Could Demographics Be the Secret?
If we could see into the future, it would certainly be easier to make those life-changing decisions that keep us up at night. Where is the housing market headed? Should we buy now, or would it be better to wait a couple of years, in case the bubble bursts? While no one has all of the answers, there are predictors we can use to make an informed decision.
The current real estate expansion began when mortgage interest rates fell into the single digits, making housing much more affordable. While this certainly has contributed to home sales, there are additional causes we can isolate. Dr. David Lereah is a best-selling author and the Chief Economist for the National Association of REALTORS (NAR). In a recent interview, Dr. Lereah revealed, "The biggest factor that affects real estate today, and has made it immune to some cyclical changes in the economy, has been demographics." Here's why:
The "Baby Boom" Generation ?
This generation is the largest so far, and their impact has been felt across the nation. Now that Baby Boomers have reached their peak earning years, they are purchasing larger primary residences as well as vacation homes and investment properties. The statistics for 2004 reflect this trend, with 36% of all home sales going toward second homes.
Immigration ?
There has been a large influx of immigrants over the past three decades. According to Lereah, it typically takes at least a generation for immigrants to become fully active in the home buying market.
Children of Baby Boomers ?
This generation, the second largest ever, is now in their twenties and looking to purchase their first homes.
Retirees ?
While the demand for housing is expanding, the supply is decreasing. With advancements in medicine and treatments of diseases, retirees are living longer. This means that they are occupying their homes for more years, which decreases the supply of homes available for purchase.
So if the current market can be explained primarily by the factors we just discussed, how do we know whether it will continue to thrive? Dr. Lereah says, "We are in the Golden Age of Real Estate." Even if the economy should slow and interest rates increase slightly in the coming years, the demand for houses is still strong. The biggest impact that such a change would have is to decrease the rate of price appreciation. The media likes to refer to the real estate boom in terms of bubbles and balloons. In keeping with that analogy, Lereah indicates that local markets may react to higher interest rates by letting some air out of the balloon. The double digit price appreciation we've experienced may decrease over the next year or two to a more typical 4-6% range. This is still a higher rate of return than found in the stock market, all things considered.
Tuesday, October 23, 2007
Wednesday, October 17, 2007
OCTOBER MARKET FLASH
Time to Take Advantage
Intro:
The fall season, a time which beckons change, is here. For eager home buyers and sellers wishing to make a change before the New Year, now is the time to take advantage. Despite what is being reported in the news media, real estate in Northern California remains a strong investment and the opportunities are out there. Interest rates remain steady and the demand for well-priced homes remains strong. Read on.
Statistics:
Statewide:
C.A.R. reported the median resale price of a single-family detached home in California for August as $588,970, a 2% increase over the revised $577,300 median for August 2006. The August 2007 median price increased 0.5% compared with July’s revised $586,030 median price. Sales activity year-over-year decreased 27.8%, which is less than last August. Unsold resale inventory in August was sufficient for 11.8 months, compared to – we said 6.8 months a year ago, CAR claims 5.9 months now – of a year earlier. Median number of days till sale was 56, up from 51 a year earlier.
County Statistics: Click Here
Bay Area:
August median price, at $655,000, is down a sliver for the month, up a respectable 4% for the year. Sales activity is down 25% for the year, about mid-pack. Alameda and Contra Costa counties are holding their medians well. They remain two of the more affordable counties in the Bay Area, with lots of attractive entry-level and move-up housing. Marin County’s huge jump in median, together with the decline in sales of over a third since last year, points to lots of top-end and all-cash purchases. Monterey County median leads this month’s pack for month-to-month, but activity is down almost 38% for the year. Napa, Sonoma, and Solano Counties are showing declines in both median and activity. Some of this may be attributable to a very weak second-home market. San Benito County’s roughly 9% decline in median puts it near the middle of the pack. San Francisco County’s median price continues strong and its year-over-year decline in sales, at less than 14%, is actually the smallest dip for this month. We suspect that cash purchases, and purchases by overseas buyers, are playing a role here as they are in Marin. Santa Clara County’s median price took a slight leap between March and April and since then has been in the range of $713,000 to $720,000, which may be able to hold in the face of generally weak medians; sales activity is down almost 35% from last year. Santa Cruz County’s $669,500 median has dropped from last month’s $720,000, near its historic high.
Sacramento/Capitol Region:
Five zip codes – Granite Bay, part of Auburn, and three areas of Sacramento – had improved medians for August. In sales, Loomis more than doubled year-over-year; Granite Bay was the only community to show an increase in both sales and median; Shingle Springs and parts of Roseville, Sacramento, and Rocklin also posted better sales. El Dorado and Placer Counties are holding their own while Sacramento County continues to experience declines in its median, both month-over-month and year-over-year.
Interest Rates*:
Thirty-year fixed rates are 6.82% nationally, but edging up on 7% in California; other statewide figures are 6.59% for conforming 15-year fixed and 6.21% for conforming 5/1 ARM.
Inventory:
Still plentiful in many areas throughout Northern California. As usual, San Francisco and the Peninsula could always benefit from an increased selection of homes.
Overall Assessment:
With an increase in inventory, emphasis is on curb appeal and staging. Bargain hunting may still be difficult. Prices have cooled in many areas, but sellers still want acceptable return on investment. Remember that a residence is a long-term purchase and that finding the right one is a well-rewarded effort.
*Area interest rates are reported to be as follows:
Sacramento/Tahoe, San Francisco Bay Area and Silicon Valley regions: Princeton Capital reports that as of October 1, 2007, the 30-year fixed with one point is 6.75%, the 15-year fixed with one point is 6.25% and the 5/1 ARM with one point is 6.375%, on non-conforming loans of $500,000.
Intro:
The fall season, a time which beckons change, is here. For eager home buyers and sellers wishing to make a change before the New Year, now is the time to take advantage. Despite what is being reported in the news media, real estate in Northern California remains a strong investment and the opportunities are out there. Interest rates remain steady and the demand for well-priced homes remains strong. Read on.
Statistics:
Statewide:
C.A.R. reported the median resale price of a single-family detached home in California for August as $588,970, a 2% increase over the revised $577,300 median for August 2006. The August 2007 median price increased 0.5% compared with July’s revised $586,030 median price. Sales activity year-over-year decreased 27.8%, which is less than last August. Unsold resale inventory in August was sufficient for 11.8 months, compared to – we said 6.8 months a year ago, CAR claims 5.9 months now – of a year earlier. Median number of days till sale was 56, up from 51 a year earlier.
County Statistics: Click Here
Bay Area:
August median price, at $655,000, is down a sliver for the month, up a respectable 4% for the year. Sales activity is down 25% for the year, about mid-pack. Alameda and Contra Costa counties are holding their medians well. They remain two of the more affordable counties in the Bay Area, with lots of attractive entry-level and move-up housing. Marin County’s huge jump in median, together with the decline in sales of over a third since last year, points to lots of top-end and all-cash purchases. Monterey County median leads this month’s pack for month-to-month, but activity is down almost 38% for the year. Napa, Sonoma, and Solano Counties are showing declines in both median and activity. Some of this may be attributable to a very weak second-home market. San Benito County’s roughly 9% decline in median puts it near the middle of the pack. San Francisco County’s median price continues strong and its year-over-year decline in sales, at less than 14%, is actually the smallest dip for this month. We suspect that cash purchases, and purchases by overseas buyers, are playing a role here as they are in Marin. Santa Clara County’s median price took a slight leap between March and April and since then has been in the range of $713,000 to $720,000, which may be able to hold in the face of generally weak medians; sales activity is down almost 35% from last year. Santa Cruz County’s $669,500 median has dropped from last month’s $720,000, near its historic high.
Sacramento/Capitol Region:
Five zip codes – Granite Bay, part of Auburn, and three areas of Sacramento – had improved medians for August. In sales, Loomis more than doubled year-over-year; Granite Bay was the only community to show an increase in both sales and median; Shingle Springs and parts of Roseville, Sacramento, and Rocklin also posted better sales. El Dorado and Placer Counties are holding their own while Sacramento County continues to experience declines in its median, both month-over-month and year-over-year.
Interest Rates*:
Thirty-year fixed rates are 6.82% nationally, but edging up on 7% in California; other statewide figures are 6.59% for conforming 15-year fixed and 6.21% for conforming 5/1 ARM.
Inventory:
Still plentiful in many areas throughout Northern California. As usual, San Francisco and the Peninsula could always benefit from an increased selection of homes.
Overall Assessment:
With an increase in inventory, emphasis is on curb appeal and staging. Bargain hunting may still be difficult. Prices have cooled in many areas, but sellers still want acceptable return on investment. Remember that a residence is a long-term purchase and that finding the right one is a well-rewarded effort.
*Area interest rates are reported to be as follows:
Sacramento/Tahoe, San Francisco Bay Area and Silicon Valley regions: Princeton Capital reports that as of October 1, 2007, the 30-year fixed with one point is 6.75%, the 15-year fixed with one point is 6.25% and the 5/1 ARM with one point is 6.375%, on non-conforming loans of $500,000.
Tuesday, October 02, 2007
SEPTEMBER MARKET FLASH
IT’S ALL IN THE DETAILS
The Northern California real estate market continues to hold steady. Overall, median home prices remain strong and inventory remains plentiful in most areas. Many home buyers and sellers are realizing that in order to successfully buy or sell a home, they have to meet at middle ground. This market has its advantages for home buyers and sellers. Read on.
Statistics:
Statewide:
The median resale price of a single-family detached home in California for July was $586,030, an increase of 3.2% over July 2006, but down from the previous month. Unsold resale inventory represented a 10.7 month supply, compared to 7.3 months for the same period a year ago. Median number of days until sale was 52 in July, up from 48 for July 2006.
Bay Area:
Note: Please Click on the table for a larger image
Many parts of California seem to be leading a charmed life. Of the 13 regions we now track – and incidentally, hello this month to Alameda and Contra Costa Counties – eight have improved year-over-year medians, from Santa Cruz County’s almost 1% to the Bay Area’s almost 7%. Strong prices are concentrated in the most affluent and most developed areas; Northern California as a whole is down almost 10%, which means the rural counties (including the ones we don’t track separately) have to be taking the brunt of the decline. What’s happening is a readjustment in the banking and lending industries, not a recession.
Sacramento/Capitol Region:
Pollock Pines is this month’s Capitol Region standout with sales up 57%, although the median has declined 6.6%. Sales have also increased in Carmichael, Davis, El Dorado Hills, Loomis, Truckee and some areas of Citrus Heights, Roseville and Sacramento proper. Sales are steady in Antelope, Granite Bay and parts of Rocklin and Sacramento; overall, sales are level or better in 18 of the region’s zipcodes, out of 58 with 10 or more sales for July.
Interest Rates*:
The financial community was waiting for the Federal Reserve to cut the Federal funds rate, the most fundamental rate over which it has influence. Instead, the Fed left the funds rate at 5.25%, where it’s been for a long time, cut the (slightly higher) discount rate instead, but then said to the lenders, “C’mon, guys, save yourselves a little money by borrowing directly from us instead of from each other.” This self-promoting behavior from a famously conservative organization is mildly weird, and the upshot is, the funds rate is still at 5.25%, prime is still at 8.25%, and the Fed seems to be protesting deep concern while really not changing very much.
News Media:
Seemingly preoccupied with a single issue – even though subprime lending represented only a sliver of the national assets. Our advice to you is: read, analyze and form opinions.
Overall Assessment:
Not, perhaps, one that you would find elsewhere. We assess this as a market that, although diminished in size, retains some advantages. Since mortgages are now more difficult to qualify for, buyers who walk in ready to arrange loans will be financially solid. Solid buyers, in turn, will appreciate the wide selection that can be made. Remember that the reshaping of this market may have broader implications for potential sellers than for potential buyers. This is a time when care in preparation can make a crucial difference; a fixed-up house will sell more easily than a fixer-upper, staging is more worthwhile than ever and curb appeal is paramount. Discerning buyers are looking for standouts. Buyers and Sellers will all find that success is in the details…because successful details add up!
*Area interest rates are reported to be as follows:
Sacramento/Tahoe, San Francisco Bay Area and Silicon Valley regions: Princeton Capital reports that as of September 4, 2007, the 30-year fixed with one point is 7.125%, the 15-year fixed with one point is 6.875% and the 5/1 ARM with one point is 6.625%, on non-conforming loans of $500,000.
The Northern California real estate market continues to hold steady. Overall, median home prices remain strong and inventory remains plentiful in most areas. Many home buyers and sellers are realizing that in order to successfully buy or sell a home, they have to meet at middle ground. This market has its advantages for home buyers and sellers. Read on.
Statistics:
Statewide:
The median resale price of a single-family detached home in California for July was $586,030, an increase of 3.2% over July 2006, but down from the previous month. Unsold resale inventory represented a 10.7 month supply, compared to 7.3 months for the same period a year ago. Median number of days until sale was 52 in July, up from 48 for July 2006.
Bay Area:
Note: Please Click on the table for a larger image
Many parts of California seem to be leading a charmed life. Of the 13 regions we now track – and incidentally, hello this month to Alameda and Contra Costa Counties – eight have improved year-over-year medians, from Santa Cruz County’s almost 1% to the Bay Area’s almost 7%. Strong prices are concentrated in the most affluent and most developed areas; Northern California as a whole is down almost 10%, which means the rural counties (including the ones we don’t track separately) have to be taking the brunt of the decline. What’s happening is a readjustment in the banking and lending industries, not a recession.
Sacramento/Capitol Region:
Pollock Pines is this month’s Capitol Region standout with sales up 57%, although the median has declined 6.6%. Sales have also increased in Carmichael, Davis, El Dorado Hills, Loomis, Truckee and some areas of Citrus Heights, Roseville and Sacramento proper. Sales are steady in Antelope, Granite Bay and parts of Rocklin and Sacramento; overall, sales are level or better in 18 of the region’s zipcodes, out of 58 with 10 or more sales for July.
Interest Rates*:
The financial community was waiting for the Federal Reserve to cut the Federal funds rate, the most fundamental rate over which it has influence. Instead, the Fed left the funds rate at 5.25%, where it’s been for a long time, cut the (slightly higher) discount rate instead, but then said to the lenders, “C’mon, guys, save yourselves a little money by borrowing directly from us instead of from each other.” This self-promoting behavior from a famously conservative organization is mildly weird, and the upshot is, the funds rate is still at 5.25%, prime is still at 8.25%, and the Fed seems to be protesting deep concern while really not changing very much.
News Media:
Seemingly preoccupied with a single issue – even though subprime lending represented only a sliver of the national assets. Our advice to you is: read, analyze and form opinions.
Overall Assessment:
Not, perhaps, one that you would find elsewhere. We assess this as a market that, although diminished in size, retains some advantages. Since mortgages are now more difficult to qualify for, buyers who walk in ready to arrange loans will be financially solid. Solid buyers, in turn, will appreciate the wide selection that can be made. Remember that the reshaping of this market may have broader implications for potential sellers than for potential buyers. This is a time when care in preparation can make a crucial difference; a fixed-up house will sell more easily than a fixer-upper, staging is more worthwhile than ever and curb appeal is paramount. Discerning buyers are looking for standouts. Buyers and Sellers will all find that success is in the details…because successful details add up!
*Area interest rates are reported to be as follows:
Sacramento/Tahoe, San Francisco Bay Area and Silicon Valley regions: Princeton Capital reports that as of September 4, 2007, the 30-year fixed with one point is 7.125%, the 15-year fixed with one point is 6.875% and the 5/1 ARM with one point is 6.625%, on non-conforming loans of $500,000.
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