It’s quickly becoming a seller’s market
Real estate agents from Boston to San Diego discuss the trends in their markets as the fall home-buying season is well underway.
Our Real Estate Roundup panel remains optimistic at the end of the third quarter. Across the country, prices are rising or have stabilized and distressed sales are down in some places. Realtors are seeing more properties receive multiple offers, a great sign for sellers. However, inventories continue to remain a problem nationwide.
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: “Good” growing pains. We are at a point that many buyers have entered into the market, driving our inventories down from the levels of June 2012. Most of the sub-$500,000 market is marked by multiple offers for homes priced close to market.
Prices: Statistics don’t always tell the story. Despite our strong market, the San Diego Association of Realtors reports that the average price for detached homes dropped by $1,802 while the median remained the same. For attached homes, the average sales price dropped by $5,345, while the median increased by $3,250.
Sales: Overall, both detached and attached home sales in September were lower than August, but August closings were the highest of the year so far.
Buyers: We continue to see quite a few first-time homebuyers enter the market. However, the market drivers appear to be both investment groups and mom-and-pop investors with cash. These cash investors usually win the bidding wars, especially in the short-sale arena, since the seller “just wants out” and will take a strong enough cash buyer for less over a higher financed offer. There are now some move-up buyers who have recovered part of the lost value in their homes and/or have decided to buy now and hold onto their old homes as rentals.
Distressed properties: Currently, there are 145 detached and only 60 attached REO properties on the market. This is a huge drop from 280 and 145 in June and reflects the shift in banks doing more short sales. September REO sales also were lower than June’s numbers with closed detached units of 206 and attached sales of 94, down from June’s 293 and 159 respectively.
Active short-sale listings are now 321 for detached and 150 for attached homes, which are also lower than June’s number of 404 and 236, respectively. Sold short sales of detached units were only slightly lower than June’s 450, with 430 closings. Attached homes actually showed an increase with 276 closing versus the June closings of 245.
Financing: Mortgage rates are great, of course. But loan underwriting continues to be tight and we are seeing some low appraisals. This is due to HVCC constraints along with the reality that appraisers must use backward-looking data even in an active market.
Gary’s comments: San Diego continues to show its resiliency driven mostly by our incredible weather along with our broader employment base compared with the defense-driven world we lived in 20 years ago. The key drivers continue to be the “Trifecta” of 1) mom-and-pop investors armed with cash; 2) record low rates; and 3) rents that are higher than mortgage payments. Over the past two years many smart investors have realized the importance of adding San Diego real estate to their portfolios for the benefits of positive cash flow. These investors are eyeing investments in a hard asset that generates cash flow that should be a major hedge against future inflation, whether they hold it for cash flow or capital appreciation.
Palm Beach County, Florida
Jeff Lichtenstein, Jeff Realty
Short take: A dramatic change in the marketplace in certain categories from two years ago. In some areas it’s a complete seller's market with little inventory available. There are 6,605 single-family homes available, which is down drastically from 11,710 in September 2011. Supply of inventory is down across the board for inexpensive and luxury homes although it’s less for inexpensive homes. However, sellers might be pushing the limit with pricing expectations.
Prices: Prices are way up from a year ago. The average sold price in September 2012 was $355,805 versus $303,787 a year ago, according to the Florida Realtors Association. A 17.1 percent increase! Townhomes and condos have gone up at a 14.4 percent clip. The average sold price has now been more than $330,000 for seven straight months, so prices have stabilized.
Sales: In a surprise, sales slipped in September versus last year at this time. There was a 4.4 percent drop in closed sales (1,031 in September 2012 versus 1,079 in September 2011). The townhouse and condo market also saw an 8.6 percent drop in closed sales.
Buyers: There is a good mix of people who are purchasing. A huge percentage is people who have sold their home and now are able to purchase; first-time homebuyers and downsizers as well. While I see more downsizing, I’m starting to see some upsizing for the first time in a while. We are also getting the first of the short-sale sellers who sold three or four years ago coming back into the market. There are a lot of South American investors in the Miami area but not in northern Palm Beach County.
Distressed properties: Short-sale inventory has been holding steady, but even those saw a drop of 14.5 percent from last year. However, banks are opting for more short sales, so we will see a continuation of this for some time.
Financing: Some clients are still running into some issues on financing. The process is taking 30 to 35 days. Banks are asking for lots of documentation and writing down investment properties. In many cases I’ve had clients find a family member or friend to co-sign.
Jeff’s comments: Last spring I wrote about the laws of supply and demand and how I saw that prices would be pushed up. That’s exactly what occurred and why sellers should put their homes on the market now if they are thinking about moving. Since last March we’ve seen a surge of sales from must-sell short sales and foreclosures to properties that had been lingering on the market forever. The lessening of supply has led to an appreciation of pricing. The best deals from the 2007 market crash have finally disappeared. Buyers need to come to grips with the fact that the excess supply from that “once in a generation excess market” is not available nor is it coming back.
However, there is a limit to how high prices will go. Economic realities, cautious lending restrictions, and a more conservative population will limit prices. I’ve seen some of this happening at street level in the past six weeks and the September pending/sold numbers support it with fewer sales occurring.
Buyers have already agreed to pay more, which is evident in higher sold price appreciation. The sellers, though, are at the beginnings of trying to push up the prices the next 5 to 10 percent and the buyers aren’t going to bite. I just had a buyer walk away from a deal where a seller was too overconfident in their pricing by trying to bump it up to the next level. This will lead to more inventory and maybe a slight dip in prices.
My advice to sellers is to avoid this overpricing temptation. The point of listing now is that if you price it properly, you can take advantage of the low inventory. Not only will you get fair market value, but your home will move quickly. If inventory starts to go up, then it will not only affect your sale price but days on the market as well.
Jody Wise, Prudential Rubloff Properties
Short take: Very active over the third quarter. Many properties (assuming they show well and are priced correctly) are seeing lots of traffic and multiple offers.
Prices: Prices are stable. We are not seeing any decline, but we are also not seeing any price appreciation. There is 5.4 months’ supply of inventory, which, in our market, is a balanced market.
Sales: Transactions (closed sales) are up 18 percent over the last 12 months.
Buyers: While increased market activity is seen at every price point (starter homes through high-end homes) the biggest gainer is lower price points. This is driven by foreclosure buying as well as first-time homeowner traffic.
Distressed properties: There is very little foreclosure inventory (~2 months’ supply). Foreclosures are about 27 percent of sales and short sales are 15 percent. While all types of sales (distressed and non-distressed) were up in the quarter, short sales are seeing the biggest gain (condo short sales are up 47 percent year over year). As banks get their processes more predictable more shorts are listed, approved and closed.
Financing: Financing still requires patient and “obedience”. If a lender asks for a piece of paper just say “yes” and deliver it. Questioning the request just delays the process. Borrowers that have good credit scores and a good debt-to-income balance with the purchase only get hung up if the condo association does not meet the lenders’ criteria. So make sure your Realtor® is asking the right condo association questions at the first showing. (For a list of lender condo issues, email me at email@example.com.)
Jody’s comments: The market is active but the biggest frustration for buyers is the absence of inventory – the pickins are slim. This is made worse by the fact that the good homes (shows well, priced well) get snatched up quickly and may experience multiple competitive offers. What remains might not be what you want.
For sellers, in some property types and neighborhoods, it might be time to sit down with your agent and see if now is the time to sell. For your specific neighborhood profile drop me an email and I will send it out.
Bill Gassett, RE/MAX Executive Realty
Short take: The market this year has been substantially stronger than last through all price points. The amount of sales year to date versus last year is better in every town that I cover. Inventory has dropped as well. While values have not risen, sales have remained steady. The outlook moving forward looks good and we could be at the bottom.
Prices: Prices have not gone up per se but values are not dropping. There are pockets in the market where inventory is very low and homes that come on sell immediately for close to asking and sometimes even over if there are multiple bidders.
Sales: Home sales are up and have been almost every month this year. By the end of the year sales will have easily surpassed last year and in some areas by a substantial amount.
Buyers: We have buyers in all categories who are moving. It has been a diverse market.
Distressed properties: Foreclosures and short sales have been on the decline in my area.
Financing: Financing has been problematic for those borrowers who do not have excellent credit, but other than that getting a mortgage has not been a big issue.
Bill’s comments: Overall going forward I see next year getting even better as long as there are no major changes in the economy and interest rates remain favorable.
Thomas A. B. Johnson, The Silver Star Group at RE/MAX TOP
Short take: 4.9 months of inventory indicate a seller’s market, however, inventory is constrained by sellers being unable to sell at current price and recover sufficient funds to purchase their next home.
Prices: Higher-end sales continued pushing the average price to a $224,464.
Sales: Sales over the past month are up an average of 20 percent year over year.
Buyers: Six hundred people a day are moving to Houston, which is driving housing demand as the energy and medical sectors continue hiring qualified professionals.
Distressed properties: Foreclosures remain an issue in the less desirable neighborhoods, however, the inventory of distressed REO properties declined 4.2 percent year over year. Median price was $80,000.
Financing: The higher-end buyers have down payments and the credit history to obtain financing, however, the underwriting remains tight.
Tom’s comments: August marked the 15th consecutive month of positive home sales across the greater Houston area, with single-family homes selling at the greatest one-month volume since August 2007. Buyers gobbled up enough properties to drive inventory down to a level last seen more than 10 years ago.
According to the latest monthly data prepared by the Houston Association of Realtors® (HAR), single-family home sales jumped 20.0 percent compared with 2011. Contracts closed on 6,600 homes in August, sending inventory falling to 4.9 months.
The single-family home average price increased 4.0 percent year over year to $224,464, the highest level for an August in Houston. The median price rose 3.8 percent to $165,000, also a record high for summer in Houston.