Our Real Estate Blog

Real Estate Market Observations - October 2009

October 7th, 2009 10:22 AM by Lehel S.

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

  • home prices are still low – in most areas prices have held steady for the last few months and they are at 2003 levels
  • there has been a slight increase in the average price per square foot over the last few months
  • market supply in Covina is at 2.9 months - on average a 6 month supply is healthy for any market – Duarte and Monrovia are slightly lower at 2.7 and 2.6 months respectively – some areas in the South Bay are as low as 1.5 months of supply – Rancho Cucamonga is just above 2 months
  • 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 for 5.5% 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)
  • most homes receive more than 10 offers (however the prices are not increasing as they did in the early 2000s)
  • appraisals are starting to come in at high values again
  • many offers are from buyers that are buying with cash
  • we are seeing a lot more investors buying properties (in many areas buying a home with 15% down will results in positive cash flow)
  • nearly all of the homes on the market are either short sales or bank owned
  • in the last few months we started to notice an increasing number of regular sales that are homes that were bought by investors at the foreclosure, fixed and then put back on the market – the problem is that you cannot get an FHA loan for these homes for at least 90 days after the investor acquired the home
  • prices of homes seem to be more stable
  • 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 that the media has been talking about has yet to materialize - we started to see a small trickle in the last few weeks
  • 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
  • short sales are still taking a long time to get approved but more of them are getting approved – unfortunately there are many agents out there who do not know how to properly handle a short sale and those transactions take even longer
  • banks are working more with homeowners to modify loans and keep defaults down – unfortunately about 80% of these modified loans end up in default within 6 months and will go back through the foreclosure process
  • for most bank owned properties you need to cross qualify with their lender
  • 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
  • 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
  • asking for 3% back for closing costs seems to be the norm now (not asking for this can make your offers stronger as it will net more for the bank - if you can afford it)
  • FHA loans are what most people are getting to qualify
  • 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
  • it is not a buyers or sellers market - it is both - whomever can submit the strongest offer in this market typically wins the deal - and that is not always the highest offer in an REO transaction - properties that are priced well sell quickly
  • the $ 8,000 tax credit for first time buyers is set to expire at the end of November – escrow has to close before 12/1/2009 to be able to claim the credit
  • we heard and read a lot on this subject ($ 8,000 tax credit) as of late - there are various proposals to keep the tax credit in some form or another - we have not heard of anything firm yet so we are not counting on the existing tax credit continuing
  • the $ 10,000 California tax credit for buying a newly constructed home is gone since they ran out of funds months ago and recent talks in legislature to extend or add to this fund have gone nowhere

Bottom line:

1. Tax credit is expiring 12/1/209

2. Inventories are low

3. Prices are right

4. Interest rates are near historic lows

5. 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 for all areas, (the price changes may vary).

The two big questions that in our opinion will affect the market and we do not yet have an answer for are:

1. Where will the market go with the tax credit set to expire soon?

2. When will the REOs that the banks are holding hit the market?

We believe this is a great time to buy for a number of reasons:

  • home prices are at about 2003 levels – LOW
  • in most areas the price per square foot has been staying steady with very slight increases or decreases from month to month
  • interest rates are low - at about 5.5%
  • $ 8,000 federal tax credit is still available
  • tax deduction values of home ownership

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 October 7th, 2009 10:22 AM

Archives:

Categories:

My Favorite Blogs:

Sites That Link to This Blog: