This Week in Real Estate 12-25-2015

Merry Christmas.

Santa brought Lucy drums.  He brought us ear plugs.

Hope you and your family have a safe and wonderful holiday.

-Kris

This Week in Real Estate 12-18-2015 - Fed Reserve raised rates

The Fed raised rates.

For the first time in 9 years the Federal Reserve raised the short term borrowing rate. It went from 0.00% to 0.25%. This increase has been talked about for 2 years. The increase had been delayed many times as well. Initially the thought was that rates would increase in February 2015.

But it happened. And guess what? The financial markets reacted by going UP more than 200 points on Wednesday.

"I feel confident about the fundamentals driving the U.S. economy, the health of U.S. households, and domestic spending," Fed chief Janet Yellen said during a press conference. "There are pressures on some sectors of the economy, particularly manufacturing, and the energy sector...but the underlying health of the U.S. economy I consider to be quite sound."

The Fed telegraphed it will be patient with future rate increases so as not to kill the economic recovery. The central bank's statement said the economy will only merit "gradual increases" in rates, which are likely to remain low "for some time." Yellen repeatedly said during the press conference that future rate hikes will be "gradual."

CNN wrote a great article talking about the impact of these moves.

http://money.cnn.com/2015/12/14/news/economy/what-a-fed-rate-hike-means-for-you/index.html?iid=surge-stack-dom

The Federal Reserve’s official press release

http://www.federalreserve.gov/newsevents/press/monetary/20151216a.htm

-Kris

This Week in Real Estate 12-11-2015 - Rental Market Crisis

Rental Market Crisis

The alarms of increasing rents have been ringing for nearly 3 years. Now a report from Harvard really is shocking. http://www.jchs.harvard.edu/americas-rental-housing

·         On average renters are spending 30% of their income on rent up from a historical average of 21%

o   50% are rent burdened spending more than 33% on rent

o   25% are severely rent burdened spending more than 50% rent

·         There are 9 Million more rental households today than 10 years ago

·         Homeownership is at the low for the past century (63%)

·         The household starts, mostly young people and millennials, are in a rental situation

·         Rental prices are way beyond the previous peak

It still might be the best bet to lock in your “rent” with a 30 year fixed mortgage on a home you own that will build equity with every monthly payment.

-Kris

This Week in Real Estate 12-4-2015 Negative Equity still a Problem

Property Tax bills

If you don’t want to pay a 10% penalty on your property tax bill make sure you have your payment to the county by December 10^th. PLEASE DO NOT MAIL it is not the post mark date. It needs to be received by the county by December 10, 2015.

Negative Equity still a problem.

I read this great article from CNBC regarding the negative equity effects still in our marketplace.

As a nation nearly two thirds of all homes have a mortgage. In California the figure is slightly higher with a little over 70%.

On average 10% of homes with mortgages (7% overall) in the bay area are underwater or have negative equity. The problem with the negative equity is that it creates a shortage of homes for sale. If you can’t sell at a profit, as a homeowner, you are stuck.

The recent study found that the majority of homes with negative equity are the less expensive homes that are below the median price for the area. Often these homes are the entry-level or starter homes.

Also the number of repeat buyers has dropped dramatically in the last decade, owing to negative equity, but when combined with tighter underwriting standards, the options for these buyers is even worse. Lenders today require higher levels of income compared to debt, and Americans in mid-tier FICO credit ranges have had increasing difficulty qualifying for loans.

While the market is much stronger and a key part of the growth of the overall economy, the prediction is that it may be 3-4 years before the “negative equity” effect is behind us.

-Kris

Toys for Tots Client appreciation party recap

I wanted to thank everyone who came out last night. We had a blast and were able to give over 200 toys to Toys for Tots.

THANK YOU.

This Week in Real Estate 11-27-2015 Happy Thanks Giving

Happy Thanksgiving.

I hope that you had a wonderful Thanksgiving. I know mine was filled with blessings again this year.

-Kris

This Week in Real Estate 11-20-2015 Rates heading higher

Rates likely to increase in December

Prior to the October’s Job report the percentage of financial analysts that thought a rate increase for the December Federal Reserve meeting was about 35%. After that report it went up to 70%. Now with unemployment near 5% and core inflation figures about to come out at 2% the increase is just about a lock.

We have seen the mortgage rate volatility increase in recent weeks as well. We are up and trending to stay that way. Up about 12-25 basis points from the beginning of October, and that is in direct proportion to the expected 0.25% increase in the FEDs short term lending rate.

This is a good sign for the health of the real estate market and overall economy as a whole.

-Kris

This Week in Real Estate 11-13-2015 2016 Forecast

Housing forecast for 2016

California’s housing market will continue to improve into 2016, but a shortage of homes on the market and a crimp in housing affordability also will persist, according to the CALIFORNIA ASSOCIATION OF REALTORS®’ (C.A.R.) “2016 California Housing Market Forecast,”. 

The C.A.R. forecast sees an increase in existing home sales of 6.3 percent next year to reach 433,000 units, up from the projected 2015 sales figure of 407,500 homes sold.  Sales in 2015 also will be up 6.3 percent from the 383,300 existing, single-family homes sold in 2014.

“Solid job growth and favorable interest rates will drive a strong demand for housing next year,” said C.A.R. President Chris Kutzkey.  “However, in regions where inventory is tight, such as the San Francisco Bay Area, sales growth could be limited by stiff market competition and diminishing housing affordability. On the other hand, demand in less expensive areas such as Solano County, the Central Valley, and Riverside/San Bernardino areas will remain strong thanks to solid job growth in warehousing, transportation, logistics, and manufacturing in these areas.”

C.A.R.’s forecast projects growth in the U.S. Gross Domestic Product of 2.7 percent in 2016, after a projected gain of 2.4 percent in 2015.  With nonfarm job growth of 2.3 percent in California, the state’s unemployment rate should decrease to 5.5 percent in 2016 from 6.3 percent in 2015 and 7.5 percent in 2014.

The average for 30-year, fixed mortgage interest rates will rise only slightly to 4.5 percent but will still remain at historically low levels.

The California median home price is forecast to increase 3.2 percent to $491,300 in 2016, following a projected 6.5 percent increase in 2015 to $476,300.  This is the slowest rate of price appreciation in five years.

“The foundation for California’s housing market remains strong, with moderating home prices, signs of credit easing, and the state continuing to lead the nation in economic and job growth,” said C.A.R. Vice President and Chief Economist Leslie Appleton-Young. “However, the global economic slowdown, financial market volatility, and the anticipation of higher interest rates are some of the challenges that may have an adverse impact on the market’s momentum next year. Additionally, as we see more sales shift to inland regions of the state, the change in mix of sales will keep increases in the statewide median price tempered.”

2016 California Housing Market Forecast

	2010	2011	2012	2013	2014	2015p	2016f
SFH Resales (000s)	416.5	422.6	439.8	414.9	383.3	407.5	433.0
% Change	-12.30%	1.40%	4.10%	-5.90%	-7.60%	6.30%	6.30%
Median Price ($000s)	$305.0	$286.0	$319.3	$407.2	$447.0	$476.3	$491.3
% Change	10.9%	-6.2%	11.6%	27.5%	9.8%	6.5%	3.2%
Housing Affordability Index	48%	53%	51%	36%	30%	31%	27%
30-Yr FRM	4.70%	4.50%	3.70%	4.00%	4.20%	3.90%	4.50%

p = projected
f = forecast

For the full 131 slide presentation from Leslie Appleton Young please visit:

http://www.car.org/marketdata/marketforecast/

Great Information.