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Existing-home sales highest since 2009

Existing-home sales in May were up 12.9% from the same period in the prior year — the largest growth since October 2011. Meanwhile, year-over-year median prices rose 15.4% in May, the largest growth since 2005.

Institutional Investors:Their Impact on the Housing Market

The real estate conversation in many corners has been dominated by the potential impact that ‘institutional investors’ may have had and will continue to have on the housing market. Institutional investor is a term used to define organizations which pool large sums of money and invest those sums in securities, real property and other investment assets.

These large institutional investors are buying residential properties throughout the United States. The New York Times recently reported that the Blackstone Group, the largest investor in single-family rentals in America, has recently bought 26,000 homes and that Colony Capital owns 10,000. There are other such firms also adding to their portfolio. In a recent Seeking Alpha article, Chris Martenson revealed that JPMorgan has initiated a fund to buy up to 5,000 homes and that Morgan Stanley has raised money to buy up to 10,000 homes.

Some are concerned that renters and absentee landlords may not properly maintain these properties. Others wonder what would happen to prices if these large scale buyers became large scale sellers.

What Could Be the Impact?

We must first realize that the number of homes being purchased by this type of investor, even if 100,000, pales in comparison to the 5 million homes projected to sell this year. Also, these investors are concentrating in the hardest hit areas where they can find the best investment opportunities. In an article last week, DSNews revealed:

“Institutional purchase activity has been especially notable in seven metros areas—Atlanta, Los Angeles, Las Vegas, Miami, New York, Phoenix, and Tampa.”

The article explained that the impact of this type of purchase would be stronger in these particular markets.

“In these markets, the impact of their exit will be more strongly felt.”

What About Going Forward?

With both prices and interest rates rising, many of these institutional investors may already be winding down their purchases. Bloomberg, in a recent article, quoted Hedge fund manager Bruce Rose, chief executive officer of Carrington Holding Co. LLC a fund that has managed over 25,000 rental homes:

“We just don’t see the returns there that are adequate to incentivize us to continue to invest. There’s a lot of — bluntly — stupid money that jumped into the trade without any infrastructure, without any real capabilities and a kind of build-it-as-you-go mentality that we think is somewhat irresponsible.”

The article also revealed that Och-Ziff Capital Management Group LLC , a $31 billion hedge fund managed by Daniel Och, has stopped putting money into rental homes.

The reason these firms are beginning to back away is that they are not seeing the returns they had hoped for. Bloomberg reports that Colony American Homes Inc. has found tenants for only 51% of the 9,931 homes it bought. American Residential Properties Inc. and Silver Bay Realty Trust Inc., two additional investors, both reported losses in the quarter ending March 31.

CONCLUSION

The impact of the institutional investor has yet to be fully determined. However, based on their limited purchasers as compared to all sales and their current uneasiness to continue with these purchases, the overall effect will probably be limited to a few markets that originally saw the greatest interest from these investors.

Housing Bubble: Is There a New One Forming?

The Keller Home Selling Team is constantly assessing the market on behalf of our client's and followers.  While the housing market has risen dramatically since the beginning of the year, this article written by a trusted nationwide blog source " Keeping Current Matters", says NO BUBBLE to worry about.  We believe this article to be true based on our local market knowledge and analysis. 

 While we can't predict exactly what the market will do, our jobs are to interpret the market as best we can.  We still believe it is a great time to buy and encourage anyone thinking about buying to do it now.  We believe in the end, you'll be glad you did.  If you have a house to sell, take advantage of the recent gains and call us for a free price opinion.

 As always, we're available to consult to you anytime you have questions.

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The housing market is recovering so nicely that it has caused some to wonder whether a new housing bubble is forming. Today, we want to explain that the fear of a new pricing bubble in real estate is unwarranted.

Trulia revealed some great data on this point in a recent blog post. They explained that, even with the recent price increases, national home prices are still 7 percent undervalued. Trulia explained:

“Home prices nationally remain undervalued relative to fundamentals and much lower than in the last bubble. That’s why today’s price gains are actually still a rebound, not a bubble.”

Prices are below their fundamental value in the vast majority of the country (91 of the 100 largest metros). Even in the parts of the country that are now overvalued they come nowhere near the percentages we saw in 2006-2007. For example, let’s look at the two markets that are most overvalued today. In Orange County, California prices are currently overvalued by 9%. In 2006, prices in the region were overvalued by 71%! The second most overvalued market today is Austin, Texas at 5%. Texas real estate prices did not skyrocket as they did in many other parts of the country during the last boom. Austin prices were shown as being 12% overvalued at the time.

Again, prices are still undervalued in 91% of markets and, even in the markets that are overvalued, they are nowhere near the numbers of the 2006-2007 bubble.

Jed Kolko, Trulia’s Chief Economist, explained:

“So are we in bubble territory? No. Bubble-phobes can rest easy. Even with recent sharp home price increases, prices are still low relative to fundamentals and are far below bubble levels.”

Dr. David Stiff, chief economist for CoreLogic Case-Shiller agreed in a recently releasedreport on prices:

“Even if double-digit price appreciation were to continue in former bubble metro areas, there is no reason to believe that new home price bubbles are forming. That’s because single-family homes in these markets are still very affordable, even after last year’s large price gains.”

 

Three reasons there will NOT be another bubble

  Prices are determined by the ratio between supply and demand. Here are three reasons a bubble will be avoided.

1. Supply is beginning to increase. A lack of inventory is creating a market of multiple bids which has caused prices to rise. The National Association of Realtors (NAR), in their latest Existing Home Sales Report, revealed that the months’ supply of inventory has increased from 4.3 to 5.2 months since January.
2. Demand will decrease in certain demographics. For an example, investors have been a large part of the housing market over the last several years. As prices continue to rise, a certain percentage of these buyers will back off.
3. As mortgage rates increase, buyers will be able to afford less. The Mortgage Bankers Association, Fannie Mae and NAR have all projected an increase in mortgage rates over the next year. Buying power will decrease as borrowers can no longer afford the same price point as monthly payments will increase.

For these reasons, we believe the fear of a new housing bubble are currently unfounded.

Orange County Housing Report: Foreclosures & Short Sales are Vanishing

Distressed homes are quickly being replaced with good ol’ fashioned standard sales, homeowners with equity.

 Distressed Sales:  Foreclosures and short sales combined only account for 4% of the active listing inventory.

Foreclosures and short sales have a much smaller roll in today’s Orange County housing market.  In February 2012 they made up 47% of all closed sales, 29% were short sales and 18% were foreclosures.  Flash forward to today and they are only 15% of the market, 11% short sales and 4% foreclosures.

 The market has been in transition since the first quarter of last year.  There was a palpable shift away from distressed properties. Instead, standard sales, regular homeowners with equity in their homes, entered the mix.  They chipped away at the distressed inventories grip on the market, and properties began to appreciate. 

 Banks had been in control of the market until the shift.  They sold foreclosures, controlling the pace and price of these bank owned homes.  Short sales, where the homeowner owed more to the bank than their homes were worth, relied upon the approval of the bank to allow the sale to even take place.  They had to agree to take less than the full loan amount in order for sales to close.  Again, they controlled the pace and price of these homes.  That is no longer the case, as standard sales have made a very strong comeback.

 Do not get me wrong, there are still many homeowners who have not paid their mortgages in a very long time.  Loan modifications, short sales, and foreclosures will still play a role in the Orange County housing market for the next two to three years, but they will no longer define housing.  They have gone from the “best actor” to “best supporting actor” in the OC housing drama.

 The data illustrates the evolution in the market.  One year ago, distressed accounted for 19% of the active inventory, 206 foreclosures and 912 short sales.  Today they represent only 4% of the market, 50 foreclosures and 119 short sales.  That’s an 85% drop in a year. 

San Clemente Tourism

San Clemente Tourism news

A three-star business class hotel and retail center is planned for the Marblehead Coastal area. It will include a 600,000-square-foot shopping center with ocean views, a 130-room hotel and conference center and 313 homes near the San Diego (I-5) Freeway between Avenida Vista Hermosa and Avenida Pico.

The first phase of construction, which includes the hotel, is expected to be completed in early 2009.

The city is in talks with the developer of The Lab and The Camp shopping centers in Costa Mesa for a 65,000-square-foot restaurant and retail facility in the North Beach area.

A meandering beach trail running from North Beach to Calafia Beach opened in February 2007. A second phase of construction to extend a boardwalk beyond Mariposa Point, create a beach underpass and install pedestrian crossing signals is still in the works. In all, the city expects to invest well over $12 million in the trail.

Locals have walked on an unmaintained dirt trail along the same stretch for years, crossing railroad tracks illegally at random points. The new trail, made largely of decomposed granite, enhances safety and includes access for people with disabilities. 

About a year and a half ago, the city spent some $3 million refurbishing the downtown, adding landscaping and upscale restaurants, as a way to lure visitors.

   Information from OrangeCounty.com

Buy or Rent: Which Makes More Sense Financially?

by THE KCM CREW

Every potential home buyer has to stop for at least a moment and consider this question. Today, we want to look at one of the many financial reasons to buy instead of rent: the housing expense moving forward.  Rent vs. Buy Calculator!

According to the latest Existing Home Sales Report from the National Association of Realtors, the median sales price of a home in the U.S. is $184,300. The mortgage payment (principal & interest) on that purchase would be $661.89 assuming a 20% down payment and a 3.5% mortgage interest rate. Currently, the median asking rent in the U.S. according to the Census Bureau is $717 a month.

We realize that the two payments do not necessarily reflect the housing cost on a similar residence. However, that is not the point of the post. All we are saying is that the monthly housing expense on a median price home is $661.89 and the median rent is $717. We now want to discuss what will happen to these costs over time. Rent vs. Buy Calculator!

The principal and interest portion of the mortgage payment is locked in for the next 30 years. We know real estate taxes may be included in the payment and will increase to some degree over that time. We also acknowledge that the homeowner will have occasion to spend money on repairs. They also receive many tax advantages as a homeowner.

However, the actual monthly housing expense remains the same for the next 30 years.

Thanks to the KCM Crew!