Monday, May 06, 2013
SOLD - 233 N. Vulcan Avenue | Encinitas
Sold for $1,250,000. Seller represented by Roth | Patterson Real Estate
Monday, May 06, 2013
JUST LISTED - 316 Glencrest Dr | Solana Beach
Seller Represented by Roth | Patterson Real Estate
Monday, April 29, 2013
San Diego’s housing market continues to get more frantic, as historically low inventory is resulting in bidding wars, quick sales and rising prices. And while the spring usually brings relief in the form of greater inventory, experts don’t expect a significant change anytime soon.
The median for single-family homes is up nearly 19 percent compared to a year ago, at $432,000. The average price per square foot is up 15 percent. Prices for condos and town homes are increasing at an even faster pace — up 30 percent from a year ago, reaching a median price of $285,000.
“We are almost creating an artificial bubble,” said John Altman, a realtor with JT Altman & Associates who closely watches regional trends. “There is so little inventory that what is there is getting bidded-up. There is so much pent up demand that it is almost scary.”
The time homes are on the market has dropped from 90 days a year ago to 60. In many submarkets, homes are receiving multiple offers within the first few days.
Our City wrote about the reason for the bidding wars in our November/December issue, pointing out that the culprit is historically low interest rates and Federal Home Administration loans that allow first-time buyers to buy a home for as little as 3 percent down payment.
Since then, inventory has dropped from 2.9 months to about 1.5 months. Economists say an inventory in equilibrium is about 4.5 months for San Diego. For homes under $400,000, the inventory is less than one month. That is also the case for higher priced homes on the coast and in some metro inland areas, including Rancho Penasquitos.
“The limited supply of homes has fueled bidding wars and has meant that buyers have little to choose from and agents have little to sell,” said Jed Kolko, the chief economist with Trulia, an online homebuyer resource. “Inventory has been tightening because construction levels are still low, adding little new housing stock, and homeowners are waiting to sell until they have more positive equity.”
While it’s a good time for sellers, many would-be homebuyers describe the market as frantic.
“The pace is moving so fast, it is hard to keep up,” said one real estate agent who works in La Jolla and surrounding neighborhoods. “A lot of agents who do not have the training and experience are not playing by the rules.”
This has resulted in agents sitting on offers, asking buyers to make higher bids, and not communicating with other agents. Plus 30 percent of all sales are cash only, which allow buyers to offer more than the appraised values. It has made it a frustrating time for homebuyers and agents, who would prefer to see a higher volume of sales.
There are currently 4,400 active listings in the county, down from 8,500 a year ago. Altman said a balanced inventory for San Diego would be somewhere between 14,000 and 16,000.
But hope may be around the corner for homebuyers.
Prices for single-family homes rose 5 percent from February to March, and that is making it more likely that homeowners will sell.
“Prices have risen enough that many people who put off selling their homes are listing it because they know they’re going to be able to move up into that nicer home, or down into a more affordable one, without leaving money on the table,” said Linda Lee, board president at the San Diego Association of Realtors. “This is good news for the market and for the local economy.”
Also, seasonal trends are working in favor of homebuyers. Inventory is typically lowest in January and highest in July.
“We are entering the half of the year when inventory typically expands,” Kolko said. “Inventory is likely to rise now through the summer because of seasonality, bringing some relief to buyers and helping boost sales activity.”
Reports also show that home prices are outpacing rents, another factor that should bring the market into equilibrium. Rents for homes in San Diego increased only 2.4 percent in the past year, according to Trulia. This is due to investors buying homes and renting them out. Soon, home prices will be too high for investors to take such action and make a profit.
But Altman said the inventory is so low that it will likely remain a sellers market for homes in the lower price ranges and on the coast and other hot markets. This is especially the case since he does not believe there will be a flood of homes entering the market in the next quarter.
Altman said that even though 90 percent of all active listings are non-distressed properties, the housing foreclosure crisis that started in 2006 is still impacting the market. There are currently an estimated 200,000 properties in San Diego County that are upside down, meaning the mortgage is higher than the worth of the home. That represents 22 percent of the inventory.
“There are a lot of people upside down mathematically,” Altman said. “But they are sitting tight on their properties, hoping the government will help them out.”
Few of those homes will hit the market until prices reach 2006 levels or the homeowner is forced to sell as a short sale. Due to that, the potential inventory is much smaller than it appears.
Also while home building has recently picked up steam, only 3,000 homes were added in 2012. San Diego needs to add 12,000 a year just to stay even with growing demand.
But, Altman said there are some bright spots. The inventory for homes over $700,000 in inland communities is 5 months, making them a buyers market.
“That means if a buyers can sell at top dollar and get a good deal moving into the higher end market.” Altman said. “And they get good interest rates.”
Some of this has already happened, with homebuyers buying larger homes moving from Chula Vista, for example, into larger homes in communities like Eastlake.
Chula Vista is currently the hot spot in the county for single-family home sales, with 166 reported in March. Rancho Bernardo was second with 62 sales, followed by Fallbrook with 57, Carlsbad with 53 and Spring Valley with 50. There were a total of 2,089 single-family homes sales in March, up 10 percent from the prior year.
Last year the number of sales increased each month from February until June, dipping in July before spiking in August. Prices also increased each month until July.
“We are headed for a very rough selling season next quarter,” Altman said. “There will be a lot of multiple offers and driving up prices.”
Our City
Tuesday, April 16, 2013
REMEMBER: Cell Phone Numbers Go Public This Month!
All cell phone numbers are being released to telemarketing companies,
and you will start to receive sales calls...you will be charged for these calls!
To prevent this, call the following number from your cell phone:
888-382-1222
It is the National DO NOT CALL list. It will only take a minute of your time... it blocks your number for five (5) years. You must call from the cell number you want to have blocked. You cannot call from a different phone number.
HELP OTHERS BY PASSING THIS ON, it takes about 20 seconds.
Thursday, April 11, 2013
The U.S. recorded 442,117 foreclosure filings in the first quarter of
2013, a steep 23% drop from a year ago and the lowest level reached
since 2007, real estate data firm RealtyTrac said in a new report.
Foreclosure filings also fell 1% from February to March, with 152,000 filings reported last month.
Despite these drops, foreclosure trends remained solidly local with
judicial foreclosure states still more likely to see foreclosure
completions stalled by long drawn-out default timelines, while
non-judicial foreclosure states pushed through distressed properties at a
faster pace.
New laws designed to prevent foreclosures on the local level also
played a role in expanding default timelines, even in nonjudicial or
quasi-judicial foreclosure states.
RealtyTrac (in the graph below) attempts to show this phenomenon by
documenting foreclosure timelines in three jurisdictions – Oregon,
Nevada and Washington. The chart shows foreclosure timelines right
before and after major foreclosure prevention legislation took effect in
those states.
Judging by the charts, default timelines even in non-judicial states
rose dramatically after the introduction of significant foreclosure
laws.
"Although the overall national foreclosure trend continues to head
lower, late-blooming foreclosures are bolting higher in some local
markets where aggressive foreclosure prevention efforts in previous
years are wearing off," said Daren Blomquist, vice president at
RealtyTrac.
"Meanwhile, more recent foreclosure prevention efforts in other
states have drastically increased the average time to foreclose, which
could result in a similar outbreak of delayed foreclosures down the road
in those states."
RealtyTrac also noted foreclosure starts increased 2% from February to March, reaching a total of 73,113 starts last month.
Twenty-three states saw upticks in foreclosure starts last month,
while 12 states — including New York and Washington — experienced rising
starts year-over-year. In fact, starts grew 200% and 154% annually in
New York and Washington, respectively.
Overall, lenders repossessed 43,597 properties in March 2013, the lowest retrieval rate since September 2007.
And Florida, once again, posted the highest foreclosure rate for Q1, followed by Nevada and Illinois.
In just Q1, 85,671 Florida properties faced a foreclosure filing,
representing a foreclosure rate of one out of every 104 housing units.
Housing Wire
Wednesday, April 10, 2013
The U.S. Census Bureau (Census) and the U.S. Department of Housing and Urban Development (HUD) have made the 2011
American Housing Survey (AHS) results publicly available on the Census’ website for the first time.
The national survey aggregates data from both owners and tenants. Topics of the survey include:
- home and neighborhood satisfaction;
- price, value, and mortgage type;
- home improvements and costs;
- safety features and health hazards; and
- socio-economic characteristics of the area residents.
Highlights of the data:
- 20% of recent movers named proximity to their workplace as the most important factor in choosing a neighborhood, hinting at an increased interest in urban living.
- Newly constructed homes are typically larger, have more bathrooms and bedrooms, and are more likely to have central air conditioning than older homes.
- Occupants of new construction tend to rate their homes higher on a 1-10 scale (10 being “best”) than those of older dwellings.
- Renters pay less for housing on average compared to owners who typically spend a higher share of their monthly income on housing expenses and mortgage payments.
- More than a fifth of mortgage holders reported a change in their monthly payment in the last 12 months, 71% citing a change in property taxes or homeowner’s insurance. Changes were mostly split between increases and decreases in amounts totaling between $0-100.
National trends are a fun and pleasant diversion, but are a bit too overarching to be of any help to California’s agents. What agents need is local data to divine the trends, motivations and demographics in their area of influence. As the old adage rightly proclaims, the most important thing about real estate is price, time and location – thus, all real estate data must be local, local, local, to be of any assistance to California agents.
Therefore, the Census’ American Community Survey (ACS) is more useful to this end. The ACS is a statistical survey sent to a quarter of a million households every month. Data for calendar year 2012 is currently on the way. It is the Census’ largest annual survey besides the decennial census, and is a wealth of information for the proactive agent. Using the localized data contained in this survey will help the agent achieve a laser-like focus when looking at their housing market.
The results of the ACS are available on the U.S. Census American Fact Finder website. The current ACS has data from 2011, with 2012 soon to come. Here, you can search for local data relevant to the location of your real estate practice by selecting the “geographies” category (circled in red), then specifying your target area. Then type “housing” into the topics field (circled in blue). You now have ACS housing data specific to your desired region. It is as simple as that.
Here we can find information on the following:
- housing occupancy;
- units in structure;
- year structure was built;
- number of rooms and bedrooms;
- housing tenure;
- year householder moved into unit;
- number of vehicles;
- house heating type;
- occupants per room;
- home value;
- mortgage status;
- average maintenance costs; and
- average rents.
A sales agent can compare these regional statistics to the properties they represent and see just how their properties fit in to the bigger picture. The agent can present this information to clients to compare competing ZIP codes, cities, or even states. A shrewd agent can get creative and let the data do a lot of the talking! When the speculators stop buying and leave the inventoryProperties available on the market through the multiple listing service (MLS). to those buyers who will occupy the property, capturing more sales will in large part depend on your use of data.
First Tuesday Journal
Wednesday, April 03, 2013
As the time to file income taxes approaches, we need to take a new look at the changing tax landscape for homeowners. The dynamic atmosphere in Washington, D.C. has a different effect each year on which tax breaks are proposed, rescinded, changed, and extended for taxpayers who own a home.
Thanks to the efforts of many real estate industry groups including the National Association of Realtors, many of the tax benefits that homeowners enjoy–which were on the chopping block over the past few months–have been protected and extended through the 2013 tax season.
1: Mortgage Interest Deduction
The mortgage interest deduction has always been the most-beloved tax benefit of home buyers in the U.S. New homeowners’ monthly mortgage payments are made up almost entirely by interest for the first few years. Their ability to deduct that interest can result in a healthy reduction in tax liability. Affordability for first-time home buyers is directly linked to their ability to deduct the interest on their mortgage.
Homeowners who itemize their deductions can deduct the interest paid on a mortgage with a balance of up to $1 million. While there is some movement to limit the total itemized deductions for taxpayers with higher incomes (over $400,000), the current deductions holds for all tax brackets. Americans save around $100 million every year by deducting mortgage interest on their tax returns.
2. Home Improvement Loan Interest Deduction
The interest on home equity loans used for “capital improvements” to a home can also be a tax deduction. On loans with balances of up to $100,000, the interest is tax-deductible for a homeowner who uses the loan to make improvements to the home such as adding square footage, upgrading the components of the home, or repairing damage from a natural disaster. Maintenance items like changing the carpet and painting a home are usually not included as capital improvement projects.
3. Private Mortgage Insurance (PMI) Deduction
Homeowners who make a down payment of less than 20% are usually paying some sort of Private Mortgage Insurance. PMI (sometimes abbreviated MIP or just MI), can be a few dollars to hundreds of dollars per month, and it is a large portion of many homeowners’ mortgage payments.
If your mortgage was originated after Jan 1, 2007, and you have PMI, it can be a tax deduction. The deduction is phased out, 10% per $1,000, for taxpayers who have an adjusted gross income between $100,000-$109,000 and those above that level do not qualify. The extension of this tax deduction in 2013 was one of many last-second saves by real estate industry advocates.
4. Mortgage Points/Origination Deduction
Homeowners who paid points on their home purchase or refinance can often deduct those points on their tax returns. Points, often called origination fees, are usually percentage-based fees which a lender charges to originate a loan. A one percent fee on a $100,000 loan would be one point, or $1,000.
On a home purchase loan, taxpayers can deduct the entirety of the points that they paid in the same year. On a refinance loan, the points must be deducted as an amortization over the life of the loan. Many taxpayers forget about this amortized benefit over time, so it’s important to keep good records on the deduction of points on a refinance.
5. Energy Efficiency Upgrades/Repairs Deduction
Homeowners can deduct the cost of the building materials used for energy efficiency upgrades to their home. This is actually a tax credit, one which is applied as a direct reduction of how much tax you owe, not just a reduction in your taxable income.
10 percent of the total bill for energy-efficient materials can be used as a tax credit, up to a maximum $500 credit. Insulation, doors, new roofs, and many other items qualify for the energy efficiency credit. There are also individual limits for certain items, such as $150 for furnaces, $200 for windows, and $300 for air conditioners and heat pumps.
6. Profit on Sale of Real Estate Deduction
If you’ve sold a home in the past year, you’re likely aware that individuals can claim up to $250,000 of profit from the sale tax-free, and married couples can claim up to $500,000 tax-free. Of course, there are some requirements to escaping the capital gains tax on this profit.
The home must be a primary residence. This means that you must have lived in the home, as your primary residence, for two of the past five years. You could rent it out for years one, three, and five, while living in it for years two and four. In this way, a homeowner could potentially claim this tax break on multiple homes within a fairly short time frame, but each tax-free sale must occur at least two years apart from the previous tax-free transaction.
7. Real Estate Selling Cost Deduction
For those lucky folks whose profits on the sale of their home might exceed the $250k/$500k limits, there are still some ways to reduce the tax burden. The costs of selling the home can be significant, and those in themselves can be claimed as tax deductions.
By adding up all of the fees paid at closing, capital improvements made to the home while you owned it, money spent to make repairs to damaged property, and marketing costs necessary to sell the home, you can add a significant figure to the cost basis of your home. This basically raises the original price you paid for the home. Your cost basis begins with the original price of the home, and then adds in the improvement and selling costs. When the new cost basis price is compared to your selling price, it reduces your potentially-taxable profit on the home significantly.
8. Home Office Deduction
The home office tax deduction is often cited as a deduction that increases your likelihood of being audited. While the raw numbers might add some credibility to that perception, it’s really the way a home office is deducted that gets some taxpayers into audit purgatory.
This deduction, when used correctly, is just as safe as any other. Homeowners deduct a percentage of their mortgage, utilities, and repair bills in direct proportion to the amount of their home that is dedicated office space.There are a few hard and fast rules to live by when deducting the costs of your home office. The home office must be your principal place of business (the primary office location where you get the majority of your work done). It needs to be exclusively used for business (it can’t be your kitchen by day and office by night). You need to be realistic with its size and use (unless you enjoy audits).
9. Property Tax Deduction
New homeowners often don’t know that their property taxes are deductible. While it may sound strange to have a tax-deductible tax, the overall effect is that you don’t pay income tax on money that was spent on property taxes.
Homeowners should be careful to only deduct the amount of property tax actually paid to their local municipality for the year. This is not necessarily the amount you paid to your escrow account, and should not include any other city/county fees that might potentially be on the same bill as your property taxes.
10. Loan Forgiveness Deduction
The Mortgage Debt Forgiveness Relief Act of 2007 was created when short sales were becoming a new and growing part of the real estate market. An underwater homeowner might convince their lender to agree to a short sale of their home at $100,000, even though they owe $150,000 on their mortgage. While the lender forgives the extra $50,000 owed after the short sale, the government views it as $50,000 in taxable income (a gift from the lender to the borrower).
The Debt Forgiveness Act temporarily relieved the taxpayer of that burden, but was set to expire this year. Through much effort, it was extended along with many other homeowner tax relief measures this year and homeowners can continue to claim this tax relief in 2013.
Realtor.com
Tuesday, March 26, 2013
Cullen Roche is worried that the trajectory of housing prices might deviate from what practical assumptions would predict.
"Real estate returns are not rocket science. Because they’re such a huge portion of the consumer balance sheet they tend to be tied very closely to wage growth. Wage growth, by definition, is very closely tied to the rate of inflation. That explains why the long-term historical return of real estate is roughly in-line with the rate of inflation. But this survey from Zillow shows that real estate “investors” are probably still too optimistic."
I can see why these assumptions are attractive, but they are not quite what drops out of macroeconomic analysis.
Fundamental Upward Pressure of Prices
Wage growth, per se, shouldn’t drive housing prices. What we might expect is that wage growth drives rents and rents drive housing prices.
The wage-rent relationship, however, is not an iron law.
Matt Yglesias and Ryan Avent are famous for pointing out that rents – and hence housing prices – could be much lower in coastal cities if residents would abandon restrictive zoning laws. For example, Dallas and Philadelphia have roughly the same median household income, but home prices in Philly are much higher than in Dallas.
In general, if a fundamental driver – regulation, technology, preference – causes rents to eat up a higher portion of folks pay checks then rents and home prices will be higher.
To some extent the national rise in home prices is due to both technology and preferences driving more people to want to live in high rent areas like the Northeast Corridor.
Those same forces are leading some people to want to live in Houston, Austin and Raleigh-Durham, but because of looser regulation that simply translates into booming housing supply and a booming population rather than higher prices.
In addition, the relationship between rent and housing prices depends on interest rates – both the real portion and expected inflation. A house is like a utility company. Instead of providing power services, it provides shelter services and keeps you from having to pay rent.
Many finance folks are familiar with the rule-of-thumb that utilities tend to trade like bonds. Higher interest rates lead to lower bond and utility stock prices. Lower interest rates lead to higher bond and utility stock prices.
This is because – like a house – you are receiving a fixed stream of services over a long period of time.
Though this framing is kinda technical, most of these factors can be summed up in a really straightforward comparison: monthly rent vs. monthly mortgage payment for similar homes.
When the market is balanced the monthly mortgage payment should be slightly higher than the rental payment because 1) Mortgages get a tax break and 2) Traditional rate mortgages offer you the stability of a fixed payment.
Adjustable rate mortgages (ARM) need to produce a payment close to or even below rent to be a good buy. That’s because you lose the security of a fixed payment and depending on the terms of the ARM you may actually be facing more payment volatility than with renting.
Trulia crunches the numbers and it looks like under their baseline assumptions its cheaper to buy than to rent in every one of the top 100 metropolitan areas in the United States.
In traditional hotspots like the San Francisco Bay area, New York City and Orange County, CA, the discount is low. Still this is a recipe for fundamentals house price appreciation.
Bubble Territory
If housing prices merely stabilized into a sustainable equilibrium with rents then the future probably wouldn’t be too dramatic. We would see a rapid shoot-up in home prices now, followed by a long period of little to no price growth as the Fed raised interest rates.
Rents would still be going up and monthly mortgage payments would rise with them to maintain equilbrium. However, mortgages payments would be rising because interest rates were rising, not because home prices were rising.
Eventually, the Fed would stop raising rates and home prices would start to drift higher and eventually home price growth would converge to rent growth.
However, there is an ever increasing chance that this is not the future we are facing. Some time in the near future it is very likely that credit standards for homebuyers will fall. This will allow homebuyers to make larger offers and it will allow young people to buy a home even when they lack a down payment.
This rapid increase in the number of buyers and their purchasing power will likely drive home prices into a bubble. Likely not as large as 2005, but it’s not out of the question that the bubble could be even larger.
We might think – “didn’t lenders learn their lesson?” Or perhaps, “see this is what we get when we create moral hazard.”
Neither of these are correct. A perfectly competitive market in mortgage lending could not help but go into bubble. To the extent our lenders avoid it, it is because regulations and/or tacit collusion among major players, prevents the competitive equilibrium from being reached.
On the most abstract level this is because liquidity earns real rents, those rents are distilled by a perfectly competitive market and ultimately accrue to the owners of the irreproducible factors of production. In this case the owners of land located in the inner residential rings of cities. That is, for the most part, homeowners.
On a more tangible level, the lenders will be encouraged to loosen standards because if any lender loosens standards then he or she will gain market share and increase asset volatility that makes all loans riskier.
If a lender tries to play it safe then she will still get screwed by the fact that any loan she makes will be to a buyer who is paying market price, which is bubble inflated. Yet, she will be doubly screwed by the fact that she is losing market share and thus not even making a lot of money on the upside of the bubble.
So she is pushed to lower standards as well.
This is amplified by the fact that the actual consequences she faces as a decision maker will be harsher the more atypical her choices are. If she goes with the flow she probably will not be punished when everything goes bad. If she refuses to go along with the flow then she will be punished for making low returns while everyone else is profiting from the bubble.
Given all of that it will be very hard for her to resist the pressure to lower standards. Hence, we should predict that a competitive market will see standards go down.As standards go down, buyers rush in with more buying power and we enter a new bubble phase. To my knowledge neither the government, the lending industry nor we as a society have done anything that promises to prevent this.
As standards go down, buyers rush in with more buying power and we enter a new bubble phase. To my knowledge neither the government, the lending industry nor we as a society have done anything that promises to prevent this.
Forbes
Thursday, March 21, 2013
IN ESCROW - 233 North Vulcan Avenue | Encinitas
Seller Represented by Roth | Patterson Real Estate
