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,
Francis

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

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...

Francis

Silicon Valley real estate

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

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,
Francis

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%

Where the mortgage deduction really pays

Where the mortgage deduction really pays...  an interesting article.
Source: CNN Money

The mortgage interest deduction is one of the most-expensive tax breaks on the books, but its benefits are distributed unevenly across the country, according to a new, comprehensive report by the Pew Charitable Trusts.

In 2010, the year that Pew analyzed, the mortgage deduction resulted in $80 billion of forgone revenue to the federal government. Over five years, the tax break is expected to reduce revenue by about $380 billion.
This article by Jeanne Sahadi @CNNMoney shows however who really benefits from the tax break (and who benefits from other tax breaks),  while these report and maps look at the geographical distribution of the mortgage interest deduction.

Make sure to look at the interactive maps, from the Fiscal Federalism Initiative, showing how widely mortgage interest claim rates and average deductions vary, both across and within states.  They show in particular some key findings like:
- Average deduction per filer, by state,
- the Claim rate, by zip code,
- the average deduction per filer by zip code.

Local info:
Look at the average deduction per household in your local area.

Simply fascinating!...

Thanks for reading,
Francis

Silicon Valley real estate specialist
Detailed, local trends etc...
 

Bay Area real estate values...

As seen on Thursday's front page of the San Jose Mercury News (and also in the SF Chronicle of today Friday), property values in the Bay Area as a whole are definitely picking up.  Typically when it gets in the paper, it is already a few months old, but the information is organized in a way that shows updates in some communities that are not obviously visible to us here in the Silicon Valley.

Some of the East Bay Cities are doing fantastic, showing some real improvement in 1st quarter 2013 over the first quarter of last year.  For instance:
Oakley is 16% higher in median values than in the first quarter of 2012,
Antioch is 28% higher,
Union City is 34 % higher,
Pittsburg is 9 % higher.

The article is also interesting because it touches on a subject I touched on earlier in this blog: why are there so few homes on the market?   They are showing that there are still a lot of houses either underwater, or with not enough equity for people to move:
according to Zillow there are still about 25% of homeowners who are in that situation in the Counties of Santa Clara and San Mateo, and a whopping 46% in the Contra Costa County.

That would include:
- people who bought when prices were higher,
- people who borrowed too much on their home equity over the years,
- prices that are slightly higher than when property was purchased, but would not break even with the costs of the sale.

Francis Rolland

Silicon Valley real estate

Trends: Local prices and graphs.

Own vs Rent ...

Despite US population growth of roughly 1 percent per year, the number of owner households has held steady, in the range of 75 million since 2007, while the number of renter households has increased from 35 million in 2007 to nearly 40 million today. 
This means that the historic proportion of 1/3 - 2/3 tenants - owners in the US is loosing ground.

Some of the reasons are:
- loss of home because of the crisis,
- difficulty to refinance,
- Some renters who would like to take advantage of today's favorable prices and interest rates are finding credit standards too tight to obtain financing.

Here is the evolution over time, nationwide:

In France, that proportion is about opposite: about 1/3 owners, and 2/3 renters.
If you are coming from another Country, let me know what is that proportion where you are coming from!
Thanks,
Francis

PS: in California, the homeownership rate has gone down regularly since 2008 and is now about 54%.

Local market trends

Current Mortgage rates

Non-profit organization worth noting: Partners for New Generations.

California: foreign-born population and homeownership.

California, the most popular State for immigrants...  When I came here first in 1970 the mentality was still very much like: "Go West, young man, go West" and a lot of people were arriving from the East to start anew.  There was a lot of space available, still, right outside your door.

 

What is the situation now?

 

 

Well, it is true that historically, California has been the popular destination for immigrants. Currently, about one quarter of the nation’s immigrants live in California. The top three countries of origin for the foreign born entering the U.S are Mexico, China and India.

However, California’s share of incoming immigrants has been declining since 1990 due to a rise in state bills related to immigration, and the settlements of new immigrant arrivals into different states with historically low concentrations of immigrants.

 

Length of stay and region of origin are significant factors in determining homeownership rate among international buyers. Those who have stayed longer, and have migrated from Europe and other parts of North America are more likely to own a home.

Homeownership rate among the foreign born population is 47.9 percent in California, much less than the rate among those born in the U.S (58.1 percent). When breaking down the foreign born population, naturalized citizens are twice as likely to own a home compare to those who are not (63 percent for naturalized citizens versus 28 percent who are not a U.S citizen).

 

One in five REALTORS® has worked with an international buyer in the past year.

The share of international buyers has slightly increased from 5.3 percent in 2010 to 5.8 percent in 2011.

In 2012, California accounted for 11 percent of home purchases by international clients, second behind Florida (26 percent).

The largest group of international clients in California is from Canada.

The median home price of foreign clients was $505,000, which is double the median price of single family homes in the state ($291,000)

 

The California Association of Realtors has published a new study on the subject.

Full study url:   http://www.car.org/3550/pdf/econpdfs/BusinessDataForInternationalRE_Final.pdf  

 

Thanks for reading,

 

Francis
Silicon Valley Real Estate

Smart stats

Reasons your neighbors hate you...

Well...  a little bit of humor mixed with some sound advice and remarks.. From Lucy O'Neill at the Improvement Center.

Francis
Silicon Valley real estate


9 reasons neighbors hate you
Courtesy of: ImprovementCenter.com