What’s Next After Labor Day?

fenceSummertime came & went already… Did you go on vacation, got a good rest and got a nice tan to prove it? Hope so for you. It’s good for the mind to go into neutral every so often. Summer 2014, however, has not been exactly quiet and relaxing for everybody and in all businesses. Try real estate for example. No time to smell the roses for the true pros; July & August have been hot in every way.

Some people might argue with the above statement. After all, sales units are actually down year-to-date, in many markets this year, particularly (and paradoxically) in the most buoyant of them. The Silicon Valley is a good illustration of this peculiarity. However, this apparent slow-down is more a mirage than the reality of the marketplace. Let me make my case…

First, the number of sales units does not always tell the story. For one thing, we can only sell what is available to be sold. As you know, we are suffering from the most acute (and often incomprehensible) shortage of inventory that I can remember. Give me more listings and I’ll give you more sales. A lot more.
But, no matter how relevant the number of transactions may be to describe the velocity of the real estate market, it is not, in my view, the N.1 indicator of a hot market. Prices are. And price appreciation during the last two months, in many sought after areas such as the Silicon Valley, has certainly continued at a good tempo, seemingly unaltered by the “slow” season.

I know what you are going to say: that too is all about that supply & demand dichotomy I was referring to earlier. Well, OK, up to a point. Prices don’t go up simply because of listings scarcity. There is a lot more to integrate that the eyes don’t see. The significant fact is that most people believe again in real estate; they believe in the value of purchasing a home, whether to live in or to leverage as an investment. The recession years are now well behind us and, if nothing else, the appetite for real estate has grown after a long diet.

There is more. US real estate is wanted. This is particularly true in the San Francisco Peninsula & the South Bay. Even when the domestic demand shrinks, for all the good reasons we can understand during tough economic times, the international demand makes up for some of the loss and keeps on driving prices higher and higher yet.

For most foreign buyers coming to town, prices are no object. They don’t perceive our real estate prices as being too high. In fact, many of them find local homes to be very affordable compared to what “similar” properties would go for in the countries they come from. Not to mention that in some Asian countries, for example, you stand to lose the property that you paid dearly for upon the expiration of a multi-years lease. Title remains with the State.

Hence a growing migration of international buyers to the US. Hence the upward pressure on prices. Cash deals, multiple offers and wild over-the-asking price offers are the new normal. It is what it is. As a Realtor, I am not complaining, I am just observing.

The thing to always keep in mind in the real estate business is that buyers “make” the market. Not the sellers; not the real estate agents. We have to look at the buyers’ behavior to measure the pulse of the market and understand where it is going. Today, the trends are good. Prices, more than units, are the expression of this optimistic view.

Labor Day is now behind us. We are about to start a “new year” of sort when the fall season pushes summer away. A big wave of buyers is approaching. It would be nice to see more listings hitting the streets. Chances are it will happen. Cross your fingers and stay tuned.

By Alain Pinel
General Manager of Intero Prestigio international
Intero Real Estate Services, Inc.

Photo courtesy of: http://blogbasics.com/i-want-to-write-a-blog-but-i-don%E2%80%99t-know-what-to-write/


Real Estate’s Top 10 Hits from 2012

top 10 of 2012 real estateThe end of the year is upon us. It’s been a good ride!

Following is a rundown of the top 10 stories in real estate that made our list this year:

1. Home prices pick up.  Home prices have been on an upward trek this year, fueled by strong demand, low interest rates and constrained supply in many markets. The most recent report year-end from Lender Processing Services showed a 3.6% increase in the home price index from a year ago. We expect the story to continue this way next year.

2. Foreclosures take a tumble. Total foreclosure inventory has fallen 9% this year, according to the latest report from CoreLogic, a good indicator of improving conditions. The number of foreclosures completed in October slipped to 58,000 from 77,000 in September and 70,000 a year ago.

3. Stellar year for Silicon Valley. We were fortunate enough to have some of the strongest housing markets in the country in 2012. In particular, Los Altos, Palo Alto and Burlingame showed the strongest comebacks this year with home prices just several percentage points away from peak levels in 2008, according to DataQuick. We expect this to continue in 2013 as our tech-fueled economy continues to flourish.

4. Housing in with Millennials. Many have speculated that the Millennial generation – 18 to 34 year olds – don’t have the voracious appetite for homeownership that previous generations have had. A recent survey showed differently as 72% of young adults said owning a home was part of their personal dream, and 43% are already homeowners.

5. Bidding wars back in vogue. The tight inventory across markets has created multiple bidding situations for buyers once again. This has been good for sellers, but obviously frustrating for buyers. The indirect effect of course will be good, though. Multiple bids help to push prices up, which can help pull homeowners off the fence and get more sellers back in the market next year.

6. Borrowers more creditworthy. After the recession hit, lending standards tightened up considerably, which made it difficult for folks with credit problems to get home loans. The good news out of this has been that apparently borrowers got the message, and have improved their situations. Borrower creditworthiness in 2012 reached the highest in 12 years.

7. Mortgage interest deduction remains a hot issue. As Congress struggles to reduce the national debt, tax break programs are constantly on the table for potential cuts or eradication. The Mortgage interest deduction has been no exception. So far, with help from housing industry lobbyists like the National Association of Realtors, we’ve staved off any cuts. But we’re likely to hear more on this next year.

8. Interest rates at unbelievable lows. Rock-bottom interest rates have enabled a ton of refinance activity this year. Average rates on a 30-year fixed-rate mortgage will end the year below 4%. The Federal Reserve has indicated they’ll continue to keep short-term rates low, which means we’ll continue to see attractive rates for mortgage borrowers next year.

9. The “underwater” story improves. Throughout the recession and recovery, we’ve heard endless stories about the number of homeowners across the country that are underwater, or owe more on their mortgages than their homes are worth. The issue is significant when we talk about housing recovery because underwater owners often can’t sell and absent that option, markets have already started seeing problems with lack of available inventory to new buyers. The good news, though, is that it’s gotten a lot better this year.

10. Dealing with housing data conflict. Even a light tread through housing news can often lead you confused. Conflicting headlines are a regular thing. It’s important to understand the context around the data, the sources and how to interpret its impact or lack thereof on your own personal housing decisions.

There you have it. Overall, 2012 has been a great turning point in housing. We look forward to bringing more commentary and context to the discussion next year.

By Gino Blefari