Real estate agents from Boston to San Diego discuss the trends in their markets as the busy spring homebuying season is just around the corner.
Many agents across the country said 2012 was the year of the housing rebound. Home prices were up and sales improved, dropping inventory levels to its lowest point in years. If you decide to wait until spring, real estate agents say the limited inventory might be all but depleted in just a few short months.
If you are a real estate agent and would like to participate in this roundup, please contact Managing Editor Tim Manni at tmanni [at] QuinStreet.com.
San Diego, California
Gary Kent, Gary Kent Team of Keller Williams Realty
Short take: Severe inventory shortage, especially under $1,000,000.
Prices: The San Diego average jumped up a whopping 4.9 percent from October 2012 to November 2012. And the median went up 5.7 percent. “Wow” on both counts! (December statistics not available.)
Sales: Sales volume was virtually unchanged from October ’12 to November ’12.
Buyers: We’re still seeing an unusually high percentage of cash buyers, many of who are “fix-and-flippers.” If you see a vacant and newly remodeled for sale, you can bet it’s a fix/flip home. There’s also a high number of first-time buyers competing with (and often losing out to) the cash fix/flip buyers.
Distressed properties: San Diego County has 194 single-family (house or condo) foreclosures currently for sale, 391 in escrow, and 195 that closed in December. For short sales, there are 220 for sale, 3,244(!) in escrow, and 825 closed in December.
Financing: There are two competing forces impacting people’s ability to get a home loan. On the positive side, the ridiculously low mortgage rates and resulting low payments make it easier to qualify. On the other hand, the ridiculously tight lending policies are making it harder to get a loan. Overall, if you have good credit and job history, you can get a great mortgage.
Gary’s comments: 2012 was the year San Diego’s market rebounded. In 2011, we begged people to make offers. Now, I’m getting so many offers on some homes that I feel like begging them to STOP! Why so many offers? There are several factors.
High demand due to: 1) low interest rates making the cost of owning little more than the cost of renting 2) pent-up demand from people sitting on the sidelines since 2006 as values dropped, and 3) fear of waiting and having to pay a higher price.
Low supply due to: 1) dramatically less REO/foreclosure inventory and 2) potential sellers unwilling or unable to sell at the lower prices. However, more sellers are slowly starting to list their homes as they see the market improve.
Palm Beach County, Florida
Jeff Lichtenstein, Jeff Realty
Short take: Normalcy! For six years, the south Florida real estate market was in a depression. 2012 marked the year we came out of it. Total inventory dropped an incredible 40.1 percent from 2012 to 2013. According to the Florida Realtors, inventory is now at 6,794 total units versus 11,299 total units a year ago. Market time is down and homeowners are getting 2.7 percent closer to their original list price from a year ago.
Prices: Prices are up from a year ago. However, there is a much greater increase in the lower prices, distressed properties, and townhomes/condos versus single-family homes. Homes in low HOA and non-mandatory membership communities are faring best.
Sales: Sales are stabilizing and have even dipped, as the bottom of the market has passed. Closed sales were up 9.9 percent from a year ago.
Buyers: Downsizing is still going on. We are seeing fewer and fewer people hanging on to their main home up north and are moving to Florida on a permanent basis. We are seeing people looking to move to Florida because of our no-income-tax status. We are working with a buyer right now who is looking to move their hedge business of 20 employees here from the northeast. The owner is looking in the $5 million to $10 million category and other employees in the $300,000 to $700,000 category. California is taxing the wealthy at 13.3 percent. If you don’t have to live in California, why would you pay 13.3 percent more to live there? Taxes going up to 39.6 percent and income taxes going up in other states have triggered a tipping point and Florida should see a bump of businesses relocating here because of it.
Distressed properties: Fewer available. I’m hearing still a few years left of short sales, but the percentage of distressed properties is going down considerably. Sellers need to move quickly, though. This year might be the last opportunity to take advantage of the forgiveness act.
Financing: Are clients having trouble getting financing? Yes and no. In the past three weeks, I’ve had four consecutive financing deals not appraise out. A fifth one did, but because it’s a jumbo loan, the lending institution is ordering a second appraisal. Remarkably, all four deals got put together. Buyers came up with the cash difference on three of the deals and the fourth one was a compromise. Sellers, who are accepting loans from buyers, need to make sure their Realtor preps the buyer’s agent that they may need to come up in price (if the house does not appraise out) while the deal is being put together. If not, buyers will get surprised at the higher appraisal, feel slighted, thus leading to a deal falling apart.Sellers need to avoid buyers with low credit scores (below 620) and who can’t afford to come up with the difference in case the appraisal doesn’t appraise out. Mortgage rates are nothing, but cash is still king!
Jeff’s comments: Palm Beach County is growing fast. See the projected population growth in Palm Beach County below. These numbers are based on an endless supply of baby boomers who will continue to bring growth to our region.
Our 0 percent income tax rate and low cost of living might lead to these numbers being higher. Phil Michelson’s comment about taking drastic measures to avoid his calculated 63 percent tax rate is on people's minds. Florida Power & Light just announced 1,800 new jobs to be created in Palm Beach Gardens in their new facility. There are lots of rental housing projects in the works but very little in new home projects. Less distressed property and continued growth could lead to much less supply, fast forwarding to a year from now. The still-tough economy and conservative borrowing standards could lead to a frustrating market in getting deals done a year from now.
Jody Wise, Prudential Rubloff Properties
Short take: In Chicago, buyers are jumping off the sidelines to grab the last of a weak sellers’ market before interest rates and prices rise beyond their reach.
Prices: Prices were pushing upward in Chicago in October-December to end the year on a positive note for sellers. In fact, the lack of inventory in the face of strengthened demand has created competition among buyers for properties. Buyers are facing multiple offers and bids over list as they fight for the choicest properties. This frenzy may slow as long-patient sellers come onto the market in the spring, anticipating better pricing than the last few years.
Sales: Units or transactions are up significantly in the fourth quarter compared with 2011. This seems to signal the beginning of a rise from the bottom which we have been bouncing along for quite some time. Buyers are facing a rise in prices and currently tight inventory along with a possible rise in future interest rates. This is prompting greater numbers to get off the sidelines and participate before the market recovery hits full stride.
Buyers: Every type of buyer is active. We are seeing closed transaction strength at all price levels and at most levels price is strengthening as well. Properties in the top 25 percent of the market based on price are slightly down on more volume and they have had stable pricing over the last 12 months.
Distressed properties: On the North side of Chicago there are very few distressed properties available. There may be shadow inventory out in the weeds waiting to hit the market, but the “investor party” we have been experiencing (finding great deals) is just about over. About 24 percent of the closed sales in 2012 were distressed. This is down from 28 percent a year ago.
Financing: Everyone seems to have settled into the rigors of getting a mortgage so it seems less onerous. It is no more or less difficult than it was a year ago. Having good credit is a requirement and so those hardest hit by the past recession will have the toughest time getting back into the housing market.
Jody’s comments: New construction in the city is back. If a builder can find a tear-down or lot upon which to build, the market is beating a path to the front door. After a four-year diet, the market is clamoring for new, never-been-lived-in, all the bells-and-whistles construction.
If you are a seller, do not wait. Do not wait for the traditional spring market. We have a small window of low inventory where you might be able to push price a bit more than expected.
Bill Gassett, RE/MAX Executive Realty
Short take: The market has improved quite a bit over the last six months with inventory steadily dropping over that time. Inventory is at the lowest it has been in many years. All projections indicate the spring market will be very active.
Prices: Prices of homes have leveled in most towns and price points. In certain pockets where inventory is extremely tight there has been some slight appreciation.
Sales: Sales are about the same as last month.
Buyers: We are getting buyers from all types of categories.
Distressed properties: The inventory of short sales and foreclosures has been coming down in most communities.
Financing: I have seen no evidence of clients who have steady employment, good credit and a down payment having issues.
Bill’s comments: Overall our market looks poised to be a good one in 2013. Sellers can expect their homes to be sold in a few months if priced correctly.
Thomas A. B. Johnson, The Silver Star Group at RE/MAX TOP
Short take: Stellar. Houston is the fastest growing major city in the U.S. The percentage gain is only behind Austin. Houston added 85,000 jobs in 2012.
Prices: Up 11.5 percent year over year; average: $244,000.
Sales: 19th straight month of positive sales gains.
Buyers: Activity is across the board with strong sales in the upper price points.
Distressed properties: Distressed properties are at a record low.
Financing: Underwriting remains tight.
Tom’s comments: Job growth in the energy and medical sectors is driving the Houston economy.