Archive for California Housing

California Housing – Home Sales Increase in May 2011

30 June 2011

California Housing is finally showing an increase in activity.  All I can say is “It’s about time!”

After 18 months of declines, California managed to show an increase in pending monthly home sales on a year-over–year basis in May 2011.

Year over year comparisons are used to compensate for seasonal differences in sales activity.  May is compared to May of the previous year, April is compared to the numbers for April one year prior, etc.

As the California Association of Realtors (CAR) graph shows, pending home sales have declined since the height of market activity in July 2008 – a point often referred to as the top of the market.

California Housing Market

This chart - courtesy of CAR - shows the California Housing Market has finally shown an increase in Pending Sales. Can closed sales be far behind?

As we all know, the economic landscape of the nation and the world changed dramatically since 2008!

But according to the CAR Pending Home Sales Index (the PHSI), unit sales actually rose in May of this year – up from the month prior and showing a gain of 12% from May 2010.

This is especially good news to homeowners watching and waiting for the depressed real estate market to start showing signs of life.

Because pending sales – or homes recently brought under contract to purchase – are a leading indicator of future real estate activity, it could be a sign that the market has hit the bottom and is beginning to recover.

Some economists are worried, however, that this increase was due more to the arrival of good weather after a rainy early part of the year. Certainly, it takes more than one to good month to make a good market. 

As the graph shows, we have a long way to go!

But this good news prompted CAR President Beth Peerce to forecast more good news to come and said this increase “is consistent with our expectation that home sales in the second half of 2011 should be higher compared with the second half of 2010.”

She also predicted the annual sales for all of 2011 would match or exceed the number of sales in 2010.

With bank-owned homes and short sales stubbornly showing the same large share of the market year-to-year, it is clear that there is much to be done before we can honestly say our market is healthy.

But this report does suggest that home buyers – possibly spurred on by low prices and favorable interest rates, are once again putting faith in the California Housing Market.

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FOMC Meeting – June 2011

22 June 2011

FOMC – The Federal Open Market Committee meets every six weeks to review economic conditions and chart the nation’s economic course.

For a chart showing the health of the nation’s economy, click here and visit the FOMC website

FOMC Meeting – Where are we headed?

Since the April 2011 meeting of the Federal Open Market Committee, economic data suggests that the recovery is moving along, but very slowly.

Although job creation nationwide has fallen short of expected goals, the blame seems to be placed on higher food and energy prices and disruption in world markets from events in Japan.

These things are temporary in nature, and Federal economists expect consumer spending and investment in equipment to continue their expansion.

On the downside, housing and commercial building remains flat and there has been an increase in inflation recently.

Long term inflationary indicators, however remain stable. This recent up trend is seen more as a result of temporary supply shortages and an increase in the cost of imported goods.

The FOMC has a tough job. By statutory mandate they must achieve maximum employment while maintaining price stability. If the unemployment rate drops too much or too quickly, a labor shortage could result which could in turn spark inflation.

If unemployment remains high – or gets much higher – the risk of deflation returns, an even more difficult problem to fix.

As it is now, the FOMC expects the recovery to gain a speed in the months to come, slowly creating jobs and gradually reducing the unemployment rate.

Inflation, although recently moving higher, is expected to abate as energy and commodity return to more “natural” levels. Still, inflation seems to be the most worrisome trend and commands the most attention by the Committee.

It should be noted, however, that although the FOMC decided to maintain the Fed Funds rate at 0% – .25%, it has far more options available to rein in inflation than to spur economic growth through cheaper money.

These are not the only tools available to the Committee, but they are by far the most familiar. In addition, they are not expected to change any time soon.

The Committee will purchase long-term Treasury Securities to the tune of $600 Billion by July 1 and will continue its policy of reinvesting payments from its holdings.

As with the nation, the FOMC will simply have to wait and see what tomorrow brings, then react accordingly.

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Bay Area Real Estate Q1-2011

7 April 2011

Northern California’s Bay Area real estate, as with real estate in other parts of the nation, has seen some dramatic changes over the past three years.

But the big question for Bay Area real estate is “Where is it headed?”

There have been bright spots such as Walnut Creek CA homes for sale and Lafayette CA real estate, but it is hard to tell whether these Bay Area real estate sub-markets are going through fits and starts as the real estate market emerges or are simply flashes of brilliance only to burn out without igniting any meaningful recovery.

To get a handle on where the activity and values for Bay Area houses is heading, we took a look at Bay Area real estate activity for the past three years (broken down by quarters) and displayed it at the bottom of the page. These are Bay Area homes that have gone under contract during that quarter.  This is the cutting edge of real estate purchasing activity.

It reveals a lot about the current health of Bay Area real estate.

First, notice how many Bay Area houses under contract were bank-owned in the recent quarters. Now take a look at how small a portion of the Bay Area real estate market these foreclosed homes comprised in the first quarter of 2008!

Clearly, a lot has changed in the Bay Area real estate market from then to now with respect to foreclosure activity and the ability of banks to reintroduce these homes to the marketplace.

We also see the percentage of bank-owned homes waning a bit from the last quarter of 2009 until the last quarter of 2010. The fact that the percentage of bank-owned homes increased in the first quarter of 2011 would worry me – until I factored in the overall increase in sales.

It is not unusual for the first quarter of any year to show gains over the preceding quarter of the year before.  But the fact that the number of Bay Area houses under contract shows the strongest first quarter of any of the past three years is a good sign.

One good quarter does not a real estate market make.

But if the next two quarters show similar signs of activity, we may find that this is the return to health that Bay Area real estate has been looking for.

Bay Area real estate

Bay Area Real Estate - Homes Under Contract from 2008 to 2011

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Light at the End of the Tunnel?

25 May 2010

How is this for some good Real Estate news!

The rate of property foreclosures dipped last month according to RealtyTrac, a real estate information company.

However, they did go on to say that the levels of foreclosure are still very high and will probably remain at elevated levels for quite a while.

But at least the trend is downward!  And it looks more and more like it could be a trend, not just a blip on the radar.  They are not only lower than a month ago, but they below the number of homes going into foreclosure a year ago as well!

Read the details of this report in Kim Amadeo’s blog post from this morning.

This comes at a time when the large residential lenders are developing, with the Treasury Department, a couple of plans to keep homes out of foreclosure by modifying the terms of troubled loans.

Fannie Mae will refinance loans up to 105% of a home’s value in some cases and some existing mortgages can qualify for reduced interest rates or extending the term.

If you would like more information on these programs, click the link below:

Making Home Affordable

Let’s hope this trend continues.  Until the market is able to absorb the over-supply of bank-owned homes (REO), it will be difficult to return to any measure of price appreciation.

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California Housing Market – Opportunity and Housing Affordability Up

26 January 2010

A Look at the Current California Housing Market

California Housing Market – The California Association of Realtors reports that the First-time Buyer Housing Affordability Index stood at 64 percent in the third quarter of 2009 compared with 55 percent (revised) in the third quarter of 2008.

This means that 64% of the households in the state can afford to buy an entry level home in California, compared to only 55% a year ago.

They also report the median price of an entry-level home in the California Housing Market was $247,150 in the third quarter of 2009 and estimated the monthly payment including taxes and insurance was $1,450 in the third quarter of 2009.

Locally, Contra Costa Affordability declined by one percentage point to 42% from last quarter, but shows 9% more households able to afford an entry level home than a year ago.

Alameda County showed a 10% year-over-year increase in the number of families able to purchase, but this figure is 3% lower than last quarter.

A 10.2% statewide increase in entry-level home prices is cited as the reason for the quarter to quarter declines in affordability.

Santa Cruz County has similar numbers to Contra Costa at 43% affordability, but dropped a full 3% from last quarter.  One year ago, the First-time Buyer Affordability Index was only 36%.

These are important numbers!  In fact, they are regarded as the most fundamental metric of the health of residential Real Estate.

The California Housing Market moves in cycles, and we expect the entry-level market to show the way by priming the sales of upper level homes.  Already, we have seen a 10+% gain in home prices – healthy appreciation in any market!

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