Month: July 2012

Shrinking supply of homes for sale has upended market dynamics

The stock of homes listed for purchase has fallen significantly from last summer, in turn raising prices and homeowners’ equity stakes and reducing total sales.

By Kenneth R. Harney; LA TimesJuly 29, 2012

WASHINGTON — Though many home shoppers who assume they are still in a buyer’s market find it hard to believe, one of the sobering fundamentals shaping real estate this summer is shrinking inventory: The supply of houses for sale has fallen significantly in most areas compared with a year earlier, sometimes dramatically so. And that is having important side effects by raising prices and homeowners’ equity stakes and reducing total sales.

In major metropolitan markets from the mid-Atlantic to the West Coast, the stock of homes listed for purchase has dropped by sometimes extraordinary amounts — 50% or more below year-earlier levels in several areas of California, according to industry studies.

In Los Angeles, available inventory is 49% lower than it was last summer, San Diego by 53%, reports Redfin, a national online realty brokerage. In Seattle, listings are off 41%. In Washington and its nearby suburbs, listings are down 28%.

According to the National Assn. of Realtors, the total number of houses listed for sale across the country in June was 24% lower than a year earlier. The dearth of listings is often more intense in the lower- to mid-price ranges, less so in the upper brackets.

Just south of San Francisco, Redfin agent Brad Le says inventory in Silicon Valley is down so drastically — and demand so strong — that the bidding wars are spinning off the charts.

“We’re not just talking about 10 or 15” offers, he says, “but sometimes 40 and 50.”

Some buyers are inserting escalation clauses into their contracts to keep pace with counter-bids, and waiving financing contingencies, inspections and even agreeing to increase their down payments to counter any differences between the accepted sale price and the appraised value. One modest, 1,700-square-foot house recently was listed at $879,000. It drew more than 50 competing offers and sold to an all-cash buyer for $1,050,000 in less than a month.

Silicon Valley is in its own special economic niche, but inventories have declined nationwide. Online real estate and mortgage data firm Zillow reports that some of the steepest declines are in places hit the hardest during the bust, and where sizable percentages of owners still are underwater on their mortgages. In Phoenix and Miami, for example, 55% and 46% of owners, respectively, have negative equity.

Both cities have seen significant drops in inventory, and both are experiencing strong appreciation in home prices. Phoenix prices are up 14.7% for the year and Miami by 9.7%, according to data from research firm CoreLogic.

What’s behind the widespread declines in listings?

Analysts say negative equity plays a major role — it discourages people who might otherwise want to sell from doing so. They don’t want to take a big loss, especially in a slowly improving price environment. So they sit tight rather than list. Banks with large stocks of pre-foreclosure and foreclosed properties are doing the same, creating a so-called “shadow inventory” of houses estimated to total 1.5 million units.

Where’s this all headed?

Stan Humphries, chief economist for Zillow, says the likely trend is for more of the same: Constricted supplies will lead to price increases, especially in segments of local markets where demand is strongest. Longer term, price increases will gradually rewind the cycle, increasing owners’ equities and convincing more of them to list and sell. This, in turn, should put a brake on price increases, especially under today’s super-strict mortgage underwriting and appraisal practices.

Bottom line for anyone looking to list or purchase any time soon: Though conditions vary by location and price segment, lower supplies of houses available for sale are changing market dynamics — putting sellers in stronger positions than they’ve been in years.

O.C. median home price up 14% in ’12

July 28th, 2012,  

OC Register

Orange County home prices in early July ran at a post-crash high, up 14 percent since the year started.
Highlights of DataQuick’s Orange County homebuying report. For the 22 business days ending July 9 — the latest numbers — Orange County’s real estate market saw …

  • Median selling price for all residences of $455,000 — that is up 4.6% vs. a year ago. In June, the median hit a post-crash high of $453,000 for the full month.
  • Total Orange County sales of 3,481 residences closed in the latest period — that is up 15.3% vs. a year ago.
  • Resales of single family homes were up 21.1% vs last year; condo sales rose 13.7% vs. year ago. Builders’ new homes sales were 17.8% lower in the same period.
  • Note: 27 of 83 Orange County ZIPs had both rising sales and prices in the period. Is your ZIP one of those neighborhoods? To see, CLICK HERE!

And more analysis ….

  • Reality check: $455,000 median selling price is 29% below June 2007′s peak of $645,000.
  • Current price is above end of 2011′s median ($400,000.)
  • The most recent median is 23% above the cyclical low hit in January 2009 at $370,000 — so the median has recouped 31% of the $275,000 price drop from the peak.
  • Compared to cyclical low, single-family house median is 24% higher ($418,250 in January 2009); condo median is 16% higher ($252,000 in March 2009.) Builder prices for new homes are 46% above June 2009′s $424,000 bottom.
  • The median selling price of a single-family home is 29% less than their peak pricing (June ’07). Condos sell 38% below their peak in March 2006. Builder prices for new homes are 29% below their February ’05 top.
  • Single-family homes were 77% more expensive than condos in this period vs. 80% a year ago. From 1988-2011, the average house/condo gap was 58%.
  • Builder’s new homes sales were 7% of all residences sold in the period vs. 10% a year ago. From 1988-2011, builders did 14% of the Orange County homeselling.

Here’s the breakdown of recent activity by key category; included is how the latest results compare to the average monthly sales pace from 1988 through 2011:

Slice Price Price vs. year ago Sales Sales vs. year ago Sales vs. ’88-’11 avg.
Houses $518,000 +4.5% 2,287 +21.1% 2.6%
Condos $293,000 +6.5% 954 +13.7% 11.6%
New $617,750 +6.7% 240 -17.8% -53.1%
All O.C. $455,000 +4.6% 3,481 +15.3% -3.2%

Lansner: O.C. house shoppers double buying speed

JONATHAN LANSNER

THE ORANGE COUNTY REGISTER, July 30th 2012

Just how much did the local housing market heat up this spring?

Well, we’ve previously told you that it was the busiest spring quarter for Orange County homebuying since 2006, by DataQuick’s tracking of sales of all kinds of residences.

Article Tab: image1-Lansner: O.C. house shoppers double buying speed

But a new metric from online housing tracker Redfin.com gives us a clue about how quickly those homes sold.

Their novel measure of housing market speed is tracking the number of homes that went into escrow within 14 days of officially hitting the market. Redfin’s fancy new statistic shows the number of these “quick sales” in Los Angeles and Orange counties doubling in the past year.

Yes, doubling! Redfin found 37.5 percent of the single-family homes listed in Los Angeles and Orange counties in the first 3.5 weeks of June were placed into escrow within 14 days of their initial listing. That compares to 35.1 percent in the previous month and 17.2 percent a year earlier. That’s a gain of 118 percent in the quick-sale rate in a year.

This quick-sale metric is part of Redfin’s new “Real-Time Home Price Tracker” that combines information from public recorded sales data as well information within brokers listing services. The tracker gives other clues why LA/OC buyers were in quick-decision mode: a shortage of choice! By Redfin’s count, June sales were up 20.9 percent in a year while inventory ran down 49.1 percent vs. 2011.

Look, high-speed buying was a Southern California theme:

• San Diego: 41 percent of the homes went to escrow within 14 days of officially listing. That compares to 37.6 percent in May and 17.5 percent a year earlier.

• Inland Empire: 37.7 percent of homes were quick-to-escrow vs. 35.9 percent in May and 15.8 percent a year earlier.

• Ventura: 42.7 percent of homes went equally swiftly vs. 37.9 percent in May and 9.9 percent a year earlier.

Redfin’s findings echo what Steve Thomas’ reports on Orange County inventory have been saying for months – thought he turned up the heat on the metaphors in his most recent analysis, writing: “The lower ranges are as hot as molten lava.”

Thomas’ signature housing measurement is his “market time” benchmark. It tracks how many months it theoretically takes to sell the entire inventory in the local MLS for-sale listings at the current pace of pending deals being made. By this Thomas logic, as of July 19 — we see …

• The market time of homes priced between $250,001 and $500,000 was merely an “eye-popping” 24 days. Thomas wrote: “With expected market times below one month, competition is so fierce that many homes generate over 10 offers. Not only do homes sell for their full asking prices, often many are sold to buyers with all-cash offers.”

• Another way to see the battle for cheaper homes: Orange County homes listed for under a million bucks have a market time of 1.19 months vs. 5.53 months for homes listed for more than $1 million. So, basically, it is 4.7 times harder to sell a million-dollar-plus residence!

• And just so you know the million-dollar market represents 30 percent of all homes listed but just 8 percent of all homes that entered into escrow in the past 30 days.

• Overall, Orange County’s market time ran at 1.54 months for buyers to gobble up all homes for sale at the current pace vs. 1.57 months two weeks ago vs. 3.91 months a year ago. That’s a 60 percent cut in market time in a year.

Still, two curious trends are hard to explain …

For one, with all the onrushing buyers, little price appreciation can be found. Redfin said L.A.-O.C.’s median price per square foot – in theory a very stable, conservative pricing measure – was up just 1.2 percent in a year for June.

And this same buyers’ rush has seemingly scared off sellers from joining the party. By Thomas’ count, the number of Orange County homes for sale on July 19 was at its lowest since March 2005.

Analyst: Cheap O.C. home market ‘hot as lava’

July 23rd, 2012,  

 OC Register

The latest Orange County home inventory report from Steve Thomas and ReportsOnHousing.com — data as of July 19 includes these thoughts …

The lower ranges are as hot as molten lava. For homes priced between $250,001 and $500,000, the hottest range, the expected market time is an eye-popping 24 days. With expected market times below one month, competition is so fierce that many homes generate over 10 offers. Not only do homes sale for their full asking prices, often many are sold to buyers with “all cash offers.”

Thomas’ signature housing measurement is his “market time” benchmark. It tracks how many months it theoretically takes to sell all the inventory in the local MLS for-sale listings at the current pace of pending deals being made. By this Thomas logic, as of July 19 — we see …

  • Market time of 1.54 months for Orange County buyers to gobble up all homes for sale at the current pace vs. 1.57 months two weeks ago vs. 3.91 months a year ago vs. 3.91 months two years ago.
  • Of the 8 Orange County pricing slices Thomas tracks, 5 had faster market time vs. 2 weeks ago; and 8 improved over a year ago.
  • Orange County homes listed for under a million bucks have a market time of 1.19 months vs. 5.53 months for homes listed for more than $1 million.
  • So, basically, it is 4.7 times harder to sell a million-dollar-plus residence!
  • And just so you know, the million-dollar market represents 30% of all homes listed and 8% of all homes that entered into escrow in the past 30 days.

Here’s the recent data for listings; deals pending; market time in months; latest vs. 2 weeks earllier, a year ago and 2 years ago. Color coding for market time is red (slowed by 5%-plus in year); green (sped up by 5%-plus in year); and yellow (in between!) Note: k=thousand; m=million …

Slice Listings Deals Market Time (months) 2 week ago 1 yr. ago 2 yr. ago
$0-$250k 671 600 1.12 1.19 3.06 2.86
$250k-$500k 1,242 1,537 0.81 0.86 2.91 2.88
$500k-$750k 1,156 788 1.47 1.55 4.52 4.18
$750k-$1m 713 256 2.79 2.57 4.89 4.81
$1m-$1.5m 557 133 4.19 3.73 7.89 6.07
$1.5m-$2m 308 63 4.89 4.17 11.49 12.61
$2m-4m 460 66 6.97 9.26 17.97 21.33
$4m+ 258 24 10.75 15.59 51.00 32.82
All O.C. 5,314 3,450 1.54 1.57 3.91 3.91

 

Wealthy homeowners brace for ‘fiscal cliff’

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Real-estate experts say that as more of the wealthy sell out of fear of a tax increase, they could drive up inventory and lower prices in the top of the real estate market.

By Robert Frank, cnbc.com
7/19/12

Realtors to the rich have started getting a strange new kind of phone call.

Wealthy homeowners with properties for sale are suddenly demanding that the brokers get them a deal  in the next five months. The reason, they say, is the fiscal cliff.

If the Bush tax cuts expire and capital-gains tax rates go up on Jan. 1, sellers in the high-end real-estate market could owe millions more in taxes on their sales. As a result, many wealthy sellers are racing to close before 2013. Others who were thinking of putting their homes on the market next year or later are listing them this summer.

Call it “The Mansion Cliff.” Real-estate experts say that as more of the wealthy sell out of fear of a tax increase, they could drive up inventory and lower prices in the top of the real estate market, which has been one of the few bright spots in the economy. Any softening at the high end, or a spike in inventory, could ripple through the housing market and add new pressure to prices, although it could also increase sales volume.

“This has become a key issue for sellers,” said Stephen Games of Pacific Sotheby’s Realty in San Diego.  “Sellers want to get a deal done before the election. They want to avoid the uncertainty.”

Games said that one of his clients recently sold a $13 million ocean-view property in La Jolla, Calif. for less than the original asking price – in large part to avoid the possible increase in taxes next year. The tax savings from the deal was more than $600,000 compared to the potentially higher bill next year.

Jorge Uribe, one of the top luxury brokers in Miami, recently sold a mansion in the posh enclave of Indian Creek for $38 million. He said the owner accepted a price below his original goal for fear of the tax cliff.

“It was certainly a factor in his decision,” Uribe said. “When you’re talking about $38 million, that’s a big difference in tax savings. The tax issue was definitely a motivator in his decision to take a little less than he wanted.”

One New York broker said she got two new listings in the past week that were driven in part by tax fears.

“The sellers were on the fence on whether to sell, but when they considered the cliff, they decided to list,” the broker said. “They want to do this quickly. The message to me is, ‘Get this done now.’”

Granted, the tax fears of the mansion-set may prove to be unfounded. Capital-gains rates could remain unchanged if a deal gets done in Washington. And the selling deliberations of the wealthy are a minor problem compared to the broader headwinds in the economy.

What’s more, the rich (especially foreigners) continue to buy real estate as an investment as stocks and other financial investments weaken.

Yet the million-plus real-estate market experienced a similar spasm in 2010, when many of the wealthy feared Congress would raise capital-gains rates. Inventory popped up and and prices slumped.

Jonathan Miller, of Miller Samuel, the New York appraisal and consulting firm, said that in the fourth quarter of 2010, the supply of homes priced at $1 million or more increased in the New York area. In the affluent Hamptons, inventory increased 5 percent in the fourth quarter, a much greater increase than the same period a year earlier.

Miller said a similar or even larger increase is likely this year.

“I’m confident we’ll see just as much or more this time because of the fiscal cliff,” he said. “People are going to be pressing to close earlier than they might have.”

The math of the mansion cliff is compelling. If the Bush tax cuts are allowed to expire, the current capital-gains tax of 15 percent will rise to 20 percent. Alan Kufeld, a principal with accounting firm Rothstein Kass and an advisor to wealthy families, explains that families who sell a second home that they’ve owned for more than a year pay capital-gains taxes on the difference between the sale price and their original purchase price (minus certain fees, improvements and other deductions).

A $38 million home purchased for $8 million with $2 million in improvements could show a gain of about $28 million. The current federal tax bill on that gain would be around $4 million. If taxes go up next year, the tax would be $5.5 million – a difference of $1.5 million.

The new federal health-care tax of 3.8 percent also kicks in next year for couples who make $250,000 or more. But for the $28 million gain described above, the tax could add another $1 million, bringing the total tax difference to $2.5 million.

On primary residences, where owners have lived for more than two out of five years, there is a $500,000 exlusion. But brokers say that when a home is priced at $10 million or $20 million, the exemption is less of a factor.

In addition to the federal tax, there will also be state and local taxes applied to the gains. Some of those tax rates are also expected to go up in some states next year.

Kufeld aid his clients aren’t making long-term real estate decisions based on short-term tax issues. And the deals have to fit into a family’s broader planning. But he said that since the potential tax savings are significant, “families are certainly having discussions about it. And they should.”

Lansner: Home prices won’t match sales jump

JONATHAN LANSNER
THE ORANGE COUNTY REGISTER

July 22nd, 2012

Homebuying in Orange County is running at a pace last seen in 2006 – just about the end of the “Good Old Days.”

Don’t expect prices to get anywhere near as exciting – if some recent forecasts are to be believed.

Article Tab: image1-Lansner: Home prices won't match sales jump

For example, value-tracker Veros Real Estate Solutions predicts that Orange County home values will squeak out a tiny gain – 0.7 percent — by June 2013.

Eric Fox of Santa Ana-based Veros notes that local inventory of homes for sale is down approximately 35 percent from the peak, “which is going to allow pricing to begin to trickle upwards. However, before significant price increases can occur, inventory must decline some more. Affordability, although better than it has been in a long time, is still pricey compared to many other markets which are recovering more significantly at this time.”

Orange County will fare slightly better than the national market, by Veros’ forecast. U.S. values will fall 0.26 percent in a year, by Veros’ estimates.

“Overall, the gradual recovery in the housing market is forecast to continue from the previous quarter,” Fox said. “We are definitely seeing a flattening for the first time in years at a national level instead of overall depreciation, which is a positive sign that the anticipated recovery is upon us.”

Phoenix is the major market with Veros’ highest projected gain in the coming year, up 6.4 percent. Then comes Boise, up 3.8 percent; Boulder, Colo., up 3.6 percent; Bismark, N.D., up 3.5 percent; and Denver, up 3.3 percent.

The projected five weakest nationwide? Inland California and Nevada markets continue to struggle and make up eight of the 10 bottom markets. Reno, down 5 percent, is seen as the worst in the coming year followed by Fresno, down 4.9 percent; Bakersfield, down 4.7 percent; Modesto, down 4.6 percent; and Stockton, down 4.3 percent.

Another price tracker – Clear Capital – predicts that home prices in Los Angeles and Orange counties should rise 2.6 percent by year’s end.

By this math, Clear Capital found the region’s home prices up 1.5 percent in the June quarter, leaving L.A.-O.C. values up 0.1 percent for the 12-month period.

Again, we see that local values are by no means alone in this meager rebound.

National home prices were up 1.7 percent in the June quarter — U.S. values are also up 1.7 percent for the year — and Clear Capital forecasts another 2.5 percent gain for the U.S. market through the end of the year.

In the 50 biggest markets, Clear Capital found 43 markets with price gains in the June quarter. Columbus, Ohio, led the way with a 13 percent gain in three months. Next came Phoenix (up 8.7 percent); Seattle (up 8.4 percent) and San Jose (up 8.1 percent.) In 2012′s second half, Clear Capital sees price gains in 42 of the Top 50 — with Seattle (up 14.4 percent) and Phoenix (10.4 percent) projected to enjoy the biggest appreciation.

Alex Villacorta of Clear Capital on the nation scene: “June home price trends provided further evidence that housing has turned the corner, with the momentum of the recovery picking up speed. Looking forward over the rest of 2012, we expect to see national, regional, and most metro markets improve by varying degrees. And while it’s encouraging to see broad-based advancements coupled with positive forecasts, we remain cautiously optimistic. The current strength in housing fundamentals remains vulnerable to domestic and global economic challenges. But right now the market is the strongest it’s been since the start of the downturn, and barring a major economic meltdown, we expect to see this organic growth sustain and strengthen through the end of the year.”

Perhaps the most bullish was in Chapman University’s recent Anderson Center for Economic Research forecast. Chapman economists saw the average median price of an existing Orange County house up 2 percent this year, followed by a 7.1 percent leap in 2013.

The Register’s Jeff Collins noted that Chapman said its forecast more reflects a change in the mix of homes that will sell over the next 18 months rather than a big increase in overall home values.

Yet Chapman economists concluded: “The combination of job recovery and high housing affordability is gradually improving housing demand … Over the long-run, pent-up demand for housing in Orange County will lead to broad-based increases in home prices.”

O.C. distressed homes sell 3 times as fast

July 9th, 2012, by , OC Register

Why is it hard to find a distressed propert to buy? Because while they’re 17% of Orange County homes listed for sale, they equal 40% of the residences recently put into escrow. That’s why Steve Thomas of ReportsOnHousing.com figures that distressed homes currently sell 3.3 times faster than non-distressed homes.

Thomas publishes every two weeks a report on the supply of local homes for sale and the share of that inventory that’s distressed properties — foreclosures and short sales. His latest report — as of July 5 — says …

Thus far in 2012, the distressed inventory has shed 2,244 homes, and now totals 927 total foreclosures and short sales. In the past two weeks, the foreclosure inventory decreased by 14 homes, totaling 183, and has an expected market time of 22 days. The short sale inventory decreased by 51 homes in the past two weeks and now totals 744. The expected market time is 20 days and for the first time during the downturn, short sales have a lower expected market time in comparison to the foreclosure inventory. Yes, short sales may take a very long time and should be coined “long sales.” They are a bit more convoluted with the coordination of the lender(s) approval, the removal of HOA and/or tax liens, and bringing property taxes current. But, with so few homes on the market, buyers are willing to wait.

Some of the details …

  • 927 distressed Orange County properties were listed for sale — 17% of the 5,478 listed overall.
  • 1,392 new escrows were opened to buy distressed Orange County properties in the past 30 days. That is 40% of the 3,482 new pending sales countywide.
  • Thomas calculated “market time” — cross of supply and new escrows showing how long, theoretically, it would take to sell inventory. Using that “market time” math, there’s 0.67 months worth of distressed properties on the market vs. 2.18 months worth of non-distressed homes.
  • 27% of the distressed listings were foreclosures being sold by banks; 73% were short sales.
  • 42% of the distressed listings were attached homes; 58% were detached homes.
  • 34% of distressed Orange County listings were in ocean-close communities.
  • Pricey? 62 of the listed distressed homes were price above $1 million — 7% of all distressed listings.
  • Cheap? 618 of the listed distressed homes were priced $500,000 or less — 67% of all distressed listings.
  • Chart summarizes trends in Thomas’ report, distressed counts and share of all listings (plus, pending sales and market time — demand divided by inventory.)

Highlights …

All O.C. Distressed All Pct. Distress
Total 927 5,478 16.9%
By type of distress Pendings Listed Time (months)
O.C. foreclosures 254 183 0.72
O.C. short sales 1,138 744 0.65
By home type Distressed All Pct. Distress
Attached homes 386 1,741 22.2%
Detached 532 3,729 14.3%
By price slice Distressed All Pct. Distress
O.C. $0-$250k 206 733 28.1%
O.C. $250-$500k 412 1,336 30.8%
O.C. $500k-$750k 181 1,205 15.0%
O.C. $750k-$1m 65 702 9.3%
O.C. $1m-$1.5m 31 541 5.7%
O.C. $1.5m-$2m 12 296 4.1%
O.C. $2m-4m 14 463 3.0%
O.C. $4m+ 5 265 1.9%
By city/High share Distressed All Pct. Distress
Stanton 10 19 52.6%
Rancho Santa Marg. 22 47 46.8%
Buena Park 30 66 45.5%
By city/Low share Distressed All Pct. Distress
Dove Canyon 0 14 0.0%
Corona Del Mar 2 100 2.0%
Newport Beach 25 400 6.3%