2009 Data
Sales Numbers Up 12% over 2008: using DQnews.com's data for resale & new property sales, we see an increase from 35219 total sales in 2008 to 38007 sales in 2009.Inventory Down ~ 20%: We went from 9380 to 7326 detached active homes countywide this year. This is our lowest inventory since April 2005.
Rates Lower than 2008: Rates fluctuated from about 4.5 - 5.5% for a 30-year fixed mortgage in 2009 for primary home owners. This is down about 1% from 2008.
Government Market Manipulation:
1. Tax Breaks & Incentives: Congress instituted a $8000 first-time buyer tax credit last year that they extended and expanded to include move-up buyers in December.
2. Fannie Mae, Freddie Mac, and the FHA: Fannie Mae and Freddie Mac own or guarantee about half of the U.S.'s ~$12 trillion mortgage market. In 2009, it is reported that government entities purchased about 90% of all home loans in the US. While they are stockholder-owned corporations, they were setup by the government as GSE's (Government Sponsored Enterprise) and as of 9-7-2008, were put under the conservatorship of the Federal Housing Finance Agency due to financial troubles. The US Treasury has since been buying stock in these companies to keep them financially secure. In addition to keeping the major holders of US mortgage notes from going under, this has also attributed to keeping home loan rates low.
3. Home Loan Interest rates: As per the above, government support has 'artificially' kept home loan interest rates low by purchasing the lion share of mortgages this year as well as pumping money into the companies holding the majority of mortgage notes. Another method of government support has been the Federal Reserve's continued plans to keep short-term interest rates low to spur the economy.
Home Values Up during 2009: Given that sales were up, inventory down and rates remained low, it is no surprise that prices went up in 2009. Although I don't have a specific measure of this, everyone in the industry will certainly agree that the lower-end markets saw the most appreciation. The Case-Shiller index reported a 2.7% rise from Jan 2009 to Jan 2010 for property values countywide. Median Home values also saw bottom in Jan 2009 and crept up the entire year throughout Socal - click for chart.
Foreclosure Activity - A Tough Read: The media articles on this topic are really hard to make sense of when you look closely. Hopefully, the statistics presented at the link below will help you understand what is really going on. A notice of Default (NOD) can occur when a homeowner is 90 days late on payments, which is the first step in the foreclosure process. 90 days after the NOD, the bank can file a Notice of Trustee Sales (NTS) if the homeowner does not pay the balance. 21 days later, the bank can foreclose - the home is auctioned for cash and if an investor does not buy it, it goes back to the bank as a Real Estate Owned (REO) property. While the number of NOD filings & the actual number of homes going back to the bank in 2009 declined, the total number of homes in the foreclosure process in California remains near record highs. We are seeing a longer time to foreclose, so more people are sitting in limbo in a stalled foreclosure process (hoping for a loan mod, waiting for short-sale approval, or in the middle of bankruptcy proceedings). Here is an excellent detailed report w/stats as opposed to opinions/theories: Foreclosure Activity
Market Segmentation: There is lower inventory and higher demand at the lower price points, while the luxury market has a higher inventory & less demand. As such, we experienced a sandwich effect this year with prices creeping up in the lower end markets and prices creeping down in the luxury market.
Here are the sales numbers for detached homes put into escrow since January 2008:
|
2008 January: February: March: April: May: June: July: August: September: October: November: December: |
1186 1455 1823 1973 2047 1921 2055 2101 2247 1985 1797 1609 |
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 |
Thoughts for 2010
Off to a Roaring Start in San Diego: Numbers for January are looking strong with regards to sales numbers being high and inventory low. Early indications show our upward trends are continuing in early 2010. Please remember that real estate is local. San Diego was one of the first areas nationwide to start taking the hit in 2005-2006, so it is not a surprise that they might be one of the first to hit bottom, if that is what we did this year. Be wary of imposing national statistics/concerns on a local market more than is reasonably warranted. Of course, national/international economics do affect our local area, but at any given time in history, some real estate markets are up while others are down.What will the Government do?: I'm not even going to take a stab at this one….tax credits are scheduled to end by June 30 this year. Congress says they won't extend it, but that's what they said last time, too… It appears Congress is committed to supporting the US housing market as the major factor in building an economic recovery, but at some point, the housing market must remove the braces and learn to walk again on its own... "run, Forrest, run!"
How Long Will Rates Stay Low?: Most Economists expect rates to stay steady or rise slightly in the very short-term (3-6 months) and start climbing as inflation/stagflation sets in. I tend to agree, but how much and exactly when??? Much of this will depend on governmental policies currently affecting home loan rates as mentioned above. One thing I'm pretty certain on is that rates really only have one way to go, which is up. This is the single most important thing to buyers today. Here's a scenario: if home prices were to reverse course and drop 10%, but home loan rates were to go up from 5% to 6%, the two changes would equal each other out when calculating monthly mortgage and tax payments. Extremely low interest rates, in my opinion, are the single-most important financial reason to purchase a home right now and get a 30-year fixed rate.
View a few historical charts on Home Loan Rates here:
30-year fixed rates from 1971-2006
30-year fixed rates from 2002-2010
Home Values in 2010?: Who knows what the future holds. We have concrete evidence showing us that home values went up in 2009. 2010 got off to a strong start and it appears prices are stable in most markets right now with the low-end market still seeing 5-15 offers on well-priced homes. If inventory stays low, I expect to see another year of modest gains in the low-end markets, a relatively flat mid-market, and a bottoming out of the luxury market. Of course, every neighborhood is different - call or email me for specific details on your area.
Foreclosure Activity: While actual activity (NOD's, NTS's & REO's) appears to be down in 2009, there remain a very high number of homes in the foreclosure process. This indicates that we will continue to see a steady flow of REO homes on the market in 2010 (unless banks and government incentives perform better than they have at accomplishing short-sales and loan modifications). However, if foreclosure filings continue to stay low, we may not see as many REO's on market in 2010 than in 2009. Personally, I'd be happy to see more homes on market because most of my buyers have so very few options and are coming up against stiff competition when writing offers. I believe our market would do well to see more inventory in the under $500k range - appraisers are the ones that kept this market from going up 20% last year in more desirable markets and they may be doing the same again this year if inventory remains low.
Foreclosure "Shadow Inventory" - True or False?: We keep hearing about a new wave of foreclosures that are supposed to hit market, but I've been hearing this for over a year and have yet to see anything to prove this theory. In fact, as stated above, inventory has dropped about 20% this year. Reports that the banks are holding on to homes already back in their possession loom in the media, but are they true? I've heard varying opinions, but little on the hard statistical side to prove this point. Then, I found this company, which seems to make a well-supported argument that there is no shadow inventory in California: click here to view article.
Thank you for reading – here are a couple resources you might find useful:
Search All listed San Diego County Homes for sale - updated daily. Click "Map Search" at top of page for an interactive map.
Get a current home valuation
I hope you have found this useful and appreciate any feedback 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
Team 73 Degrees
Keller Williams Realty
858-761-1707