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Featured Real Estate Social

Higher prices, fewer distressed sales in August

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.

About one of every four homes with mortgages is underwater.
About one of every four homes with mortgages is underwater.

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%.

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Featured Real Estate Social

CAR: Double-digit price gains will give way to smaller increases as more homes listed in 2014

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.

A home for sale in East Sacramento.
A home for sale in East Sacramento.

“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.”

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Featured Real Estate Social

Foreign, mom-and-pop investors help fuel investment market

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.

A house for rent in southwest Sacramento.
A house for rent in southwest Sacramento.

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.

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Featured Real Estate Social

Fewer home shoppers able to buy with fast-rising prices, higher interest rates

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.

The Bay Area is the most expensive market in California.
The Bay Area is the most expensive market in California.

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.

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Economy Featured Social

CalPERS enjoys 12.5% annual gains, thanks to real estate, stocks

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.