Year End Comments

We have have had a great year.  Median prices for homes have risen. Loan terms have loosened.  Multiple offers and over bids are selective.  The economy is moving up slowly without inflation.  The Federal Reserve continues to have a loose money mentality and has kept and will keep rates low. The stock market is at new highs.  Employment is picking up.

 

So where do we go next year?

 

Analysts say the Double Digit Appreciation will come to an end by 2014.  Borrowers are less healthy in the third quarter  of 2013 as home prices have moved up and Loan to Value ratios have risen.  This will stop the sharp rise we have seen in home prices as things settle down to a normal market as home ownership begins to level out and more people begin to qualify again for home ownership.  We still need to come to a conclusion and decision on Fannie Mae and Freddie Mac, they are the major processors of mortgages in America.

 

What are the reasons for a slow down in our housing market.  First is the Bubble Fears.  Certain areas in our market place have had a run of over bids and multiple offers.  While I do not believe we are in a bubble; in as much as, the bubble has to be universal.  We do not have a over bid and multiple offer environment in certain sections and cities in the Peninsula.  In fact once you move over to the East Bay or South of Los Altos the market sits loaded with inventory.

 

Next the low inventory may really be caused by under water homes.  Homes in which the mortgage is more than the value of the home.  Do we really have more vacant homes that we are aware about.  Have owners simply walked away and left it to the Bank?  Are there properties servicing agents/investors still have on their books because the owners care the property?

 

Like the recovery in stocks, real estate is an asset class that has come under extreme pressure from the 07 Crisis forward.  Even with the recovery, the Government Bail Outs and low interest rates from the FED from the past present and future at least until spring 2014 many sections of our real estate market are far from the highs of the Pre- Crisis level.

 

The buyer market still has a long way to go when one considers that foreclosures and short sales put a time line on when a buyer can qualify.  That means that we will not see from the foreclosures of 2007 until next year and most likely 2015.  Then it will be a slow process of each following year a new crop of buyers will come on the market.  unless there is some extra-ordinary rule changes in loan qualifications, the housing market will be in a slow process of recovery fed by returning buyers.

 

The signs that our market may be in for a rest is the October Existing Homes Report.  It fell 3.2% nationally, but in some sections in the West they were down 7%.  Parabolic rises collapse or consolidate.

 

From my previous Blogs, I have noted that the high End market was DEAD.  Realty Trac is quoted here:

 

Ultra High-End Foreclosures Are Up 61% in 2013

 

“Overall U.S. foreclosure activity is down 23 percent through October 2013, but foreclosure activity on homes in the $5 million-plus value range is up 61 percent from the same time period in 2012, according to a RealtyTrac analysis just released this week.

 

The number of these ultra high-end properties with a foreclosure notice in 2013 is relatively small, but each of these high-value homes represents a much bigger potential loss for the foreclosing lender compared to a median priced home.

 

From Miami to Malibu, visit us online to see a slideshow and learn the details about 10 spectacular multi-million dollar foreclosure properties.”

 

Talking about Foreclosures, the past several weeks I have been sent 3-4 Broker Price Opinion Requests.  A BPO is a precursor to a Notice of Default, which leads to foreclosure.  

 

Were are the BPO’s centered? They are 2 in San Mateo, 2 in Menlo Park, 4 in Alameda, 6 in Oakland, 3 in Redwood City, 9 in Sunnyvale and 2 in Hayward.  All in a two week period, with 3-4 to 4 a day coming in for the past several month.  

 

Now do you think we have a bubble?  I think that home prices will stall, and the market will begin to absorb the new buyers.  Buyers will absorb the future short sales and foreclosures.

 

Continuing on this vein, Bank Of American has invited me to several Short Sale Seminars.  If we are done with the crisis, why the seminars.

 

So buyers relax.  Home prices are not going higher, you will not be priced out of the market.  It remains to be the best time to buy a house.  Interest rates are historically low.  The economy is improving.  Unemployment is declining.

 

To sellers, be realistic.  This is not a return to the past where you will see your most over priced expectation come to fruition.  While home prices are higher than last year, over pricing your sale will find it languishing on the market.  Once one price cut comes in the buyers smell blood and will look for others.  Price your home under the market and continue to expect over bids and multiple offers from buyer’s realized value.