“THE MINIMUM INCOME NEEDED TO BUY THE MEDIAN PRICED HOME IN CALIFORNIA HAS RISEN SHARPLY OVER THE LAST YEAR.”
Six years after prices collapsed, housing has begun to climb out of its hole. So what are the best moves to make now? In a three-part series, we offer smart strategies for buyers, sellers, and owners, in today’s market.
Real estate has finally started to bounce back across the country even roar back in some places.
Low mortgage rates and pent-up demand have coaxed buyers back into the market, and homeowners who list their houses are seeing more traffic. That quaint relic of the bubble, the bidding war, has even started to reemerge in some cities.
Consider the mounting evidence that the long national real estate nightmare is over: During the past year, home prices increased in 92 of the country’s 100 largest metropolitan areas, according to data provider CoreLogic, with prices rising as high as 23% in Phoenix and 17% in San Francisco. Sales volume rose in 69 of the top 100 markets, and 35 of those showed double-digit gains.
Yet while most economists agree that the bottom is behind us and the five-year outlook for housing is on solid ground, the shorter term is bit less stable. “Two thousand thirteen and 2014 are going to be transition years,” says Mark Fleming, CoreLogic’s chief economist. “The market’s improving, but it’s not totally healed.”
Thinking about buying a home? For the first time in more than half a decade, the economics of the market are working against you in most places.
Inventory is tight, and bidding wars are back in some parts of the country. To snag your dream home, you’ll have to pay up and contend with continuing strict loan requirements. The bright side: Despite rising prices and mortgage rates that are edging upward, buying a home is still cheaper than renting in the majority of the top 100 markets.
Don’t waste time with a low-ball offer.
Yes, home prices are still way down from their highs, but the days when you could scoop up a house for 20% less than the list price are long gone. The typical home sells for pretty close to what the owners asked for, and even in shaky markets, sellers have gotten more realistic about pricing.
The median sales-to-list-price ratio in Detroit, for example, is 98%; the national number is 97%. (To find the figure for your market, go to zillow.com/local-info and click on “More metrics.”)
Here’s how to figure out how much to offer initially: In places where homes are still selling below list price but deals are being made in less than two months, come in no more than 2% to 3% below the asking price, says Michael Murphree, a realtor in Birmingham, Ala. Where homes are selling above the listing price, make your first offer the asking price.
Be the winner in a bidding war.
In January and February, 73% of agents with broker Redfin said their clients’ offers faced rival bids, up from 56% who said so in the fall of 2011.
You win bidding wars, of course, by raising your price; it also helps to have few contingencies and to move quickly, since today’s sellers don’t want multiple go-rounds. “You have to give your best offer,” says Dallas real estate agent Mary Beth Harrison. “Step up to the plate or walk away.”
Be flexible about closing too: Quick deals — the median time on the market for homes is 71 days, down from 99 a year ago — have left many sellers scrambling for alternative housing. Leave the closing date blank on your contract for the seller to fill in, or negotiate a leaseback if the seller needs to stay put for a while.
Outsmart the pros who bring cash.
Six years after prices collapsed, housing has begun to climb out of its hole. So what are the best moves to make now? In a three-part series, we offer smart strategies for buyers , sellers, and owners in today’s market.
Selling your home? In most parts of the country, including Palos Verdes, you now have the upper hand.
Catch buyers’ attention and get multiple offers by pricing your home in line with comparable sales, says Rick Turley, president of Coldwell Banker San Francisco: “Then let the market take it higher.”
Trading up? Move fast. Downsizing? Go slow.
It’s tempting to postpone selling to hold out for a better price. But if you want to move to a larger place, act sooner rather than later. True, higher-end homes aren’t rising as quickly, but the gap is small. So while you’ll be able to sell your home for more if you wait, the appreciation on the trade-up home will be greater.
When you’re downsizing, the math works the other way, so it pays to wait. The case for these strategies should strengthen as gains slow for cheaper homes. “Investors are driving the lower end of the market, and there is a point when the investor opportunity becomes less attractive,” says Richard Green, director of the University of Southern California’s Lusk Center for Real Estate.
Smooth out your home’s rough patches. Repair that leaky roof and address other obvious structural problems, or you’ll have to subtract the cost of doing so from your price. “In today’s economy, many buyers don’t have as much savings left over after their down payment for improvements,” says Teri Herrera, a broker in Bellevue, Wash.
Smaller fixes that pay off the most, according to a HomeGain poll of real estate professionals and consumers: cleaning and decluttering, brightening (adding lamps and clearing window obstructions), and solving electrical and plumbing problems.
Get ready for your home’s close-up. Sellers who stage their homes — rearranging or replacing furniture to bolster appearance — usually do so just before an open house. The better time to glamorize: right before you post your listing online, where 90% of buyers look first. Says Realtor.com president Errol Samuelson: “Web appeal is the new curb appeal.”
Use a professional photographer and get tight shots of fixtures and other details. The cost: $200 to $500 for a gallery of 30 to 40 photos. Homes between $300,000 and $400,000, shot professionally, sold for about $3,000 more than those with amateur images, Redfin found recently.
Guard against low appraisals. While rapidly rising prices may attract more buyers, the upswing can make it harder to close a deal. One-third of realtors polled in December reported setbacks from low appraisals, including delays in closing, lowered prices, and cancellations.
The problem: Appraisals can come in low because they’re based on transactions as old as six months — out of date, perhaps, in today’s market.
Solution: Have your agent personally oversee the process, accompanying the appraiser to point out improvements and supplying data about the latest comparable sales.
Help investors find what they’re looking for. Investors amounted to one-fifth of all homebuyers in January, but are a much larger share of some markets; 38% of deals in Sacramento and 45% in Orlando, for example, involved absentee buyers. Signs of an investor market: a steady stream of resales of foreclosed homes (you can find that info at zillow.com/local-info) and the conversion of many homes in your neighborhood into rentals.
If your area fits the bill, choose an agent experienced in investor sales; she should create a flier that highlights how easy it is to attract tenants, the rents that nearby homes command, and other pertinent bottom-line info. Says Charlotte Sears, president of Coldwell Banker Residential Brokerage in Atlanta: “All investors want to know is what their margins look like.”
Mortgage rates continued to drop, with the 15-year fixed-rate loan hitting a record low, according to a weekly report from mortgage financier Freddie Mac.
The 15-year fixed rate fell to 2.61% this week from 2.64%, The previous record low of 2.63% was set the week of Nov. 21, 2012. An adjustable-rate mortgage, the 5/1 ARM, also bottomed out at 2.58%. The most popular mortgage, the 30-year fixed-rate, came in at 3.4%, 0.09 percentage point above its record low. “The housing market is receiving some help, with mortgage rates hovering at or near record lows,” said Frank Nothaft, Freddie’s chief economist.He recognized a speed-up in the pace of existing home sales to nearly 5 million a year during the first quarter of 2013, the most since the fourth quarter of 2009.
The low 15-year rate meant that homeowners could book substantial savings by refinancing from their current 30-year fixed rates. Homeowners with 5% 30-year mortgages who switch to 2.6% loans 15-years would pay $21,000 in interest for every $100,000 borrowed over the course of the loan, compared with $93,000 in interest on the 30-year loan.
About 75% of mortgage applications last week were for refinancings, according to the Mortgage Bankers Association.
According to Bloomberg:
Home prices in 20 U.S. cities rose in December by the most in more than six years, a sign the housing-market recovery is strengthening. The S&P/Case-Shiller index of property values increased 6.8 percent from December 2011, the biggest year-to-year gain since July 2006, after advancing 5.4 percent in November, a report showed today in New York. The median projection of 30 economists surveyed by Bloomberg called for a 6.6 percent advance. Nineteen of 20 cities showed gains.
Near record-low borrowing costs and gains in employment are fueling demand and boosting property values as the number of houses on the market drops and foreclosures ease. The improvement is shoring up household net worth and confidence, which may underpin consumer spending even as an increase in the payroll tax reduces take-home pay.
“The key here is it’s not as if we’re getting all the juice from one area, it’s broadly based across the country,” said Brian Jones, a senior U.S. economist at Societe Generale in New York, who correctly projected the year-over-year increase. “Rates are low, prices are attractive, so affordability is high, and the labor market is gradually healing as well. If you were in the market to buy a home, right now it’s a good time…”
Visit Bloomberg to read more: http://www.bloomberg.com/news/2013-02-26/home-prices-in-20-u-s-cities-increase-by-most-since-2006.html
The Butcher Ranch Development Project in Rolling Hills Estates is prepared for home construction to begin. The development project planning began in 2006 and has gained tremendous progress recently. The new community built around Casaba Road includes eleven total lots at an average of twenty-thousand square feet in size. According to the City of Rolling Hills Estates all the lots have been sold. We will keep you updated on the project as it progresses over the next few months.
Nationwide, the median price for a home resale was $183,900 in September, up 11.3 percent from a year earlier as fewer people sold their homes under distressed conditions compared to a year earlier. Distressed sales include foreclosures.
Lawrence Yun, an economist at the NAR, said the low level of inventories was partially due to a lack of new homes. The rate of groundbreaking on new homes rose sharply in September but remained about 60 percent below its 2006 peak.
“Despite occasional month-to-month setbacks, we’re experiencing a genuine recovery,” Yun said. “More people are attempting to buy homes than are able to qualify for mortgages, and recent price increases are not deterring buyer interest. Rather, inventory shortages are limiting sales, notably in parts of the West.”
Regionally, existing-home sales in the Northeast fell 6.3 percent to an annual level of 590,000 in September but are 7.3 percent above September 2011. The median price in the Northeast was $238,700, up 4.1 percent from a year ago.
Existing-home sales in the Midwest slipped 0.9 percent in September to a pace of 1.10 million but are 19.6 percent higher than a year ago. The median price in the Midwest was $145,200, up 7.0 percent from September 2011.
In the South, existing-home sales increased 0.5 percent to an annual level of 1.93 million in September and are 14.2 percent above September 2011. The median price in the region was $163,600, up 13.1 percent from a year ago.
Existing-home sales in the West fell 3.4 percent to an annual pace of 1.13 million in September but are 0.9 percent above a year ago. With continuing inventory shortages in the region, the median price in the West was $246,300, which is 18.4 percent higher than September 2011.