Bryan & Allison's Real Estate Report - 9/23/13
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It has been 22 days since our last blog posting, and there is a ton to talk about. Here are the highlights about what is happening in the real estate world, starting as always with...
Home Prices & Sales
July Case-Shiller Indices Improve More Slowly
Home prices rose in July by less than two percent for the first time since March but still reached their highest level since August 2008, according to the Case Shiller Home Price Indices released Tuesday. The 20-city index was up 1.8 percent in July – 12.4 percent in the last year. The companion 10-city index was up 1.9 percent, 12.3 percent since July 2012.
Economists surveyed by Bloomberg had expected the 20-city index to increase 2.0 percent from June, a 12.4 percent annual improvement. All 20 cities included in the survey improved both month-to-month and year-to-year. The two surveys have improved month-to-month and year-to-year for 14 consecutive months.
The Case Shiller report came as the Federal Housing Finance Agency (FHFA) said its House Price Index rose in July at the fastest pace since March. The FHFA index tracks values for only those homes with loans eligible for purchase by Fannie Mae or Freddie Mac generally those with lower values.
The Case Shiller 20-city index rose 1.4 percent in March and then by more than 2.0 in April, May and June. The 10-city index rose 1.3 percent in March followed by three straight months of gains greater than 2.0 percent.
The 10 city index rose to 176.52, up 3.23 from June’s 173.29. June’s index itself was revised down from the originally reported 173.37. The 20-city index was up 2.90 from June’s 159.59. The June index was not revised. In August 2008, the 10-city index was 176.71 and the 20-city index was 164.65.
NSDCAR September 2013 HomeDex Report
The NSDCAR HomeDex Report provides August 2013 housing statistics in two separate reports, featuring North San Diego County and full San Diego County statistics. To summarize the reports:
US home prices climb 12.4% in July
U.S. home prices jumped 12.4 percent in July from a year earlier, reflecting a housing market that's increasingly favoring sellers amid a tight supply of available homes for sale.
Real estate data provider CoreLogic said that home prices in every state but Delaware climbed on annual basis in July. Ninety-nine of the 100 largest cities reported annual price gains. Home prices grew 27 percent in Nevada, to lead all states.
CoreLogic also says prices rose 1.8 percent from June, the 17th straight month-over-month increase.
Consistent job gains and mortgage rates that are still historically low despite recent upticks are spurring more people to buy homes. That's helped drive prices higher.
CoreLogic says U.S. home prices are now within 18 percent of their peak levels reached in April of 2006.
San Diego Median House Price Is $415,000 for August
San Diego’s median housing price declined by $2,000 in August but was still well above the median price for the six-county Southern California median price at $415,000. Over the 12 months from August 2012, San Diego’s median price has risen 20.2 percent, according to the latest report from Dataquick, the La Jolla real estate research firm.
For the entire Southern California region, the median price increased 24.6 percent to $385,000 over the 12 months to August. That median remained flat from both June and July.
Home sales in the region were the highest for an August in seven years and marked by stronger activity in sales of houses above $300,000, Dataquick said.
In San Diego, total housing sales last month were 4,099, up 3 percent from August 2012.
A steady increase in housing prices has resulted in more properties being put up for sale, and fewer cash purchases, Dataquick said.
Cash buyers made up 27.6 percent of total transactions last month compared with 30 percent in July and 32 percent in August 2012.
Sales in the $300,000 to $800,000 market, a range that includes most move-up buyers, rose 31 percent year-over-year in the Southern California region. Houses that sold for more than $500,000 jumped 49 percent from the prior year’s August, Dataquick said.
All lenders combined advanced $6.36 billion in funds to SoCal homebuyers in August, down from $6.52 billion in July, but up from $5.45 billion provided in July 2012.
The most active lenders last month were Wells Fargo Bank with 7.8 percent of the purchase market; Bank of America with 2.8 percent, and imortgage with 2.6 percent, Dataquick said.
Median Home Price Is Up 23% From August 2012
The median price for a single family house sold in August declined 0.4 percent from July to $483,000, but it was 23 percent above the sales price in August 2012, according to the Greater San Diego Association of Realtors.
For condos, the median priced home last month sold for $310,000 down about 3 percent from July, but up 29 percent from one year ago, the SDAR said.
The number of sales of single family homes declined during the month by 3 percent compared to July; sales of condos and townhomes increased nearly 7 percent from the prior month.
More sellers are entering the market. More than 6,600 houses were for sale in August, but that meant the inventory was sufficient for about two months, the SDAR said. A normal housing market has five to six months of supply.
In August the most active ZIP codes for sales were in Fallbrook where 62 sales were recorded; Rancho Bernardo, with 59; Encinitas, with 57; Poway, with 54; and Carlsbad, with 52.
The most expensive county listing sold last month was in La Jolla where a six-bedroom, seven-bath house sold for $13.8 million, SDAR said.
August Existing Home Sales At Pre-Recession High
Existing home sales rose an unexpected 6.5 percent in August to an annual sales rate of 5.48 million, the highest level since February 2007 – ten months before the onset of the Great Recession — the National Association of Realtors reported. Economists surveyed by Bloomberg expected existing home sales to drop to 5.255 million from July’s originally reported July’s 5.39 million sales pace which was unchanged in today’s report.
The increase in sales came as the median price of an existing single family home in August dipped slightly from July, down $300 to $212,100. It was the second straight month-month price drop.
The inventory of homes for sale edged up to 2.25 million from 2.24 million in July, computing to a 4.9 month supply down from 5.0 in July and the lowest since February’s 4.7 month supply.
The sales increase came as mortgage rates continue to rise with buyers seeking to complete transactions before rates went up further. According to Freddie Mac, the rate for 30-year fixed rate loan in August was 4.46 percent (the average of the weekly rates), up from 4.37 percent in July.
Home prices, new laws help bring down San Diego's foreclosures
San Diego County’s foreclosures have mostly stabilized with the help of increasing home prices and the Homeowner Bill of Rights, according to a local expert.
Home prices have brought some underwater borrowers into positive equity, and the Homeowner Bill of Rights, a state law that went into effect on Jan. 1, made it easier for borrowers to modify their loans, said Joe Bertocchini, director of residential real estate for the Burnham-Moores Center for Real Estate at the University of San Diego.
“We’ve seen home prices go up substantially, which puts people underwater and struggling in a positive equity position, and get beyond a place where they were struggling to get ahead of the game,” Bertocchini said.
Trustee deeds -- the final step in the foreclosure process, transferring ownership from the delinquent borrower back to the lender or to a third party -- were filed on 174 properties in August, 14.29 percent fewer than in July and 71.38 percent fewer than August 2012, according to the San Diego County Assessor's Office.
Notices of default (NOD) -- which initiate the foreclosure process by registering that a borrower is behind in payments -- decreased 7.54 percent from July to August, and fell 55.71 percent from August 2012 to August 2013.
Lenders issued NODs to 601 borrowers in August, down from 650 in July and down from 1,357 in August 2012.
Bertocchini said there has likely been a substantial increase in the percentage of people able to get through the loan modification process last year versus this year.
Homes underwater in US continue decline in Sept.
While 10.7 million homeowners nationwide still owe at least 25 percent or more on their mortgages than their properties are worth, another 8.3 million homeowners are either slightly below or slightly above water, putting them on track to have enough equity to sell sometime in the next 15 months -- without resorting to a short sale, according to RealtyTrac's U.S. Home Equity & Underwater Report for September.
The 8.3 million include homeowners with a loan to value (LTV) ratio from 90 to 110 percent, meaning they have between 10 percent positive equity and 10 percent negative equity.
These homeowners represented 18 percent of all U.S. homeowners with a mortgage as of the beginning of September.
The 10.7 million residential properties with an LTV ratio of at least 125 percent represented 23 percent of U.S. residential properties with a mortgage -- down from 11.3 million deeply underwater properties in May 2013 and down from 12.5 million in September 2012.
FNC Report Points to Improving Foreclosure Market
A report released this week by mortgage technology company FNC indicates that the foreclosure market has improved dramatically in recent months, with foreclosure rates nearing pre-crisis levels. According to FNC’s Director of Research Yanling Mayer, the Foreclosure Market Report reflects rising home equity for homeowners who are trading up to more expensive houses.
“We’ve seen hard data from the past 18 months that shows rising home prices and a foreclosure market with diminished impact due to decreasing foreclosure inventories and fewer new foreclosure filings,” Mayer said. “Meanwhile, a very encouraging trend that has been developing is the rising participation of trade-up buyers who are seeing improving home equity position and positive capital appreciation on existing homes.”
Other News & Information
Cash purchases jump to 40% of all sales in July
RealtyTrac recently released its July 2013 U.S. Residential & Foreclosure Sales Report, which shows that U.S. residential properties sold at an estimated annualized pace of 5.5 million in July 2013, up 4 percent from the previous month and up 11 percent from a year ago — the biggest annual increase in sales volume so far this year.
The Growth of Single Households: Singles Make Up Quarter of All Buyers
Since more Americans are marrying later, divorcing frequently, and living longer, greater numbers of people are living alone. In fact, single buyers comprised a quarter of all home purchases last year, according to the NATIONAL ASSOCIATION OF REALTORS®. The living solo trend is evident in the country’s 33 million one-person households. Young adults ages 18 to 34 are the fastest-growing group of people living alone.
Report: Sellers Returning as Investors Pull Out
Market indicators continue to point to an imminent slowdown in home price gains—further allaying fears of another housing bubble in the making, Capital Economic says.
In the firm’s latest edition of US Housing Market Analyst, property economist Paul Diggle notes investor activity has fallen off nearly one-fifth over the last four months, with investor sales dropping from 23 percent to 18 percent as the inventory of heavily discounted distressed homes declines.
On the other hand, the ongoing rise in prices has encouraged more sellers to enter the market, bringing new listings up faster than home sales and resulting in a 10 percent inventory improvement since the start of 2013.
“With sellers motivated by the earlier rise in house prices, we expect the loosening in supply conditions to go much further over the next year,” Diggle said. “The upshot is that the pace of house price gains will slow.”
Regulatory cost increases send homebuyers to the resale market
Activity in the new home market is helping drive buyers to the resale market, said Russell T. Valone II, president and CEO of MarketPointe Realty Advisors said.
In 2005-06, San Diego County had about 15,000 new home sales. By 2011, that number had dropped to less than 10,000 in all of Southern California. There was a slight uptick in the beginning of the year, but the second quarter saw about a 20 percent drop, Valone said.
All legacy products started in the mid to late 2000s are being sold, and the product coming on has new land costs and new regulatory costs, Valone said, which are both “up dramatically.” In this environment, a $725,000 home has about $150,000 to $200,000 in regulatory costs, he said. This cost increase creates a positive effect for real estate agents by sending buyers to the resale market.
Those regulations aren’t coming from nowhere, said Leslie Appleton-Young, vice president and chief economist of the California Association of Realtors.
“They’re reflecting the desires of existing homeowners,” she said.
Higher lot prices may boost new home prices
New homes could get more expensive in the coming months as a shortage of suitable lots drives up builders' costs. In 27 leading markets, the average price of a finished lot ready for building was up 40% in the second quarter from a year ago, according to John Burns Real Estate Consulting.
Even steeper increases have hit some markets that have also seen strong gains in home values and demand. Year over year, finished lot values were up 87% in San Francisco and Oakland, 75% in Atlanta and 70% in Las Vegas.
The big jumps are 'making up for lost ground' during the housing downturn when lot prices fell, says David Crowe, chief economist for the National Association of Home Builders.
The higher lot prices may foreshadow higher home prices months from now. Finished lot prices represent almost 22% of a new home's price, Crowe says.
Builders expect future home prices will cover their higher lot costs.
'We're betting on things two years from now,' says Dennis Webb, vice president of operations for Fulton Homes, a Phoenix-area home builder.
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