Bryan & Allison's Real Estate Report - 10/10/13
There is still a lot going on in the real estate world, even with the government shutdown. In fact, rather than begin as we normally do with housing prices, let's begin with:
The Government Shutdown
U.S. government shutdown threatens housing recovery
Congress forced the first partial government closure in 17 years after failing to pass a budget, meaning borrowers in the process of obtaining home loans could be delayed as lenders are blocked from verifying Social Security numbers and accessing Internal Revenue Service tax transcripts.
The process may also lengthen the wait for borrowers seeking approval for mortgages backed by the Federal Housing Administration because its fulltime staff is now less than a tenth of its normal size and the U.S. Department of Agriculture, which backs mortgages in rural areas, won’t take on new business during the shutdown.
“The last thing we need is anything that shakes the confidence in a softly recovering housing market,” David Stevens, chief executive officer of the Mortgage Bankers Association and former head of the FHA, said in a telephone interview. “If it’s a short-term shutdown, it’s a story about these employees put out of work. If it’s long term, it’s a broader story about the adverse impact to the economic recovery.”
The shutdown comes as construction and new housing sales are climbing back from the worst financial crisis since the Great Depression. Builders broke ground on residences at an annual pace of 891,000 in August, up from a low of 478,000 in April 2009 while still only about two-thirds of the last 20 years’ average rate, according to Commerce Department data compiled by Bloomberg.
Home Prices & Sales
Home sales down while prices climb
Home resales in San Diego County dropped in September, while prices have been climbing, according to a Greater San Diego Association of Realtors report.
Single-family home sales decreased 20 percent compared to the previous month, and nearly 8 percent from a year ago. Attached home sales saw a drop of nearly 17 percent compared to the previous month, but are up nearly 9 percent from last year.
The median price of single-family homes sold stood at $486,500 in September, up about a percent from August and 20 percent higher than September 2012. Condos and townhomes saw a September median price of $305,000, down somewhat from August but up 27 percent year-over year.
More than 7,000 homes and condos are for sale in San Diego County. It’s been a year and a half since inventory levels have been that high. On average, resale properties are on the market a month and a half before closing escrow.
“We typically see a drop in sales after the summer selling months, which were really strong,” said Linda Lee, SDAR’s board president in a statement. “I’m very encouraged by the inventory levels. The market has room for more homes but these new inventory figures are really nice to see, especially for buyers.”
In September, the ZIP codes with the most sales of single-family homes included 92057 in Oceanside with 51; 92028 in Fallbrook with 44; 92127 in Carmel Mountain Ranch with 43; 92128 in Rancho Bernardo with 42; and 92064 in Poway with 42.
The most expensive San Diego County listing that sold last month was a 6-bedroom, 8-bath, 14,800-square-foot La Jolla home that sold for $18.5 million.
Home prices rising at fastest pace since start of bubble
Home prices rose faster during the first seven months of 2013 than any year since 2004, the year that marked the beginning of the home-price bubble.
Prices tend to slow down after June, but the July report showed still strong price gains. Prices rose by 1.8% from June, the largest June-to-July increase in the 14-year history of the 20-city index.
The year-to-date gains, however, are the most eye-opening. Prices in July stood 11.2% above the level of December 2012. By contrast, prices in the same period last year were up 5.8%. In 2004, prices rose by 11.3% year-to-date through July.
The Case-Shiller index tracks home prices on a three-month moving average; Tuesday’s report measured prices on home sales that were recorded in the May-to-July period, and buyers would have closed on contracts to buy those homes one or two months before then.
Rising mortgage rates could ultimately slow the pace of price gains, though the supply of homes for sale still remains quite tight in many parts of the country.
FHFA House Price Index Rises in July
San Diego's housing market slowed in August
The rate of homes in San Diego going under contract within two weeks — from listing to escrow — slowed from 36.1 percent to 31.6 percent, according to Redfin’s Fastest Markets Report for August 2013.
Compared to other markets, San Diego’s market slowed the most from July to August.
Nationwide, home-selling speeds fell for the fourth month in a row. In August, 27.9 percent of homes went under contract in less than two weeks, down 9 percent in July and 33.7 percent in April.
August San Diego market annual home prices rose 22%
Home prices in the San Diego-Carlsbad-San Marcos market, including distressed sales, increased by 22.4 percent in August of this year, compared to August 2012.
On a month-over-month basis, home prices, including distressed resales, increased by 1.3 percent in August 2013 compared to July 2013, according to CoreLogic, a residential property information, analytics and services provider.
Excluding distressed resales, year-over-year prices increased by 18.9 percent in August 2013 compared to August 2012.
On a month-over-month basis, excluding distressed sales, the CoreLogic Home Price Index (HPI) indicates home prices increased by 0.8 percent in August 2013 compared to July 2013.
Home prices nationwide, including distressed resales, increased 12.4 percent on a year-over-year basis in August 2013 compared to August 2012.
This change represents the 18th consecutive monthly year-over-year increase in home prices nationally.
San Diego's share of distressed-home resales steady
The share of distressed home resales in San Diego remained unchanged in August from July, according to the California Association of Realtors (CAR).
The combined share of all distressed property resales was 5 percent in August, unchanged from 5 percent in July but down 17 percent from August 2012. Statewide, rising mortgage rates dampened pending home resales in August, while distressed home resales fell to levels not seen in nearly six years.
“Rising interest rates over the past several months at the specter of a tapering of the Fed’s stimulus program sent buyers to the sidelines in August,” said Leslie Appleton-Young, CAR vice president and chief economist. “However, the Fed’s decision last week to postpone the pullback should lead to lower interest rates, which bodes well for prospective buyers.”
Defaults increase slightly in September
Notices of default in San Diego County increased for the first time since April, up 10.1 percent in September from August, but still down 46.6 percent from September 2012. Trustee deeds have experienced a steady decline since a slight increase in April.
Michael Lea, lecturer of finance at The Corky McMillin Center for Real Estate at San Diego State University, said the September increase in NODs is “most likely a blip.”
“I would only get concerned if we saw three months of increase in a row,” Lea said in an email. “I expect trustee deeds to continue to fall as the Homeowner’s Bill of Rights reduces foreclosures by putting pressure on lenders to pursue other alternatives. The housing market is slowing and I expect it to level off with modest rates of house price inflation and continued low inventory. If the debt ceiling issue is not resolved it could have a significant impact on the housing market (rising interest rates).”
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 170 properties in September, 2.3 percent fewer than in August and 69 percent fewer than September 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 -- increased 10.1 percent from August to September, and fell 46.6 percent from September 2012 to September 2013.
Lenders issued NODs to 662 borrowers in September, up from 601 in August and down from 1,239 in September 2012.
Other News & Information
Wells Fargo predicts market rebound
Wells Fargo announced that it anticipates a market rebound.
“The housing market is transitioning away from a rebound driven primarily by speculative forces to one where the underlying fundamentals will be much more important,” Wells Fargo said in a report. “Over the past few years investor purchases have been the primary driver of the housing recovery, helping clear inventories of foreclosed and lender-owned properties and pulling home prices dramatically higher. Home prices, which tumbled 33.7 percent from peak to trough using the S&P/Case-Shiller Home Price Index, have since rebounded 16.3 percent and are up 12.4 percent over the past year alone. The swing in prices exaggerates the extent of improvement and likely reflects the whipsaw effect of prices overshooting to the downside during the worst of the housing bust.”
Moody's predicts strong market despite slowdown
Despite some softening housing indicators, Moody’s Analytics predicted this week that the housing market will remain strong through 2014 and 2015.
“The fundamental drivers of housing remain solid,” Moody’s reported in its monthly ResiLandscape report. “Employers are adding jobs, housing is still affordable and inventories of homes are low. Home sales, homebuilding and house prices will all head up this year and strengthen further in 2014 and 2015 as housing helps to fuel the broader economy’s expansion. These positive factors will offset the dampening impact of rising mortgage interest rates on demand for housing, although a faster than expected run-up in rates could derail the housing rebound.”
Household net worth growth slows in Q2
Household net worth improved $1.3 trillion in the second quarter — half as fast as the first quarter — as real estate values grew $626.7 billion, the Federal Reserve reported Wednesday in its quarterly Flow of Funds report.
But, with a drop in mortgage debt — including home equity loans and lines of credit –- from $9.39 trillion in the first quarter to $9.34 trillion in the second, homeowner equity grew to 49.8 percent in the second quarter from 48.1 percent in the first.
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