Watch real estate prices rise in 2013. All the indicators imply that this will be a wealth-building year for owners of residential real estate. ★The economy is officially in recovery. ★ Housing inventories are way down. ★ Mortgage rates are at historic lows. ★ And everyone who had been waiting for the bottom of the market is now panicking to get a deal before it’s too late.
2012 set the pace for big growth. In Los Angeles County, the median sold price is up 27% from 2011. DQ News notes that the median price paid for a home in California in December was up 21.5% from the previous year. CoreLogic predicts that U.S. home prices would end the year up 7.9%. Ironically, at the beach, we didn’t keep pace with the rest of the country. For single family homes in Santa Monica and Venice, comparing December 2011 to December 2012, the median sold price is up 7%.
What this all translates to is that the average price for a home in California in December 2012 was $299,000. The median price for a home in L.A. County was $738,000. The median price of a home Santa Monica and Venice in December was $1,610,000. Life is precious at the beach.
Money and availability are two of the prime causes for the recent price hikes.
Let’s talk money…the Fed’s Quantitative Easing program, dubbed QE, is reducing mortgage rates to what Federal Reserve Chairman Ben Bernanke calls a “credibly low” level. The Fed has vowed to buy up mortgage-backed securities at $40 billion per month to keep interest rates low until the job market improves. That bodes well for qualified buyers.
“Taken together, these actions should maintain downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative,” observes to a Federal Open Market Committee report.
Now let’s talk availability – inventories have declined drastically. The fine value in real estate has been impressing investors, who are jumping into the market and making all-cash purchases. They then turn these properties in to rental properties, with plans to sell as the market strengthens or to merely buy and hold.
The low inventory has left homebuyers submitting multiple bids and upbidding each other, pushing up prices – in some cases by more than $100,000 – and putting a damper on the idea of finding a deal on their dream property.
In Venice and Santa Monica, virtually all reasonably priced properties have gone pending in less than two weeks….not to mention the fact that the number of properties on the market has dropped 52% between 12-11 and 12-12.
The number of homes listed for sale at the end of 2012 stood at the lowest level in more than five year. Nationally, there were1.57 million homes listed for sale at the end of 2012, down 17.3% from one year ago, according to data tracked by Realtor.com.
Inventories were down in all of the nation’s 30 largest housing markets, compared for 2012. Sacramento led the pack with an amazing 68% decline in housing. Seattle fell 45%; San Francisco – 43%; Los Angeles – 40%; Orange County, CA and Atlanta declined 39%; and San Diego 38%.
Inventories typically decline in December, January and February as home-shopping activity cools. But in 2012, inventories never grew.
“Sellers have been reluctant to put their homes on the market,” offers Steve Berkowitz, chief executive of Move Inc., which operates Realtor.com. January and February, he notes, “are going to be an interesting time to watch” because they’ll provide early clues about buyer traffic and sellers’ expectations. Already, online search demand is up from one year ago.”
Now let’s talk about investors and their impact on the real estate marketplace.
Investor buying of single family homes as rental properties increased significantly several years ago. More recently, the entrance of and/or increased activity by “big-money” institutional investors resulted in a substantial increase in investor buying. You’ve seen it if you’ve been trying to buy in the north of Montana neighborhood of Santa Monica or on the chic streets of Venice. Many of the desirable properties are being bid up by investors going well over asking price.
If you’re in search of a deal, you need to be lucky and aggressive. Investors bought 42% of all homes sold at foreclosure auctions statewide last quarter, according to DataQuick. Not to mention that California’s foreclosure crisis eased considerably during the final quarter of last year, with the number of homes entering foreclosure dropping to a six-year low.
California has also been able to work through its foreclosure problem faster than other states, in part because foreclosures take place largely outside the courtroom, shares Celia Chen, a housing economist with Moody’s Economy.com. California has not been bogged down with the same level of paperwork issues and delays that states such as Florida or New York have experienced.
“Ultimately, fewer foreclosures means an even tighter market, which means a more rapid recovery,” concludes Christopher Thornberg, a principal at Beacon Economics. “I see very little to forestall the real estate market this year.”
The steep decline, accompanied by a similar drop in home repossessions, has cleared the path for a quickened pace of recovery of home prices. Good loans and reduced inventory suggest that housing should increase again in 2013.
We’re here to help you with your real estate property needs. Please contact Jodi Summers and the SoCal Investment Real Estate Group @ Sotheby’s International Realty – firstname.lastname@example.org or 310.392.1211, and let us move forward together.
The SAVE Act, is new bill being proposed in Congress, would create 83,000 jobs and generate $1.1 billion in annual energy bill savings. Officially known as the “Sensible Accounting to Value Energy” (SAVE) Act, it would require mortgage lenders to include expected energy-costs savings into the value of a home. Bill sponsors, Senators Michael Bennet (D-Colorado) and Johnny Isakson (R-Georgia), call the bill, ”A win-win for the economy and the environment.”
The Institute for Market Transformation notes that SAVE Act would help revitalize the hardest hit sectors of the economy by providing lower rate mortgage financing for cost effective energy improvements; allowing homebuilders and homeowners to recover the cost of efficiency investments; and enabling better federal mortgage underwriting while lowering utility bills for American households.
“It would allow folks to retrofit their homes and be rewarded for it over the life of the loan,” Senator Bennet enthused.
Let’s put the SAVE Act into action using a recently built home as our example. Most likely the newer home is as much as 75%-more energy-efficient than its older neighbors > saving the owner $1,500 a year. Under the SAVE Act, that savings would be factored into the value of the home and the borrower’s ability to make the mortgage payments.
Expected benefits include:
* Enable federal mortgage programs to improve the quality of mortgage underwriting and provide an accurate picture of repayment risk and the expected costs of homeownership
* Greatly accelerate the supply of and demand for energy-efficient new homes
* Quickly return any incremental cost for homebuyers due to home efficiency improvements
* Put people in the construction and manufacturing sectors back to work renovating and building energy-efficient homes and products
“It allows us to build and sell more energy-efficient houses, which is a win-win,” shared Randy Melvin of Winchester Homes. “It’s good for us, it’s good for the environment, it’s good for the consumer, it’s good for our country’s energy independence.”
The average homeowner spends more than $2,000-a-year on energy, yet it is not factored into appraisals, unlike insurance or real estate taxes.
“Let’s say you install double-pane windows in your house that create energy efficiency, that’s a cost as homeowner, but it’s a savings that the lender can now recognize,” concludes Sen. Bennet.
GUEST POST – VA LOAN OPPORTUNITIES
by Jay Buerck
Veterans and their families in Southern California can take advantage of one of the country’s most affordable and flexible home loan programs. The Veterans Administration’s home loan program was created specifically for the needs of those who have served our country.
VA loans offer veterans an almost unmatched degree of flexibility. The VA guarantees loans from commercial institutions. That security gives lenders the ability to offer competitive rates and favorable loan terms for qualified borrowers.
VA loans come with myriad financial benefits. Borrowers can purchase a home without spending a penny on a down payment or monthly private mortgage insurance. The VA has loan limits that vary from state to state. Some borrowers can qualify for 100 percent financing. Currently, VA loan limits for San Diego County is $593,750. In Orange County, the loan limit is $737,500. USe a VA Loan Calculator to determine the loan limit for your home purchase.
The VA has multiple loan options. Veterans must first obtain a Certificate of Eligibility (COE) before moving forward with the application process. The COE ensures that a prospective borrower meets the program’s initial requirements.
Any military member who has served 181 days on active duty during peace time or 90 days during war time may be eligible, along with those who have served at least six years in the Reserves or National Guard. Spouses of service members killed in the line of duty may also be eligible.
Not everyone who meets the basic criteria will qualify for a loan. But veterans with poor credit can still qualify for a VA loan. So can those who have filed for bankruptcy or faced foreclosure.
Southern California veterans who currently have a conventional home loan can also benefit from a VA loan. Qualified borrowers can now refinance up to 100 percent of their home’s appraised value through a VA loan.
HOME OWNERSHIP EQUITY TIPS
by Jodi Summers
1. The equity in your personal residence shouldn’t be used to pay for vacations, education, new cars and credit-card debt. Many homeowners who participated in serial refinancing when rates were low and money was easy found they had no equity left when the credit crunch hit in August 2007. A good portion of these repeat refinancers now owe more than the current value of their home.
Think twice before buying investment property
an Inman News column by Dian Hymer
Bet you’ll be surprised to learn that mortgage companies lost an average of $560 on every loan they originated in 2007, compared with the $50 per loan they lost in 2006, continuing a downward trend that began in 2004, according to the Mortgage Bankers Association’s annual cost study.
While loan origination and ancillary fees grew on a per-loan basis, they did not keep pace with increases in production operating expenses, which grew 7 percent to $3,663 per loan, the study found.
MBA’s 2008 Cost Study is based on 2007 income and expenses associated with the origination and servicing of one- to four-unit residential mortgage loans by mortgage banking companies. The study is based on a sample of 180 mortgage banking companies who originate and service loans.
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Solar Loans for Residential Systems
New Resource Bank has created five special solar loans that allow you to install a solar system with nothing down. They are based on the equity in your home, have a streamlined application and approval process, and no upfront fees, closing costs or points. The loan may adjust to reflect the savings being generated by the solar system, as the chart above demonstrates.As the homeowner and system owner, you can take advantage of rebates and tax credits. Today’s low interest rates (in the range of 5 1/2%) make this type of financing very attractive.
For information, contact Gary Groff at New Resource Bank, (415) 995-8134 or 1 (800) 772-8190.
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