2013 is going to be a good year. It’s going to be a good year for housing, among other things. Now all of us @ the beach realize that our market has long been back on track, thanks to low housing inventory and low interest rates. Kudos go out to the Federal Reserve’s aggressive bond-buying program, which has pushed mortgage interest rates down to unprecedented lows.
As our economy corrects itself, it’s all about housing. By many accounts, the housing-market “bottom” was one of the biggest business stories of 2012, and a key to our economic turnaround. After years of falling home values, the data clearly showed that the bleeding stopped somewhere in the first part of 2012 and has been slowly rising during the latter part of the year. The most recent Case-Shiller home-price index report shows a fifth consecutive month of year-over-year increases in home prices nationwide.
For single family homes in Santa Monica and Venice the bottom was May 2012, according to Clarus Market Metrics. Prices were at a median low of $1,180,000 < rising to $1,575,000 by the end of the year.
The statewide median price of an existing, single-family detached home in November was $349,300. The California Association of Realtors® calculates that the median price was up 24.8% from November 2011 – the largest year-to-year percentage increase since June 2004.
“Coastal markets, which tend to have high-end properties, accounted for a larger share of total sales and led to strong price gains overall,” shares C.A.R. Vice President and Chief Economist Leslie Appleton-Young. “The significant increase in price was due in part to the change in the mix of sales.”
In Santa Monica and Venice, sold homes are up 18% from December 2011.
Thank you Fannie Mae and Freddie Mac for fostering historically low interest rates. Mortgage bonds issued by Fannie Mae, Freddie Mac and Ginnie Mae still fund more than 90% of new home loans. Bank portfolios and other private lending make up the rest.
Analysis done by Iacono Research on the significance of the Federal stimulus efforts showed that today’s incredible low interest rates allow a home buyer to purchase a house that is 50% more expensive than they would have been able to afford under the average mortgage rates over the past 20 years.
Nationally, low mortgage rates and job gains are pushed sales of existing homes to the highest level in three years. New housing construction up 21.6% in November from a year earlier.
CoreLogic reports that U.S. home prices nationwide increased on a year-over-year basis by 6.3% in October, the biggest increase since June 2006. Investors who bought subprime mortgage bonds, saw posted returns of more than 40% since December 2011.
With no inventory on the market, and prices on the rise, now is a peak time to sell your property. Builders all but halted construction in 2007 and 2008. In 2010, mortgage delinquencies peaked; from there forward foreclosures were in decline. By 2011, rental demand rallied, and savvy investors bought in neighborhoods where homes could be easily rented out. Strong investor demand and fewer bank foreclosures have contributed to inventory drops, while many homeowners are unwilling or unable to sell.
Looking forward, there are more than 500 new units for rent and for sale scheduled to come online in Santa Monica in the coming years, and there are many more requests before City Hall. Builders and city officials are benefitting in a big way.
The Census Bureau and Department of Housing and Urban Development reports that across the country, private housing starts in November were at a seasonally adjusted annual rate of 861,000, compared to the November 2011 rate of 708,000. Home-building completions were up 16% from a year earlier.
Finally the housing market is seeing the start of what economists call a positive feedback loop. Rising home prices allow lenders to be more generous with home financing, which allows even more prospective home buyers to access the market, further driving up home prices. Higher home values give consumers and builders more confidence to go out and spend money or make investments, which also stimulates the real estate market and the national economy.
We’re here to help you with your commercial and investment property needs. Please contact Jodi Summers and the SoCal Investment Real Estate Group @ Sotheby’s International Realty – or 310.392.1211, and let us move forward together.