October 20, 2012
Our observations of the real estate market in the greater Los Angeles area (includes LA, Orange, Riverside and San Bernardino counties):
Most of the year is past us and a few things have changed in our area and in most of Southern California. Most notably, the number of available homes.
If you may have questions that were not answered below, give me a call at (626) 339-0697 or (626) 922-2514 and we can have a chat.
- market supply in Covina is at 1.4 months - on average a 6 month supply is healthy for any market
- our MLS overall has 2.2 months’ worth of supply based on 2012 volumes
- CAR reported that the statewide supply at the end of August was 3.2 months
- most cities have a market supply that is now once again BELOW 2 months
- many high demand areas are have dropped to well below 2 months’ of supply
- distressed sales (either short sales or bank owned (REO)) are now starting to decline….especially bank owned …. And are now less than 50% of the market in most areas
- the entry level market of homes under $ 300,000 is very low and extremely competitive for two reasons
- a lot of new buyers in the market
- a lot of investors looking for the same homes to turn into rentals
- if you are in the market for a home than use the holidays to find one …. many buyers take time out during this time of the year and resume after the new year …
- we have no clue what the elections will do to the real estate market … either way people will buy and sell … no reason to wait … the Washington Post had a good article on this titled “How the presidential election affects the real estate market”
- In Covina there has been an 8.8% increase in the average per square foot price since the low in February
- February was the NEW lowest average per square price in Covina since the high of the market – this is the third February in a row that we hit new low prices
- appraisals are another continuing to be a wild card and in most cases they are being scrutinized a lot more and sometimes more than one appraisal is requested and appraisers are more cautious about increasing values
- We believe that prices will continue to bounce up and down from month to month
- home prices are still low and indications are that they will continue to be low for some time even with recent increases in prices
- with the welcome increase in prices and values there may be a new set of home owners who are ready to sell because now they can at least break even or have a net gain after the sale (RIS Media reported that home owners have regained 13.5% of lost equity (national average))
|AVERAGE PRICE PER SQ FOR SINGEL FAMILY HOMES - PRICE CHANGE COMPARED TO PREVIOUS MONTH AND YEAR|
|2011||$ 240.40 ||$ 211.30 ||$ 222.78 ||$ 223.87 ||$ 224.84 ||$ 212.67 ||$ 226.26 ||$ 221.20 ||$ 214.43 |
|% CHANGE/LAST YEAR||-0.73%||-7.09%||-8.97%||-5.52%||-8.99%||-11.74%||-3.74%||-10.54%||-9.74%|
|% CHANGE/LAST MONTH||6.54%||-12.10%||5.43%||0.49%||0.43%||-5.41%||6.39%||-2.24%||-3.06%|
|2012||$ 209.00 ||$ 202.00 ||$ 212.72 ||$ 213.59 ||$ 210.74 ||$ 209.28 ||$ 222.84 ||$ 223.22 ||$ 219.76 |
|% CHANGE/LAST YEAR||-13.06%||-4.40%||-4.52%||-4.59%||-6.27%||-1.59%||-1.51%||0.91%||2.49%|
|% CHANGE/LAST MONTH||-3.50%||-3.35%||5.31%||0.41%||-1.33%||-0.69%||6.48%||0.17%||-1.55%|
- sales volumes seem to be outpacing last year and we should see an increase of sales close to 7% above last year’s volumes … that is if we have the inventory for it to happen
- the better quality and shape homes are still receiving multiple offers (however the final sales prices are close to the asking price in most areas)
- buyer activity is still good in many areas especially since interest rates continue to hover at historic lows
- loans are hard to qualify for …. so the current buyers are typically better qualified than before and are more likely to be able to complete transactions
- low prices and low interest rates have brought many ore buyers back into the market
- getting a loan for a condo purchase seems to be very hard due to the fact that many complexes do not qualify for an FHA loan even if the buyer does
- FHA recently made some rule changes that may make qualifying condo projects for FHA loans easier
INTEREST RATES AND LOANS
- interest rates are continuing to stay at record lows …. 3.5% for 30 year fixed is not that hard to find for qualified borrowers
- FHA loans are what most people are getting to qualify (FHA loan = FHA insures the loan)… (currently about 25% of the loans issued are FHA)
- Sadly the FHA up front premiums have increased to 1.75% as well as the monthly premiums to I believe 1.1%
- Cash buyers are approximately 34% of the buyers
- a pre qualification is not enough to win most deals, you need to actually have your documentation submitted and verified and have a loan approval to make your offer strong
- When going through the loan approval process the underwriters are questioning anything that may be an issues so be prepared to answer questions and if possible clean up as much of your credit report as possible before applying for a loan
- Keep your credit clean until after the loan closes … no major purchases once you decide to buy a home until after escrow closes ….. credit reports are being checked at the very end of closing and some deals are falling out because buyers are shopping for the new house and their ratios change …
- THIS IS A GREAT TIME TO REFINANCE IF YOU CAN – HAMP II seems to be a program that is working if you qualify
- We are all waiting to see what the fate of FannieMae and FreddieMac will be (they are currently about 15% of the market) … this is a big wild card right now, and likely no change until after the elections
- Just a reminder: when comparing interest rates also compare the fees that it will cost you to get that rate because that is really what you are shopping for (the cost of a particular interest rate) …. I have some good lender referrals if you should need one
MAKING AN OFFER
- Asking prices are holding up well on average in CA …. Most homes sell at 97% or higher of the asking price according to the Campbell Housing Trends Update Report
- for most bank owned properties you still may need to cross qualify with their lender and for sure have to prove funds as well be qualified and prove qualification (not just a pre-qualification letter)
- patience is vital in this market
- regular sales are once again becoming the largest part of the market
- short sales are the second largest part and banks have improved their processing of these – they are still taking a long time, compared to other types of transactions, to get approved - but more of them are getting approved and it is predicted that this trend will continue well into 2013
- many offers are from buyers that are buying with cash but right now these are mainly for underpriced homes that can be flipped - there is a lot of competition among investors and that hurts owner occupying buyers
- appraisals are another wild card and in most cases they are being scrutinized a lot more and sometimes more than one appraisal is requested and appraisers are more cautious about increasing values
- homes in good shape and high demand areas are selling quickly – often in under two weeks
- many sellers and agents are not very interested in short sales due to the long wait time for the approvals – so if you have a bit of time and patience a short sale are a good opportunity in this market
- if in trouble … we recommend trying a modification before anything else – just have patience and be prepared to provide a lot of documentation to the lenders – multiple times…..you can do a loan modification yourself … you do not have to pay anyone for the service and in CA it is illegal to take up front fees for a loan modification by anyone (including lawyers)
- while working on a loan modification please remember that the bank could still foreclose in the middle of a loan modification --- this is happening more and more and legally they can until 1/1/2013 (new laws will not allow for it in the future)
- while we are hopeful that loan modification programs will allow folks to keep their homes – the reality is that most modifications do not help much and most do not go through to the final phase of modification for various reasons – statistically less than 1 in 5 loan modifications is approved for a permanent loan modification
- when you call your bank for assistance … ask them for all available options that you may have … they may have programs that you are not aware of
- you do not have to be behind in payments to qualify for some of the programs available out there
- rental prices are increasing as there is high demand
- rental properties are moving even faster and for sale properties
- at current home prices and interest rates it typically makes more sense to buy than rent …. give us a call and we can help you figure out what makes more sense for you
INVESTING IN THIS MARKET
- great time to invest
- great deals are still out there to be had but competition is quite fierce
1. INTEREST RATES ARE AT HISTORIC LOWS
2. Inventories are VERY LOW
3. Great time to buy and just as good a time to refinance
BUY! BUY! BUY!
And if you can, REFINANCE!
And remember, we are here to help you with all of your real estate needs!
We work with many clients throughout the greater Los Angeles, San Bernardino, Orange and Riverside Counties and the above observations are true based on our experiences with our clients and talking with other professionals in our business.
IF YOU ARE LOCAING TO SELL, BUY OR NEED SOME ADVICE ABOUT YOUR OPTIONS CALL US (626) 339-0697 OR SEND AN EMAIL WITH YOUR QUESTIONS TO LEHEL@TEAMSZUCS.COM.
Call us at (626) 339-0697 if you have any questions and we will help you find the right home.
SIMPLY FILL OUT THE FORM AT THE BOTTOM OF THIS PAGE AND LET US KNOW WHAT YOU THINK AND WHAT INFORMATION YOU WANT TO SEE
We designed this page to help our clients and friends in Covina know what is happening in the city. We update this page monthly with the previous month's data. Click on the below link to find home sale data and statistics for single family homes and condominiums in the City of Covina.
COVINA REAL ESTATE ACTIVITY STATISTICS
SELECT AREA MARKET SUPPLY.xls
If you would like to see this same data for a city other than Covina just let us know and we will get the data posted.
OUR OPINION and FORECREST for 2012
- prices will stay low and even hit a third low in 2012 ... this happened in January and February 2012
- interest rates will continue to be very low (3.5% 30 year fixed rate is available in today’s market) - new low was reached in April 2012
- short sales will continue to be the largest part of the market and the banks will continue to accept short sales instead of foreclosing
- many of the larger banks believe, and unfortunately we agree, that we will continue to work our way through the current mess for at least another three to four years …. in other words, this will be the market for the foreseeable future
- the new HARP 2 loan program will have limited impact and overall much less homeowners will be helped than what is projected (just like most of the other programs)
- demand for entry level homes at low prices will continue to be strong as long as interest rates stay as low as they are (and according to the FED, rates should be low for a while)
- we anticipate interest rates to stay below the 4.75% range for a while longer
- FHA insured loans will continue to be the largest share of the market and the qualification for one will continue to get harder and cost more
- bank owned (REO) properties are coming on the market but slowly ….. we think the volume will be less than it has been and banks are being careful not to flood the market and therefore further deteriorate prices
- prices in some areas, like the high desert, do not have much more room to go down so they will likely maintain their current average per square foot price (between $ 55 and $ 90 per square foot – depending on the area) – this is lower than the cost to build the same size home today
- low rates will mean low inventory levels as people rush to lock in these low rates
If you would like to see this same data for a different neighborhood and or city other than Covina just let us know and we will try to get the data posted.
All data gathered from the MRMLS MLS system and is deemed reliable but not guaranteed.
All data gathered from the MRMLS MLS system and is deemed reliable but not guaranteed.