Here’s a strategy to get the best rate when buying in today’s market.
I want to break down one key factor if you're considering buying in today's market with higher interest rates. I'm talking about how various banks and mortgage brokers have different programs and rates.
Doing your due diligence upfront and shopping for a couple of different lenders to see which programs will fit your situation—depending on your down payment, income, FICO scores, and the kind of purchase price you’ll want to make—can make the difference between being able to buy less or more house because interest rates will always affect your payments, and that's what most buyers live in.
You can do this by looking into and comparing different programs, whether it’s a big-box bank like Chase or Bank of America, a credit union, or even a mortgage broker. It could also be property specific, whether it's in a condo or a house.
There are a lot of variables that are involved. If you want more information on this or have any real estate-related questions, call (619) 200-3236 or visit sdcoastalagent.com. I’d love to connect with you!.
Three things you have to consider when listing your home in today’s market.
Today I want to share three key factors you must consider when selling your home. As a special guest, we have Azzie here to join us! So what are the three things you have to consider if you want to sell your home in today’s market?
First, you need to price your home right. We still have very low inventory levels, but we are also seeing a drop in buyer demand. Due to this, there's no huge sense of urgency to buy. Moreover, you have to consider factors like what kind of buyer pool is in the market.
Currently, many buyers are passing on homes that don’t have desirable elements. If the property is on a busy street, they may still buy the home, but they won’t pay above the asking price the same way they would have several months ago, which is why the price has become a very important element. Otherwise, the house will sit on the market for a while, and you’ll end up chasing the market down.
Second, you have to keep your emotions in check. As a homeowner, you usually have a lot of sentimental value in your property. You lived there, and you probably raised your kids in that home. Your emotional attachment may get in the way when you negotiate the offer, so the more you can put on your home seller hat, the better of a position you'll be in when you list your house on the market .
“You have to keep your emotions in check.”
Lastly, you have to properly stage your home. Like staging the set for a movie or play, you have to set the tone and tell the story. Sometimes this involves bringing in items such as furniture, lamps, lighting, paintings, etc. Other times this can include decluttering. You have to take out the personal elements in the home, because you want to make sure that the buyer can envision themselves and their personal items in there.
The personal belongings you have in the house can sometimes stand in the way for the buyer to truly envision themselves in the space. Maybe there's a lot of family pictures on the wall, which can make them feel a little uncomfortable or make it harder for them to picture themselves living in the house. The more you can cater to the majority of buyers, the better the position you’ll be in. Staging can also involve freshening things up, such as changing a couple of wall colors or some flooring.
These are the three main factors that we need to consider when putting the house on the market. There're plenty more, but it typically depends on what the house and market is like. If you guys want to carry on this conversation, feel free to reach out to us at (619) 200-3236 or visit sdcoastalagent.com.
Thanks to forbearance, we won’t see many foreclosures, so don’t worry.
Today I will share some stats that explain how the forbearance program has affected the market. When the pandemic first hit, most experts thought our real estate market would crash. They predicted high unemployment that would cause a tsunami of foreclosures. Essentially, they expected it to play out like the last real estate bust in 2008. However, a forbearance program was implemented which allowed nearly 5 million financially struggling homeowners to stay in their houses during the pandemic when housing was more important than ever.
“Forbearance was healthy for the market, and things are looking good.”
Since the forbearance program ended, over 80% of those homeowners have either paid off the forbearance in full or have worked out a payment program with their lenders. Only 18.4% of financially struggling homeowners haven't done so yet. However, the forbearance program, low interest rates, and the rise in housing prices have given these homeowners additional equity in their properties. That equity is incentive for them to talk things through with their lenders rather than walk away from the property. Ever since the foreclosure moratorium was lifted, we’ve seen a slight uptick in foreclosure activity, but it's not anywhere near what it was from 2017 to 2019.
Nationally, inventory is at about 1 million units of housing, which is two months of supply. Even if we put the 1 million properties still in forbearance onto the market and doubled our inventory, it would still only be about four months of supply, which is still a seller's market. A balanced market has about six months of supply, so forbearance was healthy for the market, and things are looking good.
If you have any questions about the real estate market, feel free to reach out to me at (619) 200-3236 or visit sdcoastalagent.com. I look forward to hearing from you and helping you reach your real estate goals.
Why you shouldn’t put off your plans if you’ve been considering buying.
Some of my clients have been asking, “Is it still a good idea to buy a house now with inflation and mortgage rates at all-time highs?”
There’s no doubt that most of us are feeling the financial pinch with the rampant inflation increases we’re experiencing. Everything is more expensive, but the Federal Reserve has been taking measures to try to offset this inflation. For example, they've been steadily increasing interest rates throughout the year.
The Fed has announced that they are increasing interest rates yet again. Most experts agree that interest rates will come back down once they get a handle on inflation. Still, this has left many homebuyers questioning if it is still a good time to buy, and you may be wondering the same thing.
“I don’t think you should pull back on your plans.”
Obviously, mortgage rates and home prices matter when buying a home. The higher the rate, the higher the payment and the less you can afford to pay for a house. Housing has undoubtedly become more expensive this year compared to last year. However, I don’t think you should pull back on your plans.
Real estate has historically been a good hedge against inflation. Real estate isn’t immune to inflation because housing prices will increase, but homeownership is a great hedge against inflation because you can lock in your largest monthly payment, which is your housing costs. That’s a fixed cost that won’t increase anymore, but home prices will increase, so you’ll gain equity.
There are many other things to consider when purchasing a home. For example, you may need to downsize or upsize and get an extra bedroom. So if you want to go a little more in-depth with your situation, go ahead and reach out to me at (619) 200-3236 or via my website sdcoastalagent.com. As always, make it a great day!
What happened to the San Diego market during the first half of 2022?
Today I'll share a recap of the real estate market for the first half of the year. I'll review key indicators like median sales price, inventory levels, etc., to explain what's happening in the market and where it is heading.
In San Diego, the median sales price for single-family homes in the first half of the year is $987,000. It's slightly lower than its peak in April, when we reached the million-dollar mark, but it's still up 12.5% from last year. There's less appreciation compared to the year prior at 29%.
The condo market ended the first half of this year at $635,000, which is a little bit lower than what it was in May at $670,000, but it's still up 15.5% from this time last year. Condo prices are showing signs of slowing slightly since the year prior saw around 26% appreciation.
Properties are taking a bit longer to sell. The median days on market went from eight days this time last year to 12 days this year. The average days on market in 2018 was 30 days, so we didn’t see any significant changes this year. In terms of inventory levels, we have around 1.6 months of supply now, while last year we had 0.9 months, In 2018, we were at five months of supply.
“Buyer demand is slightly decreasing, while inventory is increasing.”
A key indicator showing a recent market trend is the buyer affordability index, which shows the percentage of households with the necessary median income to qualify for the median sales price based on the current interest rates. From its peak in 2014, it has slowly decreased to 56% last year and 30% this year because of increasing interest rates.
Another key indicator I'm seeing is the sale price to list price, which was at 107% last year, meaning homes sold for 7% above their initial price. Now, the sales price to list price is around 100%. It's showing signs of slowly trending down from its peak in February.
What does this all mean? The numbers are still pointing toward a sellers' market, but we're starting to shift to a more normal market. Buyer demand is slightly decreasing, while days on market and inventory levels are increasing a bit. There's still a lot of cash in the market, but some buyers can no longer afford their homes.
These stats are a bit specific to the local markets. If you need more details about your particular situation or have real estate concerns, don't hesitate to call or email me. I'll be happy to help!
Here’s how home sellers can avoid mistakes in our shifting market.
If you’re looking to sell a home, you probably know that our market is shifting. That’s why I want to talk about the importance of properly pricing your property.
Our market is in transition, but it’s still a seller’s market due to our extremely low inventory. Plenty of houses are still receiving multiple offers and selling at or above their list price, but some properties are definitely sitting on the market a little bit longer.
The main reason for this market shift is our rapidly rising interest rates. Our current rates are somewhere around 6%, while they were closer to 3% earlier in the year. This increase is pricing some buyers out of the market and slowing things down.
This means pricing your property correctly matters now more than ever. You have to consider what demand looks like in your market, how quickly homes are selling in your area, and what prices sellers are getting nearby.
“Some buyers are being priced out of the market. ”
If you overprice your property, you run the risk of buyers skipping your home. The next thing you know, your property is sitting on the market too long, and you have to lower your price. However, if you underprice your home, you could leave a lot of money on the table. Buyers aren’t willing to offer way over the list price anymore.
Finally, keep in mind that price isn’t everything when selling your home. The terms of your contract are at least as important. Properly pricing your home will net you more offers so you can pick the buyer willing to give you the best terms.
If you have questions about today’s topic or anything else, please call or email me. Make it a great day!
Here’s why a recession doesn’t automatically mean a crash in home prices.
I’ve been getting this question quite a lot recently: Is the upcoming recession going to cause the real estate market to drop? Let’s look at some historical data and make that forecast today.
Before we get into what will happen, let’s talk about what’s going on. A recession is defined as two consecutive quarters of a slowdown in GDP. We typically see a ramp up, the peak, and a decline. It’s inevitable that we will see another recession, but will that hurt the housing market?
Take a look at the chart at 0:55 in the video above from Keeping Current Matters. It shows what housing prices have done during the last six recessions. In four out of six, home prices actually went up. 2008 is really the only time we’ve seen a big drop over the last six corrections. When people hear the word recession these days, that’s the market they have in mind. Most of the time, though, the housing market actually appreciates during a recession.
“We will start to see demand and appreciation slow down.”
Interest rates are another hot topic because they’ve been on the rise lately. It’s true that they’ve risen considerably this year, but they’re still well below historical averages. In the 1980s, the average rate was 16.5%. I don’t think we’ll necessarily see a drop in the market because I don't see supply increasing dramatically from its already low level. Demand will remain high, but we will start to see the market slow down from its frenetic pace.
If you have any questions at all about the market or real estate in general, don't hesitate to reach out via phone or email. I look forward to hearing from you soon.
Our market is still strong, but it is showing signs of cooling.
I’m sure you’ve been seeing it in the headlines: Real estate markets all over the nation are beginning to show signs of cooling. Is the San Diego market slowing? We have seen a red-hot market for the last 24 months with double-digit appreciation, historically low inventory, and low interest rates. However, those interest rates are changing, so I want to show you the numbers and talk about what is happening in the San Diego market.
The short of it is that we’re not seeing a cooling market here yet, but that’s a big “yet.” We are seeing some preliminary signs that the market may start slowing. However, we are seeing some signs pointing the other way, too.
The chart at 1:08 in the video above shows the list-to-sales price ratio for San Diego County. Properties are selling for 7% more than what they list for on average, and that number is even higher for more affordable ZIP codes. That is an indicator that buyers feel pressured to get something under contract before rates increase further. Some buyers have already been priced out of the market, but their strategy has been to look outside of their preferred ZIP code to find a more affordable one.
“I think this demand will eventually dissipate as interest rates continue to increase. ”
Another indicator of change is the days on market. At 1:56 in the video, you can see that the days on market have decreased from the beginning of the year. However, showings have picked up, so buyer activity is still strong, despite the increase in interest rates.
I think this demand will eventually dissipate as interest rates continue to increase. Our market will slow down, but it won’t crash or tank. We just won’t see this red-hot market where there could be 30 to 40 offers on one property.
Keep in mind that there are a lot of cash buyers out there, and they aren’t affected by interest rates. However, if other buyers drop out, they won’t have to compete as much and won’t offer so much over the list price. We’re already starting to see buyers be reluctant to make offers on properties that are a little funky.
I think we’ll see more of a flatline market, with appreciation levels of 5% or 6%. I’m always looking at the supply of homes, and I just don’t see any huge increase in inventory on the horizon. Potential sellers aren’t putting their homes on the market as much right now because they feel they have nowhere to go. If they try to buy a bigger house, it will cost them much more, and they might not be able to afford that move.
Most people seem pretty secure financing-wise, so I don’t see our inventory increasing because people have to sell. Someone might have to move because they became unemployed, but I don’t anticipate a huge market correction.
If you are looking to buy a home, this is still a great market to buy in, even though interest rates have increased. Rates and prices will only keep rising, so it will cost more to purchase in the future. If you want to sell your home, this is still a market where you’ll get multiple offers that will drive the price past what you expected. This is still a good time to sell.
If you have any questions about our market or real estate in general, feel free to call me at (619) 200-3236. I’d love to hear from you.
Here are three ways finance buyers can compete with cash offers.
As I mentioned in my market update on the first quarter of 2022, cash transactions total 20% of all transactions in San Diego County. That’s up from 15% just a year prior. With cash offers on the rise, buyers who use financing are wondering how they can hope to compete. Today I’ll share a few strategies that I utilize with my clients so they can win out in multiple-offer situations.
Sellers are picking cash offers over financed offers because they typically come with better terms. So if you’re a financed buyer, you need to offer competitive terms as well. The main terms to consider are the loan contingency, close of escrow, and the appraisal.
Since financed buyers have to get a loan, the contract includes a loan contingency. However, a buyer can make an offer that’s not contingent on financing. That’s a risky move, though, unless you were conditionally approved. Some lenders will offer conditional approvals; they’ll take your file and send it to the underwriter, who will review all your assets, income, credit score, etc. Then, the only conditions left are to get a clear title and an appraisal. If you’re able to make an offer that isn’t contingent on a loan approval, you’ll look much more competitive in the eyes of the seller.
“If you’re a finance buyer, you need to offer more competitive terms.”
The other term to consider is the close of escrow. Getting conditionally approved will take longer on the front end; it could take seven to ten business days. The advantage in doing so allows you to cut all your time periods in the contract by seven to ten days. That means you could have a quicker close of escrow, putting your offer more in line with a cash offer. Check with your lender to see if this is an option they can provide you.
Finally, there’s the appraisal. Cash offers don’t require an appraisal contingency. So, being able to make an offer without an appraisal contingency is going to be looked at more favorably by the seller. Here the buyer can remove the Appraisal Contingency, the lender will still require an appraisal. However, the offer is not subject to the property appraising at the purchase price. This can be an effective strategy especially if you are a buyer putting down more than 30% as a low appraisal most likely would not change anything in the financing or down payment requirement. For a buyer that is putting down less than 30%, it is taking on risk and may require the buyer to bring additional funds to escrow in order to make up a gap from the appraised value and purchase price. Not all buyers are going to be able to do this financially. There is also an ability to put a cap on how much a buyer is willing to make up in the event of a gap in the appraisal. That way it's not just an open checkbook for any difference.
These are a few things to consider when trying to compete in this competitive San Diego real Estate market. The loan and appraisal contingencies and close escrow can be different with each offer. The stronger you can make yourself as a buyer the better off you will be in having different arrows in your quiver to use. Each client and price point have their unique situations. If you would like to discuss your situation more in depth, don’t hesitate to reach out to me via phone or email. I’d love to help you.
Here’s a recap of the first quarter of the 2022 market year.
It’s no shocker that the San Diego real estate market is marching forward positively. In Q1 of this year, single-family homes appreciated by 3.5%. That’s an 18.5% increase over Q1 of 2021, which appreciated 2.8%. In some markets like Point Loma, appreciation more than doubled, going from 3.1% in 2021 to 6.5% this year. Appreciation in University City nearly tripled, rising from 5% last year to 14.4% this year.
Even condos are getting more attention than they were a couple of years ago. That’s an indicator that many buyers are being priced out of the single-family market and diverting into the condo market. Condos appreciated by 4.6% this year compared to 2.8% in Q1 last year, and they're on track to reach 20% appreciation year over year.
Interest rates are on the rise; rates were around 3% at the beginning of the year, and they are now at 4.75%. As rates get higher, some sellers’ buying pools will be diminished. In most markets where rates have increased by more than 1%, appreciation rises by double digits, which will price some buyers out of the market. However, we’re in such a low-inventory market with so many buyers willing to make great offers that we’re still going to see positive appreciation.
It’s also important to consider cash purchases. Last year, 15% of countywide single-family home purchases were made with cash. In Q1 of this year, that number rose to 20%. In the San Diego Coastal markets, 38% of purchases were cash in Q1 of 2021, whereas this year, 42% were purchased with cash. So where is all this cash coming from? I think that many people are cashing out on their stock portfolios and seeking financing afterward.
“All these conditions point to a busy spring and summer market.”
It’s also important to keep in mind that rents are on the rise. Last year, rents increased by a mind-boggling 30%. In today’s market, it’ll cost you the same amount to rent a property as it would to pay for a mortgage on it.
Our list-to-sale price ratio is 106.7%, meaning that we’re selling properties almost 7% above what they’re listed for. Some markets outside of San Diego are starting to see homes sell for less than list price. Homes in San Diego are still selling in less than a week or two, so I don’t see our ratio dropping.
All these conditions point to a busy spring and summer market. If you’re looking to sell, now might be the peak time to list if you want to take advantage of the multiple-offer situations we’re seeing. As the year moves on and interest rates rise, home affordability will wane. For that same reason, now is also a good time to buy a home. Your buying power will probably only get lower from this point on.
Whether you’re looking to buy or sell, if you have any questions or would like a more in-depth analysis of your situation, don’t hesitate to give me a call or send an email. I’d love to help you.