Thursday, August 28, 2014

Investor Competition Eases

There have been many different factors in the strong run up in housing prices in the Bay Area (and Marin County) over the past few years. These include a shortage of inventory at all price levels, strengthening economy and a new surge in tech industry companies and development. Another is the interest in buying by investors. Frequently, this last one has been the cause of some people either failing to realize their purchase goals of a home to live in or having to pay a great deal more for the purchase than they had originally planned.

Well, that has apparently begun to change.

Good news for Bay Area buyers: A recent survey found that investors today are far less active in the region’s real estate markets than in years past, helping to ease some of the fierce competition for homes.
Toy housesThe news is especially welcome for first-time buyers, who have struggled to compete against well-heeled investors paying all cash for starter homes and then turning them into rental properties or waiting a few months and flipping them at even higher price points.
The California Association of Realtors’ 2014 Investor Survey, conducted in May and released to the public on Wednesday, found that  investors are changing their strategies and moving away from buying homes in more popular, urban areas in favor of rural locations of the state where better deals can be found.
In 2014, nearly half (45 percent) of California investors said they purchased properties in rural counties such as Kern, Fresno, Merced, San Joaquin, and Tulare, up from 27 percent in 2013, according to the survey.
Meanwhile, 15 percent of investors purchased properties in Northern California in 2014, down significantly from 27 percent in 2013.
The organization gave an early look at some of the survey data two weeks ago, and Pacific Union reported at the time that rising home prices have curtailed investment activity in high-dollar Bay Area markets like Silicon Valley.
The survey also found that 67 percent of investors paid cash, and one-third were residents of foreign countries, with China, Mexico, Taiwan, and India being the top countries of origin. Investors owned an average of 8.3 properties in 2014, up from 6.5 properties last year.
Reflecting the recovering housing market, the majority of investment properties purchased in the last year (70 percent) were equity sales, while 18 percent were short sales and 12 percent were foreclosures.
Most investors said they made minor or no repairs to the properties, and 55 percent said they intend to sell them within six years.
So, if you're actively seeking that 'dream' home, or have thought about taking some time out from your search, now may be the perfect time to ratchet up the pace of your search. Questions on the market? Call us! Peter: (415) 279-6466; Jane: (415) 531-4091.
Separately, if you are thinking of selling, but not sure of your home's value, we can also help in that regard. So, either way--buy or sell, let us help you make the best decision.

Saturday, August 23, 2014

Credit Standards Easing--Loans Easier to Qualify

Well, after some very intense analysis and review by various lenders and credit scoring agencies, things have gotten a bit easier for buyers. The basic parameters in credit scoring, a major portion of credit analysis on potential borrowers has been loosened a bit.
More people will qualify for home loans, and at lower interest rates, thanks to recent policy changes by several U.S. credit agencies.Yellow road sign bearing the word "credit"
Fair Isaac Co.’s FICO credit-scoring system garnered top headlines last week with the news that medical bills and paid-off debts would no longer be counted against consumers in computing their FICO scores. But other credit agencies have also eased their reporting rules in recent months.
The net result will be higher credit scores — perhaps an additional 25 points, Fair Isaac said — enabling some homebuyers to qualify for a loan that otherwise would have been out of reach or at a higher interest rate.
“This move will ultimately make a real difference in the lives of millions of Americans, who have been shut out of the housing market or forced to pay higher mortgage interest rates because of flawed credit scores,” Steve Brown, president of the National Association of Realtors, said in a statement. “Since the housing crash, overly restrictive lending has been the greatest obstacle to home ownership.”
The change follows a recent study by the federal Consumer Financial Protection Bureau that showed that both paid and unpaid medical debts were unfairly penalizing consumers’ credit ratings. An estimated 64 million Americans have a medical-collection item on their credit reports, according to Nick Clements of MagnifyMoney, a personal-finance website.
Two of the nation’s biggest credit bureaus also recently changed their credit-reporting policies.
Both Experian and TransUnion have added verified rental-payment data into credit files, to be used to compute a consumer’s credit score when applying for a mortgage and other type of loan. Experian said the change especially favors consumers with little or no credit history, and a TransUnion study showed that including rental data raised credit scores by 10 points or more for 20 percent of renters.
Together, the changes at Fair Isaac, Experian, and TransUnion could make a noticeable difference in Northern California real estate markets.
Bay Area residents have some of the highest credit scores in the nation, but buyers face added loan pressures here because home prices are far above national averages.
TransUnion recently revealed that the San Jose-Sunnyvale-Santa Clara metro area is tied with the Minneapolis-St. Paul area for the highest percentage of “A” credit scores in the United States, with 23.5 percent of its residents scoring between 900 and 990 on the VantageScore rating system.
The San Francisco-Oakland-Fremont metro area had the second-highest percentage of “A” scores — 22.9 percent.
But looking at the VantageScore numbers by another metric shows the challenges still facing homebuyers here: Residents of the San Jose metro area collectively have an average score of 700 on the 501-to-990 scale — a low “C” grade in terms of credit worthiness. San Francisco metro area residents have an average score of 696 — a high “D.”
Those numbers show how even in a high-scoring region like the Bay Area, plenty of consumers — and potential homebuyers — will benefit from increased credit scores.
What does this mean for you? Well, if you're a potential seller, it means that a larger pool of potential buyers just arrived, as easier approval standards means more people qualifying for loans, and thus able to purchase your home.
If you're a buyer, it just made things easier for you to qualify for a loan to buy that dream home.
Questions about the process or the market, or the value of your home? We can handle them all. Give us a call! Peter: (415) 279-6466; Jane: (415) 531-4091. We'd be happy to help you out!

Friday, August 08, 2014

Continued Population Growth Fuels Market

One thing that's as true as death and taxes is that for someone to want to buy your home, there has to be someone in the market. That someone must have a good job and prospects for continuation of that job. If there are enough positions of that nature in an area, the market grows. So it is with the Bay Area.
The Bay Area’s tech-industry-driven economy continues to add extremely desirable and high-paying jobs, attracting talented workers from around the nation and globe. But even though our region’s phenomenal economic growth likely will begin to slow over the next couple of years, intense demand for housing is almost certainly here to stay thanks to a pronounced lack of available homes.
“We’re getting closer to full employment,” says Stephen Levy, director and senior economist of Palo Alto-based Center for Continuing Study of the California Economy. “And what that means is that as we near full employment, that’s going to bring in people, which will add to the housing demand.”
May statistics from the California Employment Development Department show that each one of our Bay Area counties boasts an unemployment rate lower than the statewide average of 7.6 percent. Job growth remains particularly strong in Marin, Napa, San Francisco, and San Mateo counties, all of which have unemployment rates of less than 5 percent.
Levy believes that the Bay Area’s unemployment rate will never return to dot-com-era lows, when it hovered in the 2 to 3 percent range in San Francisco and Silicon Valley. However, he forecasts that even though job growth will level off over the next two years, the Bay Area will continue to outperform the rest of the country.
Population Growth Outpacing New Housing in Key Markets
Since the U.S. began to emerge from the Great Recession in 2010, the Bay Area’s population rate has jumped sizably, according to California Department of Finance data. Over the past four years, the number of residents in San Francisco and San Mateo counties has grown by nearly 4 percent while increasing by almost 5 percent in Santa Clara County.
But those counties have failed to build enough new housing units to keep up with the expanding populace. Since 2010, new housing has grown by just 2 percent in Santa Clara County, 1.3 percent in San Francisco, and 0.9 percent in San Mateo County.
“Peninsula prices and rents will continue to outpace the state and national average unless we see a dramatic increase in supply, and even then it would be snapped up pretty quickly,” Levy says.
Economic Climate Much More Stable Than in Dot-Com Days
As was the case in the dot-com boom and subsequent bust, the tech industry remains the primary driver of Bay Area employment growth. However, Levy believes that our current economy is far less frenetic than it was 15 years ago.
“I think it’s quite different,” he says. “These are real companies, and they have customers, profits, and burgeoning sales. The dot-com era was more about business plans.”
Still, technology companies aren’t the only businesses fueling Bay Area job growth. Other industries, including hospitality, health care, and construction, are seeing employment upticks, Levy says. However, he cautions that tremendous growth in the Internet sector could eventually slow expansion in other industries, including brick-and-mortar retail and financial services.
While the Bay Area’s economic outlook appears solid for the foreseeable future, the housing shortage may eventually impede growth, as workers could become wary of relocating to an area where finding a home is so difficult. Therefore, new construction remains a crucial factor in keeping our region’s economy moving upward and onward.
“I think [our economy] will always grow, but absolutely, housing poses a constraint to our growth over the long term,” Levy says. “The lack of housing could take some of the bloom off of the rose and limit some of the growth that might otherwise be there.”
Similar situations are becoming the rule here in Marin County.  This is because much of the spill-over from the growth of tech industry jobs in San Francisco is oriented to Marin with its easy commute and top quality schools.
Thinking of selling? Curious what your home is worth? Call us! We'll provide you with the information and assistance that you need to make an intelligent and successful decision. Peter: (415) 279-6466; Jane: (415) 531-4091.