Real Estate Supergirlhome
Specializing in Downtown San Diego Condos.
First, let’s make a quick recap of 2011. Home loan rates finished the year at historically low levels. We have been encouraged by the stability of home sales throughout the weak recovery. While the pace of around 4.6 million total sales is nothing to write home about, it’s certainly not nothing. The labor market did make some modest improvements, but it is still persistently weak and this is one area of the economy in particular that we need to see consistent improvement in to help our long-term economic outlook. HUD and the U.S. Dept. of the Treasury released the December edition of the Obama Administration’s Housing Scorecard this week. Data in the Scorecard show some subtle improvements in the market over the past year, but it is mixed. For example, new and existing home sales rose compared with the prior month and remain higher than a year ago, and homes are more affordable than they have been since 1971. Median-income families today have nearly double the funds needed to cover the cost of the average home. However, home prices showed a slight dip from the prior month and remain below year ago levels.
Like 2011, this coming year may bring some significant challenges here in the US and around the world.
The times are changing and this world that’s becoming smaller and smaller, other countries and economies influence us more and more. According the YouMagazine, the whole Eurozone situation will play a siginificant role :”What may happen with the US economy and home loan rates in 2012–not to mention with inflation, the housing market, the job market, and even the Presidential election–may be dramatically influenced by how the Eurozone handles their debt crisis. In the simplest of terms, the issue is that like much of the developed economies around the world, Europe has way too much debt. And a lot of this debt sits on the books of the banking sector throughout the Eurozone. Ultimately, Europe needs to provide a large financial backstop for their banks and sovereign debt in order to fix their problems longer-term. And this is something that Germany, who holds the cards in this negotiation, strongly opposes. Germany prefers to have each country shore up their own individual finances, act responsibly, and pay down their debt. Yet, Greece, Italy and other highly indebted countries have struggled to invoke tough austerity measures that would help them do so. The situation in Europe is definitely a wild card headed into 2012. The bottom line is that as long as the uncertainty continues, the US Dollar and US Bonds should benefit, as investors will see our Bonds (including Mortgage Bonds, upon which home loan rates are based) as a safe haven for their money. This could help keep our home loan rates relatively low in 2012.
While, I think, home sales will show signs of recovery, so you’d think that the prices will too, BUT, that’s probably not going to much be the case.. Interruptions in the foreclosure stream in 2011–everything from various moratoria to the robo-signing scandal–considerably slowed the process of getting formerly-failed properties back onto the market. As that logjam breaks, there could be a fair bit of inventory coming back, and that will continue to pressure prices downward.
Please keep in mind that prices falling nationally (or even locally) doesn’t mean that the price of your home will also decline. Also remember that these stats are national average stats and predictions and if you are interested in your local San Diego Market, or even more specifically Downtown Condo Market, go here.
One factor that we can’t ignore when it comes to home loan rates is inflation. Why? Inflation is the arch enemy of Bonds and home loan rates, because if inflation rises, investors in Bonds demand a higher yield to offset the lost buying power inflation imposes on a fixed payment. And as home loan rates are tied to Mortgage Bonds, this would mean home loan rates move higher. That’s why sometimes even hints or whispers that inflation is on the rise causes Bonds and home loan rates to worsen.
With so many unknowns, it’s hard to forecast an entire year’s range for interest rates, so a wide range is called for. After talking to a bunch of mortgage brokers and reading tens of articles on different forecasts and predictions, it is very hard to come up with the spedific numbers. I’ve seen some websites quote lower interest rates in the beginning of the year and rising to almost a percent higher in the last 6 months, and the complete opposite!. But average they seem to be trending between 4 percent and 5 percent for the whole year. Before you think that’s a huge range, consider that 2011 had rates as high as 5.33 percent at one point (more than a percentage point less at their bottom). That one-percentage-point range was seen in Conforming 30-year FRMs, too, which should wander in a range bounded by 3.85 percent at the bottom to perhaps 4.85 percent at the top.
In most way 2012 will feel a lot like 2011.. Inflation and the European situation will continue to play a role in how the interest rates will unfold.
If you are a lender and have any comments or your own prediction adding to this article, I would love to hear from you!
So I am going through the usual routine of my morning today and checking the hot sheets ( I do this twice a day, in the beginning and the end of the work day, so I know what new properties exactly come on the market, or go pending, sold, etc, so that way I can call my clients right away and tell them about it before anybody else sees it ) and I notice this crazy expensive rental in Harbor Club, going for $12,500 a month! Let’s admit, we all love looking at those unit of rich and famous, so in the dream state I am going through the pictures and visualizing hanging out in the jacuzzi on the 40th floor overlooking San Diego..
I looked up the sale history and looks like the unit was sold for $1.4 m in 1996! Lucky buyers! After making almost 2.5 times on it, they are selling in for $3.1 m in 2004! It doesn’t obviously stay in the hands of owners for too long, since it was put on the market again the next year and sold in 2006, this time at $4 m!
Now this unit is listed for rent as well as for sale. With $15,000 deposit and $12,500 you can get yourself a 12 months lease of this urban paradise or you can also purchase it; it is listed at $4.295 m
As the MLS listing description states – “ A Feast For the Eyes in every direction..” The unit is very spacious, approx of 3660 sq ft, and has 3 br with 1 optional and 3.5 baths. No downgrading from the house here! Also comes with 3 parking spots, pretty awesome for Downtown, but I guess you’d expect that for the price!
Harbor Club Condominiums is a high-rise residential building in San Diego, CA, composed of two towers of equal height. The 41-story towers have a height of 424 feet (129 m) and are a prominent fixture in San Diego’s skyline Located in the Marina District, San Diego, California, Harbor Club was designed by architects BPA Architecture Planning Interiors. The condos are located near the San Diego Convention Center and the Petco Park. The towers are currently the 8th tallest buildings in San Diego.
There are currently 12 active listings for sale in both buildings, ranging from $379,000 to $5.5 m and 4 rentals, 2 in each tower. If you are interested finding out more about this particular listing or others in Harboc Club, feel free to contact me,
Real Estate Supergirl
Allison James Estates and Homes
7 Horton Plaza,
San Diego, CA, 92101
NAR released its latest pending home sales index figure last week and for the second month in a row the index is up! Actually it’s even better, it broke 100!
This is significant because the only time since the housing boom collapsed that the index has broken 100 is when the home owner federal and state tax credit was in effect. There were a bunch of speculations made that the stimilus actually worsened the market condition, and once it will be out, the market will crash again causing another double dip!. Sorry, but well, in your face!
The fact that the index has returned to that level a year since the credit has been in effect means the housing market is strengthening completely on its own, without any stimulus.
Also the National Association of Realtors Chief Economist Lawrence Yun is upbeat about 2012 because in a number of areas indicators are pointing upward. “Not only are home sales up but housing starts are up and home prices are stabilizing in many markets and heading up in some. In areas where they’re still down, the declines aren’t that great.”
There are other great news that are looking positive, including the most talked about jobs picture.
Around 100,000 job are being created a month, and that could rise to 150,000—still not a quick enough pace to get us back to where we were before the downturn but it’s going in the right direction.
Real Estate Supergirl
The worst of the price declines is likely over. From the market peak in 2006, the S&P/Case-Shiller index of 20 housing markets is down 32 percent. Ugly indeed. But what’s important is what comes next, not what we’ve just come through. And no one is suggesting we have another 30% to go. To be clear, no one is suggesting roaring price gains are on the horizon either. The takeaway is that we’re potentially at an important pivot point where we’re moving from steeply falling home prices to an extended period of stabilizing prices.
2. Interest rates are at all times low
Right now the 4% interest rate on a 30 year fixed rate mortgage is beyond fire sale cheap, as is 3.5% rate on a 15 year mortgage. Assuming rates will stay where they are at, or even fall some more, seems a risky bet. Fannie Mae expects the 30-year fixed rate will hover around 5.2 percent by the fourth quarter of this year, then rise slightly throughout 2012 to 5.4 percent or so. The 2012 forecast is 5.7 percent, more than a full percentage point above where we’re at today.
3. Lack of inventory and strong demand eventually creates increase in prices
Self explanatory economical principle of supply and demand. There are around 220 active listings for sale as of 12/26/2011 in the 92101 zip code. That half as much as it was a year ago and a third as much as 2 years ago. Almost all the new inventory is gone, less than 20 units left with nothing new being built and a strong demand remaining. Connect the dots.
The threat of inflation is the elephant in the room. Historically, real estate performs well in a high inflationary environment. As long as supply equals demand, real estate should be an excellent hedge against the potential tsunami of high inflation that seems to be headed our way.
5. Tax advantages
Here’s the deal: Mortgage interest (including points) and real estate taxes are tax deductible. That doesn’t sound very sexy, but it adds up. Since most of what you pay for your mortgage in the first years is interest, on a $1,200 mortgage payment you get to deduct about $1,080 a month. That reduces your taxable income by about $13,000 a year. If you’re in the 28% tax bracket, that deduction is worth about $300 a month.
6. Renting isn’t such a good deal anymore, especially Downtown, where rents are at times as high as mortgages.
Paying from $1800 + a month for rent of a 1br Downtown San Diego and $2500+ for a 2br, owning a place is starting to make much more sense…
7. Winter time – less competition from other buyers
There may be plenty of lookey-loos at open houses these days, but the anemic sales pace is proof that there are fewer serious buyers looking to make a deal. That makes it less likely you’ll find yourself in a bidding war today. It also means you can negotiate more effectively with eager sellers. Wait to dive in and you could find yourself in a more crowded pool of buyers. It’s just common sense that once there are clear signals of recovery, demand will pick up. Being a little early/ahead of the curve gives buyers more elbow room.
Allison James Estates and Homes
7 Horton Plaza,