Thursday, June 27, 2013

Is the market slowing down?

Is the market slowing down right now?

Ask an agent who is full-time involved in the market, on the buy and on the sell side, and you will probably hear that it looks that way.   

About a year and a half ago, in the middle of January 2012, suddenly in just a matter of a week or two you could tell if you were actively involved in sales that something was changing:  properties were not available any longer to place an offer on, or offers were just going to be heard that evening with 2 or 3 offers expected, or it was too late by a day etc... So we would go to the next best one, and it was gone too, with multiple offers.

In a similar way today little signs appear here and there: a property comes back on the market a few days after being in contract, or we see "offer dates" pass with no offers brought in.  Also the inventory (finally!) increases a bit so that there is actually some choice for potential buyers.  I also hear sometimes that after a few days on the market very few people have actually looked at the disclosures online.  A month ago you would already have had by the start of the week-end most interested buyers checking out the disclosures.
So yes, it seems to me that the market is slowing down.  Sales figures in a month or two will tell us if this is correct.  I would attribute this slight slow-down to factors like:

  • Buyers are jaded by so many unsuccessful bids they may have placed,
  • Prices have gone up significantly for the same type of house, certainly so in the eyes of buyers, and if the asking price is too close to the last comparable sale, another 10 or 15% jump from that high becomes too intimidating,
  • With higher values have also come on the market properties which may not be the same high quality as those who just commended such high prices,
  • A sense, at least for some would-be buyers, that they just do not know where prices should be any longer, after the many extreme bids that all can see in the MLS (hence the need for a good Realtor...),
  • .. And last but not least, the rise in mortgage interest rates that have shot up in the past 2 weeks, effectively pricing out those buyers who were at the top of their borrowing power.


Let’s qualify those remarks though: in the areas with good schools, for properties priced lower than the last sales, there are still multiple offers, no doubt. For areas with very little inventory, the demand which has gone unsatisfied for so long is still there, and even only one offer will often bring a much higher price than the asking price.  The market is still very much a sellers’ market.  But in areas where inventory is larger, the new prices coupled with more choices will give a break to buyers who can still qualify. 

The future will depend a lot on:
-       The inventory (going up, going down again??)
-       The interest rates
-       Seasonality to a certain degree.  There are fewer people around during summer.

If I had a guess I would say that in general, going forward, we should expect prices to reach somewhat of a plateau, a market of muted price increase.  .. well, so there is my crystal ball. Do you want to try yours out in a comment?

Thank you for reading,

Local real estate
updated loan rates   Rates are up mostly, except for the 1-yr adjustable

Monday, June 17, 2013

Not enough money for your downpayment?

Not enough money for a downpayment?

Let’s imagine that you really, really want to purchase a home, you have the income to do it, and you’re ready, willing and able (all 3 conditions that as Realtors we always check for).  But there is a little problem: you do not have enough money for the downpayment.

The typical options are: - to get some gift money (it’s got to be from a relative to be acceptable by the bank making the big loan), - or get a second, in the form of an equity line of credit (just making their come back now), - or win at the lotto...

There is however an other option, that I have personally never seen used, but that I just read about and is worth mentioning:

REX HomeBuyer, a form of shared appreciation (or depreciation).

The principle of this option is that a group of investors get together, and loan you money to help with the downpayment on our purchase.

If the property has appreciated when you sell it, they share in the profit.
If the property has depreciated when you sell it, they share in the loss.

This is a good option for people who need some help with a downpayment, and feel shy going it alone on their purchase; it is reassuring in a way to have someone else share in the risks of the market variations.  And all the while you own the house the advantage is that you have used the downpayment money to actually buy a home and live in it, - and for a lot cheaper than if you had to borrow the whole amount.  (remember that when you borrow a 90% amount on a house, you have to pay PMI –Private Mortgage insurance – and this is not cheap: about 1 to 1.5% of the amount you pay, every time you pay anything it seems).

In that option, you do not pay interest on the money that made the rest of the downpayment.  It is like having a friend co-buy with you but without the hassle to draw a complicated “separation agreement” for when you want to be on your own later. Here it is done from the start, in a clear way.

More on this interesting idea on this Los Angeles times article by Lew Sichelman.
As always with financial arrangements, run this by an advisor or an attorney if you are considering trying it...


Trends: Local prices and graphs.
A noteworthy local non-profit:  Our Brothers' Home

Friday, June 7, 2013

Tax break disappears as housing values rise

As property values have been going up sharply in the Silicon Valley, so are the assessors' values of our houses, throughout the area. We can expect therefore to pay more in property taxes, come November and December of 2013.

During the past 4 years I have prepared updated market analysis for several of my clients, in order to justify a lower value to be sent to the tax assessor's office. The goal of course was to pay a lot less in property tax, and I am glad to have been incidental to huge tax reductions in several instances. It is very unlikely that this is going to be possible going forward, as for most of the local area values have gone back to the highs of 2007, and sometimes higher yet. There are some small pockets in the County which would still be lower but there are fewer and fewer of them.

Nonetheless, if you feel that you are being assessed too much, do not hesitate to call on me to double check on it!

An article on the subject was recently published in the Mercury News, stating that "tens of thousands of homeowners will see their property taxes go up significantly this year as rising home values
restore some or all of their homes’ lost equity".

Do you feel you are being assessed unfairly this year? Let me know.

Thanks for reading,

Local real estate
updated loan rates   Rates are up mostly, except for the 1-yr adjustable
Week ending 6/6/2013 (Source: Freddie Mac)
30-yr. fixed: 3.91% fees/points: 0.7%
15-yr. fixed: 3.03% fees/points: 0.7%
1-yr. adjustable: 2.58% Fees/points: 0.4%