Fast-rising home prices are helping financially strapped homeowners, as fewer mortgages are underwater, pushing equity sales to the highest level in August since late 2007.
Equity sales – basically deals where homeowners walk away with money in their pocket – increased to 84.7% in August, compared to 82.9% in July and only 62% in August 2012, according to the California Association of Realtors. Equity sales have declined in 18 of the past 19 months.
Equity sales are now at the highest level since November 2007, and short sales were only 10.2% of the market in August, the lowest percentage since February 2009.
Twenty-five of the 38 counties tracked – some counties have too few sales to report – had a monthly decrease of distressed sales in August compared to July, with several counties in the single digits.
Siskiyou and Lake counties had the largest percentage of distressed sales at 37% and 34%, respectively. San Mateo County had the lowest at 3%.
California home prices will increase at a more modest pace in 2014, as primary homebuyers rather than investors become more prevalent in the market.
The state’s median home price – meaning half the homes sell for more, the other half for less – will increase 6% in 2014, compared to the projected 28% rise this year, according to the California Association of Realtors. California has enjoyed double-digit gains for the past several months, as foreclosed homes and investors flock into the market.
Annual home sales will improve 3.2% to 444,000 units, a slight gain from projected sales in 2013. Home sales are expected to be down a modest 2.1% this year compared to 2012.
“The housing market has improved over the past year, and we expect the trend to continue into 2014,” says CAR president Don Faught. “As the economy enters the fourth year of a modest recovery, we expect to see a strong demand for homeownership, as buyers who may have been competing with investors and facing an extreme shortage of available housing return from the sidelines.”
Many communities are reporting faster-than-average home sales in recent months, especially in the Bay Area where almost half of the homes listed are sold within two weeks, according to a recent Redfin report.
“We’ve seen a marked improvement in housing market conditions in a year with the distressed market shrinking from one in three sales a year ago to less than one in five in recent months, thanks primarily to sharp gains in home prices,” says CAR vice president and chief economist Leslie Appleton-Young. “As the market continues to improve, more previously underwater homeowners will look toward selling, making housing inventory less scarce in 2014. As a result of these factors, we’ll see home prices moderately from the double-digit increases we saw for much of this year to mid-single digits in most of the state.”
More than one of every three home investors plans to sell their properties within a year, according to a recent report from the California Association of Realtors.
Fast-rising home prices – double-digit year-over-year gains for 13 consecutive months – historically low interest rates and a recently struggling stock market have encouraged more investors to look at real estate during the past four years.
Three of every four investors are considered mom-and-pop buyers, owning less than 10 investment properties – with about half of those owning two to five homes.
About one of every four investors was a foreign buyer, with many from China, India and Mexico.
The median-home price for an investment property was $272,500, allowing two-thirds of investors to pay cash. And 80% of those investors spent at least $10,000 in repairs for those properties. Homes under $250,000 required a larger percentage of repairs than those above $500,000, 4.2% vs. 3.4% of the purchase price.
Finally, two-thirds of investors manage their own properties.
California homeowners are cheering double-digit price gains, but home-shoppers are jeering, as more are unable to purchase their piece of the American Dream.
Fast-rising home prices coupled with higher interest rates – 3.64% today vs. 2.82% a year ago — have greatly curbed the number of families able to buy homes in recent months.
Only 36% of homebuyers could afford the median-priced home during the second quarter, the first time affordability dropped below 40% since third-quarter 2008, according to the California Association of Realtors.
Affordability was at 44% in the first quarter, and 51% in second-quarter 2012, according to the industry association.
How much does fast-rising home prices affect affordability? The average homebuyer needed to earn at least $80,000 to qualify for the median-priced home of $415,770 during the just-completed quarter.
Homebuyers who earned $62,400 per year could afford the median-priced home — $316,490 – a year ago.
The Bay Area, as always, remains the most difficult market for homebuyers. Only 17% of homebuyers could afford homes during the second quarter in San Francisco and San Mateo. A year ago, about one of every four homeowners could afford a home in those counties.
Santa Barbara was the second-least affordable market at 18%.
Madera County – just north of Fresno – remains the most affordable market, at 71%. But even that county’s affordability has dropped from 77% a year ago.
Real estate and stocks generated a nifty performance during the just-completed fiscal year for California Public Employees’ Retirement Service (CalPERS).
The massive pension fund enjoyed a 12.5% gain during the fiscal year, outperforming its benchmark by 1.5 percentage points, officials say. The annual increase easily outpaces 20- and 25-year returns, and allows CalPERS to meet its current and future obligations for retirees.
Stocks led the way, with a 19.0% increase, followed by private equity at 13.6% and real estate at 11.2%. Income-generating properties — such as office, industrial and retail – accounted for much of the gains in real estate.
“When things got rough, we didn’t panic,” says Joe Dear, chief investment officer for CalPERS. “We stuck with our exposure to growth assets and applied the lessons we learned from the past. The numbers show is that our approach is working.”
CalPERS assets topped $257.8 billion at the end of June.
“CalPERS is a long-term investor and we try to not focus too much on one year of performance,” says Henry Jones, chairman of the CalPERS Investment Committee. “But, obviously, 12% is a great number and we’re pleased with the performance.”
CalPERS is the nation’s largest pension fund, administering benefits for 1.6 million current and retired public workers.
Big cable deals, an improved revenue-sharing pact for smaller-market teams and a strike-shortened season helped increase NBA team values by 30% to $509 million.
California’s four teams – the Los Angeles Lakers and Clippers, Golden State Warriors and Sacramento Kings – enjoyed a combined league-beating 35.5% gain over the past year, according to a Forbes magazine report in January. The four teams have a combined value of $2.51 billion, led by the $1 billion tag for the Lakers, the second-richest team, behind only the New York Knicks at $1.1 billion.
The 16-time NBA champion Lakers – led by Kobe Bryant and Dwight Howard — boast the biggest payroll in the league, thanks in part to a 20-year cable deal with Time Warner Cable valued at $3.6 billion. The Lakers had revenue of $197 million, with operating income of $47.8 million – both are the second-best in the NBA.
The Golden State Warriors finished at No. 8, with a value of $555 million, a 23% increase from a year ago. The Bay Area team had revenue of $127 million and operating income of $29.1 million.
The Sacramento Kings, currently the center of multiple offers for about $520 million, are valued at $525 million, a head-turning 75% boost from the 2011-12 season. The Kings had revenue of $96 million last year with a paltry $2.6 million of operating income – or about the equivalent of eight games played by all-star Bryant.
The Kings could move to Seattle if businessmen Chris Hansen and Steve Ballmer, president of Microsoft Corp., are the successful bidders, which should be known in the next several weeks. Or a competing group could purchase the Kings from the Maloofs and build a new arena in downtown Sacramento, the latest plan for the troubled team.
The Los Angeles Clippers – headed by Chris Paul and Blake Griffin – finished at No. 18 with a value of $430 million. The Clippers, longtime on-court disappointments, had revenue of $108 million last season, with operating income of $9.1 million.
Only the Clippers were the only California team valued at less than the league average of $509 million, a 30% increase over last year.
A new collective-bargaining agreement, which cut the cost for players from 57% to 50%, an increase in revenue from cable television deals, and new and renovated arenas are the primary reasons for the impressive one-year gain. The labor agreement also boosted the dollars that high-revenue teams must provide to low-revenue teams, such as the Los Angeles Lakers sending money to teams like the Sacramento Kings.
California has the nation’s fourth-highest state and local tax burden as a percentage of personal incomes in 2010, and that was before voters favored Proposition 30 that increases sales and income taxes last fall, according to the latest national survey by the Tax Foundation.
Californians’ tax burden was 11.2% in 2010, the latest information available from the nonprofit group. The Golden State was only better than first-place New York at 12.8%, New Jersey (12.4%) and Connecticut (12.3%). And on a per-capita basis, California’s state-local tax burden was the sixth highest at $4,934.
Arizona and Nevada – bordering states that aggressively advertise and recruit companies from California – were among the lowest in the nation, at 8.4% and 8.2%, respectively. Arizona finished at No. 40, while Nevada ranked No. 42, or two of the states with the lowest rates.
And Californians agreed to boost the state’s sales tax rate by a half-cent and increase additional income taxes on the highest-income residents in the state. Prop. 30 is expected to raise about $6 billion per year, though the state would still remain lower than third-place Connecticut, according to the Tax Foundation.
California’s high tax burden is largely based on high sales, income, gas and corporate taxes, while property taxes are relatively low, thanks to Proposition 13.
Nevada has the nation’s lowest corporate and personal income tax rates, while Arizona finished at No. 24 and No. 17, respectively.
Alaska had the lowest overall state and local tax burden at 7.0%.
Check the complete report at http://taxfoundation.org/article/facts-figures-handbook-how-does-your-state-compare-0