Full Article: Call It a Comeback for Risky Home Buyers by: ANNAMARIA ANDRIOTIS
Full Article: Call It a Comeback for Risky Home Buyers by: ANNAMARIA ANDRIOTIS
Full Article: http://spresd.com/?p=2154
Thousands of investors who bought and held San Diego County apartments became…
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.”
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).
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.
Shore Point Real Estate
928 Hornblend St #4
San Diego, CA 92109
CA DRE License # 01400985