Why Waiting Out the Market May be a Fool’s Game

Should you buy a home now, or wait?

Let’s face it; nobody wants to purchase a home at the peak of the market. And most buyers would love to imagine they got a good deal. But with today’s local market conditions, that’s a tall order to fill.

The internet has changed the way buyers search for homes. Gone are the days of buyers waiting for their REALTOR to call each week with the latest new listings. Today, buyers have more-or-less unfettered access to the Multiple Listing Service where agents cooperate by sharing their inventory of homes for sale.

There is a small selection of “off-market” or “Pocket Listings” which we discussed in an earlier article. How do you find these? For that, you still need a REALTOR.

The larger question is should you purchase a home today, or wait for more inventory or prices to decline?

This graph for San Mateo County illustrates that as of June 2013 we are still not back to historic high home values—though in select neighborhoods on the Peninsula we just recently surpassed previous historic highs.

 

San Mateo Home Values

Today’s buyers are snapping up homes with a frenzied sense of urgency—and they’re paying top dollar to do so. Why?  Because interest rates are still very favorable and increase a buyer’s ability to pay over the seller’s asking price—but the trend is about to change and probably for good. We predict that in Q2 of 2014 mortgage interest rates will probably be a full point higher than they are today. And that’s not pure conjecture; the Federal Reserve has not only signaled they have overtly stated that when unemployment reaches  6.5% it will begin raising the federal funds rate—and they have already begun easing up on purchasing bonds to artificially keep rates low. In this article we discussed how much more one would pay interest over the life of a  home loan when rates return to normal levels–and the numbers are staggering.

If the entire country’s housing market was rebounding at the same rate of homes on the Peninsula, one can easily see that the Fed would have already reacted and raised rates.

Buyers are locking in lower than historical trend rates and in most cases paying well over what a seller is asking for a home because money is cheap.

Should I wait for More Favorable Conditions?

Have you been lulled into thinking these historic low rates will continue? Then take a moment to read this eye opening post we did back in March. Trying to save more money for a down payment at this point may be futile as home prices are escalating at a rate that the average buyer could never keep up with in monthly savings. Once interest rates begin to rise to normal historical levels, any perceived savings—even if the market cools off—will be quickly negated in interest higher payments.

We’ve been in business for over 20 years selling home on the Peninsula and we’ve experienced several recessions so the trends and cycles are obvious to us. Timing them is more difficult, but from everything we have seen, we believe it would be better in today’s environment to jump in and get a home today, rather than bet on more favorable conditions in the near future. If you are still sitting in the sidelines, you are betting against the odds—that unprecedented low interest rates will continue, and that home prices have already hit their peak and will soon decline. Barring any unforeseen catastrophe, that’s not a bet we would take right now.

 

 

Drew & Christine Morgan are REALTORS/NOTARY PUBLIC in Belmont, CA. with more than 20 years experience in helping sellers and buyers in their community. They may be reached at (650) 508.1441.

The information contained in this article is educational and intended for informational purposes only. It does not constitute real estate, tax or legal advice, nor does it substitute for advice specific to your situation. Always consult an appropriate professional familiar with your scenario.

Belmont Home Values Rise Again in April But Sales Cool Off – Housing Report for April 2013

We’ll do a quick re-cap of the Belmont housing market for April 2013, since by now unless you’ve been living under a rock you’ve heard that the Peninsula housing market is back in full swing; and some would argue the swing is becoming dangerous to ride.

We’re probably a few years away from that precipice and we seriously doubt that the current run up of home values will continue at the frenetic pace we’ve seen in the last year. If the rate of appreciation settles down to sub double digit increases year-over-year the market will be more sustainable.

If you are some place where you can hear our audio accompaniment, we’ve recorded a short piece which helps explain some of the perplexing numbers for Belmont home values in April of 2013.

That’s a long way of saying we’ll be brief in our analysis this month. We’ll start with the big news which is probably not what you’d expect to hear…

[click on the sales for a full size chart]

Belmont Home Sales April 2013

SALES

Sales year-over-year dropped 30% in the month of April. In April of 2012 24 homes traded hands while in 2013 only 17 homes closed escrow.

 

New Listings

New listings were up 40% in 2013 over 2012 for the month of April.

Current Inventory

The inventory of homes available for sale in April of 2013 dropped 27% over last year at the same time.

Months of Inventory

The time it would take to sell off the entire current inventory of homes at the current rate of sales was virtually unchanged from 1.78 months of inventory last April to 1.76 months this year.

Do some of these numbers seem paradoxical? More new listings and fewer sales—is the market cooling off? If you’d like a more detailed discussion you may visit our blog page for a short podcast where we explain the correlation these numbers have to each other.

MEDIAN PRICE

The median home price in Belmont increased around 12% to $955,000 over last April when the median price was $849,500.

Reading between the lines—we see that the size home that sold in 2012 though was also 2,070 square feet as opposed to the homes which sold this April which were only 1,520 square feet. Effectively this means in 2013 you get a home in Belmont that is 26% smaller but cost you 12% more. That’s a serious increase in prices in just one year which we discuss more in the audio portion.

PRICE REDUCTIONS

Another indication of the hot Belmont housing market is reflected in the number of price reductions—or lack thereof. There were no price reductions in April for any Belmont home which sold.

In April of 2012, out of the 24 sales 10 homes sold above the asking price, 4 sold at the asking price and 10 sold below. In 2013 all but one home sold over the asking price.

PERCENT RECEIVED

Sellers in Belmont received on average 111% of their asking price in April of 2013 as compared to 99.6% last April.

If you are a seller who has been waiting for the market to rebound, it just did.

Data from the Multiple Listing Service for San Mateo County – MLS Listings, Inc.

Disclaimer:

The information contained in this article is educational and intended for informational purposes only. It does not constitute real estate, tax or legal advice, nor does it substitute for advice specific to your situation. Always consult an appropriate professional familiar with your scenario. Drew & Christine did not participate in all of these sales.

Forget Everything You Thought You Knew About Home Values

It seems there’s even more pent-up demand for housing than there was after the 1989 housing crash. The lower than usual interest rates is undoubtedly a contributing cause for the frenzied activity but what else is creating the stratospheric rise in housing activity?

It’s becoming a common event for a home to have 10-20 offers submitted by enthusiastic buyers. One first time buyer home in San Mateo recently sold with 86 offers! We’ve been in bidding wars ourselves where the winning bid paid over $300,000 more than asking price for a modest San Carlos home.
It’s probably not a leap for you to then believe that the median size home in San Mateo County climbed 29% since last March?
How’d we come up with that 29%? We adjusted it to account for the size of homes selling during the two periods. Had we not done so the raw figures showed a 34% increase.
In March of 2012 the median home in San Mateo country sold for just $689,000 and this March the median home price was $925,000. So did a lot of larger homes sell this year? For sure the upper market is starting to get traction again but the median size home selling in 2013 was only 5% larger. So we roughly estimate that if one can get a 5% large home in 2013 but have to pay 34% more, than prices probably went up by a factor of around 29%.
Looking at the housing picture for San Mateo County for March of 2013 as compare to March of 2012, we see that there were 20% fewer home sales this year as compared to last.
Why the fewer home sales if the market is so hot? Because, simply put, there are fewer homes for buyers to choose from. In 2013 there were 20 percent fewer sales but 29 % fewer new listings-which explains the low inventory.
For buyers wanting to get into a home, it may be now or never as home prices appear to have skyrocketed almost 30% in San Mateo County just in the last year. If interest rates rise, that double whammy may just put home ownership out of the reach for many.

 

 

The information contained in this article is educational and
intended for informational purposes only. It does not constitute
real estate, tax or legal advice, nor does it substitute for
advice specific to your situation. Always consult an appropriate
professional familiar with your scenario.

 

Interest Rates Predicted to be 10% by Year’s End

That could easily have been a headline ripped from the pages in major newspapers back in August of 1994 when rates were only 6%–yet by year’s end the prediction nearly came true as a mere four months later they would rise to almost 10%!

Are you old enough to remember what normal mortgage interest rates were like?

Interest Rates DropAccording to Bankrate.com, mortgage interest rates have been attractive for such a long stretch of time that many homebuyers and homeowners might not realize that rates haven’t always been this low. Mortgage interest rates in the 4-percent range were unheard of until 2010, and rates in the 5-percent range were unknown prior to 2003, according to Bankrate.com surveys through the years and a chart of monthly average mortgage interest rates tracked by the Federal Reserve since 1971.

Prior to 2003, higher mortgage interest rates were the norm. In the early 1970s, rates hovered in the 7-percent range and spiked up above 9 percent in late 1975, late 1976 and most of 1978. At the end of the decade and throughout the 1980s, mortgage interest rates rarely dipped lower than 10 percent.

In the early 1980s, mortgage interest rates brushed the stratospheric highs of 18 percent and even 19 percent. Imagine trying to get a home loan with an interest rate of 18 percent. At that rate, the mortgage interest deduction would be a very lucrative income tax perk, but the monthly payment on a loan would be far more painful than a typicalmortgage payment today.

During the 1990s, mortgage interest rates ranged from around 7 percent to roughly 9 percent for many years. It was only in 2000 that rates began to fall to earth. They held at less than 9 percent in 2000, less than 8 percent in 2001 and less than 7 percent in 2003.


Reproduced with the permission of Mortgage-X.com

If you’ve been putting off refinancing your home or buying a new one, don’t get lulled into inaction with the thought that these new low rates are here to stay.

The information
contained in this article is educational and intended for informational
purposes only. It does not constitute real estate, tax or legal advice, nor
does it substitute for advice specific to your situation. Always consult an
appropriate professional familiar with your scenario.

 

Drew & Christine
Morgan did not necessarily participate in these sales.

DRE License Numbers
01124318 & 01174047

Drew & Christine
Morgan, REALTORS | Notary Public