2010 Year-end Summary
Sales Numbers Down: down about 15% from 2009 numbersInventory Up: up the first 3 quarters, then down in 4th
Rates Hit Historic Lows!: enough said...
Govt. Incentives: Thank you Washington & Sacramento
Foreclosure Activity: New Filings down, resolutions/sales up, foreclosure process longer
2010 Year-end Review Details
Sales Numbers: Sales volume was on a steady incline the first 4 months. In May (coincidentally corresponding to the end of federal tax cuts?), sales numbers took a drop and then trended more steadily downward for the remainder of the year. Bearing in mind that 2009 was one of our strongest years for sales in the last 5 years & home values (mostly in the lower price ranges) were up, my estimates show a 15% drop in the number of sales from 2009 to 2010. Here are the numbers comparing 2009 to 2010:|
2009 January: February: March: April: May: June: July: August: September: October: November: December: |
1992 2110 2408 2406 2254 1999 1922 2037 2045 1792 1599 1220 |
2010 January: February: March: April: May: June: July: August: September: October: November: December: |
1534 1919 2009 2164 1699 1752 1693 1685 1518 1373 1464 1180 |
Inventory Up: 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 started 2010 at 7326 detached home listings countywide after inventory had dropped all of 2009. This inventory level of 7326 homes was our lowest inventory point since April 2005 (our last market peak). We ended 2010 at 8902 homes. Our inventory levels rose about 20% over 2010.
Rates Down: 30-year fixed rates started 2010 at about 5.25%. Rates were down and then up the first quarter, but steadily declined month over month after that until October brought our lowest rates in over 50 years - just under 4.25%! But the last 45 days of the year saw a precipitous jump back up to just under 5%. Overall, interest rates averaged less in 2010 than 2009 and dropped about .375% from Jan to Jan.
Extremely low interest rates continue to drive buyer demand as many expect rates to rise above current levels. How much and when? Only the future knows....
2010 Mortgage Rates Chart:
Historical Home Loan Rate Charts:
30-year fixed rates from 1971-2010
National Average Contract Mortgage Rate from 1963 to 2010
Government Incentives: Tax credits and government backing of home loans played a major role in our national markets this year. They have increased buyer demand by:
1. Offering cash in the form of tax credits (both Federal and CA state)
2. Keeping rates low
3. Providing money to lend (buying on the secondary market)
We saw a very quick downward shift in sales after the (up to) $8,000 federal tax credit was done April 30th. The CA tax credit ($10k over 3 years) continued for a few months until the money put aside for it ran out. The federal credit was clearly a major driving force in the market this year. And, without the govt backing close to 90% of loans in 2010, we clearly would have had a more grim year in sales.
Foreclosure Activity in CA: The first half of 2010 was relatively positive for the market as a whole. Foreclosure cancellations were up, which means that more short sales & loan modifications were approved. Investors who bought foreclosures at the public auctions were able to execute quick fips for profit, while the market remained hot.
However, when the tax credits expired, the market slowed. With the slowing of the market in the second half of the year, came less foreclosure cancellations. Then, in the beginning of the third quarter, the robo-signing scandal led to dramatically lower foreclosure sales, less NOD's, etc., including a complete halt by Bank of America for nearly two months. This has caused a build-up of pre-foreclosure inventories, much of which is hard to track because the banks stopped posting NOD's during that timeframe. As such, we have seen yet another increase in resolution timeframes.
All in all, the foreclosure numbers for CA in 2010 were down from 2009 (except resolution timeframes). But, the recent market slowness and halting of foreclosures at the end of 2010 does not bode well for 2011 predictions. We are seeing, however, that the banks are much more willing (and able) to approve short-sales in a more timely manner. I certainly hope this trend continues as we will be seeing a lot of them this year.
Here's my top reference for quality foreclosure data: Foreclosure Radar
2010 Summary & Expectations for 2011: We have so many big stories this year, it is hard to limit myself to talking about just a few. We hit historic lows for home loan rates, saw the government intervening heavily in the market to spur sales, had the lowest inventory in recent times, and saw a huge difference between the first half of the year and the second.
Home loan rates, more affordable housing and governement tax credits were the major driving forces behind buyer demand this year. Distressed situations like short-sales, foreclosures, job relocations & trust sales dominated the SOLD listing inventory and ultimately, home values. We opened up the year with a high level of demand and one of the lowest levels of inventory in quite some time, at least in the lower price ranges. Thus, home values in entry level markets continued to increase til the summer. Inventory was on a steady rise the first half of 2010 and we saw a dropoff of sales when the tax credit ended. May to September was "OK" - sales were relatively constant, but slightly low. The last 2-3 months of the year were quite slow and all but came to a standstill in December with one of our lowest sales months since Dec 2007.
One of the less written about stories of the year has been the difference between the low-end and high-end markets. The lower end markets had very low inventory, quick sales (often with multiple offers), and an increase in home values the first half of the year. Conversely, the luxury market has seen a large buildup of inventory, slow sales and decreasing home values all year long.
And who will soon forget the historically low home loan rates? I have a feeling we will see a lot of creative financing in the next 10 years as people with extremely low home loan rates sell to buyers in times when banks are offering much higher rates. Ever heard of a wrap-around deed or an All-inclusive Deed of Trust (AITD)? You will soon enough...
Expectations: So, what does all this mean for the future, right? I don't know, but here are some guesses. Disclaimer: don't base your life or your finances on my predictions as the future often proves us all wrong. When it comes down to it, my job is to buy and sell homes (and I do that well), not to do detailed economic analyses and predictions for the future. That being said....
My general expectations are that we will follow more standard seasonal norms this year. We will have a slightly higher inventory than last year, which will bring prices down a bit. We are currently experiencing fairly good sales/demand - I expect that to continue for the first quarter. Inventory is back on the rise, which is typical as a seasonal norm, and I expect that to continue through til summertime where it will plateau and then come back down. I expect prices to stay relatively flat the first quarter with a slight drop in the second (down 1-4%), at which point inventory will have outpaced demand and prices will drop a little more in the 3rd and 4th quarters (down 2-5%). We will see more distressed homes on market this year than we did last year (both short-sales and foreclosures). The market segmentation we have experienced in the last few years will be less pronounced except in the very high price ranges, where I expect we will continue to see very few sales. Home loan rates will probably hover were they are for the time-being just under 5%, but I expect they will rise at some point in the not too distant future. I can't say when or how much, but I wouldn't be surprised to see a 15-20% increase in home loan rates this year putting us near 6% by the end of the year. I do expect the rise in home loan rates to outpace a drop in prices, making homes less affordable by 2012.
Thank you for reading - stay tuned for my 1st quarter report to see which of my predictions come true!! Here are a couple resources you might find useful:
Search the San Diego County MLS - updated daily. Click "Map Search" at top of page for an interactive map.
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, Realtor
CEO & Owner of Team 73 Degrees
Keller Williams Realty
858-761-1707