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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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Real Estate

Corelogic: Only 1% of homes enter foreclosure in July

A booming housing market has closed the door on many foreclosures in the Golden State, with less than 1% of mortgages in trouble in July.

A better economy and fast-rising home prices have allowed more financially strapped homeowners to remain rather than walk away from their properties, according to industry tracker Corelogic.

In fact, California, which often battled Arizona and Nevada for the foreclosure title a few years ago, has become one of the best-performing states.

California’s 0.9% foreclosure rate is among the lowest, rivaling Colorado, Nebraska and North Dakota. Wyoming has the lowest rate at 0.4%, followed by Alaska, according to Corelogic.

In comparison, Florida has the highest foreclosure rate at 8.1%, followed by New Jersey and New York at 5.9% and 4.7%, respectively. The national rate was 2.4% in July.

However, California has the second-most foreclosures in the nation during the past year, with about 65,000 homes returning to lenders. But the figure is largely because of the sheer number of homes – and mortgages – in the state.

The Inland Empire – Riverside and San Bernardino counties – accounted for about one of every five foreclosures in the state (13,314) during the past year. The Inland Empire had the fifth-most foreclosures in the country, but only half as many as front-runner Atlanta with 26,000.

Los Angeles ranked No. 8, with 10,725 foreclosures, while Sacramento 6,058 since July 2012, placing the capital region at No. 15.

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Employment

Unemployment rate unexpectedly rises to 8.7% in July

California’s jobless rate inched higher in July, ending five months of falling rates, according to the state Employment Development Department.

The jobless rate increased to 8.7% in July, compared to 8.5% in June and 10.6% in July 2012. However, the state added 38,100 jobs in July, and gained 807,700 positions since the recovery started in February 2010.

Seven categories – including manufacturing, transportation, information, professional services, and education and health services – combined to add almost 50,000 jobs last month. Professional services added the most, with 15,000 positions.

Construction and government cut about 11,400 jobs in July, with construction – a bright area in recent months – eliminating 7,300 positions.

The Bay Area continues to enjoy the lowest jobless rates, with Marin at 5.3% in July. San Mateo and San Francisco followed at 5.7% and 5.9%, respectively.

Despite a better economy and job creation, more than half of the state’s 58 counties reported double-digit jobless rates in July. Agriculture-dependent Imperial County had the highest rate at 26.1%. The county has 19,800 job-seekers, more than double the number in larger Marin County.

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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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Real Estate

Foreclosures at second-lowest level since 2005

More homeowners are making their monthly mortgage payments and avoiding foreclosure, as fast-rising home prices are easing the number of underwater loans.

Mortgage lenders filed 25,747 notices of default during the second quarter, a 38.7% increase from the first quarter – but also the second-lowest filings in seven years, according to DataQuick. The just-completed quarter is off 53% from second-quarter 2012.

First-quarter filings were the lowest since fourth-quarter 2005, according to the San Diego-based industry tracker.

“At this point in the cycle, it’s fairly straightforward to see what’s going on,” says John Walsh, president of DataQuick. “Just do the math, it’s not calculus, it’s fourth-grade arithmetic. A foreclosure only makes sense when the home is worth less than what is owed on it. As home values rise, fewer homeowners owe more on their homes than the homes are worth.”

California’s median-home price climbed 14.7% to $344,000 during the second quarter, compared to $300,000 in the first quarter, according to DataQuick (the California Association of Realtors has a much higher median price for the quarter). And current home prices are up 27.4% from the $270,000 a year ago.

The state’s median price peaked at $485,000 in second-quarter 2007, and bottomed at $235,000 in second-quarter 2009, according to DataQuick.

San Francisco, Santa Clara and San Mateo counties boasted the lowest percentage of homes falling into foreclosure, while Fresno, Riverside and Solano counties were the highest.

Counties with the most-affordable homes – below $200,000 – were the most likely to endure foreclosures, according to DataQuick.

About 2.2 homes per 1,000 homes entered foreclosure in the most-affordable ZIP codes. Only 1 per 1,000 homes entered foreclosure in homes priced from $200,000 to $800,000, and a paltry 0.3 per 1,000 homes in neighborhoods of $800,000-plus properties.

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Economy

Cash collection disappoints, but deficit borrowing will be lowest in four years

California’s cash balance was 6% lower than estimates, largely with a drop in personal income taxes.

The state collected $4.8 billion in July, compared to projections of $5.1 billion, according to the State Controller’s Office.

“Reflective of the state’s improving fiscal health, California’s upcoming cash flow for borrowing is shaping up to be the smallest in four years,” says State Controller John Chiang. “While this month’s numbers disappoint, reaction must be tempered by the fast that July is often the state’s least significant revenue collection month.”

California State Controller John Chiang.
California State Controller John Chiang.

Personal income taxes were $273 million – or 7% — lower than projections in the state budget. Corporate taxes and sales-tax revenue were up 4.9% and 0.9% from projections.

The state ended the month with a cash deficit of $10.9 billion, covered with internal borrowing from other funds.

California will only need about $5.5 billion in short-term borrowing this fiscal year, the lowest in four years – and about half the amount in 2012-13, Chiang says.

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Employment

Unemployment rate at lowest level since fall 2008

California’s unemployment rate dipped to the lowest level since October 2008, as several industries helped create jobs in June.

The state’s jobless rate dropped to 8.5% in June, compared to 8.6% in May and 10.6% in June 2012, according to the state Employment Development Department. It’s the fifth-consecutive month drop of the unemployment rate.

California added 30,200 jobs last month compared to May 2012 – and 253,900 jobs during the past year, according to the closely watched report.

Seven categories added jobs during the past year, with leisure and hospitality leading the way with 70,800 new positions. Construction had the largest percentage increase at 5.5%, gaining 32,200 jobs.

A career center at a Macy's department store in downtown Sacramento.
A career center at a Macy’s department store in downtown Sacramento.

Construction had 615,500 employees last month, the eighth-consecutive month above 600,000. But the current construction job number pales compared to the peak of 945,100 in February 2006.

Bay Area counties fared the best with the monthly report, with Marin County’s 5.1% jobless rate the lowest in the state. San Mateo, San Francisco and Napa counties finished in second- through fourth-place, each with jobless rates below 6%.

Imperial County has the highest jobless rate at 23.6%.

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Employment

Federal extension benefits to end for 100,000 Californians on Aug. 11

California’s hard-hit jobless received another dose of bad news –they will lose their federal extension unemployment benefits — some in the next few weeks and all by the end of the year.

A declining jobless rate and improving economy has prompted the move, according to the state Employment Development Department.

About 100,000 people will be affected by the decision in the next few weeks. At least 275,000 more will lose assistance by the end of the year.

Cash-strapped California, which enacted budget cuts and furloughs in recent years, is faring much better during the first half of the fiscal year.
Cash-strapped California, which enacted budget cuts and furloughs in recent years, is faring much better during the first half of the fiscal year.

More than 750,000 people are collecting jobless benefits in California, with more than half receiving funds from the federal extension program.

California’s three-month jobless rate average has dropped below 9%, the minimum level required for the final 10 weeks of the Tier 4 federal extension, according to federal guidelines.

Anyone who files for the Tier 4 extension on or after Aug. 11 is not eligible for the benefits. Those who apply and are eligible for Tier 4 benefits before Aug. 11 will receive funds until Dec. 28.

Tier 4 benefits assist jobless residents who exhausted their 26-week, state-provided benefits and the first three tiers of the federal extension.

“The EDD knows just how vitally important unemployment benefits can be to out-of-work Californians and their families,” says EDD Chief Deputy Director Sharon Hilliard. “We want to make sure that our customers have as warning as possible about reduced benefits so they can plan their personal finances accordingly.”

All federal extension benefits will end Dec. 29. The federal effort provided unemployment assistance for up to 99 weeks.

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Economy

Golden State ends fiscal year $2 billion in the black

A better economy coupled and voter-approved tax initiatives greatly increased the state’s revenue last month – and during the just-completed fiscal year.

California collected $13.1 million in June, a head-turning $1.2 billion more than the governor’s projections, according to the State Controllers Office on July 10. And fiscal-year revenue finished at $100.1 billion – a nifty $2 billion more than projected.

It’s an about-face and dramatic turnaround after several years of shortfalls.

“Rising employment, economic expansion and voter-approved tax increases have generated revenues outperforming even the rosiest projections,” says State Controller John Chiang. “However, California’s history of revenue cycles should be a cautionary tale that informs our spending decisions and incentivizes policymakers to prudently pay down accumulated debt.”

California State Controller John Chiang.
California State Controller John Chiang.

Across the board, larger-than-expected gains generated the $1.2 billion increase. Corporate taxes were $373.5 million – or 21.5% — more than projections. Personal income tax and sales-tax revenue beat estimates by $644.6 million and $70.1 million respectively.

California’s better job growth helped boost personal income tax – and encouraged more spending by consumers.

California entered the 2011-12 fiscal year with a cash deficit of $9.6 billion, which has been narrowed to $2.4 billion at the end of June. Internal borrowing from specials fund is covering the shortfall.

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Employment

Construction helps hammer down jobless rate to lowest level since October 2008

California’s jobless rate dropped to 8.6% in May, the lowest level in almost five years – and the 10th-consecutive month of lower or unchanged rates.

The state’s jobless rate was 9.0% in April and 10.7% in May 2012, according to the Employment Development Department. It’s the lowest rate since October 2008.

California added 10,800 jobs in May, and 767,200 since the recovery started in February 2010.

About 1.61 million Californians were jobless last month – or at least collecting unemployment benefits – the fewest since November 2008, according to the closely watched monthly report.

The professional and businesses services category has added 73,400 jobs during the past year, the most among the seven categories with gains. Construction added 38,500 jobs, a 6.6% increase from a year ago, the largest percentage gain.

Manufacturing, once considered a bright point in the state’s anemic recovery, continues to struggle recently, losing 8,000 jobs during the past year.

Again, the Bay Area boasts the best job market, with Marin County at 4.5%, followed by San Mateo County at 4.9%. San Francisco and Napa counties reported jobless rates of 5.2% and 5.3%, respectively.

Agriculture-dependent Imperial County has the highest jobless rate in the sate at 22.8%.