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 – email@example.com or 310.392.1211, and let us move forward together.
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