2011 Q1: Looks Like a Level Market
With the dismal 4th quarter of last year behind us, buyers were eager to get back into the market and take advantage of the recent drop in home values.
2011 Quarter 1 SummarySales Numbers up: healthy, but not overwhelming sales activity 2011 Quarter 1 DetailsSales Numbers: Sales volume has been slowly declining since June of last year. There was a significant jump in Q1 – more sales than we saw since this time last year, but slighly lower than 2010 numbers (I believe those numbers were artificially high leading up to the end of the federal tax credit). Here are the numbers since January 2010:
View the current Market Velocity chart displaying the above stats Inventory Up a Little: If you click on the above link, you’ll get an excellent visual representation of the inventory vs sales numbers (aka supply vs demand). Inventory took a small jump of 5% from December to January, which is a seasonal norm. People often either take their home off market or wait until January to list. The rest of the quarter showed a slight increase (4% over 2 months). Rates Steady: Most 30-year fixed rates in Q1 fell in the 4.75 – 5.0% range. Rates opened this year at about 4.75% after 45 days of steady rate hikes at the end of 2010.
Historical Home Loan Rate Charts: 30-year fixed rates from 1971-2006 Government Incentives: All the tax credits and QE2 are done, so what else is there? The secondary loan market. Most loans are turned around and sold on the “secondary market” soon after they are funded by big banks like Wells Fargo, BofA, Chase, etc. If a bank keeps the loan in-house, it is called a portfolio loan & these are rare right now. Government supported agencies like FNMA (aka Fannie Mae) are backing about 90% of new home loans today by buying them on the secondary market. This is enabling banks to write loans to consumers that fit the profile required for these govt backed loans. There is a lot of talk and debate about when and how to diminish or remove the govt agencies from this role in the future, but for the time-being, I believe it will continue as long as there is a president in the White House that doesn’t want a recession to happen during his/her term. But, the US can’t keep printing money forever (right??), so they will have to get private institutions back in the portfolio lending game. The likely result of this will be higher rates, larger downpayment requirements, and more stringent qualifying criteria. There is also the Home Affordable Foreclosure Alternatives (HAFA) Program that is targeting short-sales. I just completed my first of these last month and it was so much easier than the usual short-sale. Among other things, when banks like Wells Fargo participate in this program, the buyer is gauranteed an answer within 30 days of submitting a complete offer package to the bank, homeowner is no longer liable for the written off debt, and the homeowner also gets $3000 in relocation assistance at closing. Read more at the HAFA Website. I’m really excited to see if this will revolutionize the short-sale industry which desperately needs help! Foreclosure Activity in CA: Looks like the banks have been purging the system this quarter after a hold back that happened in Q4 2010. Our inventories and filings are down compared to last year’s Q1 numbers. Here are the Q1 2011 stats in comparison to Q4 2010: 1. Notice of Defaults were down a bit (3-4%) We had a buildup of inventory in the last 3-5 months of 2010 and some of the big banks put all foreclosures on hold due to the “robo-signing” debacle. Thus, it is not a surprise to see an increase in resolutions, which means that either the home was foreclosed, a short-sale accomplished, or the foreclosure cancelled. The good news for the future is that pre-foreclosure inventories are down. With less distressed homes coming down the pipe, I am more optimistic about home values in the near-term. Foreclosure timeframes went up again this quarter, but I expect that a more streamlined short-sale process (thank you HAFA) will get timeframes on the decline by the end of the year. All in all, the foreclosure news this quarter is positive. Here’s my top reference for quality foreclosure data: Foreclosure Radar Summary & Expectations: Q1 was a relatively healthy market. We had decent sales and normal inventory increases for the season. As a result, home values were mostly flat this quarter. The market was much more active than Q4 of last year, which was a welcome turn. Prices came down about 3-6% from last year, which contributed to the increase in sales this quarter. Usually, the market begins to slow down a bit at the end of the second quarter and I think we will see that this year. I expect a decent sales market in Q2, with slight inventory increases and slight price decreases. Rates have crept up over 10% since they hit historical lows last fall. As predicted, rate increases have outpaced home value depreciation twofold and I expect that trend to continue (possibly for as long as 2-4 years). What this means, should my predictions be true, is that people who purchased last fall, will likely have hit the bottom perfectly, when it comes to affordability (i.e. their monthly costs to own). That being said, I continue to remind all my buyers to diligently follow rates, just as much as home values & rents, when thinking about the financials of purchasing a home. Thank you for reading – here are a couple resources you might find useful: Search All listed San Diego County Homes for sale Request a current home valuation I welcome any feedback or thoughts you have for me. I also appreciate your referrals – if you know of anyone thinking of buying or selling real estate in San Diego, I would be happy to work with them. Warmest regards, Adam Pascu |
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