Yes, Home Prices Are Rising. No, a New Housing Bubble is NOT Forming

We recently reported that home prices are continuing to rise across most of the nation. This has created concern in some pundits that a housing bubble, like we saw ten years ago, is forming again. We want to explain why these concerns are unfounded.

The current increase in home values can be easily explained by the theory of supply and demand. Right now, the number of families looking to purchase a home is greater than the supply of homes on the market.

Here is a chart that explains how the months’ supply of housing inventory impacts home values:

According to the latest Existing Home Sales Report from the National Association of Realtors, there is currently a four-month supply of inventory. That puts us in the blue section of the above graphic. Home prices should be appreciating.

The difference in 2006…

A decade ago, the demand for housing was artificially boosted by lending standards that were far too lenient. Today, the strength of the demand for housing is legitimate, as lending standards are nowhere near what they were a decade ago.

For proof of this, let’s look at a graph of the Mortgage Bankers’ Association’s Mortgage Credit Availability Index:

The higher the number, the easier it was to get a mortgage. We can see that from June 2005 to June 2007, mortgage standards were much more lenient than they have been over the last nine years.

Bottom Line

Today’s price increases, unlike those a decade ago, are the result of qualified buyer demand exceeding the current inventory of homes available for sale. Once the supply increases, prices will level out.

U.S. Sees Big Spike in All-Cash Chinese-Speaking Buyers

Almost half of Chinese homebuyers across the country are paying for their purchase entirely in cash, a substantial increase over the past decade.
A RealtyTrac blog post says that for the 17 months ended May 2015, 46 percent of transactions by Mandarin-speaking buyers were all-cash deals, up from 14 percent in May 2005. Nationwide, all-cash transactions rose from 20 percent in 2005 to 33 percent in 2015.

“Cash buyers across the board are playing a much bigger role in the housing market now than they were 10 years ago, and that is particularly true for Chinese Mandarin-speaking cash buyers, who are more likely to be foreign nationals,” RealtyTrac Vice President Daren Blomquist said in a statement accompanying the report. “Foreign cash buyers have helped to accelerate U.S. home price appreciation over the past few years given that these buyers are often not as constrained by income as local, traditionally financed buyers.”

Over the past decade, Mandarin-speaking homebuyers have increased by 9 percent, more than any other foreign-language group. Earlier in the summer, a survey by the National Association of Realtors found that buyers from China were responsible for 16 percent of U.S. international property sales, also the most of any nationality. For the 12 months ended March 2015, China invested almost $29 billion in the U.S. housing market.

The Bay Area is a top destination for Chinese homebuyers, who are attracted to the region for its relative value compared with property costs in other international cities, high-caliber educational opportunities, and healthy lifestyle. In an April interview, Pacific Union CEO Mark. A McLaughlin told SFGate that 25 percent of homebuyers in Palo Alto had a connection to China.
McLaughlin, who developed and implemented Pacific Union’s unique China Concierge program in 2013, will travel to Beijing in November to present at Hurun Report’s 2015 Top Entrepreneurs Forum.

(Photo: Flickr/401(K) 2012)


Article and images sourced from http://blog.pacificunion.com/u-s-sees-big-spike-in-all-cash-chinese-speaking-buyers/

Wealthy Americans Propel Vacation Home Sales to New High

One in five U.S. properties sold in 2014 was a vacation home, the result of a thriving economy and strong consumer confidence.
The National Association of Realtors’ 2015 Investment and Vacation Home Survey says that vacation home sales accounted for 21 percent of all U.S. transactions in 2014. Vacation home sales surged 57.4 percent from 2013 to reach 1.13 million units — the most since the organization began conducting the poll 12 years ago.

In a statement accompanying the survey, NAR Chief Economist Lawrence Yun attributed the sizable uptick to both economic and home price growth.
“Affluent households have greatly benefited from strong growth in the stock market in recent years, and the steady rise in home prices has likely given them reassurance that real estate remains an attractive long-term investment,” he said.

NAR’s survey found that vacation homebuyers were taking home bigger paychecks, with the median household income at $94,380 in 2014, a year-over-year gain of 10.2 percent. These buyers are also overwhelmingly optimistic about the country’s housing recovery, with 85 percent saying that now is a good time to purchase real estate.

While sales volume was up big, the median sales price for vacation homes declined to $150,000, down 11.1 percent from 2013. According to Yun, the drop in prices is the result of a trio of factors.

First, the number of vacation homebuyers who purchased a condo or a townhouse rose from a year ago, although most — 54 percent — bought single-family homes. Additionally, distressed properties accounted for a greater share of vacation home sales in 2014 than they did in the previous year. Finally, nearly half of all vacation homes sold last year were located in the South, where prices tend to be lower than in other parts of the country.

Regardless of property type or geography, vacation buyers prefer coastal areas, with 40 percent purchasing a home at the beach. The survey says that 19 percent of vacation homebuyers purchased properties in the country while 17 percent bought homes in mountain regions.
(Photo: Flickr/Harvey Barrison)

Article and image sourced from http://blog.pacificunion.com/wealthy-americans-propel-vacation-home-sales-new-high/
 

Staging Can Increase a Home’s Appeal During Bustling Spring Season

With the coming of spring, potential Bay Area home buyers will begin pounding the pavement, and homes that make a good first impression are the most likely to make the biggest impressions on eager buyers in what could be a crowd of open houses.

That’s where home staging can help.

A recent survey by National Association of Realtors’ 2015 Profile of Home Staging showed that 81 percent of homebuyers found professionally decorated properties easier to visualize as a future home. Staged homes typically sell within 30 days, according to research by The International Association of Home Staging Professionals and HomeStaging.com. Additionally, staging usually leads to a higher final sales price.

“Staging isn’t about decorating your home,” says Laney Nelson, Accredited Staging Professional stager for Walnut Creek-based East Bay Staging. “It’s about selling.”

THE BASICS AND BENEFITS OF STAGING

Stagers conduct a home assessment, examining items to be removed and refurbished, neutralizing decor to appeal to a majority of buyers, and maximizing both indoor and outdoor space to generate positive impressions of the home’s features. Replacing carpeting and flooring, painting, cleaning, landscaping, changing furniture, and even simple fixture replacements can help a property connect with buyers.

But mixing conflicting styles and accessories can put off homebuyers, according to Kelly Wood, a buyer’s specialist and a former stager. “The extremes don’t really work,” she says.

Additionally, staging and repairs offers the appearance of home upkeep, both in the real world and online, says Danielle Cirelli, owner of Walnut Creek-based staging company Designed to Sell. “Photos are an essential part of marketing because over 90 percent of the buyers will preview a property online,” she says.

Millennials, who currently make up the largest share of homebuyers, are even more likely to peruse online listings before visiting a home. Pacific Union CEO Mark A. McLaughlin stressed the importance of technology on the real estate industry in his recent Inman Select Live presentation, saying that digital strategies are geared toward users likely to “give you eight seconds.”

CONNECTING WITH A STAGING PRO

Sellers who decide that staging is the way to go will likely want to employ the services of a pro. Many expert real estate professionals offer their clients a list of recommended contacts – including architects, general contractors, and interior designers – who can help enhance a home’s appeal. Some real estate professionals provide staging services as a part of their service package. Sellers can also find a staging company through online resources such as Yelp and Angie’s List or referrals from friends and family.

Though some sellers might fret over staging expenses, it actually costs less — an average of $675, according to NAR’s study — than the first price reduction – typically at least 10 percent of asking price. And a lingering home on the market sans staging can incur additional price cuts, according to Nelson.

“Every month a home is on the market, there is a price reduction of usually 5 percent,” she says.

(Photo: Flickr/boulderite)

Article and photo sourced from http://blog.pacunion.com/spring-staging-tips/