Confused? Just think about it. If first time home buyers purchase entry level homes, that allows the entry-level homeowners to sell and move-up to a mid-level, move-up market. By purchasing those homes, the move-up market is able to sell and ultimately purchase homes in the luxury arena. It’s a much-needed domino effect that could catapult our market’s rebound.
Well I talked about it eight months ago but at least you can’t accuse me of being a day late and a dollar short. I guess in this case I was a day (or eight months) early and, as my wife would say, still a dollar short. But it’s finally happening and numbers released over the last two weeks are certainly proving that.
First, let’s look at NAR’s release this week of its March existing home sales. Now of course some media did use the nationwide decrease in sales as an opportunity to take a negative spin but there were a lot of positives in this news. First, nationally, prices rose from February to March by 4.2 percent which is much higher than the typical 1.8 percent seasonal increase between those two months.
Second, housing inventory at the end of March fell 1.6 percent to 3.74 million existing homes available for sale which represents a 9.8 month supply at the current sales pace.
In the West, existing home sales declined 4.2 percent to an annual rate of 1.13 million in March but, and this is a big but people, are 18.9 percent higher than last year at this time.
Now what do all of these numbers mean? Well the fact is, the share of lower priced home sales have trended up, indicating a return of many first-time buyers. Sales in the upper price ranges remain stalled but there are two reasons for this. First, jumbo loans still are difficult to obtain right now—though that may change in the second and third quarters thanks to the government’s work to restore this—and second, now that first time home buyers are once again entering the market, it will take some time for the domino effect to take shape onto other price ranges.
Another interesting note, the Mortgage Bankers Association this week released its Weekly Mortgage Applications Survey for the week ending April 17. The index showed an increase of 5.3 percent from the previous week and that was a 76.9 percent increase compared with the same week a year ago. Yes, 76.9, that’s not a typo.
Whatever you think about what our government is doing to revive our economy, it seems some of the early work like the first time home buyer tax credit is working. Earlier this week Inman News reported that the preliminary numbers from the IRS suggest 1.4 million taxpayers will claim the federal first-time home buyer tax credit on their 2008 tax returns, meaning the program is likely to meet or exceed the 2 million target set by lawmakers before it ends November 30, 2009.
Finally and I think this is probably most notable, the Wall Street Journal reported this week that prices have fallen back into line with what the typical household can afford to pay in most of the U.S. The report showed that home prices are dubbed “fairly” valued in 202 of the 330 markets studied. That means the average price level is within a band 14% above or below the historical norm. Twenty-one markets are “overvalued” or between 14% and 34% above the norm. And 106 markets are considered “undervalued” or more than 14% below the norm. Take a look at this graph which showcases where we were in the early part of the decade as compared to today:
Now I know some of you are scratching your heads and saying, how is the drop in property value a positive thing. But the fact is that though the ride was nice in the big real estate boom of the early 2000s, we couldn’t sustain those types of record appreciation levels without eliminating certain consumer niches, including first time home buyers. Now that levels are back within range, the first time home buyers are once again able to reenter the market which is why we are seeing such a strong surge in sales in that level.
It’s just a matter of time before we weed through the remaining banked owned inventory and we should begin to see prices stabilize. Once we see that, the remaining areas of the market should begin to see an upswing, too.
With that said, let’s take a look at this week in real estate:
- Auburn—The energy level has picked up and we are seeing many offers being written but the cash ones seem to be winning even if they are considerably lower than those with a loan. Our REO Agents are being given many BPOs to process but have not been given the go ahead to put them on the market. We are having a little challenge with the verbiage in the listings that state there must be a pre-approval from a direct lender even on FHA/VA loans and yet FHA/VA loan letters must be called “prequel” per HUD.
- Dixon/Davis—We had three new banks call with listings, no referral, and using CAR forms! Inventory low, multiple offers on everything. Short sales are still frustrating and slow. Buyer calls are high. We’re all waiting for the REO listings to be released! Agents are working hard and taking on the challenge of this market with good attitudes and team efforts.
- El Dorado Hills— The inventory is about the same but the pendings in the last 30 days have doubled from previous months. Open house activity is strong and buyers seem more serious. We're not seeing many multiple offers. We had three short sales we've been working on for several months get approved but overall the short sale process is dragging on for months. We've been waiting nine months on one transaction.
- Elk Grove Laguna—We have had seven new listings and 15 sales. We held at least three open houses one of which had 15 people through and another had six. We have continued to see multiple offers on properties. As for short sales we had one approved in two weeks—with Kathy's package Wells Fargo has committed on another to approve or reject in 37 days. Activity continues to remain strong with high demand for homes in the south county.
- Placerville—Inventory has shrunk some, partially due to withdrawn and cancelled listings. These seem to be sellers removing their homes from the market because they don't need to sell. No multiple offers. Our walk ins have tripled and are serious buyers.
- Rocklin/Lincoln—The energy level has picked up and we are seeing many offers being written but the cash ones seem to be winning even if they are considerably lower than those with a loan. The Agents are finding that the well priced homes are gone within a day or so of the listing.
- Roseville/Granite Bay—The listing inventory is growing and the sales inventory remains steady. We are not seeing many multiple offers at this time. Of the nine homes held open, traffic ranged between 2-27 groups. Many short sale offers out without approval. We saw activity on two of our Previews listings. We are waiting patiently for the REO tsunami to hit.
- Sacramento Fair Oaks—The listing inventory in the office has been down this past month. Also overall in all areas of Sacramento. In terms of multiple offers, there are a lot. Every Agent in the office meeting raised their hand about multiple offers—around 40. Open house traffic is pretty steady but depends on the location. I had a few Agents, one in Arden Park who stopped counting after 40 potential buyers came through. Others had around five or six. REO sales are good if you have any inventory left. They have sold very quickly. Yes a lot of our inventory is short sales and the same thing with them.
- Sacramento Metro—We’re seeing good inventory in our primary marketplace. Properties are selling within 30 days. We have had 21 new listings in the last two weeks and 50 sales in the last two weeks. We have had a total of 50 ratified offers in the last two weeks. It’s busy!
- Sacramento Sierra Oaks—Listing inventory is increasing while sales inventory is steady. It seems that in the price range of under $100,000 and up to $300,000 there are many multiple offers. We are starting to notice more activity in our higher end listings. For the rest of the market, inventory remains low.
- Tahoe/Truckee Region—Inventory Summary: The listing inventory for the Tahoe-Truckee market increased slightly for the week bringing the total active listings to 2,035. Currently, there are 1,418 residential properties and 617 lots/land listed for sale. Of the active listings, there are 113 properties listed as short sales, (5.6%) and 57 properties listed as REO, (2.8%). Based on the current inventory and sales year to date the market has roughly 11-months of inventory available. Sold Summary: On a year to date basis there have been 189 properties sold in the market as compared to 276 for the same period in 2008 which is 31.5% reduction in sales. For the week of April 13th to 19th, there were 11 properties sold all priced below $750,000. Activity Summary: Open house activity continues to be hit and miss as this is a very slow time of year for visitors to the area. Once the summer season hits we should see increased activity. The Sales Associates are seeing increased buyer activity with multiple showings at all price points. Activity on short sales and REO’s remains brisk with multiple offers occurring. We had two properties go into escrow last week. It is apparent that buyer interest and activity is picking up as there are continued great values in the market. Lake Tahoe and Truckee properties are priced well and present great opportunities for interested buyers. As the summer season approaches, we are anticipating more and more buyer activity.
Next week will bring some more interesting news. Check out this article that ran Monday in The Wall Street Journal: http://www.washingtonpost.com/wp-dyn/content/article/2009/04/19/AR2009041901875.html. Once we see the results of new home sales (existing home sales were already reported), we should have a better indicator of where we are. I’ll leave you with this excerpt from the The Wall Street Journal’s story:
“Whatever the March numbers say, there are good reasons to think that home sales will improve as the spring selling season gets underway. Anecdotal reports suggest that low mortgage rates and an $8,000 first-time home-buyer tax credit are coaxing buyers back into the market. And while foreclosures are set to rise as banks begin to move on delinquent homeowners, that actually could boost home sales as banks auction homes for whatever the market will bear.”
The market is without a doubt changing and we may finally be seeing the end of the great housing challenge of the 2000s. I for one am very happy to see it.
Until next week,
Have a great one,
Bob Bronswick
President
Coldwell Banker Residential Brokerage Sacramento/Tahoe
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