Real estate agents from Boston to San Diego discuss the trends in their markets as the spring and summer home-buying season gets underway.
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 Real Estate
Short take: Very low inventory overall, but a surplus of buyers in the entry-level market
Prices: Prices are rising in the entry level under $500,000 and flat over that amount.
Sales: April sales were down 4.9 percent from March.
Buyers: First-time buyers are buying like crazy. With low rates and affordable (by San Diego standards) pricing, they see their after-tax payment isn't much more than renting.
Distressed properties: The inventory of foreclosures is dropping quickly, while the short-sale inventory is dropping slowly. 477 single-family foreclosures closed in April vs. 496 in March. 607 single-family short sales closed in April vs. 688 in March.
Financing: Qualified buyers with strong FICOs are seeing more loan options, including conventional 3 percent down and easing of condo loan restrictions. But marginally qualified buyers are having trouble getting loans. All borrowers are faced with excessive documentation and scrutiny.
Comments: San Diego is facing a shortage of housing inventory, particularly in the first-time buyer market, where multiple offers are common. One of my agents recently had an offer accepted against SIXTEEN other competing offers. First-time buyers are also competing with a glut of cash investors looking for "cheap" properties. The number of foreclosures is consistently dropping every month, while short sales are still prevalent, but not increasing. Prices haven't recovered enough to tempt many traditional sellers to put their homes on the market. All these factors contribute to our shortage of housing inventory in San Diego.
Palm Beach County, Florida
Jeff Lichtenstein, Jeff Realty
Short-take: I'm seeing continued improvement in the real estate market. Still nothing to get overexcited about. Kind of like an F student getting a D+. It's better, especially on the supply side, but not a cause for celebration.
Prices: Home prices are rising up. The average price per square foot was $156 in March versus $147 in February.
Sales: Sales were up in March (1,071) compared with February (1,002). However, they were down compared with last year at this time (1,223).
Buyers: Inventory is moving fast in the $200,000 to $400,000 category (8.7 months' worth of inventory), and slowest in the $1,000,000 dollar market (34.8 months of inventory). However, both categories are going down. The lower-priced homes are doing better than high-priced homes because there is more downsizing going on and people staying within their means. Also, homes in communities with high HOA fees or mandatory club memberships are seeing a higher inventory. Newer construction, which there is a lack of, moves very quickly.
Distressed properties: Short-sale inventory is stable and foreclosure inventory is rising. I'm also seeing the first beginnings of the end of the short sale. I lost a deal with a purchasing client because the court and bank would not stop a short sale and the property went to auction. Have two other properties where the auction process has started. Part of the reason banks have wanted to short sell is they have been waiting for three years on average in Florida to foreclose! Homeowners have been basically living rent-free for three or four years! The party is over, as banks are now foreclosing faster. While it's still advantageous for banks to work out a short sale and avoid the costly foreclosure process, we will see much less of this as that three-year timetable goes down significantly. One investor who purchases lots of short sales told me that he thought there was a 12-month window left for short sales. In 2006 I had no idea what a short sale was, so the rarity of the short sale might be what we are going back to.
Financing: My clients are not having that many issues getting loans. There's just a lot more red tape with more verification (a good thing) and scrutinized appraisals. The short sales are the most difficult because you need to do a double appraisal, one that appraises low (for the third-party institution) and the other high for the new lending institution. More on those goofy dynamics below.
Comments: New federal rules that could speed up the short-sale process to within 30 days if the loan is owned by Fannie Mae or Freddie Mac should be taking place by June. To that I say there is a better chance of my cable company getting their customer service act together. It's just not going to happen. Cable missed four appointments with us last week. They have this automated system that confirms appointments. Twice the automated system never called. Once it did but I picked it up in the middle of a message and another time I missed the call by a minute. Only after a call to my HOA and the threat of losing 640 homes did the account representative make it happen. Short sales are like our cable company, only far worse.
The loan company won't verify the price until an offer is received, paperwork goes from one department to another, and instead of using licensed appraisers, the lien holder gets a broker's opinion. While this saves them hundreds of dollars, the broker has to do huge volume and cover a vast territory. I had one house recently where the broker told me he does 60+ broker opinions a day and goes from Miami to Orlando. That's crazy, as you can't be an expert for the whole state. He also thought there were three baths when the house only had 2.5 baths. To complicate things further, the house has to appraise in order to get the price low enough so the lien holder knows they aren't giving it away. On the flip side, you hope it appraises high when the buyer's mortgage company appraises it for sale. Furthermore, with some institutions, if a buyer walks, they start the whole process all over again. The lien holder has to be incurring a ridiculous amount of costs holding the note and analyzing each short sale.
What really should be done on short sales is that prices should be set before they go on the market, just like a foreclosure. Those prices should be good for three months. If they really analyzed it, they probably would be better off foreclosing on the house, because the time and energy to handle the short sale has to be enormous. Fortunately, the red tape in the court system is speeding up and short sales may be passé in a year or two. Until then, maybe the lien holders should do like me and order DirecTV.
Jody Wise, Prudential Rubloff Properties
Short take: In Chicago there were lots of buyers writing lots of contracts. Contracts were up 60 percent versus last April and up 8 percent versus last month.
Prices: The average price of a "regular" sale remains pretty flat over the last three years. Prices in general, however, are feeling the impact of the distressed sales. In the last 12 months almost half of all sales are either short sales (where the owner is selling for less than the amount owed on the mortgage) or foreclosures that are owned by the bank.
Sales: Home sales (closings) were up over 6 percent in April as compared to March. And if you break that number out by property type, size or price point, you see about the same movement in every segment.
Buyers: There is slight improvement in every sector but by far most of the activity (in the city in general) is on the lower end, suggesting two strong groups of buyer: first-timers and foreclosure/short sale investors.
Distressed properties: 650 distressed properties closed in April. This is down from 860 last month. This may be driven by low inventory. For foreclosed properties the new listings get snatched up pretty rapidly and there are only about 3 months inventory available. We are seeing many multiple offer situations in the segment.
Financing: Buyers should be prepared to provide lots of paperwork and have every bank account and purchase scrutinized in the process of getting a loan but we are seeing slight improvements in the financing area.
Comments: The Northside markets in which I specialize are beginning to see a recovery. Neighborhoods like Lincoln Park have very few distressed and very large increases in both closed sales and properties under contract. Contracts in Lincoln Park (click to see a vintage gem) are up over 60 percent in April versus a year ago. This plus a strong drop in inventory suggests a very solid recovery is underway.
Bill Gassett, RE/MAX Executive Realty
Short take: The market right now is in a major upswing with activity increasing dramatically in the last few months. Homes that are in popular price points with low inventory get scooped up quickly.
Prices: Home prices have remained firm in most areas with some decline in the upper end of the market.
Sales: Homes sales are on the rise as compared to last month. We are in the peak selling season here in my market.
Buyers: There are all types of buyers purchasing homes, however, there are a quite a few first-time buyers. First-time buyers and move-up buyers in the lower half of the market are most prevalent. Luxury home sales are still weak.
Distressed properties: Inventory of short sales and foreclosures has remained steady. We have not seen a big influx of them.
Financing: For the most part financing has not been an issue for those with steady employment and a good credit history.
Comments: Our market is probably stronger than many parts of the country being in a high-tech belt. Overall we are certainly experiencing a changing market as compared to previous years. Activity has increased substantially and market time is down.
New York, New York
Short take: Currently, the city continues to see a very competitive rental market. For the second straight month, the average rent for a Manhattan apartment hit a record high - currently at $3,429 for April.
This, coupled with low interest rates, appears to be driving renters to explore the buyer's market for the first time. There has been a definite increase in interest in studio and one-bedroom apartments, which are popular among first-time homebuyers.
Prices: The average price-per-square-foot for condos is $1,529, the highest it has been since July 2008. These price gains are due to strong activity in three-plus-bedroom residences. In Brooklyn, average price per square foot was up 11 percent from April 2011 and 5 percent from March 2012 with the biggest percentage increases in the studio and three-plus-bedroom categories. Average negotiability declined from last April to 1.5 percent below last ask.
Sales: Manhattan market-wide contract activity is up 19 percent from last April with strong activity from both condos and co-ops. Inventory is 10 percent lower than a year ago, due to a 15 percent decrease in condo inventory. This limited supply is driving condo prices higher and pushing buyers into the co-op market.
Buyers: We're still seeing an increase in first-time purchases as rising rents drive up the value of buying instead of renting. Foreign investors (specifically Brazil and Russia) also seemed to be spurred by favorable buying conditions and the ability to ask for higher rents for their investments.
Distressed properties: Co-ops make up a large majority of the sales inventory in Manhattan. As a rule, they have stricter financial requirements for approval than other types of home purchases. This tends to keep the number of foreclosures and short sales to a minimum.
Financing: In NYC, getting approved by a co-op board is often a bigger hurdle than getting financing.
Comments: The New York City real estate market is unique in that 70 to
75 percent of apartment inventory consists of rentals. As previously mentioned, we are seeing a jump in first-time buyers as a result of an extremely tight rental market.
Newport, Rhode Island
Paul A. Leys, CRB, CRS, Gustave White Sotheby's International Realty
Short take: Most definitely improving! The number of sales are up, inventory is plentiful, rates are at historically significant all-time lows and most importantly… buyer confidence is rebounding. This is leading to acceptable offers being made.
Prices: Pretty much at the same amount as last month.
Sales: Slightly up in the smaller market of Newport County but level when looking at the broader R.I. statewide market.
Buyers: Same as always… a lot of second time/summer home buyers from the tri-state (N.Y./N.J./Conn.) area as well as the Boston and surrounding suburb market.
Distressed properties: Short-sale inventory has been clogging up the inventory for way too long at this point, but Realtors locally are starting to see the "light at the end of the tunnel" of ridding our market with an oversupply of such inventory. Those numbers continue to decrease and it will be very helpful to our market when they don't exist anymore.
Financing: Buyers are not necessarily having problems getting financing, but it does become a cumbersome project fraught with delays, paperwork issues, appraisal problems, etc. Bottom line is… patience is a virtue and 20 percent or more down helps!
Comments: Pending sales (properties under contract but not closed yet) are trending upward. This is a great sign of things to come for the market in the foreseeable future. I am also keeping an eye on the "days on the market" statistic. It is floating at about 100 days right now, which is a much lower number than the past few years. Once that gets below 100 days on a consistent pattern month to month, good things will follow.
Thomas Johnson, The Silver Star Group at RE/MAX TOP
Short take: Houston is getting healthier by the month. The Houston area added 96,000 jobs in the past 12 months. Inventory is shrinking and prices are rising.
Prices: Home prices are moving upward earlier in the buying season this year.
Sales: Sale are steadily moving up in a more normal seasonal trend.
Buyers: Investors are buying distressed properties for cash. The relocating families are often forced into the rental market as they cannot sell the home in the market they came from. This is putting demand into the single-family rental category. First-time buyers who have an employer are starting to take advantage of low interest rates and FHA financing.
Distressed properties: Distressed properties fell below 20 percent of the market, a positive sign.
Financing: Self-employed borrowers are having a difficult time getting through underwriting.
Comments: Here are some of the Houston real estate milestones in April.
- Volume of single-family home sales rose 9.6 percent, accounting for the 11th consecutive monthly increase;
- At $223,328, the single-family home average price reached the highest level for an April in Houston.
- At $160,120, the single-family home median price also hit the highest level for an April in Houston;
- 5.7 months inventory of single-family homes remains at the lowest level in three years and compares favorably to the national average of 6.4 months.