Prudential California Realty is #1 in North America
Agents’ outstanding skills, market knowledge and service make Prudential the market leader….
Prudential Real Estate Affiliates recognized Prudential California Realty for ranking #1 for sales volume in 2012, out of the company’s vast network of residential brokerages in North America. The achievement earned Prudential California Realty the Gibraltar Circle award.
David M. Cabot, CEO, comments, “The success of our company is a reflection of the success our agents have achieved in assisting their clients, so we are very proud of these awards and distinctions. I would like to thank our agents for their dedication and our buyers and sellers for making us their choice in real estate.”
The Gibraltar award is Prudential Real Estate Affiliates’ highest honor. It recognizes the top 50 brokerages in North America for sales production or transactions over a given year.
Prudential California Realty also received many Pinnacle awards. The Pinnacle award recognizes the top 10 offices and sales associates in the US.
For sales production in 2012, Prudential La Jolla was the #1 ranked office in the US. The Santa Barbara office followed closely behind at the number three position, Prudential Newport Beach ranked number six, and the company’s Brentwood office ranked number eight in the nation.
David Offer of Prudential Brentwood was the #1 ranked individual agent for sales production last year. Representing the Montecito office was Daniel Encell, who placed number four, and Gary Glass of the Brentwood office ranked at the number five position. Shauna Covington of Prudential Laguna Beach was the number eight ranked individual, and Kathleen Winter of Santa Barbara rounded out the national top 10.
For Prudential teams, Marc and Rory Shevin of Prudential Calabasas ranked number five in the US for their sales in 2012. Gregg and Debbie Neuman of the Downtown San Diego office were the number seven ranked team nationally, and K. Ann Brizolis and Associates of Prudential Rancho Santa Fe ranked at the number eight position. Greg Noonan and Associates of the La Jolla office placed number nine, out of all Prudential teams in the US.
Leeann Iacino, COO, adds, “Placing in the national top 10 is a remarkable achievement. I would like to congratulate all of our Pinnacle award winners and the top PREA 100 agents. Thank you for your commitment to provide our clients with exceptional results. Our agents are the most professional and knowledgeable in our industry.”
With over 3,200 sales associates in more than 62 offices across Southern California and the Central Coast, Prudential California Realty is one of the top five brokerages in the nation. In 2012, agents of the firm, one of the largest companies in the Prudential Real Estate International network, closed nearly $11 billion in sales volume and well over 14,000 transactions. Prudential California Realty is proud to be a member of HomeServices of America Inc., a Berkshire Hathaway affiliate.
Post-election Prospects for Housing Deem Positive
With the re-election of President Obama, most of the uncertainty that has held U.S. markets in suspense is gone. Though Wall Street reacted with a temporary freefall, just as it did following the election in 2008, such volatility only improves the outlook for housing.
Home ownership has long been considered the third cornerstone of the asset-allocation pyramid, alongside stocks and bonds. While the home ownership rate has fallen from the peak of 69.2%, set in 2004, at 65.4% the rate has returned to the historical mean – where it was in 1997, says the Commerce Department. That was the year of the Tax Relief Act of 1997, one of the first federal stimulus acts that improved tax deductions for home owners.
With mortgage interest rates continuing to break records in October and still hovering near all-time lows in November, the borrowing costs for housing compared to other forms of credit are irresistible.
Further, home prices nationwide remain well below pre-recession levels. In February, prices reverted to where they were in 2002, but have steadily risen since then, according to the National Association of REALTORS®. Home prices have risen for seven straight months on buying demand, reaching a median $183,900 in September 2012, up 11.3% from the previous year.
The Federal Reserve Bank of Atlanta found that the median credit scores for mortgage borrowers is 40 points higher than it was in 2006, allowing many to buy homes without as much risk to themselves or to banks. National credit scores are the highest they’ve been in 12 years.
That brings us to the biggest challenge facing housing now – supply. Nationally, housing inventories are below the benchmark six-month level considered by many to signal a healthy, balanced market. In California, supplies are critically short in some areas and in some price ranges, to the point where sales volume is being restricted on lack of available homes.
In September, sales volume was down 5.2% from August on a tight 3.7-months’ supply, says the California Association of REALTORS® (C.A.R.).
But there’s still a lot of good news for buyers. Dataquick found that the typical California mortgage payment in September 2012 was 54.9% lower than the 1989 peak, and 63.9% lower than the 2006 peak (adjusted for inflation). Median California home prices peaked at $484,000 in 2007, hit bottom at $221,000 in 2009 and are currently at $287,000, the highest level since August 2008.
Despite rising prices, it’s still an excellent time to buy a home.
The only other question concerning housing is the fate of the mortgage interest federal deduction, one of the most popular home owner benefits there is. Pundits such as Trulia’s Chief Economist Jed Kolko believe that the administration will likely let it remain, or reduce the benefit for only the most wealthy home owners. With “blue” states such as California, Michigan and Nevada, which were hit hard in the housing downturn and still in recovery, voting overwhelmingly for President Obama, it’s unlikely the administration would reward such loyalty by eliminating such a popular tax deduction.
Currently, there isn’t an economic driver to compel prices backward, particularly in California. The state’s foreclosures have fallen to the lowest levels in years, says Dataquick, and mortgage defaults are at the lowest they’ve been since Q1 2007, the onset of the housing downturn. One reason is that the jobless rate in California is declining – down to 9.7% from 11.5% by Labor Department calculations.
The median price of a single-family detached home in California was $345,000 in September 2012, up 19.5% from $288,700 in September 2011. It’s the largest year-over-year increase since May 2010 when federal tax credits were stimulating home buying for first-timers.
This time, however, there are no tax credits and no incentives for any home buying demographic. Housing sales are decreasing in moderate price ranges on zero-to-three-month supplies, says C.A.R. Vice President and Chief Economist Leslie Appleton-Young, but they are rising in middle and upper-end price ranges where inventories aren’t so constrained. “Sales of homes priced $400,000-$500,000 rose more than 14%, and those priced above $500,000 increased more than 15%,” she said in a November release.
In C.A.R.’s recent Annual Housing Market Survey, there was good news for sellers: 57% of home sales received multiple offers - the highest percentage in 12 years. The typical home received 4.2 offers, an increase from 3.5 offers in 2011. Additionally, the survey shows 41% of sellers sold their homes without discounting their asking price, and homes sold in 32 days, down radically from 67 days in 2011.
Advice for buyers: With inventories at seller-market lows, you may feel homes are disappearing as soon as you find out about them. This is not the time to search for homes without hiring a real estate professional. Your agent may learn about homes coming onto the market and may be able to get you inside far sooner than the home appears on your favorite home search site.
Advice for sellers: If you’re wondering whether or not to put your home on the market, keep in mind that housing supply favors sellers right now. Buyers who are shopping now are highly motivated – they may have been shut out by the summer rush, or they may be transferring with a company and need to be settled by the new year.
Berkshire Hathaway HomeServices, The Real Estate Industry Game Changer
HomeServices of America, Inc., a Berkshire Hathaway affiliate, and Brookfield Asset Management announced today that they have partnered to introduce Berkshire Hathaway HomeServices – a new premium franchise brand that joins the existing brands and affiliate networks including Prudential Real Estate nationwide.
The announcement of Berkshire Hathaway HomeServices signals a defining moment in real estate. It unites the strengths of two industry leaders, bringing together unparalleled operational excellence, innovation and integrity. With a vision to become the most respected and valued company in the real estate market, this powerful new network will exemplify the reputation of Berkshire Hathaway – among Fortune’s 2012 most admired companies – in the real estate space.
Prudential California Realty, a wholly owned company of HomeServices, is honored to be part of this game changing strategy. “The power of HomeServices and Berkshire Hathaway is unmatched in our industry. The national and international reach for our sales associates will be unparalleled” said David M. Cabot, President & CEO.
Adds Leeann Iacino, COO of Prudential California Realty, “This announcement represents an extraordinary opportunity for our clients, and our sales associates, that is second to none. We are so proud to be associated with the combined strength that Berkshire Hathaway and HomeServices represents in this real estate industry game changing announcement”.
Since the inception of HomeServices 15 years ago it has been an ongoing plan to grow as a national brand, this escalates this opportunity. HomeServices will continue to identify companies for acquisitions in other markets locally, nationally and internationally.
“Berkshire Hathaway HomeServices passion for our industry will redefine the future of real estate and the American Dream”, said Iacino.
It’s a new day for the housing market.
With almost 3,000 sales associates in 60 offices across Southern California and the Central Coast, Prudential California Realty represented over $9 billion in sales volume in 2011. Recognized as one of the top five brokerages in the nation and one of the largest affiliates in the Prudential Real Estate international network, Prudential California Realty is proud to be a member of HomeServices of America Inc., a Berkshire Hathaway affiliate. HomeServices of America represented almost $32 billion in residential real estate sales with 114,500 transactions in 2011 and closed over $3 billion in home mortgages.
Housing Market Continues Upswing: Real Estate Outlook Improves
One of the most celebrated effects of the improving housing market is recovering home owner equity. According to the Obama administration’s September Housing Scorecard, home owner equity jumped $406 billion or 5.9% to $7,275 billion in Q2 2012.
Says Steve Cook, editor of the Real Estate Economy Watch, “Total equity has grown 13.5% since the end of 2011 through Q3 2012.”
For California, equity losses since 2006 are being overturned more rapidly than other parts of the country. Statewide, prices dropped 37.7% from the housing peak to trough, as computed by the CoreLogic Home Price Index, yet in September 2012 alone, housing prices in California gained 5.5%.
And the California Association of REALTORS® calculates that prices rose 15.5% statewide over the previous year to a seasonally adjusted median price of $343,820 in August 2012.
Such results are based on the positive momentum gained in housing sales volume and sale prices year-to-date. Like a rising tide that lifts all boats, gains in housing volume have a number of effects including supply reduction and price increases. Not only are equity homes in shorter supply, so are distressed homes, which are composed of bank-owned properties and bank-sanctioned short sales.
Foreclosure backlogs have shrunk for four consecutive months to the point that lack of inventory is inhibiting sales and causing prices to rise.
Said Anand Nallathambi, president and CEO of CoreLogic, “The reduction is being driven by a variety of resolution approaches. This is yet another hopeful sign that the housing market is slowly healing.”
For August 2012, the California Association of REALTORS® reported that housing sales volume has increased year over year for five consecutive months, causing low inventories to be a growing concern.
According to Realtor.com, the number of homes for sale has dropped by one-third over the last two years. Negative-equity-plagued cities such as Oakland, Stockton, Fresno, Sacramento, Riverside, Bakersfield and San Jose have taken the lead in declining inventories.
With only days until the presidential election, forecasters are predicting a positive year for U.S. housing regardless of which candidate wins. According to the UFA 100 Mortgage Report by University Financial Associates of Ann Arbor, the five-year forecast is that home prices will rise nationwide between 8.5% and 22%.
The California Association of REALTORS® outlook says that prices will rise 5.7% in 2013 across the state, and that sales volume will top 2012 by 1.3%.
The wild cards, says C.A.R. Vice President and Chief Economist Leslie Appleton-Young, will be federal, monetary and housing policies going forward, as well as the behavior of underwater home owners, who may opt to stay put.
“The housing market momentum that began earlier this year will continue into 2013,” said Appleton-Young. “Pent-up demand from first-time buyers will compete with investors and all-cash offers on lower-priced properties, while multiple offers and aggressive bidding will continue to be the norm in mid- to upper-price range homes.”
Advice for buyers: In October 2012, benchmark 30-year fixed rate mortgages reached the lowest cost since 1971, according to Freddie Mac. Additionally, C.A.R. researchers say these low rates won’t last and have nowhere to go but up. Get prequalified by your mortgage lender so you can take advantage of continuing low rates.
Advice for sellers: Home prices are up, but the best way to price your home is to get a comprehensive market analysis (CMA) from your real estate professional. It should show you the prices that homes similar to yours have brought on the open market as well as current asking prices. You want to strike a balance – low enough to attract buyers, but high enough that you don’t leave money on the table.
Pent-Up Buyer Demand Creates Opportunities for Sellers
Between July 2011 and July 2012, home prices increased 3.8% – the largest year-over-year gain since August 2006, according to the Corelogic Pending HPI. Prices rose 1.3% in July 2012 over the previous month.
Both benchmarks mean a fifth consecutive increase in home prices year-over-year and month-over-month nationwide.
When distressed sales are excluded, the numbers are even better – a 4.3% gain year-over-year and a 1.7% gain month-over-month.
In California, housing prices are still 38% below the peak of April 2006, which has made home buying attractive to buyers for the last several years.
One of the factors lowering prices was a high percentage of distressed homes, but as buyers have swooped in to take advantage of record low prices and interest rates, two things have happened – prices are rising and excess inventory in distressed homes is being absorbed.
RealtyTrac found that foreclosed homes in the second quarter of 2012 averaged 6% higher prices than the first quarter and were up 7% from Q2 2011.
In California, Q2 2012 foreclosure-related sales declined 10% year-over-year. Foreclosure prices averaged $248,676, a 4% increase quarter-over-quarter and year-over-year.
The shortage of available homes on the market “impeded home sales” in July, said the California Association of REALTORS®, even while pending sales rose from the previous year “for the 15th straight month.” Bank-owned housing sales dropped 35% year-over-year due to tight inventories – only 1.5 months’ supply on hand.
Banks are allowing more “short” sales to sellers so they can sell their homes for less than the mortgaged amount in applicable markets. California short sales were up to 22.6% of total sales in July, up from 18.8% the year before.
Meanwhile, equity sales – sales of non-distressed homes – rose in July to 59.5% of all sales, up significantly from 52.5% of sales in July 2011.
What’s driving sales? Pent-up demand — those buyers who have been on the sidelines and first-time home buyers.
Nationwide, current home owners are showing greater interest in buying homes. Move-up buyers were 40.3% of home buyers in May, 42.0% in June, and 43.5% in July.
The July median price was $333,860, up 12.7% from a year ago and marks the fourth straight month the median price has risen above $300,000 and the highest level since August 2008.
Said C.A.R. Vice President and Chief Economist Leslie Appleton-Young, “The strong performance in the median price over the past few months reflects a sales shift away from homes in the lower price ranges of the market due to stark inventory toward sales of homes priced above $500,000.”
In July, sales of homes priced below $200,000 declined 9.4% from the previous year, and homes priced above $500,000 climbed 27.7% from a year ago, Appleton-Young explained.
Southern California sales figures for July reflect the statewide trend. According to DataQuick, the number of Southern California homes that sold for less than $200,000 fell 5.8% from a year ago, while homes between $200K and $400K rose 13.4%. Homes priced between $300K and $800K increased 22.0% from July 2011. Homes above $800K rose 7.2% year-over-year.
And distressed sales were only 39.7% of sold properties – the lowest level since January 2008.
The return of buyers who were waiting and now ready to buy is a positive indicator that housing is again stabilizing.
Advice for buyers: Get preapproved for a mortgage so you can act quickly when you find the right home. Talk to your mortgage professional at HomeServices Mortgage for advice about what you need to do to prepare for today’s market. When competing with multiple offers you want to take the extra steps needed to properly package and present your offer. Now more than ever, the agent you select to work with you is vital.
Advice for sellers: Now’s the time to put your home on the market while affordability is still attractive to buyers through low mortgage interest rates. Be careful about pricing your home aggressively. Even though prices are rising, your price has to be justifiable to your buyer’s lender and fall within the bank’s guidelines for expanding markets.
Prudential California Realty appoints Leeann Iacino, former CEO of a leading real estate brokerage in Denver, as its chief operating officer.
Southern California real estate powerhouse Prudential California Realty, one of the nation's largest residential brokerages, has appointed real estate executive Leeann Iacino, past CEO of a leading Denver-real estate brokerage, as its Chief Operating Officer, overseeing more than 60 real estate offices and 3,000 broker-agents from Santa Maria and Santa Barbara, south to Los Angeles, Orange County and San Diego.
"This has been an extensive search that's resulted in acquiring an exceptionally talented and accomplished executive," said David M. Cabot, President and Chief Executive Officer of Prudential California Realty. "We're coming into a market that's full of extraordinary opportunities; Leeann is a professional with both the experience and the leadership skills to complement our company." According to Cabot, Iacino will directly manage Prudential California's multiplicity of offices, while integrating new information technologies into sales management and marketing systems. She will also create training programs for agents that unlock opportunities for effective personal marketing and sales, using new media.
"It's a great opportunity to work in California at this moment in time, for a company with Prudential California Realty's prominence and potential," Iacino said in accepting the position. "Those of us who have spent careers in real estate are more than familiar with challenging markets; but also with how those situations can shift, and how we can take advantage of a rising market to serve our clients and better our market share."
Iacino is one of the nation's most respected and innovative real estate professionals, for her expertise in training and information systems, as well as sales management. A top-selling agent with legendary Colorado broker Moore and Company, in 1999 she founded Colorado-based Prestige Real Estate Group, an independent company that grew to 350 agents and amassed $1.1 billion in sales covering the entire Denver-Boulder area. In 2009 Iacino engineered a merger between two of the leading real estate brokerages in the Denver area to create one the region's largest brokerages. As its CEO she watched it grow into one of Colorado's highest producing companies, with 750 agents that dominated sales in many of Denver's higher priced suburban neighborhoods. Throughout her career, Iacino has repeatedly gained recognition for her public service work, both on behalf of established organizations like Boys and Girls Clubs and the Susan G. Komen Foundation; as well as in creating new Realtor-based charities that identify families in her agents' communities that face health and other crises, channeling direct support to them through exceptional volunteer involvement and a minimum of overhead expense.
With over 3,000 sales associates in 60 offices across Southern California and the Central Coast, Prudential California Realty is one of the top five brokerages in the nation and the largest company in the Prudential Real Estate international network. Prudential California Realty is proud to be a member of HomeServices of America Inc., a Berkshire Hathaway affiliate. To contact Iacino, call (858) 792-6085; or visit Prudential California Realty at www.prudentialcal.com.
Prudential California Realty Market Report
The rest of the nation is finding out what Californians already know – it's a great time to buy a home.
The S&P/Case-Shiller index of home values reported the first increase in national home values in over half a year. All California cities included in the 20-city index reported higher prices.
Recently, home prices rose 2.0% over the previous year, and 1.8% over the previous month, marking the third consecutive year-over-year and month-over-month increase in home prices nationwide, according to CoreLogic.
More people signed contracts to buy homes in May than any time during the previous two years, says the National Association of REALTORS®. A whopping 14.5% increase in pending sales was cited for the West.
And, a weekly Freddie Mac survey of mortgage interest rates found that by July 2012, rates were the lowest on record.
While there are still large numbers of home owners who are upside-down on their mortgages, fewer are losing their homes to foreclosure. Government reforms are supporting more short sales and regulating the foreclosure process.
With distressed homes pulling down home values for over five years, many sellers of non-distressed homes decided to wait to sell their homes until market conditions improved. The strategy is finally paying off – California home prices are higher, inventories are lower, and, buyers are competing for homes.
In fact, confidence in the housing market is building so rapidly that buyers and sellers may be surprised at how much market conditions have changed. Shortages of inventory for sale are becoming widespread. Sellers are holding firmly on prices and terms. An unknown number are still withholding their properties in hopes that prices will rise further.
The bottom-line effect for buyers is that homes in their area and price range are more difficult to find. When buyers find the home they want, they find themselves in fierce competition with multiple offers from other buyers. If they aren't prepared with a complete offer, including a prequalification letter from a reputable lender, they may find themselves out of the running.
To illustrate how the market has changed, recently Southland median home prices reached $295,000, up 1.7% from the previous month and 5.4% from $280,000, according to DataQuick. Transaction volume recently rose 21% compared to last year.
Dataquick attributes the gains to fewer foreclosures, more transactions in the coastal regions, and a better proportion of sales across all price ranges. For example, sales of homes priced $300K to $800K rose 23.1% while homes priced $800K and above rose 11.8% in May 2012 over the previous year.
A greater percentage of homes priced $500K or more are selling, the highest since July 2010. At 19.1% of loans, "jumbo" loans (those at or above the conforming limit of $417K) were the highest they've been since December 2007.
In other words, move-up buyers have joined the marketplace that has been dominated in the past few months by investors and first-time home buyers seeking entry-level homes.
With California home prices posting gains for three consecutive months and sales volume well above last year, the California Association of REALTORS® says that the most critical issue facing the housing market going forward is lack of inventory.
Explains C.A.R. Vice President and Chief Economist Leslie Appleton-Young, "Inventory levels have not been this low since December 2005, when the supply matched the current level."
It takes a typical home 46.6 days to sell, down from 52 days a year ago. That means opportunity for both buyers and sellers if they are ready to move quickly.
Advice for buyers: Be prepared to make on offer with confidence by getting prequalified by your HomeServices Mortgage lender so you can show sellers that you are ready to move forward.
Advice for sellers: It's a good time to downsize, upsize or get out from under an underwater mortgage by selling your home. Homes are selling so quickly that you will be able to sell your home without much effort if it is pristine and priced to sell.
Back to a Seller's Market
What a difference a few months can make. The direction of the housing market has changed, and Southern California – in many price ranges – is back to a seller's market.
Seller's markets are characterized by high demand and low inventories, which results in altered behaviors from buyers and sellers. Sellers who are priced correctly hold firm or raise prices, offer fewer incentives and hold the line on concessions. Buyers, sensing the market's momentum, make quicker, firmer buying decisions, often paying asking price or above, or participate in multiple offers.
The reasons may have changed, but the market conditions for buyers remain the same. While past seller's markets were built on speculation and the instant equity of rising prices, today's market is based on affordability. People are buying homes because salaries have advanced while home prices retreated to where they were a few years to a decade ago. The typical mortgage payment in April 2012, according to Dataquick, is 62% below the market's peak in July 2007.
The window of opportunity for buying can't be predicted, but it's clear that the trend line is currently very favorable.
According to the California Association of REALTORS®, recent home prices and sales volume shot to the highest levels in more than two years. At $308,050, the statewide median price is above $300,000 for the first time in 16 months. Closed sales were 10% higher than in March, and 11% higher than the year before.
Among the reasons for higher median prices was stronger volume in the higher price ranges. Homes priced above $500,000 increased nearly 11%, said C.A.R. Vice President and Chief Economist Leslie Appleton-Young. "Additionally, the strong sales increase of higher-priced homes resulted in a considerable decline of inventory of homes in the higher price ranges when compared with last year. This signifies the tight supply conditions we've been experiencing in the lower price ranges over the past several months are now extending into the upper price ranges."
In April, overall there were 4.2 months' supply of homes for sale, down from 5.6 months' supply a year ago. However, in many markets and prices ranges there is 4 weeks or less of inventory. A six-to-seven-month supply is considered normal and balanced, depending on the market.
In Southern California, C.A.R. recently reported that month-to-month home prices were higher in every county. Year-over-year, sales volume is up substantially in Orange County (19.2%), Santa Barbara (14.4%), San Diego (9.7%) and Ventura (4.8%).
DataQuick reported that the percentage of distressed homes, which have depressed prices, made up a smaller portion of sales – the lowest percentage since April 2008. Investors are buying homes at twice the historical rate and cash buyers are paying $15,000 more per home than they did last year.
When a market picks up speed, that's the time to hire a professional and take advantage of the most current market data available. Regardless of your experience as a buyer or seller, your Prudential California Realty sales professional will help you negotiate today's market, because it's like no other before it.
Advice for Buyers: Be prepared to act quickly, but not hastily. Don't forgo precautions and safeguards because competition has increased from other buyers. Hire a Prudential California Realty sales professional to help you form your buying strategy, supply you with accurate and updated market sales data, and navigate the transaction, especially if it is a short sale or foreclosure buying opportunity. Don't let market pressures keep you from confirming sellers' disclosures and getting a home inspection to ascertain the property's condition. Confer with your HomeServices mortgage professional so you can make your purchase offer with confidence.
Advice for Sellers: While it may be tempting to price your home higher, carefully consider the competition from other homes similar to yours in your area as well as "good buys" in neighboring areas. Buyers will look as closely at value in a buyer's market as they do in a seller's market. If prices are rising in your area, be prepared for the buyer's lender to demand more comparables to support your price.
California Housing Turns a Corner
Figures signal a solid positive change in the California housing market.
The California Association of REALTORS® announced that the median price of homes in March 2012 posted the first year-over-year gain in 16 months and the largest gain since March 2004. The statewide median price was up 1.6% from the year before, and up 9.2% from the previous month. Housing inventories were at 4.1 months' supply, down from 5.4 months a year ago.
In Southern California, the rebound was less dramatic because sales volume and sale prices were already on the mend in many areas. The median, according to Dataquick, was flat compared to the year before, and sales volume was up 2.8%, which is more typical of March-over-February sales gains. The counties with the most improvement were Orange, Ventura and San Diego counties.
Another sign of stabilization is improvement in the distressed home market. Corelogic reported that California had the third-biggest decrease in defaults and foreclosures among U.S. states and has declined to the lowest level in almost five years.
Foreclosure resales and short sales continue to dominate over equity transactions, but the percentages are declining as the majority of loans in default originated between 2005 and 2007, and are concentrated in the most affordable California communities, says Dataquick. Zip codes with homes priced $800K and above experienced less than one-fourth the number of defaults as those with homes priced $200K to $800K.
In other news, jumbo mortgages increased in March to 16.4% of purchase loans, up from 14.4% in February, and 16.2% a year ago. Over 19% of homes sold in Southland were for homes priced $500K or higher – the highest percentage in over six months.
In the Southland, housing sales have increased for seven out of the last eight months, with affordable home prices rising fastest, due to the near-record influx of first-time home buyers and investors and all-cash buyers at double the historical level.
As buyers piled into affordable bargains, prices softened at the higher price points. Now buyers are turning their attention to more expensive properties.
While these improvements appear small, consider the following. Nationwide, March housing sales were down 2.6% from February, says Dataquick, while in California sales celebrated an early and enormous leap into the spring selling period as well as the largest March gain since 2007.
Advice for buyers: When housing inventories drop, multiple offers from other buyers and competition from cash buyers increase. You may find homes in certain price ranges or neighborhoods selling as quickly as they go on the market. The best preparation is to get preapproved by a knowledgeable HomeServices mortgage advisor (www.hslca.com) and to develop a buying strategy with your Prudential California Realty sales professional so you can act quickly and decisively when the home you want becomes available for purchase.
Advice for sellers: As a seller, a changing market can be confusing. Not only is your home in competition with both distressed homes and those that can be sold with equity, but you may see wide price variances in very similar-appearing properties. Let your Prudential California Realty sales professional give you a thorough market analysis so that you can price your home with confidence and to sell quickly and for the highest amount possible within current market conditions.
Recent sales trends are stronger than usual
With consumer confidence at the highest level in over a year, the outlook for late spring home buyers is growing increasingly positive.
"Recent sales trends are stronger than usual with sales in major metropolitan areas such as Los Angeles, Orange County and San Diego all logging double-digit gains from the previous year," said C.A.R. Vice President and Chief Economist Leslie Appleton-Young. "Recent encouraging signs in the GDP, employment picture, and consumer confidence suggest that a growing economy is in the making. All this, combined with continued-low mortgage rates, lays out a good foundation for the housing market to continue to grow as we enter the spring home buying season."
According to the Thomson Reuters/University of Michigan's latest reading, consumer confidence in March was well above economists' forecasts, due to "favorable income and job trends" offsetting bubbling gas prices.
As a precursor to future consumer spending, confidence is a widely watched economic indicator. Consumer spending accounts for approximately 66% of gross domestic product.
More than one-third of families reported that they were in a better financial position than at any time in the previous four years, and over 38% said job conditions had improved.
Jobs are the most important variable in housing; while the number of new jobs added in March was fewer than in February, more jobs were added by private sector employers. At the end of March, unemployment shrank to 8.2%, said the Labor Department.
Housing is already benefiting. By early April, mortgage applications had risen for seven consecutive weeks. Applications for conventional loans were up over 10%.
The number of national foreclosures dropped in February from the previous month and the year before, says Corelogic.
"With the spring buying season upon us, the inventory may decline further as the pace of distressed-asset sales rises along with the rest of the housing market," said Mark Fleming, chief economist for CoreLogic. Distressed properties still make up more than half of homes sold in California.
According to Dataquick, the Southland housing market posted "the highest number of February home sales in five years." Record levels of "investor and cash buyers" poured into homes priced under $300,000. Across six Southern California counties, the median price paid for homes edged up from January, but prices were held under the previous February by a high percentage of distressed homes in the mix.
Because of shortages in many areas, with as little as one to two months' supply on hand, sales volume has risen six out of the last seven months in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties.
The result is multiple offers and higher asking prices in homes under $300,000, as transactions rose nearly 10% compared to the year-ago period.
Sellers of entry-level and affordable properties are seeing prices rise, but generally, prices are rising for mid-priced or upscale homes, except in pockets of some communities. Median prices are up 1.8% from January 2012, but 3.7% below year-ago levels.
As long as distressed sales dominate the market, prices will stay in check, but what makes it a great time to buy a home is such low prices coupled with low interest rates, which have hovered at or below 4% for benchmark 30-year fixed rate loans for months.
Advice for buyers: Pre-approval for your home loan has never been more important! Nearly 33% of home buyers paid cash last month. To compete, buyers needing a mortgage must be prepared. Talk to one of our knowledgeable HomeServices mortgage (www.hslca.com) advisors for assistance to help yours be just like a cash offer.
Advice for sellers: Banks are committed to moving more distressed homes through the pipeline. That will cause prices to remain in check. Be prepared to be flexible with your price if comparables come in low. If you are a seller of a "short sale," your position has improved. Banks are making it easier to sell short, but you must be prepared with comparable home sales. Ask your Prudential California Realty sales professional to help you negotiate a "short sale" price for your home, so you can market your home with more confidence, knowing the bank will approve.
Americans more optimistic about home ownership
Americans are much more optimistic about home ownership than they were a year ago, according to the second annual Prudential Real Estate Outlook Survey. Eight in 10 respondents said home ownership is very important to them.
The survey also found that despite the recession, home ownership is still central to the American dream:
- With interest rates at historically low levels, 96% agree or somewhat agree that now is a good time to buy.
- A full 70% of respondents have some degree of confidence that property values will improve over the next two years; there was an 8-point increase in those very confident or confident compared to last year.
- 63% believe that real estate is a good investment despite the recent market volatility; that's up 11 points from last year.
One of the most heartening responses in the survey concerned the strong ties between home ownership and the community; 77% of respondents agree that home ownership strengthens a sense of community. Nearly half of Gen Y respondents said a sense of community makes home ownership more important. Gen Y'ers are particularly optimistic about the road ahead with 72% expressing favorable views about the residential real estate market.
Across all generations, 94% of respondents believe that finding the right home and community are crucial to helping their family be happy.
Concurrently, a recent survey by the National Association of Builders also found that most people want to be home owners. 78% of home buyers likely to vote in the presidential election said that "owning a home was one of the most important things in their lives." And 74% said that owning a home was "worth it," despite the volatility in housing over the last few years.
Nationwide, optimism is resulting in rising housing sales over three consecutive months, with inventories at a 6.1-month supply. According to the NAR, "normal" levels are between 5.2 months and 6 months' supply on hand.
"Given more favorable housing market conditions," said NAR chief economist Lawrence Yun in a statement, "the trend in contract activity implies we are on track for a more meaningful sales gain this year. With a sustained downtrend in unsold inventory, this would bring about a broad price stabilization or even modest national price growth, of course with local variations."
Housing inventories are down even more in California, where the supply on hand was 5.5 months, up from 4.1 months in December 2011. The gain in January inventories is seasonal, notes C.A.R., well below the 6.8-month supply in January 2011.
The number of foreclosures and short sales in California still remains high, more than 50% of the market. Prices are still suppressed, which is attracting investors and entry-level buyers. Where prices are declining while sales volume is increasing, more buyers are pouring into investment-grade and entry-level price points. Statewide, prices are averaging 46.7% below the peak set in Q1 2006.
Lender Processing Services found that by the end of 2011, delinquency rates were down, and California is no longer among the states with the most mortgage delinquencies, despite having the second-highest unemployment rate.
While most of California began 2012 with lower sales volume and prices, Southern California sales volume rose a marginal 0.4% year-over-year, the fifth consecutive rise in five of the last six months, says DataQuick.
Affordability is fast approaching a record, with median home prices at about $260,000, down 3.7% from the previous year. The lowest median price for the Southland was $247,000 in April 2009, and well below the $505,000 median of June/July 2007.
Prices reflect not only a decline in home values in the last five years, but also buyers that are choosing less expensive homes to purchase, including gravitating toward "inland foreclosures" to obtain bargains.
Foreclosures, says DataQuick, made up 32.6% of resale purchases in January 2012, while short sales were 21.3% of resales – the highest level in recent history.
The silver lining there is that lenders are approving more short sales, which prevents many homes from going into foreclosure and neglect.
Non-occupying home buyers purchased a record 26.8% of homes for sale in Southern California, with a near-record 31.4% paying all cash and a median of $199,000. The 10-year monthly average for cash buyers is 15.1%. Low-down-payment FHA loans accounted for 31.2% of purchase loans in January 2012.
About 16% of homes sold in January were for $500,000 or more, above the cyclical low of 13.8% in January 2009, but well below the 10-year average of 27.2%.
Southern California home buyers committed to a typical mortgage payment of $983 – the lowest on record since May 1999. Adjusted for inflation, it's the lowest payment on record since 1988.
Lower prices coupled with near-record interest rates means that housing affordability in Southern California is the best it's been in decades.
Advice for buyers: Competition from cash-paying investors is stiff because they can close quickly. Buyers should be prequalified by a lender so they can offer more and shorten the loan approval process. For buyers of more expensive homes, negotiating skills are more important than ever. Buyers should work closely with their Prudential California Realty sales professional to utilize their market knowledge before they make offers.
Advice for sellers: Lenders carefully consider comparables as well as days on market in determining their risk. While sellers in certain price ranges may see their home values rising, they should not price their homes too far above the latest comparables. Sellers of higher-priced homes may find that long days on the market are hurting home values, because prices inevitably decline when supply exceeds demand. They should price below the market and work with their Prudential California Realty sales professional to utilize their market knowledge before they choose a list price for their home.
March 2012 Prudential California Realty
Local Housing Supply Reveals Shortages in Some Price Ranges, Areas
One thing about the housing market is that it never stays the same. For the first time in months, or maybe years, the outlook for spring is overwhelmingly positive and bullish for housing.
A frequent featured guest on major networks, Ron Peltier is CEO of HomeServices of America, the second-largest real estate group in the nation. He commented that "The year 2012 will be a transformational year from correction and continued distress to stabilization and minimal recovery, and slow, steady growth going forward."
He believes that the U.S. population is growing at approximately 3 million households a year, yet we are currently forming half that number. This means pent-up demand for home ownership as the costs to own drop below the cost to rent in many areas.
"Home prices have corrected to 2002 levels," said Peltier. "Affordability for home buying is now at an all-time high. Today's home values are realistic and when looking at the low interest rates and the overall economics of ownership, the monthly cost to own a home today is the same as it was in 1981."
In addition to unprecedented affordability, other good news is making buying a home easier:
- FHA government-guaranteed loans were restored to higher temporary borrowing limits, already resulting in more sales volume in high-cost areas such as Southern California
- National unemployment rates dropped to 8.4%
- Banks approved more short sales and foreclosure write-offs, allowing stagnant inventory to move through the pipeline
- Mortgage interest rates reached new record lows
But wait – aren't prices supposed to fall further? Don't count on it in Southern California.
According to the California Association of REALTORS®, the median price of an existing, single-family detached home rose 1.8% to $285,920 in December 2011, up from $280,960 in November. Sales volume has risen for three months in a row to the highest level in a year. Year-over-year, sales are up for the sixth year in a row.
Dataquick found that housing sales surged in December in Southern California, with activity strongest in homes priced under $300,000 and sold to a record share of "absentee" buyers. Counting new and resale single-family and condo sales, volume was up 14.0% over November, slightly more than the historical 13.2% increase between November and December.
By price segment, luxury homes lost the spotlight to entry-level homes, which leapt 5.9% in transaction volume, bringing the median price down to $270,000 from $275,000 in November. Distressed homes accounted for 52.5% of Southland resales.
Non-occupying home buyers – investors and second-home buyers – purchased a record 26.4% of homes sold in December. Cash buyers purchased one-third of all homes, and paid a median price of $202,500.
Southland home buyers committed to the lowest monthly mortgage payment since January 1988, an affordable $1,026, down from $1,049 in November and $1,205 in December 2010. Adjusted for inflation, payments are 55.8% lower than they were in 1989 and 63.8% lower than they were at the most recent peak, July 2007.
Clearly, these data are offering buy-now signals, as well as sell-now signals, particularly for underwater home owners. But it's not enough to know whether home prices are up and down, it's also important to know why the data are changing, and whether that data is relevant to your situation and your goals.
That's where the importance of local data from your Prudential California Realty real estate professionals comes in. You may be surprised to learn that prices aren't falling in your neighborhood, or in your price range. It all depends on supply.
In California, and especially Southern California, there is such demand for affordable traditional homes that there are real shortages developing in many areas. Investors, cash buyers, and first-time home buyers are all seeking affordable traditional homes.
For example, detached homes under $300K are selling as fast as they can close.
Orange County – detached homes – 3.1-month supply
San Diego County – 2.4-month supply
San Fernando Valley – 2.2-month supply
San Gabriel Valley – 1.9-month supply
Santa Barbara County – 2.2-month supply
Santa Maria and the Santa Ynez Valley – 2.2-month supply
Southwest Riverside – 3.3-month supply
Ventura County – 2.2-month supply
Westside Los Angeles – 3.4-month supply
And there are shortages in other price ranges besides entry level. Due to the restoration of higher loan limits in high-priced areas, Westside Los Angeles has only a 2.8-month supply of homes priced $600K to $699,999. Santa Barbara has only a 2.1-month supply of homes priced $500K to $599,999. The San Gabriel Valley has only 2.8 months' supply of homes between $700K and $799,999.
Attached homes are also selling rapidly. The San Fernando Valley has only a month's supply of condos and townhomes priced $700K and above. Southwest Riverside has less than two months' supply of condos and townhomes – at any price.
To obtain the most recent sales data for your area, contact your local Prudential California Realty sales professional.
Advice for buyers: If you've been on the fence, 2012 is the year to take action.
Advice for sellers: In most markets and price ranges you can put your home on the market with confidence.
February 2012 – Prudential California Realty Market Report
As housing conditions slowly improve, buyers and sellers could be surprised by a different market than in recent years.
Inventories are down, prices are lower, interest rates are at record lows, and the "shadow" inventory of distressed homes is receding.
In other words, housing is stabilizing, and that counts as a vast improvement compared to the last five years. Depending on your point of view, housing could be at the beginning of a market rally, or it could continue to bump along with only modest gains in sales volume and prices.
The California Association of REALTORS® reported that the increase in home sales for November 2011 was the fifth consecutive month of year-to-year sales increases across the state. Not only were housing sales higher than the previous month, they were higher than the previous year.
Yet housing sales and prices remain below normal levels, largely due to factors outside of buyer demand. The lowering of temporary federally insured loan limits on Fannie Mae and Freddie Mac-bound loans impacted the sale of higher-end homes, particularly in high-cost areas such as Ventura, Orange County, Santa Barbara and other areas.
Fortunately, the higher loan limits have since been restored to $729,500 in many areas, so sales figures going forward should illustrate why it's a good time to buy a home in Southern California.
In addition, many banks are facing lawsuits and demands for restitution over fraudulent loans they sold to Fannie and Freddie. This explains the huge reluctance of banks to lend money to anyone except those with near or perfect credit and credit scores of 720 or above.
Despite such headwinds, pending sales climbed higher than a year ago, but the best news is that equity sales (homes not sold under distress of missed payments, foreclosures or short sales) rose to 55.1% of the market in November, up from 53.9% in October and 54.4% a year ago.
Another positive trend is that short sales were 21% of total sales, up from 19% a year ago. Banks are more willing to work with distressed sellers than take them through the foreclosure process.
According to Dataquick, Southern California home sales have increased for four consecutive months, less than the NAR's statewide average. It was a tale of two markets. While transaction volume rose 6.1% in November 2011 for homes priced under $400,000, sales of $500,000 and above fell nearly 16% from a year ago. Sales of homes $800,000 and above fell 17.6%.
Investors – nearly 25% of Southland home buyers – and buyers are pouring into homes that can be purchased within conforming and conventional loan limits up to $417,000, which could create a seller's market not so much by area, but by price range. The number of short sales that were purchased rose, while foreclosures declined, again a slight improvement toward shifting inventories away from the domination of distressed homes as opposed to equity homes – those sold with no financial encumbrances by the seller.
These are the kinds of reports that are improving inventory levels, which will eventually lead to more stable prices.
So what does 2012 hold in store for buyers and sellers? At Prudential California Realty, we believe that the trends mentioned in this report will develop further in the directions they are already going:
1) The number of home sales will continue to rise;
2) Inventories will increase, mostly due to a rise in foreclosures, but they will be absorbed quickly in the affordable price ranges;
3) Distressed properties will make up half of all sales as more sellers sell short;
4) An improved short sale process will emerge to help more home owners avoid foreclosure; and
5) Foreign and domestic investors will buy 25% of homes.
In these market conditions, look for buyers of affordable homes to see their equity building faster in 2012, while high-end home buyers may obtain some of the best bargains in recent years.
Advice for buyers: Lenders are closely watching housing sales in every price range and may use appraisal algorithms that adjust for the rate of declining prices. Buyers should carefully consider recent comparables when making offers for homes. That means that the home as well as the buyer must qualify for the borrower's loan. To learn more, contact your mortgage professional at HomeServices Lending.
Advice for sellers: For sellers of high-end homes, the number of people who would have purchased using a federally insured loan has dropped by about 14%. Cash buyers are kings, and may demand additional discounts. Carefully consider competing homes and prices when pricing your home for sale or negotiating terms with a buyer. To learn more, confer with your Prudential California Realty sales professional.
January 2012 Prudential California Realty Market Report
New Year Begins in Optimism
Rents have risen 4% while home prices have fallen by about the same amount in 2011, according to Zillow. New jobs and falling home prices are impacting rent prices. That means that in many areas, it is more affordable to buy a home than to rent. Adjusted for inflation, the amount home buyers in Southern California are paying for their mortgages is less than at any point in the last 15 years.
California recently reported the second-largest month-over-month increase in employment gains in the nation. Many counties reported unemployment rates below 10%, including Orange, Santa Barbara, San Diego and Ventura counties. In Orange County, employment gains were the highest since spring 2009. The best news comes from San Diego, where job growth is 3.0% compared to 2.2% statewide.
The job picture is improving, but previous job losses continue to be reflected in the high numbers of distressed homes for sale more than half of housing sales in October, says the California Association of REALTORS® (C.A.R.).
Ron Peltier, CEO of HomeServices of America, says there's a "silver lining" banks are shifting their strategies from foreclosures to short sales and involving the home owner. "It's less costly, more efficient and a better solution to a bad problem," he told Fox News in December.
Foreclosures are about 34.1% of the market, down from 36.7% the previous year, and well below the all-time high of 58.5% in February 2009. Short sales are about 19.5% of resale homes, up from 18.2% a year earlier, but the good news is that more banks are selling their way out. The figures show that banks are more willing to work with sellers to sell their properties at a loss rather than risk new additions to foreclosure inventories.
Year-over-year, median prices for MLS-listed homes across the state fell 8.9%, from $305,150 to $278,060, making affordability the best in nearly three years. Couple that with record low interest rates and you have a tremendous buying or investment opportunity. Confirmation? Both existing home sales and pending home sales were recently up 8.5% while pending sales were up 10.7% from a year ago. Inventory has dropped as well; single-family detached home inventories were recently 5.3 months of supply, down from 6.2 months' supply.
Higher conforming loan limits for FHA loans up to $729,750 have been extended through 2013. While less than one in five loans in California is FHA-guaranteed, look for that number, along with prices, to rise in 2012 if Fannie Mae and Freddie Mac don't restore higher conforming loan limits.
Advice for buyers: In many price ranges — not all — inventories are being absorbed and prices are stable to slightly rising. Mortgage loan limits and restrictions are easing. Interest rates are still at near-record lows. These are ideal buying and investing conditions. Choose the home you buy wisely — one that is well within conforming loan requirements and has a location and features that will serve your household's needs for years to come.
Advice for sellers: It's even more challenging for home owners to compete in today's market. The worst mistake a seller can make is to overprice a property. You're better off pricing low — or using Prudential Value Range Marketing — to attract more interest. Let your real estate professional show you the most current "comparables," based on the latest appraisal guidelines from lenders. It doesn't matter what your neighbor's home sold for four months ago if your buyer's bank appraiser isn't allowed to use it as a comparable.
Remember that your buyers and their agents will be using the same search parameters and comparables. They can instantly compare homes online and determine if your home is a good buy or overpriced compared to other similar homes.
Pricing your home is only half the battle. You also want to make sure the home closes. Don't wait for the buyer's home inspection get one of your own in advance so you can fix trouble spots and make your home more attractive by comparison to other homes. Proper disclosures generate more trust from buyers if they see your inspection report and the steps you took to fix problems so they won't have to deal with them.
December 2011 Prudential California Realty Market Report
Opportunities for Home Buyers and Investors
The numbers tell the story. California and Southland housing market conditions are creating great opportunities for home buyers and investors.
Housing sales for 2011 are on track to parallel the volume achieved in 2010, when half the year's sales were boosted by federal and state incentives. In fact, unsold inventories are at 5.1 months on hand, well below the 5.9 months on hand in September 2010.
The California Association of REALTORS® says that September 2011 home sales were higher for the third consecutive month and are at "stable levels." Pending sales, or contracts yet to close, were up year-over-year for the fifth month in a row.
September 2011 housing sales volume was 6.7% higher than the previous year, according to DataQuick. The median-priced California home was $249,000, down from $265,000 a year ago.
That's close to the April 2009 low of $221,000 but well off the early 2007 peak of $484,000.
Opportunities for first-time, move-up and investment buyers
Month-to-month sales prices were down statewide by 3.2% due largely to the high levels of distressed homes and the lowering of temporary conforming loan limits.
Foreclosures accounted for more than 34.2% of the market across the state, while short sales made up 17.8% of sales volume in September.
With 52% of the housing market in distress as of Q3 2011, prices are falling despite a 0.3% increase in demand, as distressed homes typically sell at a significant discount compared to other homes.
First-time home buyers and lower income borrowers are cashing in with conforming loans requiring relatively low down payments. FHA loans in the Southland were 32.5% of purchase mortgages in September 2011, up from 31.8% in August.
Lower conforming loan limits negatively impacted high-priced areas in California. Homes priced $500,000 and above were 19.8% of the market, down from 20.1% in August and 21.6% a year ago.
But the effect wasn't nearly as devastating as expected. In September 2011, "jumbo loans" were 17.8% of the market, up from 17.2% in August and well over the 10% low set in early 2009. That's positive for move-up buyers, who are looking to buy into a better cost-to-value home than they may currently own. Dataquick found that mid- to high-end homes are "normal, compared with recent history at 37.1% of the market, just over the 10-year average of 36.8%."
Low prices are attracting investors in record numbers. Investors purchased 29.7% of foreclosed homes at auction, said DataQuick in a foreclosure report. But the door may be closing on that opportunity – notices of default in Southern California were 15.2% lower and homes lost to foreclosure were 15.7% lower in Q3 2011 than they were in Q3 2010.
Many investors are snapping up homes without paying for a mortgage – a whopping 59% of non-occupying home buyers paid cash for homes in September 2011.
Those buyers who did take out a mortgage found their payments lower – $1,084, down from $1,101 in August and $1,177 in September 2010.
By the first week of November 2011, mortgage interest rates dropped to 4%, and welcome news that the economy grew by a modest 2.5% in Q3 2011 has made home buying conditions even more attractive.
By any measure, it's a great time to buy a home, especially in Southern California.
November 2011 Prudential California Realty Market Report
It's All About YOU!
Like the rest of the nation, California housing sales are rising on unprecedented affordability. The combination is thrilling for home buyers and investors – prices are still well below peak levels and interest rates are at record lows.
Price gains are small, but steadily improving. August 2011 housing sales volume was 8.6% higher than July and 10.2% higher than a year ago, according to the California Association of REALTORS®.
Median prices were the highest since December 2010. At $297,060, that's over 20% higher than the February 2009 trough of $245,230, but well enough below the 2007 peak of $594, 530 to keep buyers interested.
The news for Southern California was even better. Home sales were also 8.6% higher in August than July, and 6% higher than a year ago. Sales gains between July and August typically rise 3.4% because families want to move into their new homes before school begins, so an 8.6% increase is significant, according to Dataquick.
By the first week of October, mortgage interest rates dropped below 4% – the lowest rate since Freddie Mac began keeping records in 1971.
That spells unprecedented opportunity for home buyers and sellers. Yet many buyers are waiting for prices or interest rates to go lower, and many sellers are wondering if now is the time to sell their home.
Yes, it's a great time to buy and sell. For buyers, market conditions couldn't be better – prices are relatively low and interest rates are at rock bottom, affording more home than ever.
Should you wait? There will always be those who try to "time the market," but where is the bottom? You only know for certain when it has passed. For example, those who held their breath when interest rates were dipping below 4% the first week of October have already been disappointed that interest rates didn't go down further. A report that showed more jobs added across the U.S. quickly sent mortgage interest rates above 4% again.
A quick visit to a mortgage calculator will show you this is true:
- For every $100,000 of mortgage with a 30-year, fixed-rate mortgage at 4¼%, your monthly payment will be $491.94 and you'll pay $77,098.36 in interest over the life of the loan.
- The same $100,000 mortgage at 5% interest costs $536.82, a difference of $44.88 more per month and $93,255.79 in interest over the life of the loan. The difference in interest payments alone is $16,157.43 per $100,000 of mortgage.
Just for argument's sake, let's leave out down payments, taxes and insurance and look at a real world and recent example:
- Let's say that you buy a home in San Diego County for the average sales price of $486,000. At 4.25%, your payment is $2,390.83, and your total interest paid over the life of the loan is $374,698.05.
- If you had purchased your $486,000 home at 4.03% interest, as you could have in the first week of October, your home would cost you $2,328.65 ($62.18 less than at 4.25%) and $352,314.66 over the life of the loan, a difference of $22,383.39.
The question is – did you?
You can do all the math, but the message is the same – it doesn't pay to wait. No matter how hard you try to see the bottom, there are too many variables in market conditions that change daily.
That's why we don't buy homes only for financial reasons. We buy homes to raise our families, be close to friends and relatives, and to be free from a landlord where you get nothing back but cancelled checks at the end of the lease.
Unless you've refinanced your home recently, you can sell your current home and repurchase another at a lower overall cost of acquisition than what you presently have.
You come first
To help you have the best home-buying or -selling experience possible, Prudential California Realty equips its agents with the finest tools and closing services, so they can give you extraordinary service. From our affiliate mortgage lender HomeServices Lending powered by Wells Fargo, to our in-house relocation division, to our closing and title services, we provide you with one-touch access to a wealth of personalized services.
We take you through the buying and selling cycle seamlessly:
- Prepare you to buy with a comprehensive consultation on current market conditions, neighborhood and school reports.
- Assist in the load preapproval process so you can shop like a cash buyer. Knowing what you can comfortably afford – purchasing power – empowers you to buy right.
- Negotiate on your behalf and help you navigate through disclosures, inspections and all the other steps to a successful closing
- Help you prepare and market your home to sell
Our agents go above and beyond. Buyers are guided through the market with accurate and thorough personal tours and customized feature sheets for comparing homes. Not only do our agents provide access to industry-leading market trends and statistics, we support our sellers with monthly competitive analysis reports, a consumer video, and our expertise on proper pricing and staging.
The results speak for themselves. Check with your agent, as they most likely outperform the market in:
- Overall average sales price
- Percentage of listings taken versus listings sold
- Sales price to original list price
- Sales price to most recently available price
Last but not least, Prudential California Realty pioneered the Value Range Marketing concept which allows buyers to view a larger pool of homes for sale, and sellers to compete in a broader range of homes. This has changed how multiple listing services handle listings instead of boxing buyers and sellers into narrow price ranges.
No other real estate brokerage can say what we can – that we are the consistent leaders in every market we're in. That's how we put you first.
It's all about you.
October 2011 Prudential California Realty Market Report
Don't Let Mortgage Myths Scare You
The national average 30-year fixed-rate mortgage after Labor Day was reported as the lowest rate ever recorded in Freddie Mac's weekly survey. Yet, purchase applications for the same week were the lowest on record since 1996.
What's keeping home buyers from jumping on such affordable financing?
Fear. Home buyers are spooked by two pervasive mortgage myths – that you have to have 20% down to buy a home and that only buyers with perfect credit can get a loan.
"Neither one is true," says HomeServices Lending (www.hslca.com) branch manager Michael B. Moses. "People are letting a small percentage of the market frighten them. Yes, we have unemployment, but more than 90% of people are working, and more than 90% of our portfolios are performing."
Lending requirements aren't as strict as people think – borrowers are getting loans at great rates, says Moses. Loans are available with as little as zero down through the Veterans Administration, for veterans and active-duty military. And FHA has programs as low as 3.5% down for qualifying borrowers who buy within maximum loan limits, up to $625,500.
It's also not true that only borrowers with perfect credit can get loans, he says. "Credit scores are a strong indicator of risk for lenders to consider. It's true that lower credit scores impact the rate a borrower receives," explains Moses. "For example, a qualified b borrower can buy a home with 5% down (Conventional Conforming), but only with a higher credit score and a low debt to income ratio."
The rule of thumb is simple – less money down requires a higher credit score and vice versa.
"The credit score will tell you how much money you have to put down and it's a factor in your interest rate," continues Moses. "If you put 20% down, you can get a loan even if you have a low credit score of 620. If you have a 740 or 760, the lender may be flexible with less money down."
Other myths are also out there, such as that lenders are no longer doing stated income loans or jumbo loans. Also not true, says Moses. "We do loans that don't require a verification of employment income if the customer has a large portfolio of liquid assets."
The housing market is getting stronger. In fact, there's rarely been a better time to buy a home. Seldom are prices and interest rates simultaneously at multi-year lows.
The California Association of REALTORS® Affordability Index found that 51% of buyers could afford the median-priced, single-family home in Q2 2011, fewer than the 53% who could afford the median in Q1 2011, but more than the 46% who could afford the median in Q2 2010.
Affordability will be even lower going forward, as FHA extended loan limits expire in October 2011. In Orange County, for example, the qualifying loan limit for Orange County was $729,750, but after October 1, the loan limit will be $625,500. In other words, borrowers who purchase homes outside of conforming loan limits will still be able to get loans, but they'll pay more for them.
Waiting for interest rates to go lower won't work, says Moses. "You may think you qualify for the lowest rate, but lenders look at approximately 15 to 20 pieces of criteria, including credit scores, down payments, liquid assets, current employment, debt to income ratios, property defects, and much more."
You may qualify for a better rate on one criteria, but not qualify on another. That's where a good lender can make a difference. "When you have a good lender, they will work with you," says Moses. "If you want a lower interest rate, it may cost you, so don't look just at the interest rate alone, look at the total costs of buying the home. We are here to consult with you and get you into the loan that's best for you and your goals."
The lesson for home buyers is: don't try to time the market. "The best time to buy is right now no matter what time it is," advises Moses. "If you find a house you love and you can afford it, buy it. Don't get stuck on getting the best deal. The cheapest house you'll ever have is the one you're buying right now. Start building equity now."
Advice for buyers: Get prequalified with a reputable lender like HomeServices Lending. A good lender will explain the true costs of borrowing so you can comfortably afford the home you want as well as the monthly payments.
Advice for sellers: Make sure your buyer is prequalified with a reputable lender. If your buyer is paying cash, as one-third of home buyers are doing, you have the right to verify the source of funds.
September 2011 Prudential California Realty Housing Market Report
Turning Myths Into Money: An Insider's Guide to Winning the Real Estate Game
According to the California Association of REALTORS (C.A.R.), one-fifth of housing sales are short sales – sales in which the seller owes more than their home is valued on the open market.
In C.A.R.'s most recent lender satisfaction survey, 75% of Realtor respondents complained that lenders are making short sales "difficult" to "extremely difficult."
To assist with short sales, Governor Jerry Brown signed SB 458 into law, a bill that extends the provisions of SB 931 (2010) that any lender that accepts a short sale agrees that the short sale payment pays in full all outstanding loan balances. The significance is that the lender cannot pursue sellers after the short sale closes to pay the difference owed on the original mortgage and the final short sale purchase price. The other aspect of SB 458 is it prevents the lender from requiring any financial contribution (cash, note or any other form of financial contribution) from the Seller/Borrower as a condition of the short sale.
Fortunately for the housing market, foreclosures are declining in California. DataQuick found that foreclosures in Q2 2011 are the lowest since 2007. Notices of default against California homes dropped nearly 20% below the number filed a year ago for a total of 56,633 homes.
The real estate data company also noted that home owners in "more affluent coastal counties" were less likely to default on their mortgages.
In June, pending home sales also rose for the second consecutive month, says C.A.R., making the outlook even more positive for the Southern California market.
The importance of having a good real estate agent in today's market
It's more important than ever that home buyers and sellers utilize the training and experience of a good real estate agent.
To help buyers and sellers successfully navigate the complex transaction process, Prudential California Realty agents are continuously trained on the latest laws, regulations and trends taking place every day in the industry. Their knowledge and expertise makes them respected professionals in their communities.
H. Richard Steinhoff, has recently authored a book for buyers and sellers titled Turning Myths Into Money: An Insider's Guide to Winning the Real Estate Game. The book is already a bestseller, and filled with useful tips for buyers and sellers.
"A good competent Realtor can be invaluable to both buyers and sellers," advises Steinhoff.
The best way to find a good agent is to get referrals from family and friends. "In addition to the commission, the agent's incentive is to do well so he will receive more referrals from your friends – and maybe even from you!" Steinhoff says.
Other market myths
Steinhoff's book offers plenty of market myths that buyers and sellers take as fact. These are just a few of his most surprising myth-busters.
Myth # 16: When shopping for a loan, always take the one with the best interest rate.
Fiction, says Steinhoff. The interest rate is not as important as the Annual Percentage Rate, which is the true cost of the loan and includes the points and fees paid to the lender to acquire the loan.
Myth #17: It's always best to get a fixed rate loan.
Fiction, says Steinhoff. There are three types of loans, fixed rate and adjustable rate, or a hybrid that includes a fixed rate term that rolls over to an adjustable rate. Fixed rate mortgages are best for first-time buyers, people on a fixed income, or those who plan to stay in their homes a long time. Adjustable rates are best for people with upward mobility, people who plan to stay in their homes only a short time, and those who wish to obtain a larger mortgage.
Myth # 56: Always make a low-ball offer to get the best price
Fiction, says Steinhoff: Low-ball offers offend sellers and make them more difficult to negotiate with. Sometime they won't even respond.
Myth #77: When selling your home, never take the first offer.
Fiction, says Steinhoff. First offers often turn out to be the best offers because the buyers really like the house and want to move on it right away.
Myth # 78: When listing your house you should always try to negotiate a lower commission.
Fiction, says Steinhoff. If your goal is to get the most money possible, why cut the income of the one person who can make it happen? In addition, the listing agent's commission is split with the buyer's agent. Which property is going to get more showings, yours or the property offering full service commissions to all agents?
Myth # 81: It's hard to get started in investment real estate.
Fiction, says Steinhoff: Start small and work with a real estate agent experienced in investments.
The bottom line is that there are many myths circulating in the market that may be misleading buyers and sellers. Whether you want to buy or sell a home or an investment property, don't let market myths take you in the wrong direction from your goals.
Pick up a copy of Turning Myths Into Money. Talk with your real estate professional and ask for his or her guidance so you can learn firsthand what's happening in your local market and respond with the best strategy for you and your family.
Advice for home buyers: Mortgage interest rates are retesting previous lows, but that doesn't mean they'll stay there long. Buyers should put a pencil to today's rates and home prices and they will see that affordability is historically high. Even if prices should drop further, the mortgage interest rate savings is a great reason not to wait. Sign up for interest rate alerts at www.hslca.com.
Advice for home sellers: Sellers may be competing with fewer foreclosures and other distressed homes in their markets, but it's too early to try to test buyers or lenders with higher asking prices. Price to current market values with the help of your real estate professional, and your home will sell more quickly and for more money.