have the highest home values in the country at $748,800 and $648,700 respectively.
- In addition, it looks like the Oakland inventory crunch is starting to ease up. Statistics show that there was a 19% increase in homes for sale in February.
- Although new housing starts are cooling off across the country, there is a new planned development coming along in Walnut Creek near the BART station soon.
Last week, Pacific Union CEO, Mark McLaughlin wrote this insightful piece about the future of Bay Area home prices.
We are frequently asked how long the current real estate market or housing cycle will run. Our industry is not short on opinions, predictions, and speculations. This past month, I reviewed the most comprehensive housing report I have read since 2007: the John Burns Real Estate Consulting Home Value Index.
The report defines housing-cycle risk as a function of demand, supply, and affordability. This is a fairly simple perspective that comes as no surprise. The forecast or outlook is dependent on job growth for demand and excess supply in the form of new construction or foreclosures. On a relative scale compared with the housing market in the U.S., our local markets have limited excess supply at this time.
The Burns report goes on to note that the markets with the most upside are clearly those that experienced the most significant downs. Again, this concept is not overly complex, and the variables are relatively easy to comprehend.
The most stimulating aspect of the report is in the Burns Home Value Index Forecast for December 2017. We have often struggled with the S&P/Case-Shiller and similar indexes, which generally offer perspectives based on 90 to 120 days trailing market performance and do not look forward.
The Burns report cites summary research from nearly 100 economists’ responses to questions about housing appreciation in the U.S. from Q4 2012 through December 2017. The Burns report estimates 35.9 percent appreciation through December 2017, with more than 9 percent already realized through September 2013. The 100 economists’ consensus for that same time frame was 22.9 percent appreciation, with 6 percent already realized.
The Burns report provides regional outlooks on nearly 100 markets. The Bay Area findings are illustrated in the table below:
With the caveat that real estate is local and each neighborhood and home is unique, these forecasts are very reassuring. In particular, the outlook for 2017 is exceptionally encouraging. However, the report illustrates that the majority of the lift in the market will occur in 2014 and 2015, with modest to flat growth in 2016 and 2017.
The opportunity to realize value in real estate and historically low mortgage rates is now. Mortgages will likely exceed 6 percent by 2016, a 30 percent increase from today’s rates.
Your local Pacific Union real estate professional is uniquely positioned to review macro trends and neighborhood specifics to assist you in your residential real estate investments. Please remember that your most significant real estate investment is in your home — which is a place to live and create memories — rather than just your house.
– Mark A. McLaughlin, CEO, Pacific Union
US Real Estate prices have risen year-over-year for the 17th consecutive month. The median price in the US is now approximately $215k, just shy of the high-water mark set in July, ’06.
What does this mean for us? According to Pacific Union’s blog, the median home price in the Bay Area was $720,000 in July or approximately 3.33 times higher than the rest of the country. Tight inventory is helping to drive up the cost, according to NAR’s Chief Economist, Lawrence Yun. For more information on the recently released July housing report, go to Pacific Union’s blog: http://blog.pacunion.com
You read the headline right: home prices around the Bay Area spiked 6.9 percent from May to June, setting a new record for June increase. Overall, prices of skyrocketed by 33.1 percent since the same time last year!
Around the nine counties, the median home price was $555,000 — the highest it’s been since December 2007. That’s up from $519,000 in May and $417,000 in June of 2012.
DataQuick, the firm tasked with researching home sales information, said prices went up because of “disappearing distress sales, an improving economy and mortgage rates that, while up off the bottom, remain very low.”
There’s still a ways to go before prices reach the peak of the housing bubble. The Bay Area’s highest median home price was $665,000 in June and July of 2007. It dropped to as low as $290,000 in March of 2009.
Economists are urging homebuyers who are currently able to buy a home to act while they can. Interest rates continue to rise, and you can save yourself hundreds of dollars by locking in a lower interest rate before it disappears.
Interest rates have already increased by more than 1 percent since May and are expected to continue going up all the way until 2014. According to the Mortgage Bankers Association, interest rates for a 30-year, fixed-rate mortgage with conforming loan balances averaged 3.59 percent during May. Loans that are nonconforming (or jumbo loans) averaged 3.79 percent.
But if you blinked, those rates passed you by. By mid-June, interest rates for similar mortgages were averaging 4.17 percent for conforming loans and 4.23 percent for jumbo loans.
For July, those same rates have again increased to 4.68 and 4.81 percent respectively.
While these rates are still low historically (in the early 2000s, rates reached an average of 6 percent, while in the 90s rates were as high as 7 to 9 percent), the increases are no drop in the bucket. If you’re planning on buying a home and want to lock in a low interest rate, the time to act is now!
In Fannie Mae’s latest housing survey, 57 percent of Americans expect rising interest rates and home prices in the next year. 72 percent believe now is a good time to buy a home. Do those two have any correlation? You bet.
Fannie Mae’s chief economist Doug Duncan believes interest rate hikes “may increase housing activity in the near term by driving urgency to buy.” 30-year mortgage rates are already up 1 percent from the beginning of May to the end of June, and Duncan believes this trend will continue to bolster the housing market.
“Consumers may recognize that today’s still-favorable mortgage rates and homeownership affordability levels will recede over time,” Duncan said. “Given rising home and rental price expectations and improving personal financial attitudes, more prospective homebuyers may be deciding that now is the time to get off the fence.”
The potent local economy and low unemployment rates will likely increase real estate activity locally, according to Pacific Union. That, coupled with the temptation of locking in lower mortgage rates, should convince homebuyers that they have more spending power as property prices start to climb.
California has reached it’s lowest unemployment rate in five years, and the Bay Area is ahead of the pack. The state’s unemployment rate is now at 8.6 percent, down 0.4 since April and 0.8 since March according to the state Employment Development Department. Things are looking even better for the nine Bay Area counties though, where unemployment levels are as low as 4.5 percent.
Marin County boasts the lowest unemployment numbers in the area and the highest is Alameda County at 6.8. With unemployment levels at nearly half of California’s average, good news continues to flow in for both the economy and the local housing market.
A huge factor in the local unemployment drop is the Bay Area’s increasing job growth. Economist Stephen Levy analyzed the EDD statistics and concluded the Bay Area’s many technology firms helped boost employment rates over the first several months of this year.
“Real GDP growth in California in 2012 was 3.5 percent, tied for fifth highest in the nation,” Levy said. “The Department of Finance reported that income tax receipts were $500 million above expectations in May, and the California Association of Realtors reported another month of strong gains in median home prices.
“The gains in home prices have a ‘triple bottom line’ in the sense that they show a strengthening demand for housing, they bring more households out of negative equity so that they can sell their homes without losing money, and they allow more homeowners to refinance on the basis of higher equity, which translates into an increase in spending power as mortgage costs drop.”