Market Update - Stephanie Witt's Blog on Marin County Real Estate
If a new home is in your 2015 plans, no doubt a mortgage loan is also part of that picture. The breadth of mortgage loans is extensive and it's important to understand each in order to find the type of loan that makes sense for your situation. The following is a snapshot of real estate loans available to homebuyers:
While house-hunting in Marin, Kiu Phung of Novato and her husband, Michael Murray, made offers on three homes to no avail, always losing out to higher bids. Finally, they wrote a letter to a seller introducing themselves and explaining why they loved the property — and they snagged the house this month.
The couple’s story is just one example of how practices that were common in the boom of the early 2000s are catching on again.
As has been the case for the past few years, Bay Area home sellers remain firmly in the driver’s seat, with four of our local counties ranking among the top 10 in the nation for largest premiums this spring.
RealtyTrac’s most recent U.S. Home Sales Report says that U.S. single-family homes and condos sold for almost exactly 100 percent of their estimated full market value in April. In a statement accompanying the report, company Vice President Daren Blomquist said that while that statistic indicates a national overall housing supply-and-demand balance, most local markets tended to favor either buyers or sellers.
According to the report, homes sold for more than their estimated full market value in 27 percent of U.S. counties in April, with Northern California and Bay Area counties dominating the list of places where sellers enjoyed the largest premiums.
Home sellers in Alameda and San Francisco counties netted the largest amounts over market value in the nation, both at 108 percent. Marin and Contra Costa counties tied four others for second place – including Yolo in the Sacramento area — with sellers receiving 107 percent of market value. Shasta County also cracked RealtyTrac’s list, with the average home selling for 106 percent of market value. No state other than California had more than one market that ranked among the top 10.
In its latest monthly home sales report, the California Association of Realtors said that the Bay Area was the only region in the state where homes were selling for above asking price – an average of 107.1 percent in April. CAR wrote that a lack of inventory throughout the region is the primary factor pushing final sales prices beyond original prices.
Bay Area counties had the fewest available homes for sale in California in April, with the months’ supply of inventory (MSI) at 1.6 in San Francisco, San Mateo, and Santa Clara counties. Alameda had the second smallest MSI – 2.0 – while Contra Costa and Marin tied San Benito and Yolo counties for third lowest at 2.4.
According to Pacific Union President Patrick Barber, employing the services of an expert, trusted real estate professional is the most important thing that sellers and buyers can do to navigate highly competitive markets with low supply levels. “Too often do I see good buyers lose out or sellers leave money on the table because of poor representation,” he says. “Hire a real estate professional the same way you would a doctor or a lawyer; get referrals and interview them.”
(Photo: Flickr/Miran Rijavec)
The latest TransUnion Industry Insights Reportputs the number of U.S. delinquent mortgages – defined as those that are 60 days or more late on payments — at 2.95 percent in the first quarter, down from 3.59 percent one year ago. The national mortgage delinquency rate has declined for 13 straight quarters and is now at its lowest level since the third quarter of 2007. Delinquency rates peaked at 6.94 percent in the first quarter of 2010.
TransUnion says the subprime mortgage-delinquency rate decreased to 27.23 percent, down from 29.76 in the first quarter of 2014. The number of subprime mortgage delinquencies also reached a high in the first quarter of 2010, when 40.48 percent of borrowers where behind on their payments.
“It’s taken more than seven years, but the mortgage delinquency rate has reached pre-recession levels,” TransUnion Vice President Joe Mellman said in a statement accompanying the report. “We continue to see a steady decline in the mortgage delinquency rate, primarily driven by strong performance by newer vintage loans. It’s also encouraging to see continued delinquency rate declines for the subprime and near-prime risk groups.”
The company says that all 50 states saw an annual decline in mortgage delinquencies in the first quarter, as did most major metro areas. California saw the second largest delinquency drops in the country, down from 2.78 percent in the first quarter of 2014 to 2.00 percent in the first quarter of 2015. California homeowners carried an average mortgage balance of $324,835, the highest in the country’s five most populous states.
According to TransUnion, the San Francisco metro area had the lowest rate of delinquent mortgages in the country in the first quarter: 1.32 percent, down from 1.92 percent one year ago. Miami had the most delinquent mortgages in the U.S., with 6.15 percent of borrowers behind on payments.
The report found that Bay Area residents are also fiscally responsible when it comes to credit-card debt, with just 0.88 percent of cardholders 90 days or more delinquent on payments in the first quarter, the fewest in the country. California had a credit-card delinquency rate of 1.30 percent, lower than other highly populous states and the national average of 1.37 percent.
(Photo: Flickr/Oliver Symens)
Home prices grew slightly faster than rents across the country over the past year, but purchasing a property remains the less-expensive option, thanks in part to low mortgage rates. That’s true even here in the Bay Area, which lays claim to the highest home prices in the nation.
According to a recent Trulia study, buying a home is currently 35 percent cheaper than renting in all 100 of the largest U.S. metro areas, up from 33 percent one year ago. The company calculated its buy-versus-rent ratio assuming a 30-year, fixed-rate mortgage with a 3.87 percent rate and a 20 percent down payment. The study also assumes that buyers are in the 25 percent tax bracket and plan to keep the property seven years and itemize federal tax deductions.
Trulia says that declining mortgage rates – which averaged 4.5 percent in 2014 – are one reason that it’s becoming cheaper to own a home than it is to rent one. The other is that home price growth outpaced rent increases by just 0.2 percent over the past year.
San Jose homebuyers currently face the largest prices in the nation, with the median sales price at $900,000 in the first quarter according to the latest statistics from the National Association of Realtors.San Francisco was the nation’s second priciest market, with a median sales price of $748,300. So while the gap between owning and renting in the Bay Area is predictably smaller than it is nationwide, it is still substantial.
Trulia estimates that it is 24 percent cheaper to own a home in San Francisco than it is to rent, up from 17 percent in the spring of 2014. In San Jose, it is 17 percent more affordable to buy than rent this spring compared with 11 percent one year ago. Still, the report characterizes both Bay Area markets as ones where buying versus renting is “a tougher call.”
Trulia points out that homebuyers should also carefully consider HOA fees when deciding whether it is more affordable to purchase than rent, as they can narrow the gap. Both San Francisco and San Jose ranked within the top 10 U.S. markets for highest monthly HOA fees — $300 and $290, respectively.
Even when factoring in HOA fees, it is still 15 percent cheaper to buy than rent in San Francisco and 8 percent cheaper to do in San Jose, Trulia says. However, the company notes that under certain scenarios, renting might gain the upper hand. For instance, buying a home would be more expensive than renting in 29 percent of the 100 largest U.S. metro areas were an owner to not itemize deductions, keep the property five years, and qualify for a mortgage rate of 4.5 percent.
Renters who are considering purchasing a home should note that mortgage rates remain near historic lows, averaging 3.85 percent for a 30-year, fixed-rate loan for the week ended May 14. But the low rates may not linger much longer, according to Freddie Mac’s May 2015 U.S. and Housing Market & Economic Outlook, which projects them to rise to 4 percent by the end of the year and 4.9 percent by 2016.
In its latest US Housing Analysis and Forecast, John Burns Real Estate Consulting says that it also expects mortgage rates to increase, though the company predicts that they will remain around 3.8 percent for the remainder of 2015.
If you plan to buy a home in the Bay Area or the Lake Tahoe/Truckee region, Pacific Union’s mortgage partner, Mortgage Services Professionals, can offer loan advice and consultation to help make your purchase a success.
The median Golden State home price hit its highest point in more than seven years in April, while sales volume rose for the third consecutive month. The Bay Area also enjoyed healthy home sales gains in April, with volume rising by more than 20 percent from the previous month.
In its most recent home sales and price report, the California Association of Realtors says the median price for a single-family home in the state was $481,760 in April, up 2.8 percent from March and 7.4 percent from a year ago. CAR says that April’s median sales price was the highest recorded since November 2007.
Across the state, there were 427,620 home sales in April, the most since August 2013. In a statement accompanying the report, CAR President Chris Kutzkey noted that the uptick in sales is a promising sign that home sales will remain strong through the remainder of the traditionally busy spring season.
“We are finally seeing some of the pent-up housing demand that we talked about in the past turning into actual sales, thanks to solid job growth, record-low interest rates, and looser lending requirements,” Kutzkey said.
Here in the Bay Area, April was also an active month for real estate, with sales volume increasing 23 percent from March across the nine-county region. Eight counties posted double-digit sales increases from the previous month, ranging from 34.4 percent in Sonoma County to 14.4 percent in Alameda. Napawas the only local county where home sales slipped month over month, falling by 6.7 percent.
The median sales price for a Bay Area single-family home was $844,810 in April, up 4.4 percent from March and 9.4 percent from April 2014. Prices rose from March in every county but San Mateo and Solano, where they decreased 1.5 percent and 2.1 percent respectively but were up across the board year over year. San Francisco overtook San Mateo as the state’s most expensive county, with a median sales price of $1,348,480. San Francisco also had the largest price per square foot in California: $793.
Despite the sales gains, housing-stock constraints remain an issue locally and statewide, with the months’ supply of inventory (MSI) decreasing on both a monthly and yearly basis. California’s MSI fell to 3.5 in April while dropping to 2.2 in the Bay Area, meaning that both markets strongly favor sellers. In a statement accompanying the report, CAR Vice President and Chief Economist Leslie Appleton-Young said that current supply conditions are concerning since they drive up prices and lessen affordability, which could lower homeownership rates in the long term.
CAR says that a lack of homes on the market caused Bay Area homes to sell for an average of 7.1 percent more than original price in April, up from the 5.2 percent premiums recorded a year earlier. The Bay Area remains the only region in California where the average seller can expect to pocket more than asking price.
(Photo: Flickr/Jeremy Brooks)
Mortgage rates move higher for third week in a row
Employment gains, 10-year Treasurys provide upward pressure
In its 2015 Investor Survey, the California Association of Realtors (CAR) found that 75 percent of investors believe that real estate prices in their neighborhood will increase over the next five years, while 70 percent expect appreciation in one year. Investors project that their property prices will grow by 27 percent during the period of ownership, an average of 6.1 years in 2015. In both 2013 and 2014, investors said they would keep their homes for an average of about eight years.
And if recent home price gains are any indication, California real estate investors have just cause for the sunny outlook. According to CAR’s survey, the median sales price paid for an investment property increased from $292,000 in 2013 to $375,000 in 2015.
Overall, the number CAR real estate professionals who reported closing a transaction with an investor over the past 12 months declined from 39 percent in 2013 to 26 percent this year. Survey respondents said they had an average of 5.4 investor clients in 2015, essentially unchanged from last year but down from seven in 2013.
California investors still far prefer single-family homes, with 72 percent buying that type of property. Multifamily property purchases by investors grew from 14 percent in 2013 to 21 percent in 2015, a trend that CAR attributes to the depletion of distressed housing inventory on the market.
The survey found that two-thirds of investors financed the transaction in all cash, virtually identical to the previous two years. About half of investors funded the purchase with profits from a previous investment, while 42 percent tapped their personal savings.
Two-thirds of investors also plan to become landlords – with the average monthly rent pegged at $1,850 — while about one-quarter intend to flip the property. California investors tend to gravitate toward homes that are already in excellent shape, with 69 percent purchasing properties that needed no or minor improvements. Those that did have to renovate spent a median of $10,000, down from $15,000 last year.
Southern California is still the preferred locale for investors in the state, accounting for 46 percent of transactions in 2015. However, investor activity in Northern California is rising, up from 15 percent in 2014 to 24 percent this year.
(Photo: Flickr/Sarah Reid)
NAR: 5 most and least expensive housing metros in 2015
California takes over most expensive list
- Deciphering mortgage loan options
- Marin homebuyers resort to creative incentives to get scarce properties
- Bay Area Is the Nation’s Hottest Market for Home Sellers
- Are you in a buyer's or seller's housing market?
- San Francisco Metro Area Mortgage-Delinquency Rate Is Lowest in U.S.
- Buying a Home in the Bay Area Is Still Cheaper Than Renting
- California Median Home Price Reaches Highest Level Since 2007
- Mortgage rates move higher for third week in a row
- Golden State Real Estate Investors Optimistic About Price Growth
- NAR: 5 most and least expensive housing metros in 2015
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