Real Estate Supergirlhome
Specializing in Downtown San Diego Condos.
Well Buyer’s Market constitutes a market where there are a lot of houses that sit on the market for a long time which makes the price fall.
Seller’s Market, on the other hand, is the market where there aren’t as many houses on the market and they sell quickly after listing, which brings the price down.
So. The interest rates are historically low. Prices have fallen radically. Government is proposing all sorts of programs to recover the economy and help and encourage people buy homes. (First time home buyer’s credit and Move-up buyer’s credit would be some of those) All these creates and incredible opportunity to buy real estate in San Diego or anywhere else for that matter.
Still though, would I call it a Buyer’s Market? I have to admit, not in all areas. It all depends on the price range. How can we say we are in Buyer’s Market if when you submit an offer for your client, you compete with 5, 10, 15 other offers and the place get’s sold in 5 days for way higher than the listing price?… That doesn’t seem like Buyer’s Market to me…
Another thing people talk about is “hidden inventory” or all the foreclosures that are supposedly coming to the market in 2010… Well first of all, when talking about that inventory, we have to understand that all the homes that are NOT foreclosures yet. They are homes on which the mortgage payment is late for more than a month. That could be just a late mortgage, or a short sale or a possible foreclosure. Banks are not prone to release their entire inventory at the same time obviously. They pace themselves. Plus there is not guarantee that interest rates will stay as low as they are. Nobody can say for sure, but it doesn’t look like market will dip much further, definitely not in the under $400,000 price range.
On another hand, high end market, I believe, still has some room to adjust. I estimate another 8-10% price correction. Considering all the short sales in this range, as well as the time homes are sitting on the market (around 11 months), it helps me establish an opinion about a further drop in pricing of those homes. I welcome anybody else’s opinions and predictions on this matter.
A.k.a. Real Estate Supergirl
Prudential California Realty
What the heck is going on with the market NOW?..
So. Let’s stop making assumptions for a minute, and talk about numbers.
Unsold inventory. There are two types of those: Visible and Invisible. Visible inventory consists of all the properties that are currently on the market, listed, but haven’t been sold yet. Invisible, or as they call it “shadow inventory” consists of REO properties, that are owned by banks, as results of foreclosures, etc. It also includes real estate, who’s owners are minimum 90 days delinquent on their payments.
According to First American Core Logic, there were 3.8 million units of visible unsold inventory available on the market. That is improvement from the year before, which was 4.7 million. In months, it would be 7.8 months from 10.1 a year before.
Right when we wanted to breath deeply and announce that market is getting better… But here comes the “shadow inventory, which actually increased from a year before. From 1.1 million units in September 2008, to 1.7 million units 12 months after. At the current sales rate, the pending supply increased to 3.3 months from 2.4 months. ( By monthly supply, we mean how fast the inventory will run off given the current sales rate. )
So the total supply of real estate, that consists of both visible and invisible inventory was just a little down from 5.7 million to 5.5 million units, where the month supply of inventory was down to 11.1 months from 12.7 a year earlier. Looks like we have made a little progress all together, but it honestly, doesn’t seem as significant as the economy needs right now. Plus, we need to consider the artificially low interest rates and government programs won’t last forever and estimate to end by the 1st quarter of 2012.
The Federal Housing Administation is proposing to rise the downpayment for borrowers and possibly other costs, in an effort to protect agencies finances since they have been significantly affected by the defaults of mortgage insurance programs.
One of the legislature officials suggested to require a minimum of 5% down. FHA officials say that that would make the buyers hold on to the loans and easily let go and default on them, since they brought more money to the table.
The other changes that are being discussed are higher credit score requirements for FHA backed mortgages and lowering seller’s concessions. As for now, sellers are allowed to pay up to 6% of a property’s value in closing costs plus different kinds of “free upgrades”. Officials are thinking of lowering it to 3%.
” Currently, the agency backs about 30 percent of all loans for home purchases and 20 percent of refinancings. In the past, the FHA has resisted raising down payments or insurance premiums for fear of shutting out qualified borrowers and stunting the housing market’s slow but steady recovery”, – Washington Post.
Shaun Donovan, who is the House and Urban Development Secretary says due to a higher amount of FHA loans being processes, they need to tighten the requirements and protect the agencies finances
He states: We’ve learned from recent history that the market is fragile, and we have to plan for the unexpected, That uncertainty is complicated by an organization we inherited that, to be honest, was simply not properly managing or monitoring its risk. There are several ways to accomplish this, and so we are currently analyzing various options to determine which is the most effective and consistent with our mission”
The credit score required by law for FHA founding is 500 out of 850 possible. It’s pretty much like no credit required.. Nowadays you wouldn’t even get a phone line with this kind of credit without putting a security deposit forth. And we are talking about houses here.
Some lenders though have higher requirements while others still issue high risk default loans.
FHA basically can not afford to loose money anymore, since they are already below the required by law minimum in their reserves.
At the moment in that reserve ( which is meant to be set aside of unexpected losses ) there are $3.6 billion, comparing to $12,9 billion a year before.
Another action the agency took is suspending abusive lenders. There are 270 lenders that have been denied FHA approval and couple big ones, like Bean and Whitaker, suspended.
All these measures, says Donovan are nessecary for the agency
It isn’t set in stone yet, will know on Wednesday after he testifies on FHA’s changes in front of the House of Financial Services Committee,
You have probably heard a lot of positive feedback about real estate here in San Diego and nationwide. Where it’s going, how the market is getting better and how realtors see the light inside the tunnel…
Well it was almost fooling me as well. As I posted in my “To Buy or Not to Buy” Blog, in July this year prices have increased by 12% than a year ago and there were 23% more homes sold. That all made everybody think that market is leveling off at last..
We saw more homes getting sold, more buyers buying, lower interest rates, a lot of inventory to choose from, etc… PLUS the First time Home Buyer’s Credit helped a lot!
We almost felt, “Thank God it’s getting over and things start improving!
And here new negative data again..
According to the article in Wall Street Journal “The proportion of U.S. homeowners who owe more on their mortgages than the properties are worth has swelled to about 23%, threatening prospects for a sustained housing recovery”…
Almost 11 million households have negative equity on their homes.
These so-called underwater mortgages are roadblocks to a housing recovery because the properties are more likely to fall into bank foreclosure and get dumped into market. Economists from J.P. Morgan Chase & Co. said Monday they didn’t expect U.S. home prices to hit bottom until early 2011, citing the prospect of oversupply.
Borrowers who owe more than 120% on their mortgage are more likely to default. In states like Arizona, Nevada, Florida and California, home owners who are upside down, sometimes owe more than 150% of their home is current value…
Almost a quarter of all home owners have paid off mortgages at the moment.
Another interesting fact is that even home owners that could afford to pay their mortgage chose not to and strategically defaulted on it for various reasons. That tends to happen in the states where the buyers are protected under certain laws to not be judged over their deficiency.
The refinancing and loan modifications usually work for people who are less than 110% under their mortgage. For those who are more than that – tough story. A lot of banks wouldn’t be able to refinance the loans, unless they reduce the principal and not take into consideration the appraisal.
What can WE, as realtors do? Make sure we educate our clients and give them a lot of useful information and real date so they can make better choices… and just hope for better..
Real Estate Supergirl