Our Real Estate Blog

Real Estate Market Comments for June 2010

June 16th, 2010 9:42 AM by Lehel S.

June 16, 2010

Our observations of the real estate market in the greater Los Angeles area (includes LA, Orange, Riverside and San Bernardino counties):

MARKET SUPPLY

  • market supply in Covina is at 3 months - on average a 6 month supply is healthy for any market – our MLS overall has 3.8 month’s worth of supply based on 2009 volumes
  • most cities have a market supply of less than 3.5 months
  • the number of homes on the market has been slowly but steadily increasing
  • in the last few months we started to notice an increasing number of regular sales – more research has shown us that these are homes that were bought by investors at the foreclosure sale, fixed and then put back on the market
  • nearly all of the homes on the market are either short sales or bank owned
  • below is a breakdown of sales by type

HOMES

2009

2010

SOLD

327

187

REO/BANK OWNED SALES

91

39

SHORT SALES

65

55

REGULAR SALES

144

74

AS APERCENT OF TOTAL SALES

REO/BANK OWNED SALES

27.8%

20.9%

SHORT SALES

19.9%

29.4%

REGULAR SALES

44.0%

39.6%

CONDOS

2009

2010

SOLD

74

40

REO/BANK OWNED SALES

29

13

SHORT SALES

21

12

REGULAR SALES

17

13

AS APERCENT OF TOTAL SALES

REO/BANK OWNED SALES

39.2%

32.5%

SHORT SALES

28.4%

30.0%

REGULAR SALES

23.0%

32.5%

  • the number of homes in escrow have increased over the last few months and are still quite high in some areas – we anticipate this to level off as the tax credits have expired or will soon run out of money

HOME PRICES

  • home prices are still low and have stabilized– in most areas prices have held steady for the last few months and they are at 2003 levels - average per square foot prices are moving within a 5% or less range
  • average per square foot price of homes compared to last year averages is up close to 5%
  • homes are selling on average at 98% of asking price and many are now selling up to 5% above the asking price
  • it looks like the low for average per square feet was in February 2009 for homes and July 2009 for condos – this could still be tested since the banks are still sitting on a lot of foreclosed homes (at least that is what we are hearing from a lot of reliable sources)

SALES VOLUMES

  • surprisingly condo sales seem to be increasing - even though getting a loan for a condo purchase seems to be harder
  • most homes are still receiving multiple offers (however the final sales prices are no more than 5% above the last asking price in most areas)
  • the volume of homes sold and in escrow are both up and we anticipate this to continue into April as people are trying to beat the federal tax credit end date
  • year to date sales volumes and projections are about 10% or less below last year volumes in most areas – we think that with the summer months this will change and sales volume this year will be higher than last year

INTEREST RATES AND LOANS

  • interest rates spike and sink based on various economic data that is released - rates are still well below historical averages - depending on various criteria, a loan under 5.25% or less is still possible - if you can afford it, you can even buy this rate lower
  • 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)
  • FHA loans are what most people are getting to qualify
  • 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

MAKING AN OFFER

  • for most bank owned properties you need to cross qualify with their lender
  • asking for 3% back for closing costs does not seem to be the norm any more
  • chances of getting 3% back for closing costs are higher with a short sale than other types of loans due to the low supply and high demand
  • if you can afford a 10% or higher down payment and get a conventional loan you will have a better chance of getting your offer accepted - although conventional loans are getting tougher to get
  • patience is vital in this market with homes receiving multiple offers – in some cases as many as 30 or more – supply is low and demand is high
  • short sales are still taking a long time to get approved but more of them are getting approved – unfortunately there are still many agents out there who do not know how to properly handle a short sale and those transactions take even longer
  • the new government sponsored program that is still being implemented will help streamline the process and make short sales quicker
  • many offers are from buyers that are buying with cash
  • we are continuing to see a lot more investors buying properties (in many areas buying a home with 15% down will results in positive cash flow)
  • there is a lot of competition among investors and that hurts owner occupying buyers
  • appraisals are starting to come in at high values again – although in a lot of cases they are being scrutinized a lot more and sometimes more than one appraisal is requested
  • with the expiration of the tax credits it seems that some buyers have left the market (or are in escrow) and offers are easier to get accepted

TAX CREDITS

  • $ 8,000 federal tax credit for first time buyers and $ 6,500 tax credit for move up buyers expired at the end of April – these transactions have until the end of this month to close
  • The California tax credit are running out and about a week ago had only half the money left that was allocated to the program – this is on a first come first served basis and once the money runs out it is it – this tax credit is given over three years
  • the loss of the tax credits drove some buyers out of the market and thus reduced competition and has made it easier to have offers accepted

LOAN MODIFICATION

  • there are new programs and a bigger push to keep people in homes – if you are in trouble you have a fair chance of getting help
  • banks are working more with homeowners to modify loans and keep defaults down – few trial modifications end in permanent modifications - unfortunately about 80% of these modified loans end up in default within 6 months and will go back through the foreclosure process

OUR OPINION

  • we anticipate prices to stay low and interest rates to start a slow but steady climb toward the 6% range by the end of the year
  • we also believe that demand and competition will remain strong with the new California tax credit (at least until it runs out of funds)
  • FHA loans will continue to be the largest share of the market and the qualification for one will start to get harder and cost more
  • in our opinion there will be more bank owned properties coming on the market in the near future and for the next few years, however we think the volume will be less than it has been
  • the high volume of REO properties (the shadow inventory) that the media has been talking about has yet to materialize - we started to see a small trickle in the last month and are hoping the banks will release more soon
  • we also heard from a respected source, who attended a meeting of asset managers at the major banks, that the REOs that have been talked about for release in the 4th quarter of this year may not be released as planned and will most likely be released in the 1st quarter of next year – this is at the request of the government - we have not yet seen an increase in REO properties available
  • we believe that average per square foot prices will move flat with slight up and down movements and will finish the year less than 5% above last year’s prices

Bottom line:

1. Federal Tax credit is is gone

2. State Tax credit that started in May 2010 is half gone

3. Inventories are low

4. Prices are right and seem to be stabalized

5. Interest rates are still close to historic lows

6. Properties are receiving multiple offers

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 LOOKING 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.



Posted in:General
Posted by Lehel S. on June 16th, 2010 9:42 AM

Archives:

Categories:

My Favorite Blogs:

Sites That Link to This Blog: