August 5, 2014

Lemmings All Jump In At The Same Time

The Mercury News reports from California. “The Bay Area set records in the second quarter of this year in the number of homes sold for $1 million or more as well as those costing at least $2 million. In the nine-county region, 5,734 homes sold in the April-June period for at least $1 million, representing a staggering 24.5 percent of all sales of new and existing homes and condos, according to CoreLogic DataQuick. The previous peak was 5,699 in the second quarter of 2005. ‘There’s no way we can afford to buy a home and to make it,’ said Amy Austin-Hanson. ‘Worse, rent in the Bay Area has skyrocketed. My husband and I went to the bank to try to qualify to maybe buy at least a townhouse. The lady actually laughed at us.”

“She noted that townhouses in their neighborhood are going for $600,000 to $700,000. ‘The house down the street, an older tract home, is selling for $998,000,’ added Austin-Hanson, who lives in an apartment in West San Jose with her husband, a Safeway truck driver, and their 3-year-old daughter. ‘You would think, if you spend $1 million, you would be buying a mansion. These are three-bedroom tract homes.’”

“Wendy McPherson, who manages Coldwell Banker’s Menlo Park office, said prices have been pushed up ‘by the amount of money being pumped out by Silicon Valley and the international market, especially the offshore Asian buyer.’ With large cash down payments required at these high prices, even a couple making $400,000 a year between them would have trouble raising the money, she noted. In Dublin, ‘you can’t buy a new single-family house on a 5,000-square-foot lot for less than $1 million,’ said Stephen Smiley of Meyers Research, an adviser to home builders. ‘Affordability is going to be a major issue.’”

The Associated Press. “San Francisco Association of Realtors President Betty Taisch has two words of advice for those who want to live here and think $1 million will buy them their dream house: Think again. Taisch put her professional skills to work this summer on behalf of her adult son and his family, who had outgrown their one-bedroom apartment. After three unsuccessful offers, they ended up paying $913,000 for a two-bedroom, one-bath house with an outdated kitchen, a yard that can charitably be called overgrown, and a big basement that Taisch counts as its most attractive feature.”

“‘It certainly is a milestone. It’s like, ‘Wow!’, she said of the city’s new million-dollar median. ‘Everybody thinks San Francisco is all Pacific Heights Victorians, and it’s not. There are many areas of the city that are just normal, single-family homes that are small and not posh at all.’”

From Oakland Local. “Today’s overheated Bay Area real estate market is very different for buyers than the real estate bubble of the mid-2000s. ‘There have been a lot of all-cash deals,’ says realtor Martha Hill of Pacific Union. Real estate professionals don’t know where the glut of cash is coming from, but they agree that there is no single source. ‘During the downturn, all cash was relegated to investors and flippers,’ says Hill. Now, she says, ‘I’ve seen everything.’ Some people are taking money from their 401(k)s or borrowing from family members. Hill notes that ‘it seems like the lion’s share of the all-cash offers are at the high end of the market,’ which she defines as sales over $1 million.”

“Viral Joshi, a Loan Consultant and Branch Manager for C2 Financial Corporation, sees the current competitive market as part of a predictable real estate cycle. As interest rates have ticked up, people are jumping into the housing market hoping to get in while they can still get a low rate. ‘The consumers act as one. They’re kind of like lemmings,’ he adds. ‘They all jump in at the same time.’”

The Daily News. “Southern California stood out among the tony markets for several reasons, ranging from an influx of foreign buyers into the market, an improving economy to rising home prices. For example, homes that were selling for around $850,000 to $900,000 a year ago now cost $1 million or more, said CoreLogid DatqQuick analyst Andrew LePage. ‘In the high end market we are truly seeing buyers from abroad. It used to be 75 percent of the buyers were people you knew and now 75 percent of the buyers are coming from abroad,’ said Kurt Rappaport of Westside Estate Agency. Many are from Russia and China, he noted.”

The Press Telegram. “With plans to start a family, Enrique Manzano and his wife went home shopping in Long Beach a few months ago, looking to move from the two-bedroom condo they have lived in for about three years. ‘Our budget was $450,000, and we realized that we were better off in a condo because that’s all you can afford,’ Manzano said. ‘We were looking around and noticed a two-bedroom, two-bath home going for $700,000, which is ridiculous, and we gave up. We decided that we were looking somewhere else.’”

“The couple decided to buy a home in Riverside and have opened escrow on a four-bedroom, three-bath house in a good neighborhood with good schools, and within their budget. Manzano gave advice for those in his position specifically. ‘If you want to start a family, I suggest you look elsewhere,’ he said.”

The Monterey Herald. “The average home price in Monterey County has jumped more than $200,000 from this time last year. Realtor Linda Dorris, who specializes in sales in and around Salinas, said the home prices rose too high. She said sales have stalled, largely because lower-income buyers have now been pushed out of the market. Sandy Haney, CEO of Monterey County Association of Realtors, said young buyers are the ‘first domino’ to fall in a successful housing market. Haney said the only people who seem to be selling now are those who have to move or have to sell for some reason.”

“She also feared prices increased too fast in the first six months of this year and predicted things would slow down in the second half of 2014. ‘Too much, too fast,’ she said. ‘Everyone needs to take a breath.’”

The Union Tribune. “A time-tested signal of weakness in the housing market is flashing yellow. When you compare the number of home sales (which are highly seasonal) with those from the same month a year earlier, this key measure has declined in San Diego County for nine consecutive months through June — with five at double-digit rates. Statewide trends are similar, with 11 straight months of year-over-year sales declines, according to DataQuick. ‘My sellers are in complete shock. We’re getting no calls, no inquiries. It’s like the market just went away,’ said Kimberly Dotseth, a San Diego real estate broker. ‘Buyers think prices are too high.’”

“In the first six months of 2014, there were 46,146 active listings in the county, up from 26,294 last year, the San Diego Association of Realtors reports. And listings surpassed 8,000 this month for the first time since February 2012. So tight inventory probably isn’t hurting overall sales as much as slack demand at today’s prices. Potential buyers and sellers took a lot of financial shrapnel when history’s biggest housing-market bubble burst nearly a decade ago. Healing will take time, with relapse always a real possibility.”

The Desert Sun. “Coachella Valley foreclosures rose in June as a lingering trail of distressed homes returned to their lender, a new housing report shows. The slight increase may continue into the fall, real estate analysts and loan officers said. Borrowers who had tried to avoid foreclosure through efforts under the California Homeowner Bill of Rights had delayed the inevitable, they said. ‘It’s been so long, and it’s been so much time, at this point, the people that are losing their houses have exhausted every other option,’ said Bret Cohn, a senior loan officer for Stearns Lending in Palm Desert. ‘The people who are foreclosing, who had little or no money down for an FHA loan, may had a catastrophic event, and are now losing their house.’”

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