Few options for home sellers looking to downsize in SD

By SAMANTHA HENRY, The Daily Transcript

San Diego is about to experience increasing demand in homeowners looking to downsize in a market with few single-story options, local real estate professionals say.

They discussed this pent-up demand at a recent roundtable discussion hosted by The Daily Transcript and sponsored by the Greater San Diego Association of Realtors.

Those looking to downsize will also be competing with first-time homebuyers, who typically seek similar houses to buy.

“Everybody is starting to see in their lives changes that make you wonder, ‘What will we do? Will we go to a smaller home?’ And the desire is for one-story, single-family homes more so than condos. … And that’s the same competition for the starter young family,” said Leslie Kilpatrick, 2014 board president of the Greater San Diego Association of Realtors.

Trisha Daly, a Realtor with Re/Max Associates, said single-story homes are hard to find because the trend in the 1980s and ’90s was for developers to build two-story homes.

“It’s very difficult to find something like that. We need to push our single-level families to move up to the two-story, and then bring the two-story [owners] into their single-level homes,” Daly said.

Jeffrey Douglass, branch manager at Pacific Sotheby’s International Realty, said some people are downsizing by moving downtown and into buildings that have elevators.

All infill projects are going vertical, said Ashley Lunn, team leader at Keller Williams San Diego Metro. She cited a project under construction in North Park that has 70 steps from the street to the first unit.

Developers should consider making their projects more senior-citizen friendly, Lunn said, or they’ll have a hard time selling something that isn’t accessible to everyone.

Pent-up seller demand is also coming from those who got out from underwater due to price increases, and Kilpatrick said she expects inventory to come back on the market.

The best time to put a house on the market is between now and May, “before the market gets flooded with a lot of inventory,” Daly said.

But Peter Martin, a Realtor at Pemberley Realty, said sellers won’t enter the market until they’re satisfied that they’ll get an acceptable offer.

While Kilpatrick and others agreed that the market has seemed busy, Lunn said the numbers for January don’t reflect that frenzy. For the past decade or so, January has averaged about 2,500 homes sold, and as of Jan. 30, there were only 1,550, she said.

“It’s off — extremely,” Lunn said. “What I think is happening is we’re going to make it up immediately — in February and March. All of this activity that isn’t going on is going to pop.”

Lunn said she also expects to see an immediate pop in prices, which will trail off as inventory approaches 10,000. To have a balanced market, there would need to be closer to 15,000 units, she said.

Leo Sullivan, principal of Sullivan Lawyers, agreed that there will be a pop in prices, and he expects a long-term downward trend afterward.

“I don’t think we have the employment base anymore to support the current prices, number one, and number two, we’re having this outward immigration of people,” Sullivan said.

With more than 24 months of month-over-month increases in prices, Lunn said, she’s nervous about a dip.

“You can’t sustain month-over-month increases at the rate we have forever,” Lunn said. “Typically, once we appreciate 25 percent, we go down a little bit, and we’re close to that number.”

Cory Shepard, general manager of Coldwell Banker West, said the typical recovery to a recession is about five to seven years.

The housing market bottomed about February 2009, but Sullivan said he doesn’t expect history to repeat itself.

“I think we’re about five to seven years away from another recession because even though statistically the recession bottomed out four to five years ago, in reality, it didn’t,” Sullivan said.

Douglass said he expects interest rates to increase in the long term, which is creating some urgency now as buyers realize that the bottom was a while back and an increase is in the future.

Judy Bramer, a Realtor at Re/Max Associates, said she, too, has seen buyers rushing to avoid higher interest rates.

Shepard said he expects an upward pressure on interest rates this quarter as the Federal Reserve pulls back on its bond-buying program, and that he wouldn’t be surprised if there is a 1-point increase in interest rates to 5.5 percent by the end of the year.

Kilpatrick said buyers and sellers get caught up in trying to time the market when they should act on their own personal circumstances.

“When we had that big run-up last year and that burst of excitement — those conditions had existed for months. Months. And then suddenly, a few people started acting and it picked up steam,” Kilpatrick said. “I think the best job we can do is educating people who are sellers on how to sell in the market they’re in and when you should buy is when you can.”

Buying a house is a life investment, she said, and while people are constantly analyzing when the market can go up or down, “at the end of the day, if you can’t buy because you don’t have a job, it’s immaterial to you.”

Real estate agents have taken on the role as a counselor for their clients, and are no longer typical sales people.

“When I was in business 20 years ago, it was much more sales, and now it’s much more of a service and the agents that are [successful] now, or in the future, are those who can take this vast amount of raw data that’s out there and walk people through and decide what’s relevant and what’s not,” Douglass said.

Consumers have access to a lot of information through the Internet, and Realtors often have to guide their clients away from some sites, said Alex Rojas, broker/owner at Shore Point Real Estate.

Advising clients can feel like therapy, Kilpatrick said.

Real estate transactions occur around transitions in people’s lives much of the time, she said. Sometimes those transitions are positive, such as marriages or births, and other times they are about divorce or job loss.

“Love and loss, that’s what we’re dealing with,” Kilpatrick said. “We’re dealing with people who are going to do major financial transactions during stressful times, and one of the most important things a good Realtor can be is a good counselor, a clear head, somebody guiding you through what you can and cannot reasonably do in your situation and achieve the outcome you’re looking for.”

Kilpatrick said that’s why she is resistant toward statistics: They don’t matter if it’s not the right time in someone’s life to buy or sell.

Daly said she also goes on many “counseling interviews” with Bramer to lay out options for her clients and decide what’s best for them.

Daly said she advises her young clients to be aware of a home’s potential resale or rental value, just in case.

“I know I’m talking myself out of business, but I always tell people, ‘Let’s try to get you something that when you outgrow it or get transferred or life changes, let’s see what the rental market would be — if it would cover the mortgage and HOA fee, if there is one. That way, when you move, you’ve started your retirement,’” Daly said.

She also often reminds her clients to breathe when everything seems to be moving so fast.

“Stop the madness,” Daly said, “just for a second.”

 

County existing home prices up 20% in 2013

By Daily Transcript Staff Report

San Diego County existing homes saw a 20 percent gain in the median price in 2013, with single-family homes selling for a median of $457,000, according to the Greater San Diego Association of Realtors (SDAR).

“We can breathe a sigh of relief as we look back at the 2013 housing market,” said 2014 SDAR President Leslie Kilpatrick. “Strength and stability are what we can hope for in 2014.”

Single-family home prices rose 19 percent in 2013 — a median price of $457,000. Condo and townhome prices increased by nearly 29 percent, reflected by a 2013 median price of $295,000. The total number of home sales last year was 36,240, virtually the same as 2012.

The December median price of single-family homes in San Diego County was $478,500, an increase of 2 percent from the previous month, and nearly 14 percent from December 2012. The median price of condos and townhomes in December ($300,000) was down slightly from November, but is 19 percent higher than the same time last year.

The number of single-family home sales in December was down only slightly from November, but condo and townhomes saw a healthy 6 percent increase in December sales over the previous month. Sales were down, however, from one year ago.

In December, the ZIP codes with the most sales of single-family homes include: 92028/Fallbrook – 53; 92057/Oceanside – 42; 92128/Rancho Bernardo – 41; and four ZIPcodes posted 37 sales: 92021/El Cajon, 92056/Oceanside, 92114/Encanto, and 92127/Rancho Bernardo.

The most expensive San Diego County listing sold last month was a 5-bedroom, 5-bath, 8,500-square-foot home in La Jolla that sold for $16.25 million.

SDAR’s housing statistics are compiled monthly from the Multiple Listing Service (MLS).

Increasing interest rates, more short sales in ’14

By SAMANTHA HENRY, The Daily Transcript

Next year may see increasing interest rates, stabilizing prices and another wave of short sales.

That’s what a group of local real estate professionals discussed at a recent roundtable discussion hosted byThe Daily Transcript.

However, Century 21 Horizon owner and broker Joe Carta said he expects interest rates to go back down into the 3s in 2014 — a prediction that was challenged by other roundtable participants. He also said that a drop in interest rates would be a good thing and would allow the first-time homebuyer to have a chance in the market again.

“We still need that because the first-time homebuyer is a step-up homebuyer five years from now,” Carta said.

He added that interest rates are manipulated for one reason: jobs, and for every one escrow that opens, 30 jobs are put in motion.

“As these rates go up, unemployment is going to go up with it,” Carta said.

Vanessa Ruelas, owner and Realtor at Twin Cities Realty, disagreed with Carta and said interest rates “need to be above 5 [percent].”

“The sense of entitlement in these first-time homebuyers who are not responsible going through and holding their loans is unacceptable,” Ruelas said. “The sense of entitlement for these kids nowadays has to be taken away. It is the American Dream. It is something that has to be earned — it is not a right, and I think that is one of the biggest problems we’ve had.”

Alisha Sirois, senior loan officer at Guild Mortgage, said changes in interest rates affect those she has spoken with and who were putting offers on houses when the rates changed.

In June, people who called her on a Monday were told the interest rate was 3.25 percent, and by Friday it had gone up to 4.25 percent, increasing their payment by $250 per month.

“It was devastating,” Sirois said. But to those who call her for the first time and hear 4.25 percent, “it doesn’t mean a whole lot,” she added.

Alex Rojas, ShorePoint Real Estate owner and broker, said interest rates were too low at the beginning of the year.

“Too many people could afford too much property,” Rojas said. “From my sample … I would price [my listings] above any recent comp and I was getting over 20 offers, and I was getting $30,000 to $40,000 over the list price, and that is not OK.”

Rojas said he was one of the few who were happy the interest rates went up a full point — because it slowed the market down and brought it to a healthier level.

Cameron Herndon, Realtor at Keller Williams Realty, said increasing interest rates has, historically, been a good thing.

“Typically, when we look back to ’95-’96, maybe ’85-’86, interest rates started going up and real estate starting going up,” Herndon said, referring to a long-term change.

But in 1995, there were other factors backing an increase in interest rates, including a great economy with people making more money, Herndon said.

Ruelas predicted that interest rates will be at 6 percent by the end of the second quarter in 2014, and said that there’s going to be “another huge wave of short sales.”

“There’s no doubt about it — because the loan modifications that were already done and accepted — they’re already failing again,” Ruelas said. “Our economy is not doing well.”

She said 501 people in the 92592 ZIP code – the Temecula area — were late on their mortgage payments in November. She said her company has done short sales where there are no groceries in the house and looks at the loan and asks “why on Earth” that person is an owner.

“An agent, a lender, put them in irresponsibly into something that with any change in the economy, they were going to lose it,” Ruelas said. “So we’ve got to get interest rates up, we’ve got to get rid of people that are buying beyond their means and, most important, teach them how to save — they you can get into conventional.”

Loren Sanders, Realtor at Sea Coast Exclusive Properties, said real estate lenders shouldn’t take all of the blame, and he said first-time homebuyers are being more conservative than in the past.

“The whole country was ‘over-lifestyling.’ It wasn’t just real estate — so they used their real estate to over-lifestyle and then when they had a problem, there was nowhere to go,” Sanders said. “That was the biggest difference that I’ve seen in all my time doing real estate. People sucked equity out of property where, in the past, when they got in trouble they could go back … and pull [money] from there.”

Sam Khorramian, partner at Big Block Realty, agreed with Ruelas that 2014 will see more short sales.

“One, the average house in San Diego that was going for $200,000 is now going for $400,000, which is very close to what we were selling … at the peak,” Khorramian said. “People buy because of benefits of rate or because of benefits of value. And if value is now back to almost where it was at our peak, rates are not going to stay where they are forever.

“I think that with values being where they are and people having a lot of uncertainty with Obamacare and everything, I think that next year is going to be a rude awakening for a lot of us.”

It took more than 13 months for values to go from $200,000 to $400,000 in the last upswing, Khorramian said.

“We didn’t learn our lesson. We did it again and twice as fast,” Khorramian said.

Sirois said the financing on the properties were a “huge contributor” to the short sales from 2007 to ’09. Loans made from 2005 to ’08 still had a “triggering factor,” and a lot of those short sales were predicated by an interest rate adjustment or interest-only payment adjustment becoming an amortized payment, she said.

“So there was a significant change in an existing homeowner’s monthly payment on their mortgage that upset their household, that made them consider whether to keep their house or not,” Sirois said.

At the time, those people didn’t have the option to sell because they may not have had any equity. Now, almost all loans made since 2009-2010 have been 30-year fixed-rate loans, Sirois said, and, due to increasing home prices, homeowners have the option to sell if they can no longer afford their house.

“So the borrowers know what their mortgage payment has been and what it’s going to be. And so there’s no triggering event that makes somebody have to make a decision right now because their mortgage payment just went up $700 a month and they don’t want to continue to pay more for the house they’ve lived in,” Sirois said.

But Khorramian said buyers are making a smart choice in that area, but bad choices elsewhere when they pay $40,000 over a property that’s already overpriced. Rojas said the growth in 2013 isn’t sustainable and that he doesn’t expect prices to appreciate by 20 percent year-over-year in 2014.

“We bounced off the bottom and now we’re going to see something different going forward,” Rojas said.

Homebuyers, sellers may be surprised come spring 2014, experts say

By SAMANTHA HENRY, The Daily Transcript

Local real estate professionals took a look back on 2013 while predicting what’s to come in 2014 at a recent roundtable discussion hosted by The Daily Transcript.

The biggest change for buyers and sellers in 2014 will be the absence of investors come spring, they said.

“2013 started with low prices and low interest rates and short sales and REOs — and investors were buying them up like crazy,” said Joe Carta, owner and broker at Century 21 Horizon. “Then a couple things have happened — in the middle of the year, toward the second and third quarter, interest rates started to rise, prices started to rise, there were fewer and fewer short sales, fewer and fewer REOs, and now investors are writing offers to property owners not banks and short sale lenders.”

San Diego is difficult to generalize because of the different micro-markets, said Marty Conrad, regional vice president at Coldwell Banker. He said he’s seen a slowdown in the number of units the past few months, and the average time on the market is about the same as it was six months ago.

The spring of 2013 was “absolutely amazing,” said Cameron Herndon, Realtor at Keller Williams Realty, but it was just a short-term change.

“What I’m worried about is come this spring, you have a lot of buyers and sellers — especially sellers — thinking, ‘Oh, we’re going to have an amazing spring like last spring.’ But if investors aren’t coming back … then I don’t see us having that spring again,” Herndon said.

He said buyers are waiting for the spring in hopes of seeing more inventory, and sellers are also waiting in hopes that the spring will bring another increase in prices.

Loren Sanders, Realtor at Sea Coast Exclusive Properties, said it’s up to those in the industry to inform buyers and sellers of the odds for another spring like last year.

Conrad said that local professionals predicted that the San Diego market would come back strong and without notice at a roundtable at the end of 2012 — and it did. But it wasn’t because of the economy. People realized it was a good time to buy and followed each other, “until it didn’t make sense anymore and then they put the brakes on.” And about three to four months ago, there was a price reduction from sellers.

Marie Jebavy, chairwoman for the North San Diego County Association of Realtors, said a normal market in Vista, Oceanside and Carlsbad sees about 33 to 40 listings per day, and it has 18 to 20 listings and is selling about 10 to 12 of those. Inventory is increasing and sellers are reducing their prices, she added.

Buyers stepped back when interest rates increased in the summer, and Herndon said many investors left right around that time, as well.

A big change has been sellers waiting the extra two to three weeks to get 20 to 30 percent more than what they may have gotten from an investor, Carta said.

Dan McAllister, treasurer-tax collector for San Diego County, cited a report from UCLA, which said Blackstone (NYSE: BX) picked up 3,250 single-family detached homes in Southern California in the past six months.

“Those are not homebuyers. Those are renters. And so the concern at UCLA is and was that maybe there’s a false foundation here in the minds of a lot of people who think this economy is on an uphill trajectory, given that 20.9 percent [increase in home prices],” McAllister said.

Herndon added that investors hopefully and theoretically know something that others don’t know.

“They’re buying up all this property and they’re not cash-flow properties, these are equity properties that they want to keep for three to five years … and then unload eventually,” Herndon said. “Which means they’re going to hopefully increase their equity — which means they believe that the market, that we’re going to come out of this recession finally.”

The county reached an all-time high for collection rates at 98.6 percent, McAllister said. There was about a 3 percent overall increase in valuation for tax purposes and is projected to bring in $4.8 billion from collections — up from $4.55 billion last year. The number of taxable parcels in the county has reached a new record over the past nine years, up about 1,500 from last year to 981,829.

Alex Rojas, owner and broker at ShorePoint Real Estate, said most of his clients are investors. He’s seeing infill properties by the beach, with developers tearing down old properties and seeing how many homes can be built there.

“We have new construction set up from 2012, 2013, 2014, 2015. Looking forward, we have a real healthy perspective as to what our demand is going to be moving forward. We also still have a small pool of investors that are buying notes and trying to take those properties over and sell them out as a flip property,” Rojas said.

McAllister agreed with Rojas. “There’s not a lot going on in some areas, but there is some in other areas.” There used to be land buyers who purchased large chunks of land, but there aren’t big chunks to buy anymore, he said, and those buyers are now being “very cautious and careful” as to what they do buy.

“Some of the areas in Eastlake and South Bay and San Marcos … they’re taking them 10 to 20 lots at a time instead of 200 lots at a time and they’re doing smaller, incremental projects,” McAllister said.

Alisha Sirois, senior loan officer at Guild Mortgage, said the change she’s seeing is an increase in step-up buyers as prices appreciate. She also said the market has switched from a seller’s market to a more traditional market, with sellers waiting a little bit to get a good, qualified offer.

Vanessa Ruelas, owner and Realtor at Twin Cities Realty, said she thinks it’s turning into a buyer’s market in Riverside County. Buyers are starting to have choices on houses, which are sitting 30 to 45 days before getting a quality offer.

“Prices are softening, the buyers are few but the buyers that are shopping are qualified,” Ruelas said.

Gary Nordstrom, owner of The Nordstrom Team, said insecurity has kept buyers from the marketplace. That insecurity is resulted from the government shutdown, he said, and health care reform contributes to it because people don’t know what their personal insurance price is going to be, he said.

“I don’t know of anyone who can come to the table and say, ‘Yeah, write a loan for me and I want to buy this house,’ when they don’t know what they’re going to be paying in health care,” Nordstrom said. “To me, that is an insecurity that is not going to go away for a long time, simply because I think we’re just seeing the tip of the iceberg relative to health care costs.”

Jebavy and Rojas agreed that the Dodd Frank regulations are worrisome for 2014. Rojas said it will restrict lending with the restriction on the debt-to-income ratio.

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