The San Diego Union-Tribune - November 17, 2009
Overall median posts first increase since June 2006
San Diego County marked an economic milestone last month when home prices exceeded year-ago levels for the first time in 40 months, MDA DataQuick reported yesterday.
The increase was small — less than a percentage point — and it might be temporary.
But industry observers said the symbolism was important.
“It’s a reflection of a market that has stabilized in many areas,” DataQuick analyst Andrew LePage said.
The overall median of $325,000 was unchanged from August and September, but it was $1,500 higher than the $323,500 reported in October 2008. It was the first annual increase since June 2006.
That follows a near free-fall in price drops, when for 13 straight months — from May last year to May this year — year-over-year declines exceeded 20 percent; January’s was the biggest, down 34.7 percent. Economists focus on year-over-year changes to eliminate seasonal differences. The median price over that period plummeted from $380,000 to $280,000 before starting to rise again.
What changed?
“Government has a lot to do with stabilizing a lot of the market,” LePage said.
He cited low mortgage rates, at or below 5 percent, with helping to make affordability the best in years.
When lenders nearly collapsed under the weight of subprime mortgage defaults, the Federal Housing Administration stepped in to insure loans, whose ceilings were raised to cover most loans in most areas. Meanwhile, the U.S. Treasury took over Freddie Mac and Fannie Mae, the two federally chartered companies that buy loans and sell to them to investors.
Finally, Congress approved and recently extended and expanded homebuyers’ tax credits to nudge shoppers off the fence.
“If something rocks the boat here — a rate spike, tougher qualifying standards for the FHA because it’s had some problems, new waves of foreclosures — then there goes your price stability,” LePage said. “So the market is on this precarious perch again. A lot of things that have been driving sales may not be here next year.”
Peter Dennehy, senior vice president at the Sullivan Group Real Estate Advisors market analysis firm, said sales tell more about the market than prices.
There were 3,671 sales in October, up 6.3 percent from September and 2 percent higher than a year ago. It was the most active October since 2006. October sales are often less than in September.
“Overall prices are up a little and volume for the year is higher,” Dennehy said. “That’s probably a good thing.”
He said a monthly sales pace of 3,500 homes is healthy, but what is not normal is the dominance of first-time buyers and investors, who are often bidding against each other on low-cost foreclosure homes. Of all resales last month, 34.5 percent involved homes foreclosed on in the previous 12 months, DataQuick said.
“We are in a sellers’ market for certain types of product and certain locations,” Dennehy said. “Quite clearly, when you have a market where there are 30 to 40 offers per house like you do in some parts of the county, that’s a sellers’ market.”
What needs to happen now to achieve a real housing recovery, he said, is more sales activity in higher-priced neighborhoods. Transactions have remained low because buyers often cannot get financing and sellers have not reduced prices enough.
“It’s still a very fragmented market recovery and a market that needs to have broad-based participation,” Dennehy said.
At the neighborhood level, there is no clear trend. Low-priced areas are not necessarily rising in value in response to overbidding demand, and high-priced ones aren’t necessarily falling because of lackluster demand.
For example, high-priced Mission Hills/Hillcrest and Cardiff saw increases, up 32.2 percent to $750,000 and 20.9 percent to $665,000, respectively.
Similarly, low-priced Golden Hill was down 23 percent to $180,000 on 13 home sales, and City Heights was off 18.8 percent to $195,000 on 25 homes.
Robert Brown, an economist at Cal State San Marcos, focused on the inventory of distressed properties — foreclosure, bank-owned and short-sales, which involve sellers and their lender selling for less than the mortgage balance.
“The number of distressed properties, while still high, seems to be sustained a bit, leveling off and even falling in some ZIPs,” Brown said.
The figures from the San Diego Association of Realtors suggest a coming shortage with 8,291 active listings yesterday and 6,350 in pending status. The total is down 13 percent from year-ago levels.
But observers said they cannot predict the future if a new wave of foreclosures floods the market because distressed owners cannot get their loans modified. That would send prices lower again.
“There’s still pain in the housing market, as far as people being upside-down in their loans and mortgages,” said Kelly Cunningham, economist at the National University System Institute for Policy Research.
But the overall housing picture appears to be turning around.
“We’ve been looking for that for some time,” he said. “Certainly, it does show solid evidence that the market has started to turn a corner. It’s not getting worse and it even shows some improvement.”
As he has warned in recent months, Cunningham said concerns should now be turning to the long-term supply of housing, if construction continues to remain as low as it has been this year. Through September, single-family housing permits totaled 1,323, one-third of the comparable figure in 2006.
“At some point, when we’re building so little new construction, that suggests we’ll have in a few years a severe housing shortage because of so little in the pipeline,” Cunningham said.
Home Buyer Tax Credits FAQs
Tax Credits Provide Outstanding Opportunities for Home Buyers
The Worker, Homeownership, and Business Assistance Act of 2009 has extended the tax credit of up to $8,000 for qualified first-time home buyers purchasing a principal residence. It also authorized a tax credit of up to $6,500 for qualified repeat home buyers.
* Frequently asked questions about the $8,000 first-time home buyer tax credit.
* Frequently asked questions about the $6,500 tax credit for repeat home buyers.
Visit this link:
http://www.federalhousingtaxcredit.com/home.html
The Worker, Homeownership, and Business Assistance Act of 2009 has extended the tax credit of up to $8,000 for qualified first-time home buyers purchasing a principal residence. It also authorized a tax credit of up to $6,500 for qualified repeat home buyers.
* Frequently asked questions about the $8,000 first-time home buyer tax credit.
* Frequently asked questions about the $6,500 tax credit for repeat home buyers.
Visit this link:
http://www.federalhousingtaxcredit.com/home.html
Senate passes bill to extend $8,000 "first-time homebuyer" credit & extend a $6,500 tax credit to "move-up buyers"
WASHINGTON -- The U.S. Senate late Wednesday unanimously passed legislation extending unemployment benefits and also significantly expanding a tax credit that was championed by Republican U.S. Sen. Johnny Isakson of Georgia.
As part of the unemployment package, the Senate also voted to extend an $8,000 first-time homebuyer tax credit through April 30, 2010.
The homebuyer tax credit program, which is currently set to expire Nov. 30, 2009, also would be expanded to give all homebuyers a $6,500 credit as long as they had been in their previous home for at least five years.
“We are about to do something very meaningful for the American Economy,” Isakson said in a statement. "The bill in the end is a jobs bill."
Isakson, a former Atlanta-area real estate broker, has said extending and expanding the home buyer credit was essential to getting the beleagured housing market -- and in turn, the overall economy -- on track. He had been working on the tax credit idea for months, and co-sponsored the latest version with Democratic Sen. Chris Dodd of Connecticut as an amendment to the unemployment benefits bill.
The U.S. House has already passed an extension of unemployment benefits, but must still approve the homebuyer tax credit. A spokeswoman for Isakson said Senate leadership has gotten assurances from House leaders that the amendment will get approval, and President Barack Obama is expected to sign it.
Under the amendment passed by the Senate Wednesday, both the $8,000 first-time homebuyer tax credit as well as the $6,500 tax credit for “move-up” buyers would end April 30.
It would be limited to homebuyers who make $125,000 or less as an individual or $225,000 or less as a couple. The cost of the home being purchased may not exceed $800,000.
In extending the unemployment benefits, the $24 billion bill will continue the benefits of more than 1 million out-of-work Americans who would otherwise run out of benefits by the end of the year.
The bill also provides tax relief for businesses that are losing money, allowing them to use net operating losses in 2008 or 2009 to offset taxable profits from the previous five years.
As part of the unemployment package, the Senate also voted to extend an $8,000 first-time homebuyer tax credit through April 30, 2010.
The homebuyer tax credit program, which is currently set to expire Nov. 30, 2009, also would be expanded to give all homebuyers a $6,500 credit as long as they had been in their previous home for at least five years.
“We are about to do something very meaningful for the American Economy,” Isakson said in a statement. "The bill in the end is a jobs bill."
Isakson, a former Atlanta-area real estate broker, has said extending and expanding the home buyer credit was essential to getting the beleagured housing market -- and in turn, the overall economy -- on track. He had been working on the tax credit idea for months, and co-sponsored the latest version with Democratic Sen. Chris Dodd of Connecticut as an amendment to the unemployment benefits bill.
The U.S. House has already passed an extension of unemployment benefits, but must still approve the homebuyer tax credit. A spokeswoman for Isakson said Senate leadership has gotten assurances from House leaders that the amendment will get approval, and President Barack Obama is expected to sign it.
Under the amendment passed by the Senate Wednesday, both the $8,000 first-time homebuyer tax credit as well as the $6,500 tax credit for “move-up” buyers would end April 30.
It would be limited to homebuyers who make $125,000 or less as an individual or $225,000 or less as a couple. The cost of the home being purchased may not exceed $800,000.
In extending the unemployment benefits, the $24 billion bill will continue the benefits of more than 1 million out-of-work Americans who would otherwise run out of benefits by the end of the year.
The bill also provides tax relief for businesses that are losing money, allowing them to use net operating losses in 2008 or 2009 to offset taxable profits from the previous five years.
Update on Tax Credit
The CALIFORNIA ASSOCIATION OF REALTORS (C.A.R.) in late October called for the U.S. Senate to swiftly adopt the Dodd-Lieberman-Isakson amendment which would extend and amplify the hugely successful first-time home buyer tax credit until June 30, 2010. Under additional provisions in the Dodd-Lieberman-Isakson amendment, taxpayers would be able to claim the credit on purchases completed in 2010 on their 2009 income tax returns.
The amendment maintains the provision that home buyers do not have to repay the credit provided the home remains their primary residence for 36 months after purchase, and waives this requirement for active duty military personnel who move due to a military order. There is better news, the amendment would expand the credit by removing the first-time buyer requirement and instead would apply to all home buyers. The amendment also would increase the qualifying income limits to $150,000 for single buyers and $300,000 for those filing joint income tax returns.
According to C.A.R. President, James Liptak, “The success of the home buyer tax credit and its positive impact on the real estate market is clear, according to our research, nearly 40 percent of first-time buyers said they would not have purchased a home if the Federal tax credit for first-time home buyers was not offered. This underscores the significance of the Federal tax credit to the housing market’s recovery in California.
The amendment maintains the provision that home buyers do not have to repay the credit provided the home remains their primary residence for 36 months after purchase, and waives this requirement for active duty military personnel who move due to a military order. There is better news, the amendment would expand the credit by removing the first-time buyer requirement and instead would apply to all home buyers. The amendment also would increase the qualifying income limits to $150,000 for single buyers and $300,000 for those filing joint income tax returns.
According to C.A.R. President, James Liptak, “The success of the home buyer tax credit and its positive impact on the real estate market is clear, according to our research, nearly 40 percent of first-time buyers said they would not have purchased a home if the Federal tax credit for first-time home buyers was not offered. This underscores the significance of the Federal tax credit to the housing market’s recovery in California.
Market update & advice from our brokerage
Happy day after Halloween! I hope not too many of you are in sugar shock from all the leftover candy.
The San Diego real estate market continues the same patterns we have seen for some time now. Our total inventory of available detached and attached homes now stands at 7,947 units on the market unsold. This total represents about half of our normal selection and much of it consists of newer short sales that could take months to process and are therefore not as attractive to buyers as either equity sales or bank owned properties, both of which offer a much faster trip through the escrow period.
On the detached home front, 5,512 homes are on the market as of today. 1,854 units opened new escrows last month and another 2,328 went "contingent" (short sales with accepted offers awaiting lender approval) during the month. The total of 4,182 new pendings and contingents means that we have about a 3 week supply of inventory and that prices are starting to increase. Offers must be aggressive and pre-approved to have a fighting chance, with up to 30 bids competing on many listings. I have begun to limit my real estate practice to showing only equity sales, bank owned properties or approved short sales because the frustration level experienced by all parties is tainting the home buying process.
On the attached property front, 2,435 units are on the market today. 965 went into new escrows over the past month and another 1,956 went "contingent" over the same period, meaning that 2,921 units went off the market which is about 20% more than we have available. This obviously creates difficult bidding situations and rising prices.
Buyers often ask me what they can do to win a bidding war so we've created the list of suggestions below. Keep in mind we do not recommend any of these steps unless you are fully aware of the possible consequences.
Possible Options in Multiple Offer Situations
(Not encouraged by this firm without full understanding in advance)
• Bid very aggressively on the price, at the top of your loan qualification or comfort level. In a strong seller’s market where inventory is low this could mean 10% or more above the listed price.
• Pay all cash or use a conventional loan with 20% or more down. FHA & VA loans are difficult due to the small down payments and loan requirements on sellers.
• Make a large good faith deposit (up to 3% of the purchase price).
• Do not ask for seller concessions.
• Request a closing less than 30 days away and offer to pay a per diem charge if you are late, or be prepared to accept one that the seller counters with.
• Offer to buy the property as is, without repairs if possible.
• Eliminate the appraisal contingency.
• Provide proof of the funds needed to close with the offer.
• Provide a loan pre-approval based on your credit report.
• Offer to remove contingencies in less than 17 days.
• Offer to pay for your own home warranty.
• Offer to pay some or all of the seller’s closing costs.
• Be prepared to walk away from out-of-pocket expenses for inspections and appraisals.
Many of these options involve risk on your part. Do not pursue any of them until you have a full understanding of the possible consequences you could face.
It looks like the tax credit will probably be extended and possibly expanded to include non-first time buyers over the next few weeks. Unfortunately, at least in San Diego, it has been very tough for first time buyers to take advantage of the credit due to the difficulty experienced in winning a bid.
I hope this helps and look forward to hearing from you soon...
The San Diego real estate market continues the same patterns we have seen for some time now. Our total inventory of available detached and attached homes now stands at 7,947 units on the market unsold. This total represents about half of our normal selection and much of it consists of newer short sales that could take months to process and are therefore not as attractive to buyers as either equity sales or bank owned properties, both of which offer a much faster trip through the escrow period.
On the detached home front, 5,512 homes are on the market as of today. 1,854 units opened new escrows last month and another 2,328 went "contingent" (short sales with accepted offers awaiting lender approval) during the month. The total of 4,182 new pendings and contingents means that we have about a 3 week supply of inventory and that prices are starting to increase. Offers must be aggressive and pre-approved to have a fighting chance, with up to 30 bids competing on many listings. I have begun to limit my real estate practice to showing only equity sales, bank owned properties or approved short sales because the frustration level experienced by all parties is tainting the home buying process.
On the attached property front, 2,435 units are on the market today. 965 went into new escrows over the past month and another 1,956 went "contingent" over the same period, meaning that 2,921 units went off the market which is about 20% more than we have available. This obviously creates difficult bidding situations and rising prices.
Buyers often ask me what they can do to win a bidding war so we've created the list of suggestions below. Keep in mind we do not recommend any of these steps unless you are fully aware of the possible consequences.
Possible Options in Multiple Offer Situations
(Not encouraged by this firm without full understanding in advance)
• Bid very aggressively on the price, at the top of your loan qualification or comfort level. In a strong seller’s market where inventory is low this could mean 10% or more above the listed price.
• Pay all cash or use a conventional loan with 20% or more down. FHA & VA loans are difficult due to the small down payments and loan requirements on sellers.
• Make a large good faith deposit (up to 3% of the purchase price).
• Do not ask for seller concessions.
• Request a closing less than 30 days away and offer to pay a per diem charge if you are late, or be prepared to accept one that the seller counters with.
• Offer to buy the property as is, without repairs if possible.
• Eliminate the appraisal contingency.
• Provide proof of the funds needed to close with the offer.
• Provide a loan pre-approval based on your credit report.
• Offer to remove contingencies in less than 17 days.
• Offer to pay for your own home warranty.
• Offer to pay some or all of the seller’s closing costs.
• Be prepared to walk away from out-of-pocket expenses for inspections and appraisals.
Many of these options involve risk on your part. Do not pursue any of them until you have a full understanding of the possible consequences you could face.
It looks like the tax credit will probably be extended and possibly expanded to include non-first time buyers over the next few weeks. Unfortunately, at least in San Diego, it has been very tough for first time buyers to take advantage of the credit due to the difficulty experienced in winning a bid.
I hope this helps and look forward to hearing from you soon...
Subscribe to:
Posts (Atom)