Real Estate Roundup: Bay Area Homes Are Selling Faster Than Anywhere Else

Here’s a look at recent news of interest to homebuyers, home sellers, and the home-curious.

SAN FRANCISCO, SAN JOSE ARE THE NATION’S QUICKEST-PACED HOUSING MARKETS
The Bay Area’s well-documented inventory crunch is ensuring that serious homebuyers waste little time making deals this fall, with the San Francisco and San Jose metro area housing markets moving at the fastest pace in the nation.

That’s according to inventory data from the National Association of Realtors, which says that U.S. homes sold in an average of 79 days in October. At the end of the month, there were 2.02 million existing homes for sale, down 4.3 percent on an annual basis.

Bay Area homes are selling more than twice as fast as they do nationwide — 35 days in San Francisco and 37 days in San Jose. And in certain local submarkets, the pace of sales is even quicker. MLS data from Pacific Union’s October Real Estate Report shows that single-family homes in our East Bay region sold in an average of 17 days.

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BAY AREA HOME SALES DOWN BY DOUBLE-DIGIT PERCENTAGE POINTS IN 2016
Home sales have decreased across the Bay Area so far this year, particularly at the lowest end of the market, and more cooling appears to be in store for next year.

Citing data from PropertyRadar, The Mercury News reports that home sales across the region dropped by 10.3 percent from January to September of this year. San Francisco saw the largest declines, at 13 percent, while sales sunk by 11.3 percent in Alameda County and 10.1 percent in Santa Clara County.

Along with constrained inventory, fewer distressed properties on the market are contributing to cooling sales. Distressed sales in the Bay Area dropped by 35.7 percent in the first nine months of the year. The shortage of distressed properties, which typically fall below the $500,000 price point, is further eroding affordability across the region, which could translate to another year of sluggish sales in 2017.

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ONE-THIRD OF HOME SHOPPERS SEEK FORMAL OFFICE SPACES
Here’s another factor to consider when staging a property: A home-office space will appeal to a significant portion of potential buyers and likely increase its price.

A recent report from John Burns Real Estate Consulting documents the rise of telecommuting and how it affects demand for home offices. The company says that 39 percent of new home shoppers work from their houses at least one day per week and that almost one-quarter of Gen Xers work out of their homes at least three days per week.

JBREC’s survey found that one-third of buyers want a formal home office, with younger buyers more likely to prefer this amenity. As many homebuyers born in the 1970s and 1980s have young families, a space with a door helps them better concentrate and participate in conference calls. The majority of respondents to the poll indicated they would pay a premium for a home with a dedicated work space.

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FEWER AMERICANS MOVING THAN EVER BEFORE
The number of Americans who moved their residence has dropped to an all-time low this year, although quite a few Californians packed their bags for the Lone Star State.

RIS Media reports that just 11.2 percent of the population moved domestically this year, even with a solid housing market and economy. Consistent with other reports, the Golden State’s expensive real estate market and high cost of living are pushing some residents to cheaper places; this year, more than 65,000 Californians moved to Texas.

Other residents appear to be fleeing high-cost urban counties for the suburbs, particularly in Southern California. In 2016, almost 40,000 people have left Los Angeles County and migrated to neighboring Orange and San Bernardino counties.

(Photo: Flickr/Bunches and Bits {Karina})

Article and images sourced from http://blog.pacificunion.com/real-estate-roundup-bay-area-homes-are-selling-faster-than-anywhere-else/

Real Estate Roundup: Rising Home Sales and Prices Projected for 2017

Here’s a look at recent news of interest to homebuyers, home sellers, and the home-curious.

2017 FORECAST: STEADY RISE IN HOME SALES, PRICES 
Next year will see steady growth in existing-home sales and prices, with stronger growth in 2018, according to the latest forecast by real estate analysts — boosted by a greater number of millennials entering their prime homebuying years, rising household formation, and continued job growth.

Forecasts for the coming year were a highlight of the National Association of Realtors’ annual Conference & Expo, held last week in Orlando, Florida. NAR analysts expect sales to grow  by 2 percent to 5.46 million in 2017, followed by 4 percent growth in 2018. The national median existing-home price is expected to rise by 4 percent next year.

NAR Chief Economist Lawrence Yun said that tight supply and affordability problems currently facing buyers in many markets will gradually ease next year.

“NAR surveys from both current renters and recent buyers prove that there’s an overwhelmingly strong desire among the younger generation to own a home of their own,” Yun said in a statement. “The housing market over the next couple of years should get a big lift in demand from these new buyers. The one caveat is it’s essential that there’s enough new and existing supply at entry-level prices for them to reach the market.”

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SAN JOSE, SAN FRANCISCO SELLERS LEAD U.S. IN HOME PRICE GAINS 
U.S. homes sold for an average of 23 percent above their purchase prices in the third quarter of 2016, the highest gain in nine years. And the news is even better in the Bay Area, where homes in the San Jose area sold for 68 percent above their purchase prices and 67 percent in the San Francisco area.

San Jose and San Francisco once again led the nation in home price gains, according to data compiled by ATTOM Data Solutions. They were followed by Portland, Oregon and Seattle (tied at 51 percent) and Los Angeles (49 percent).

The company’s Q3 Home Sales Report also showed that distressed sales nationwide fell to a nine-year low of 12.9 percent of all sales. All-cash purchases also fell to a nine-year low, to 25.9 percent of all sales, down from a peak of 44.8 in 2011.

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MILLENNIAL HOMEBUYERS TURN TO REFINANCING
Millennial homebuyers are growing in number, and they’re increasingly choosing to refinance their homes, too. That’s the news from mortgage software provider Ellie Mae, which released its monthly Millennial Tracker report last week.

Refinances accounted for 20 percent of all closed loans by millennial borrowers in September, up from 17 percent in August, the company said. Eighty percent of millennial loans were for home purchases, compared with 54 percent overall for U.S. borrowers.

Other findings from the September Millennial Tracker report:

• The average FICO score for millennial borrowers rose to 726 in September.
• The average interest rate on home loans continued declining, to 3.728 percent.
• The average loan amount increased to $184,179, up from an average of $181,326 in August.

“As the average rate on home loans continues to decline, we are seeing millennials with more purchase power, indicated by the average loan amount increase,” Joe Tyrrell, executive vice president of corporate strategy at Ellie Mae said. “We’re also seeing a slight uptick in the number of refinances in September, indicating maturity among those millennials who previously purchased a home and are looking for an opportunity to lower the cost on their existing mortgage.”

(Photo: Flickr/SoulRider.222)

Article and images sourced from http://blog.pacificunion.com/real-estate-roundup-rising-home-sales-prices-in-2017/

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.

Real Estate Roundup: Mortgage Rates Keep Dropping in the New Year

Here’s a look at recent news of interest to homebuyers, home sellers, and the home-curious.

MORTGAGE RATES DIP TO 3-MONTH LOW

Mortgage rates have declined every week so far in 2016 and are currently at their lowest levels since the fall, a fact that could help motivate hesitant homebuyers who have been sitting on the fence.
That’s according to the most recent numbers from Freddie Mac, which said that 30-year, fixed-rate mortgages fell to 3.81 percent for the week ended Jan. 21, down from 3.92 percent from a week earlier and up from 3.63 percent a year ago. Fifteen-year mortgage rates displayed a similar pattern, dropping from 3.19 percent to 3.10 percent on a weekly basis but up from 2.93 percent year over year.
In a statement accompanying the report, Freddie Mac Chief Economist Sean Becketti attributed the declines to weak inflation in 2015 and global economic turmoil, which is driving investors to treasuries.

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HOW MUCH YOU NEED TO EARN TO OWN A BAY AREA HOME
California residents must earn more than those in any other state in order to purchase a home, with Bay Area homebuyers requiring the biggest paychecks in the nation.
In a recent analysis, consumer financial-services comparison website Finder.com examined how large of a salary residents of 78 metro areas needed to earn in order to comfortably afford a home, assuming a 20 percent down payment, the ability to cover per-person expenditures, and the ability to pay off debt not related to the mortgage. By those criteria, San Francisco area households need to pull in more than $180,000 per year to afford the average home costing $1,119,500, the highest in the U.S. San Jose was the second priciest market in this regard, with a salary of $129,864 necessary to buy a home valued at $805,000.
Los Angeles and San Diego also made the top five for biggest salary requirements. Finder.com notes that those four California metro areas were among just six in the country where the salary required to obtain a mortgage is higher than the salary needed to pay for mortgage payments, average debts, and average expenditures.

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SUPER BOWL TRAFFIC, TRANSIT MAYHEM PROJECTED FOR SAN FRANCISCO
Although Super Bowl 50 at Levi’s Stadium in Santa Clara is still almost two weeks away, its impact is already being felt in downtown San Francisco, as streets close and havoc is predicted to befall strained public-transportation systems.
Curbed SF reports that the construction of Super Bowl City began over the weekend at the Embarcadero. The extravaganza will disrupt 19 Muni bus lines and close an entrance to the Embarcadero BART and Muni stations for most days. BART trains themselves are expected to be packed to capacity, though the agency plans to add extra trains to the rotation.
Worse still, predicts Curbed, will be the traffic that the detours create. Although the city is only closing a compact grid of streets right around the site of the festivities, the San Francisco Municipal Transportation Agency is directing drivers traversing the streets to major northbound/southbound corridors such as Van Ness Avenue and Gough Street, which could potentially clog up traffic several miles west of the event.

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1 IN 3 REAL ESTATE DEALS FACES DELAY
About one-third of real estate transactions encounter a delay before closing, but savvy buyers can take steps to ensure smooth sailing.
Citing data from the National Association of Realtors, an article in The Washington Post says that 32 percent of real estate sales encountered a delay over the past three months. Of the deals that were delayed, financing issues were the most common culprit, affecting almost half of those buyers.
In order to keep one’s financial ducks in a row while closing a loan, homebuyers should not make any major purchases that could affect their credit score. The article also recommends that buyers be completely transparent with their loan officer, disclosing all financial obligations and changes in employment.
(Photo: Flickr/401(K) 2012)

Article and images sourced from http://blog.pacificunion.com/real-estate-roundup-mortgage-rates-keep-dropping-in-the-new-year/

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/