Market Updates | California Real Estate

10.08.09

Southern California Market Snapshot

Santa Barbara Real Estate

As of September 2009, Santa Barbara is in a blistering seller’s market in all price ranges, with between 1.0 and 1.6 months of inventory on hand in all homes priced $899K or below. Only 3.8 months of inventory remain for homes priced $900K or above. That’s the least inventory available for sale in any market in Southern California. The number of homes for sale has more than doubled from 98 in July to 244 in August 2009, as sellers take advantage of the market. Even with more listings, there were 431 closings. Homes are being absorbed faster than they enter the market.

Ventura Real Estate

Ventura County is in a blistering seller’s market in homes priced at $899K or below, with between 0.9 and 5.7 months of inventory on hand as of September 2009. Since January 2009, more homes have entered the Ventura market than have been sold, but the sales pace is close, except for luxury homes in the highest price ranges.

San Fernando Valley Real Estate

The San Fernando Valley is one of the healthiest seller’s markets in Southern California with 1.8 to 5.1 months of inventory on hand in homes priced at or under $899K. And homes priced $900K or above are in a buyer’s market, but well below other regions with 10.3 months of supply on hand. For the first time in over a year, more homes were sold (3,992) than listed for sale (3,719) in August 2009.

San Gabriel Valley Real Estate

The San Gabriel Valley is one of the hottest seller’s markets in Southern California, with between one and five months’ inventory in every price range. Homes priced above $900K are selling nearly as quickly as homes priced $700K and lower. This means the number of listings sold is outpacing the number of listings on the market. In August 2009, 1,705 homes were sold in the San Gabriel Valley, while only 638 listings remained on hand.

LA Westside Real Estate

The Westside is currently enjoying one of the healthiest housing markets in years. Homes in affordable conforming loan ranges are in a seller’s market with six months’ supply on hand or less. A balanced market is usually considered to be about six months’ of inventory. The market has absorbed the excess inventories of homes from January through August, at a healthy rate. Currently, 1,861 listings are in inventory against sales of 1,533 units as of August 2009.

Orange County Real Estate

Orange County is one of the fastest-moving markets in Southern California, with a hot seller’s market in homes priced at or under $899K, and only 11 months of inventory on hand in homes priced above $900K. Not since December 2008 have listings been absorbed faster than they enter the market. The number of listings on the market was down to 3,290 in August 2009 from 3,453 in July. Listings sold were up to 3,568 units in August from 3,126 sold in July.

San Diego Real Estate

In August 2009, housing prices were down 23.2% year-over-year, spurring sales 11.9% higher than the previous year. The number of listings available for sale fell from 3,884 in July to 3,312 in August. However the number of listings absorbed fell by more than half, from 3,368 in July to 1,597 in August. Under $600K, San Diego County is in a feverish seller’s market with as little as 1.7 months of inventory on hand for homes priced under $300K. At the opposite end of the spectrum, homes priced above $900K have 22 months of inventory available.

Santa Maria and Santa Ynev Valley Real Estate

Affordable homes are in a seller’s market with less than 3.4 months of inventory in homes priced $399K or under. Above conforming loan ranges in homes priced between $700K and $899K, there is over a year’s supply, and nearly a three-year supply of homes priced above $900K. Homes are being sold faster than new listings hit the market, however. In July, there were 738 listings and 854 were sold. The trend continued in August, with a much lower inventory of 606 homes with nearly one-third more sold - 933 units.

For more details in your area contact your local Prudential California Realty agent. Find an Agent >>

10.01.09

Heated First Time Buyer Market Changes Strategies for Buyers and Sellers

US home prices are up two months in a row, says the Federal Housing Finance Agency, overseer of Fannie Mae and Freddie Mac. The Commerce Department reported that August new home starts (a documentation of construction beginnings) rose 1.5% to an annual rate of 598,000. Building permits rose 2.7% to 579,000. Both figures were the highest since November 2008.

The National Association of REALTORS® (NAR) reports that in July, the number of pending sales contracts signed increased for the sixth month in a row, largely due to affordability and federal and state incentives.

Existing home sales inventories fell 10.8% in August to an 8.5-month supply, the lowest level of inventory since April 2007. However, sales closings slowed 2.7% after four months of rising sales volume.

NAR Chief Economist Lawrence Yun noted that nationwide, the typical mortgage payment for a median priced home now represents less than 25 % of a family’s monthly income. He added that 2009 payment percentages have been the lowest on record since 1978.

California

Home sales volume increased 12% in July compared with the same period a year ago, according to the California Association of REALTORS®. Record affordability and tax incentives were the primary drivers.

July 2009 sales prices in the state declined by 19.6 % to a median of $285,480, compared to $355,000 in July 2008.

As the tax credit draws to an end, sales are rising. Month-to-month sales in July 2009 increased 8.1 % over June, and median prices rose 3.9 % to $285,480 compared to the June median of $274,740.

“July marked the fifth consecutive month of month-to-month increases in the median price,” said C.A.R. Vice President and Chief Economist Leslie Appleton-Young. “This was the largest increase on record for the month of July, based on statistics dating back to 1979. The yearly decline in July also was the smallest in the past 19 months.”

Foreclosures pressure prices

Data Quick Information Systems reports that notices of default in Southern California were up 3.8% year over year in the second quarter of 2009. According to Credit Suisse, 40% of Alt-A loans are due to reset in the next 24 months. Another wave is due to reset in mid-to-late 2010. The majority of those loans are Option adjustable rate mortgages.

First-time home buyers lead the way

About 67% of first-time home buyers can now afford to buy a home in California, compared to 76% of first-timers nationally. Homes priced under $500,000 accounted for 74% of the California market in July — a testament to the strength of the first-time home buyer. As of June 2009, California topped all states with a 10% market share of all FHA lending in the U.S.

Historical comparisons favor today’s housing recession

Surprisingly, California’s current housing correction isn’t as severe as the one the state experienced during the recession of the early 1980s, when housing sales plummeted 61% peak-to-trough between 1978 and 1982. In comparison, housing sales volume sank 44% between mid-2003 and 2007, and has steadily risen since that time.

With improved affordability comes demand. In July 2009, there was at a 3.9-month supply of unsold inventory across the state — down dramatically from a 16-month supply in January 2008.

Advice for buyers:

Cash buyers are making it difficult for other buyers to compete in certain price ranges. Make it easy for the listing agent and the seller by offering a complete package so they don’t have to wonder who you are and whether you can afford the home. In addition to a well-written and complete purchase offer, include the following to show the seller your offer is as good as cash:

A personal letter indicating why you would be a good fit for this home
Pre-approval from a major lender, like HomeServices Lending powered by Wells Fargo. Pre-approval is better than pre-qualification, since it requires verification of your employment, income, credit and other factors.
An earnest money deposit as close to 3% as possible
Proof of funds for the down payment and closing costs
You may also want to consider removing contingencies earlier than called for in the contract.

Advice for sellers: Homes in many price ranges below $750,000 are attracting the most qualified buyers the market has seen in years. However, it’s still a tale of two markets. Homes priced below 750,000 are selling quickly; for those priced above $900,000, the buyer has the advantage. If your property is in this higher price range, it’s critical to set realistic expectations based on market conditions. An experienced agent will help you price your home properly, market it aggressively, and make it easy for buyers to see it.

Introducing Real-Time Real Estate Data.

See your local Prudential California Realty agent for trends in your zip code. In the example below for Irvine California, we can see that new listings coming on the market and new listings sold are nearly equal, indicating a balanced market. Unlike April of 2009 where we can see more listings coming on the market than those sold, indicating a strong buyers market.

Real Estate Market Chart by Altos Research www.altosresearch.com

09.02.09

Prudential California Realty Report Indicates Housing Sales Up for the Fourth Consecutive Month

September 2009 (Irvine, California.) The latest Prudential California Realty report indicates housing sales up for the fourth consecutive month. The month of August began cautiously with mixed economic news, but by the end of the month, the outlook for September housing was greatly improved. The Bureau of Labor Statistics reported that job losses were continuing, but at a slower pace.

Housing continued to improve, largely driven by the first-time home buyer tax credit. The National Association of REALTORS reported that July existing home sales jumped 7.2 % — the largest monthly sales gain since 1999 and the fourth consecutive month of growth. If the current rate of improvement in existing homes remains at a steady pace, from 9.8 months on hand in June to 9.4 months on hand in July, the existing housing market could be balanced (on a national basis) in approximately eight months.

On August 20, the Mortgage Bankers Association announced that mortgage applications were also up, as interest rates crept down to a five-week low, with purchase applications up for the third consecutive week. Among the reasons cited were the success of the first-time home buyer tax credit and price-to-income ratios falling below historical trends.

Momentum in housing sales should continue, spurred by the end of first-time home buyer tax credits on November 30, 2009. With new banking and appraisal rules adding time to the typical closing process, first-time home buyers should open escrow by the end of September if they hope to close on time and qualify for these credits.

Other information cited in the report:

The economy is improving

The worst recession since the Great Depression may be winding down, said The Conference Board on August 20, 2009. The analysts found that leading economic indicators rose 0.6% in July, following a 0.8% rise in June. That’s two consecutive months of improvement halting eight months of declines.

While the indicators can certainly slide backward on new data, serious home buyers should realize the days of wholesale bargains may be numbered. This could explain why California entry-level prices are rising, and luxury home owners are starting to stick to their prices.

Inventory is being absorbed

We appeared to hit bottom during the second quarter of 2009. Since then we have seen a steady rise in closed sales. Existing, or pre-owned, home inventories are being absorbed and are close to a balanced market at 9.4 months of supply. At their highest during the recession, new and existing home inventories hovered at 11 months on hand. A balanced market is approximately six months of inventory on hand.

Average sales prices are starting to rise

Lawrence Yun, chief economist for the NAR, says that improved affordability has driven sales, with first-time home buyers taking advantage of the tax credit. “The demand for foreclosed and lower-priced homes has spiked, and lack of inventory is becoming a common complaint,” he notes. In many Southern California communities, homes priced at or below conforming loan levels have little inventory on hand, allowing sellers to raise prices and entertain multiple offers.

Advice for home buyers:

Since May 2009, Federal Housing Finance Agency appraisal regulations have slowed home sales transactions. The National Association of REALTORS® has found that 76% of its members reported delays in closing.

As the first-time home buyer tax credit comes to a close, banks will be inundated with loan applications for an already narrow production pipeline. Home buyers should allow at least 60 days closing, which puts some first-time home buyer loans at risk of not meeting the November 30, 2009, deadline if they are not in escrow by the end of September 2009.

Advice for sellers:

Price your home for today’s market, not what you think it will do in two or three months. Lenders are very cautious about appraisals.

While demand is picking up, the percentage of foreclosures in the second quarter 2009 was the highest ever recorded by the Mortgage Bankers Association. The trade organization says foreclosures will continue to grow, peaking at the end of 2010 — placing continued pressure on pricing.

To avoid delays in closing, make sure your home is in top repair and you have all your property disclosures ready for the buyer’s inspection. You may see some buyers still waiting for signs of a bottom, but motivated buyers will respond immediately to a well-priced home in great condition.

See your local Prudential California Realty Real Estate Professional for additional trends in your area. Find an Agent >>

09.01.09

Southern California Market Update from Prudential California Realty

Santa Maria and Santa Ynez Valley Overview

Santa Maria and Santa Ynez Valley areas are in a heated seller’s market in homes priced under $599K, while luxury homes priced above $900K remain in a buyer’s market with 24 months of inventory on hand.

Santa Barbara Overview

Santa Barbara is showing improved sales in many price ranges, while inventories of luxury homes priced above $999K are among the largest in Southern California.

Ventura County Overview

Ventura County is in a seller’s market in homes priced under $899K. Homes under $500K have less than three months of inventory on hand, and homes under $300,000 have one month of inventory.

San Fernando Valley Overview

The San Fernando Valley is in a seller’s market, with as little as 2 months of inventory on hand in some price ranges. Only homes priced above $900K are selling more slowly at nearly 11 months of inventory on hand.

San Gabriel Valley Overview

The San Gabriel Valley is in a heated seller’s market in all price ranges, including luxury homes priced above $900K, where there is only a 6.8 months of supply, among the slimmest inventories in Southern California.

Westside LA Overview

The Westside LA housing market is heating up in nearly all price ranges, including luxury homes priced above $900K, where supplies have steadily diminished in the first two quarters of 2009.

Orange County Overview

Orange County is enjoying a seller’s market in affordable homes priced below $899K. Only homes priced above $900K are selling more slowly at nearly 13 months of inventory on hand, but that is far from the highest inventory in luxury homes in Southern California.

San Diego County Overview

San Diego County is enjoying a seller’s market in affordable homes priced below $799K. Only homes priced above $900K are selling more slowly at 17 months of inventory on hand.

See your local Prudential California Realty Real Estate Professional for additional trends in your area.

08.07.09

Latest Prudential California Realty report reflects cautious optimism on economic recovery

August 7, 2009 (Irvine, CA) - The latest Market Conditions Report from Prudential California Realty suggests an economic recovery - albeit a very gradual one - may be on the horizon. The report cites recent national and state data that suggest a glacially paced slowing of the recession. With the national unemployment rate at 9.5% and over 1.5 million properties in some stage of foreclosure as of July 1, 2009 (Realty Trac), consumer confidence in a housing recovery is hesitant, and people are hungry for good news. One positive sign: existing and new home sales are up.

Other information cited in the report:

Existing homes
The National Association of REALTORS® reported a third consecutive rise in monthly existing home sales in June 2009. Affordability and incentives are driving the climb. The median national home price is $181,800 - 15% lower than a year ago. Home inventories are now at 9.4 months on hand; according to Lawrence Yun, chief economist for NAR, price stabilization occurs at about 7 months on hand.

New homes
The Commerce Department reported new home construction was up 3.6% in May after a disappointing low in April. At an annual pace of about 582,000 housing units, building is still well below the rate needed to serve new household formations and replace dilapidated structures (about 750,000 to 1.2 million units annually). Builder confidence is also up, as firms sell off the overstock of homes built during the housing boom.

The best news is that demand for housing is increasing. While most of the action is in the affordable ranges, spurred by the first-time home buyer tax credit, luxury homes are also selling faster.

California
In California, one out of every 34 homes is in the foreclosure process. This is keeping the pressure on housing prices; they're the closest to the national median they've been since 2002, before the housing boom. In many communities, home prices have reset back to the halcyon days of 2000.

Renewed affordability and the opportunity to buy a better home for less have galvanized home buyers. In May, the California building industry reported the year's fourth month of improved sales volume. Existing home sales have improved month-over-month for a year, says DataQuick. June 2009 home sales showed a 25% improvement over June 2008.

Many Southern California markets are reporting new life in sales of luxury homes priced above $900,000, and as few as two months' inventory on hand of homes priced below $300,000. From May to June 2009, the median home price lifted 7%, from $230,000 to $246,000.

Nonetheless, the housing recovery is unlikely to overheat. The lending industry, reluctant to avoid the excesses that precipitated the housing boom and bust, has adopted stricter regulations for approving mortgage loans.

HVCC: Effective May 1, 2009, Home Valuation Code of Conduct rules limit the influence banks can have on appraisers. This new oversight ensures more accurate and fraud-resistant appraisals, making loans purchased by Fannie Mae and Freddie Mac less likely to default.
HERA: Effective July 30, 2009, the Truth in Lending Act was amended by the Home Ownership and Equity Protection Act (HOEPA) and the Housing and Economic Recovery Act (HERA). These amendments include the Mortgage Disclosure Improvement Act, which regulates disclosures and the timing of fees to home buyers.

While the impact of these regulations is intended to be positive, real estate professionals are reporting that the detailed rules are causing delays and costing consumers more money. In addition, many lenders are applying the new rules to FHA government-insured loans, even though the HVCC rules apply only to loans intended for resale to Fannie Mae and Freddie Mac.
Among the changes home buyers can expect, according to the Prudential California Realty report:

The earliest any home transaction can close is seven business days after the lender issues initial mortgage disclosures to the buyer. (Saturday counts as a business day for disclosures only.)
The lender may not collect any upfront fees except those required to generate a credit report until the buyer has been issued the initial mortgage disclosure.
The home buyer must receive a copy of the bank appraisal at least three business days prior to closing.
Home buyers must be notified at least three business days before closing if the Annual Percentage Rate (APR) increases by more than .125% over the initial Truth In Lending disclosure. The APR is the true cost of the loan to the consumer.

The report added that according to HomeServices of America, there are a number of reasons the APR may differ from the original TIL disclosure, which can cause delays in closing.

Unlocked rate
Change in loan amount
Product change
Rate relock due to market improvement
Change in closing date
Changes in fees, including settlement agent fees

Advice to home buyers:
Lock in your interest rate and fees before you start shopping for a home. Extend your lock from 30 to 45 days. Allow ample time for the lending process when you choose a closing date.

Advice to sellers:
Be patient with your buyer's lending process, and prepare to be flexible with the closing date.

About Prudential California Realty
With over 3,400 sales associates in 58 offices across Southern California and the Central Coast, Prudential California Realty is the name to trust when buying or selling a home. In 2008, our agents closed more than $12 billion in sales volume and well over 16,000 transactions. As one of the top five brokerages in the nation and the largest company in the Prudential Real Estate international network, we have the resources and connections to protect your interests and make sure your experience is a successful one.
Prudential California Realty is proud to be a member of HomeServices of America Inc., a Berkshire Hathaway affiliate. For more information, visit www.prudentialcal.com

07.03.09

Prudential California Realty Market Report – July 2009

With affordability reaching unprecedented levels nationwide, including Southern California, housing sales are climbing.

The National Association of REALTORS® (NAR) reported the largest jump in pending sales in nearly eight years, largely due to the $8,000 tax credit stimulus for first-time home buyers. (www.prudentialcal.com > Buyers > $8000 Tax Credit) Existing home sales increased 2.9%, reversing a downward trend in March.

The median home price dropped 15.4% from a year ago to $170,200 – the second-largest yearly price decline on record.

The cause for the dramatic plunge is the rise of foreclosures and short sales, which impacted as many as 45% of homes sold. Distressed homes swelled inventories, driving them to 10.2 months on hand, up from 9.6 months on hand in March.

Mortgage interest rates have hovered near or below 5% for benchmark fixed-rate loans for as long as five months, as home buyers took advantage of a trifecta of opportunities: low interest rates, high inventories, and low prices.

First-time home buyers now make up nearly 50% of the market, up from an average of 30%.

Southern California housing outlook improves
Southern California first-time home buyers were joined by investors buying bargain-priced properties, and the sales pace increased for the tenth consecutive month, according to MDA DataQuick.

The percentage of absentee owners in the market, which has stood at 15% since 2000, suddenly jumped to 18.6% in April 2009.

For the seventh month in a row, Southern California foreclosures accounted for more than 50% of sales, bringing the median sales price down from the first quarter of 2009. Foreclosure sales were notably higher inland than along the coast, and builders added little inventory due to heavy competition from distressed homes.

Another weight putting downward pressure on the median sales price is low sales volume in the luxury ranges. Inventories of homes priced above $900,000 — out of conforming loan range — are at an 18-month high, while many communities have less than two months’ inventory of homes priced under $300,000.

“Jumbo” mortgages – those above $417,000 — are harder to get. Although conforming loans can be obtained up to $730,000, the relatively high cost of living in Southern California meant that only 10.9% of homes sold in April were purchased with jumbo loans. Before August 2007, when the credit malaise began, nearly 40% of Southland sales were in the jumbo range.

Nonetheless, overall home prices across California increased 1.4%. The median price rose to $256,700. Home buyers should be delighted that despite rising prices, homes are still priced 36% below 2008 levels, according to the California Association of REALTORS®. Prices are rising on volume of sales, which is up almost 50% for the same period.

The takeaway: buyers may find declining prices in some price ranges and accelerating prices in others.

Tax credit update
With five months left on the federal tax credit for first-time home buyers, the credit is expected to continue fueling entry-level home sales.

Mortgage interest rates still a bargain
Ideal home buying conditions don’t last for long. Currently, home buyers enjoy tax benefits, low prices, generous selections and low mortgage interest rates — but it’s inevitable that one or more of these conditions will change.

Mortgage interest rates are already beginning to climb, reaching 5.6% for the week ending June 11, 2009. That’s still well below a year ago, when they averaged 6.32% — so current rates should be more than attractive to home buyers, particularly in view of lower home prices and greater selection.

Home buyers who are concerned about rate increases would do well to look at Freddie Mac’s historical table on benchmark mortgage interest rates.

Between 1972 and 2008, mortgage interest rates have seen an annual high of 16.63 with 2.2 points and an annual low of 5.83 with 0.6 points. (Discount points are the percentage of the loan the lender charges to provide a given rate.) From a historical perspective, there has not been a single year since 1972 when interest rates have been lower than they are right now.

And a rise in interest rates can be negated by lower home prices. Here’s why.

If interest rates rise 1/8th of a point, that translates to about $25 or less a month in monthly payments on a conforming loan, and $9,000 over the full term of a 30-year loan. But if a home buyer pays $9,000 less for a home, these higher interest costs are negated.

For example, if home prices have sunk by 15% over the past year, home buyers are paying $15,000 less, or $85,000, for a $100,000 home. They’re paying $60,000 less, or $340,000, for a $400,000 home. That 1/8th point rise in interest rates is negligible compared to the opportunity to buy a home at a 15% discount.

This explains why mortgage interest rates and home prices don’t always rise or fall in tandem — and if they do, it’s not for long. As home buyers rush to take advantage of mortgage interest rates and other stimuli, lenders reach their capacity to provide loans, and interest rates inevitably rise.

Advice to home buyers: Be ready to make your move by prequalifying with your lender. If interest rates move up before you’ve locked in your rate, make sure you still qualify for the home by requalifying. To lock in your rate, you must be preapproved, which means you’ve shared your financial information with your lender.

Advice to home sellers: Price it right the first time. With first-time home buyers dominating the market, a home in move-in condition will always sell faster than one that needs updating. If you have a higher-priced home, your home has to be in better condition and better priced than your competition.

Santa Maria
The Santa Maria housing market is a tale of extremes. Homes in the conforming loan price ranges (up to $417,000) are in a seller’s market with as little as 2.6 months of inventory on hand for homes priced under $300,000. Mid-priced homes (up to $730,000 for jumbo conforming loans) are in a buyer’s market. Luxury homes priced above $900,000 are in a buyer’s market, at 26 months of inventory on hand as of June 3, 2009.