This Intero Insider – Video Series brings you Dominic Nicoli, one of our top real estate agents at Intero Real Estate Services from the Los Altos office. He speaks candidly with Intero COO Tom Tognoli and shares his insight and projections on today’s real estate market from luxury real estate to foreclosures – where we have been, where we are now, and where we are headed.
Posts Tagged ‘real estate market’
This Intero Insider-Video Series brings you Steve Becerra, one of the top real estate agents at Intero Real Estate Services from the Saratoga office. Steve has been in the business for over 20 years and is an expert on the commercial real estate market, owning his own brokerage business for 10 years. Steve speaks with Intero COO Tom Tognoli and shares his knowledge about the current condition of the commercial market both locally and globally as well as giving us his insight about what to expect in the future.
Cash is king in real estate right now. In March, 35% of all existing home sales were from buyers who paid in all cash, according to a report out last week. That’s a new record.
After stumbling in February, existing home sales increased 3.7% in March from the month before (but were down 6.3% from March a year ago), according to data from the National Association of Realtors.
Perhaps even more interesting is that 22% of March sales were to investors – an increase from the previous month and year.
This news is a tad bittersweet. As I’ve noted before, there’s a lot of opportunity out there right now for investors. But, you’ve also got to figure that a portion of these sales to investors presumably will be coming back to market at some point. These homes – likely rehabs or flips – will add more inventory to the market, which could further pressure prices.
The National Association of Realtors’ Chief Economist Lawrence Yun is pretty optimistic about the state of housing right now. With the latest data, he points out that sales have risen in six of the last eight months. But, the national median price is still falling at $159,600 in March (down 5.9% from the same month last year). Distressed homes, which typically are sold at discounts, made up 40% of the market in March, up from 39 percent in February and 35 percent in March 2010.
These numbers are not horrible. They’re far from cartwheel-worthy, but also not bad. What worries me most about the housing market these days are actually the numbers and factors outside of home sales stats:
- Rising gas prices
- The national deficit (and prospect of further budget cuts)
- Proposals to further restrict mortgage lending
These are all things that could trip up a full housing recovery – or continue to prolong it. So, am I optimistic about the state of housing and the state of “all-cash” deals? Well, I think we have an OK market right now at the national level. But I like to remind myself and others that real estate is local and as such, some markets are doing well while others aren’t.
The fact that there are so many cash deals happening right now tells me that investors still have confidence in real estate. And that’s a good thing.
Intero President and CEO, Gino Blefari candidly speaks with Intero COO, Tom Tognoli and shares his projections for the real estate market in 2011.
Read more on Gino Blefari here.
We are about to start a new year that will prove positive upward motion for both our state and local San Francisco Bay Area economy. We’re going to see some job growth, which will help to fuel initial growth in the housing recovery. But it’s going to be a slow start in 2011 – a year of transition is a good way to describe it – and we may not always feel like we’re making progress because of the slow speed.
Despite how slow or fast we’re moving, we are saying goodbye to the bottom and setting our sites on upward movement in 2011.
For housing, I expect to see a rise in sales volume and median prices in California in 2011 from our bottom year of 2010. I think a lot of buyers who’ve been waiting on the sidelines – either for a more secure employment situation or a signal of the market bottom – will finally move and buy.
We’ll continue to see high levels of foreclosures, but the market will continue to work through them.
In the Bay Area, there are a lot of developments that make me feel optimistic about 2011. Facebook game developer Zynga recently signed the largest lease for San Francisco office space in five years. Facebook itself recently announced a joint $250 million fund for social application developments. Stocks have been surging at Oracle, eBay, Google, Intel and other Silicon Valley tech powerhouses. And while sales volume has lagged, home prices in the Bay Area rose for 13 straight months through September, according to MDA Dataquick numbers.
These are all very positive signs that the Bay Area economy is already looking up, though we need to be mindful that miracles are not going to happen in 2011.
Here is what I am projecting:
Home buyers: Expect the loan process to be long and strict. You will need cash, a solid credit history, appropriate salary and job security. You won’t have the lowest of the low interest rates forever so you will come off the fence in droves in the spring of 2011. This rush may even surprise you as you find yourself competing for offers.
Home sellers: The folks at the California Association of Realtors have discussed the tale of two housing markets in our state: the high end versus the low end. How you come out in 2011 as a home seller really depends on which market segment you are in.
Sales of properties valued at less than $500,000 have largely been distressed properties and banks are expected to release more inventory next year. This means sellers of properties in this price range will continue to have a lot of competing inventory.
Meanwhile, sales at the high end – above $500,000 – have seen and will continue to see constraints from tightened lending.
The prognosis? It won’t be the best year to be a home seller in 2011, but be patient as there are buyers on the sidelines waiting to jump in.
Homeowners: Underwater owners are a wildcard in the forecast next year. I don’t see the trend of walking away from a mortgage ending completely, but hopefully some of the positive economic news will create a much needed sense of security for these folks.
The transition we need
We have a lot going for us in 2011. Our state’s sheer size of nearly 37 million residents, expansion of the exporting and technology sectors, and an expected rise in personal incomes are all factors we have working for us. We are still the eighth largest economy in the world with a gross domestic product of some $1.8 trillion.
It takes a lot to keep us down, and it will take a lot to pull us back to normal. 2011 won’t be remembered as a breakout year of growth, but it will be the year we turned the economy back around – the year we needed to transition from decline to moving up.
As the market continues to move slowly through this recovery, I like to focus on the positives from time to time as a reminder that we’re not just going to make it out of this mess; we are making it out of this mess.
We’ll call them glimmers of hope. Some of these recent news bits have been:
Foreclosure freeze thaws a bit
Bank of America and GMAC Mortgage each recently said they would resume some foreclosure proceedings that had come under scrutiny for alleged botched paperwork. This is good news because about a quarter of all home sales have been foreclosures. Resuming the process keeps this segment of the recovery moving.
Some movement is better than no movement, which is what was happening when the major banks each put freezes on foreclosures in the midst of investigations around the “robo-signing” mess.
Construction of new homes increased
New home construction slows down significantly when the housing market is slow. That’s because builders don’t want to flood the market with too much supply when there’s an obvious lag in demand. That’s why the latest news that construction of new homes increased a bit in September is a good sign for the overall market.
At the same time residential construction has increased, builder confidence has also inched up, which is another good thing. Despite the overall rise in confidence, though, officials at the National Association of Home Builders are still cautious about future conditions.
We still have a ways to go, for sure. But these two recent news items show that movement is continuing. We knew this half of 2010 would be difficult after the jolt from the home buyer tax credit faded. But no one predicted the foreclosure freeze and robo-signing debacle (which really does have the potential to stall our road to recovery for an unknown length of time). The major banks seem dead set on working through it as quickly as possible so that we can return to a more reasonable pace – and that’s good news for everyone.
As expected, the countdown to the final closing days of the homebuyer tax credit has brought on more debate. Should the government create more programs aimed at boosting home sales or just stay out of it and let the market correct itself?
Many of the programs that were created to help homeowners and home buyers have been utter failures. Sure, the tax credit boosted sales while it was in place. But even now that conditions arguably are better for buyers – record low interest rates and lower prices in many areas – home sales continue to slog in many cities.
Another program may or may not help home buyers or struggling homeowners. But what happens when it ends? With the home buyer tax credit, we saw an artificial boost to the market, followed by the inevitable fall in sales as the immediate incentive went away.
So what’s next? As I’ve said in this column before, it’s all in the jobs, really. If the government really wants to help housing and homeowners then we need to think about security, incomes that are in step with mortgage payments, and a confidence in the future.
With interest rates as low as they are and the opportunities that abound for buyers today, it only makes sense that the missing key here is stability in incomes. Tax credit or no tax credit, life goes on. The reasons for buying and selling real estate always withstand the test of time – through markets good and bad. It’s a roof over your family’s head. It’s pride in ownership.
The government might do better to focus on helping those families who feel stuck – the ones who are underwater on their mortgages. They want to be owners. They have the means to pay. But they feel caught up in the waves of the mortgage mess that inflated the values of homes when they happened to buy. Another tax credit is not going to help them continue to pay a mortgage on a house they know they can’t sell without a loss.
Let’s get to the root of the problem, which isn’t necessarily home prices or the pace of sales. The real problem is a lack of stability and a lack of economic security. That’s the glue that holds together American ownership.
Former Speaker of the House Tip O’Neill stated, famously, that “All politics is local.” The same could be said for real estate.
This is true for many reasons, but for my purposes today, I’m going to focus on just one of them.
For my money, there’s nothing that compares to a local expert. Someone who knows the markets in which he or she works. Local agents know the neighborhoods in which they do business in a way that a big box company simply can’t. They know that home prices don’t vary simply from state to state, nor from city to city. They know that home prices are specific to neighborhood and that making sweeping generalizations about the real estate market in a given area might get you in the right ballpark, but they’ll rarely hit a home run.
I’ll give you an example.
Earlier this morning, while I was getting ready for the day ahead, I was watching a popular morning news program. On it, a nationally-recognized real estate figure was encouraging first-time homebuyers to use online tools like Zillow and Trulia to decide what a fair price for a home in a given area might be.
Now, I’m not going to knock Zillow and Trulia. Each of these tools is in business because it’s brought something new and innovative to the real estate table. But the fact remains that the information they make available for home values is very often wrong. Dead wrong. Sometimes, its values are dramatically below actual market price, sometimes they are far above.
These services simply cannot provide the perspective that (A) a human being and (B) someone who’s intimately familiar with an area can.
When you work with a real estate professional, work with someone who understands the subtle nuances of the neighborhoods in their market area. Work with someone who knows that homes on the side of the street with water views are going to cost more than those on the side of the street with no view (for the record, Zillow can’t tell the difference).
Work with someone who’s going to know which price constitutes a great deal for his or her clients.
At Intero, we pride ourselves on being this type of company. We take pride in being a hometown company whose agents live, work, and play in our market area. We take pride in knowing that our real estate professionals understand the market data that really matters, and we take pride in knowing that our agents know the tiny details that will make the biggest difference to you.
Each time a glimmer of positive news about the real estate market shows its face, economists, real estate professionals, and politicians alike begin to shout, “We’re on our way back up! Nothing but blue skies ahead!”
While I remain hopeful, I think assertions like this are foolhardy and irresponsible.
Anyone who lives in the State of California, or who’s considered moving here, knows that the real estate market for the past several years has been pretty grim. As quickly as California’s home values increased through 2005, they have since fallen considerably due to the economic downturn, and foreclosures have run rampant.
Recently, some improvements have been noted. In the last S&P/Case-Shiller home price index, for example, home prices in California were shown to have strong gains. In Los Angeles, prices rose 1.8% in January. There were gains in San Diego of 0.9% and in San Francisco, the gain was 0.6%.
This is terrific news, make no mistake, but I suggest that a more cautious view be taken.
Historically, spring home sales (and the spring market doesn’t wait til March to begin, I assure you) are the strongest of any throughout the year. Weather improves, making it more pleasant to look at homes, and people want to be able to buy a new home, so that they can move at the end of the school year, or what-have-you.
This year, we also have the Homebuyer’s Tax Credit driving more buyers into the marketplace. Add to this the fact that mortgage rates are still at rock-bottom levels, which have been made possible, in large part due to the Federal Government’s sizable activity in mortgage-backed securities, and the market for buyers is very, very attractive.
Here’s where things get sticky.
The tax credit is set to expire in just a couple of weeks. The pressure to buy before it expires will be gone. Strike one. The Federal government is about to remove itself from the mortgage-backed securities game. Mortgage rates are going to rise. Strike two. There’s wide speculation that foreclosures are going to get worse before they get better (unfortunately). Strike three.
At Intero, we choose to stay level-headed. We choose to stay in the game that’s currently being played, not the one that may or may not come in the near future. We are hopeful that things will improve, but until they do, you need agents who are dealing with reality. You need agents who will tell you like it is. Agents who know the markets in which they work and live. Intero are those agents.