February 2011

National Association of Realtors® recently announced that 49 of 50 states had an increase in single-family homes and condominiums sales in the fourth quarter of 2010. While we usually focus on the California Market, we could not pass on reporting this encouraging national news. If you want to know who the lone state was that experienced a decrease in sales ----it was Virginia, they reported a 5.4% decrease. Idaho, with a 103.1% increase, was by far the largest gain. The overall increase for the nation was 15.4%. Broken down by region from least to most was the south South at 11.4%, the Northeast at 15.0%, the Midwest at 18.3% and the west West has bragging rights with a 19.9% gain in fourth quarter sales. California was below the average with a reported 5.6% gain in fourth quarter sales. This is certainly encouraging news even though some of the gain can be explained by a slow third quarter in 2010. The reason for the slower third quarter may be partially due to the Federal Tax Credit expiring September 30, 2010. To be eligible a qualified buyer must have had a binding contract by April 30, 2010 and must have closed escrow by September 10, 2010. Most buyers that had a binding contract by April 30th would have closed escrow in the 2nd quarter. This created a rush to close in the second quarter will with only a small percentage closing in the 3rd quarter. Still, the report of 49 of 50 states increasing sales in the fourth quarter is great news and gives credence to the  majority of economists’ predicting predictions of an improving real estate market in California and the U.S. for 2011

January 2011
    Now that we have rolled into 2011, we can take a look back to 2010 to determine what type of real estate year it was. The year 2010 started off fairly robust due to the Federal First Time Home Buyer Credit. Looking back, we can clearly state that the Federal First Time Home Buyer’s Credit did spur on the market—at least for a while. Qualified buyers had until April 30, 2010 to enter escrow and until September 30 to close the escrow if they wished to receive credit of up to $8,000; so, as would be expected, buyers had an in- centive to beat this deadline. This had a similar effect to that of a store offering a big sale. Sales would increase through the sale dates and, of course, would significantly drop off after the sale. This is exactly what happened—the market was much stronger through September, followed by a much slower fourth quarter. The Great Recession of 2007 to 2009 led to many foreclosures and also made qualifying for a home more diffi- cult. Therefore, more Americans became renters, thus driving rental prices up by 11.6% in 2010. The increased rents are bringing investors back into the market and are also making homeownership more attractive to renters. The Housing Affordability Index, which is based on housing prices and interest rates, has increased by 54.7%. With higher rental prices, an increased Housing Affordability Index, and the release of more bank-owned properties into the market, 2011 looks to be a promising year for Californian real estate.

December 2010
    Why are lenders nationwide sitting on hundreds of thousands of foreclosed homes? An estimated 80,000 of these foreclosed homes are in California alone. Some suggest it is because they are holding on to these properties until prices appreciate in order to recoup some of their losses. Others suggest that the lenders are releasing properties slowly to avoid flooding the market and creating more depreciation in prices. Still others believe that lenders just move that slowly. For example, homeowners are typically able to stay in their home for almost 500 days after they stop making payments. An efficient process could reduce this time period by more than 50%. Instead, Bank of America just announced that they are freezing all foreclosures. Lenders in 23 other states have done the same with others likely to follow suit soon. This is in response to findings that questioned if some lenders and/or loan services
were following the correct foreclosure protocol. California law required lenders to make contact with at-risk borrowers between January 1, 2003 and December 31 2007 to discuss options for avoiding foreclosure at least 30 days before starting the foreclosure process. It is estimated that internal reviews at B of A and other lenders can be completed within 30 days. Then the foreclosures process will be able to resume once again. It is challenging at best to fully understand all that is going on within the lending industry. One thing you can take to the bank: Home values are attractive and interest rates are at a 50-year low, making this a great time to buy!

November 2010
    Now that interest rates are at record lows, prices are down 30 to 40 percent from their record highs, and there is ample inventory, the real estate market is poised for some long-term stability. An improvement in our national economy is all that is needed to insure this long-term stability for the real estate market. The real estate market has far fewer moving parts than the vast national economy which makes it easier to predict. Even though the national economy is complex and often very hard to predict, a few indicators can make this process easier. These days economists are paying special attention to the employment market (jobs), the stock market, consumer confidence, consumer price index (inflation), and housing sales. In August there was a net gain of 54,000 jobs. The Dow Jones Industrial Average started August at 10,150 and ended Friday, September 10th at 10,462. This is notable because very few economists predicted this “mild rally”. The Consumer Confidence Index now stands at 53.5, up from 51.0 in July. Inflation is currently predicted to be 1.2% for 2010. A 1.2% inflation is considered very low and alleviates the fear of inflation in the near future. Housing sales nationally will most likely remain at or near 2009 levels which were a vast improvement over 2007 and 2008. Leading indicators would suggest that our economy is in a slow but steady recovery. The best way to describe what we should be feeling is -“cautious optimism.

October 2010
    In the last year, low home prices, low interest rates, and government tax incentives have turned the real estate market around. While prices are experiencing a slight appreciation in the under $500,000 range, prices above $500,000 seem to have stabilized but are not appreciating. These factors indicate that this will be the trend for the near future. Most economists predict that interest rates will remain low, however, a bump of 1/2 to 1% is likely to occur if the real estate market continues to stabilize and the national economy continues to grow. As the federal tax incentive was expiring, California passed Assembly Bill 183, which provides a tax credit for up to $10,000 for first-time homebuyers or buyers of new construction. Even recent negative news headlines such as the devastating economies of several European countries, an increasing U.S. deficit, oil leaks in the Gulf, and a volatile stock market seem to have produced little negative effects on an improving real estate market. Whether you subscribe to the belief that buyer confidence improves as the market improves or that the market improves as buyer confidence improves, the good news is...buyer confidence is on the rise! The short term as well as the longer-term real estate market in California appears to be strong and stable.


Here To Serve You...

    Valued friends and clients--feel free to take advantage of my free market evaluation service. If you would like detailed information on your home, your investment potential, or, a little help strategizing for the future, I am here to serve you at all times.