Friday, July 22, 2016

Bubble? What bubble?

As housing prices continue to head northward, you frequently hear some self-proclaimed "expert" on housing saying we're in danger of having another Housing Bubble with all of the negatives that such an event carries along with it. Well, here's some REAL information on housing bubbles and the likelihood that we're in one or in danger of being in one.

Residential construction activity and home price appreciation are both expected to see modest growth over the next 12 months, with the U.S. housing market showing very little indication of a looming bubble.
Those are a few of the key takeaways from The Summit, an annual conference held by John Burns Real Estate Consulting and attended by real estate consultants, investors, developers, and executives. The general consensus among attendees was that the U.S. housing market is in a state of slow, sustained recovery, though all assume that the country may face a moderate recession within the next three years.
This year’s attendees had fairly moderate expectations for construction volume, with 42 percent believing that the U.S. won’t issue 1.5 million permits until 2021, which translates to 5 percent annual growth over the next five years. Reasons given for the lagging construction activity include high regulatory and building costs and a lack of affordable labor. Participants expect single-family home construction to increase by 8 percent in 2017.
Home prices, too, should continue growing over the next 12 months, with attendees unanimously calling for single-digit appreciation. The vast majority — 77 percent — expect between 2 and 5 percent price growth. JBREC forecasts 5 percent price growth for this year and 3.5 percent in 2017, keeping with the theme of normalization that emerged at Pacific Union’s Real Estate Economic Outlook 2018 last November.
Homebuyers should continue to enjoy low mortgage rates in the coming year, with nearly 90 percent of attendees expecting rates to remain flat or to rise by 25 to 75 basis points. Fannie Mae’s chief economist believes that mortgage rates will actually dip even lower, pointing out that interest rates in some countries are currently negative.
Three years ago, attendees of The Summit offered 10 qualitative and quantitative signs of a housing bubble, and so far, only a few of them have surfaced. On the qualitative side JBREC cites an uptick in both urban high-rise and exurban home construction activity. Quantitatively, developer profit is slim to none in some markets, while others suffer from affordability constraints — including those in California and the Bay Area.

So, the word from here is: Don't waste a lot of time listening to all of these so-called experts.  A bubble appears unlikely at this point.

Which brings us to the next point.  If a buyer or seller you be--and you want some knowledgeable assistance, give us a call!  Whether it's finding out what your home is currently worth, what improvements make the most sense, or what's happening in the market closest to you, we offer the benefits of over fifty years in combined experience to you.  We can--and WILL-- give you good, reliable information based on facts to help you make the decisions that will benefit you the most.  You can reach us at either of the following numbers: Peter: (415) 279-6466; Jane: (415) 531-4091.

Thursday, July 21, 2016

Job Growth Strong

Forget what the pols are trying to tell you at the nominating convention.  The latest information shows that job growth is very strong, and that's a good thing--for the economy and for those of you trying to sell real estate.

  • Today’s much-anticipated U.S. June jobs report showed a strong rebound in hiring. The country added 287,000 jobs in June following downwardly revised numbers for May in which 11,000 jobs were created. May’s sharp slowdown has proven to be a blip.
    • June’s job numbers confirm that the U.S. economy is still growing solidly and highlight the importance of examining a broad range of economic data. Job growth averaged 149,000 in May and June and 172,000 per month this year. At this rate, the U.S. economy is poised to create more than 2 million jobs in 2016.
    • The national unemployment rate ticked up to 4.9 percent from last month’s 4.7 percent, but that reflects more people entering the labor force, which is a again a good indicator of consumer confidence.
    • The U-6 measure, a broader gauge of unemployment that captures discouraged and part-time workers, also showed an encouraging reversal in June and hit a cyclical low of 9.6 percent. This indicator has remained stubbornly high during the recent economic recovery.
    • Furthermore, wage growth continues to show strength and increased 2.6 percent on an annual basis. This is the highest reading of wage growth this year, and expectations suggest further acceleration of wage growth to reach 3 percent.
    • A separate report on tech employment showed a strong rebound in the IT sector, which added 32,100 jobs in June and a net of 43,900 new jobs in 2016. The rebound does partly reflect the return of Verizon’s workforce from a May strike.
    • The IT sector grew at a faster rate than overall employment, with all categories recording positive growth in June. Additionally, the number of IT job postings also increased slightly in June. Software-developer positions topped the list of IT job openings, at 60,500.
    • The rebound in national employment numbers suggests that we will most likely see strong June numbers for California and the Bay Area, and that May’s statewide net gain of 15,200 will be revised up. The California Employment Development Department will release June employment numbers later this month.
    • This job growth means more and more folks will be able to purchase a home ore other real property, as they will definitely have the means to do so, even as prices rise.
    So, if you want to sell, or get your property ready to sell, give us a call.  We can show you what it will take, and how to go about the preparation for the sale.  If you're not sure about selling, but wondering what your home is worth, we can give you an idea of its value, including what the competition will be for your property.

    You know the numbers! Give us a call! Peter: (415) 279-6466; Jane; (415) 531-4091.  We'd be pleased to help.

    Friday, July 15, 2016

    China Buys American!

    Every so often the subject of foreign buyers of US property pops up in conversation.  Most individual property owners don't get too involved as they either are not sellers of what many believe to be 'appropriate' property, or they feel that the foreign buyers would not be likely to contact local sellers.  In both cases, however, they may be incorrect.  The accuracy depends on the specifics at the time of the conversation.
    For example, if you would be interested in expanding your opportunities to sell your property to include foreign buyers, it would help to know what nation or nations are the origin of the largest number of foreign buyers.  As the following info indicates, now that is China.
    For the fourth straight year, buyers from China invested more money in U.S. real estate than any other foreign country. They also purchased the most housing units and the priciest homes, and California remains one of their preferred destinations.china_us_flags
    According to the National Association of Realtors’ 2016 Profile of International Activity in U.S. Residential Real Estate, foreign buyers purchased $102.6 billion of U.S. residential real estate between April 2015 and March 2016, a decline of 1.3 percent from the previous year. International buyers picked up 214,885 properties with a typical value of $277,380, about $50,000 more than the median U.S. existing home price.
    In a statement accompanying the report, NAR Chief Economist Lawrence Yun said that rising home prices are not deterring international buyers from investing in the U.S. housing market, with Chinese citizens leading the way.
    “Foreigners — especially those from China — continue to see the U.S. as a solid investment opportunity and an attractive place to visit and live,” he said. “Although China’s currency modestly weakened versus the U.S. dollar in the past year, it’s much stronger than it was 5 to 10 years ago, thereby making U.S. properties still appear reasonably affordable over a longer time span.”
    Chinese buyers were responsible for $27.3 billion in real estate purchases from last April to this March, a slight decrease from the previous year’s analysis but still more than triple the amount spent by Canadians, the second most active international investor. In fact, spending by Chinese investors exceeded the total sales volume of the next four ranked countries combined. Buyers from China purchased 29,195 housing units, more than any other country, and also bought the most expensive properties, with a median price of $542,084.
    Five states accounted for half of all international home purchases, with 15 percent of foreigners opting to buy a home in California — second only to Florida in popularity. NAR says that the Golden State is one of the most popular destinations for Asian buyers, with Chinese investors exhibiting a strong preference for single-family homes. Additionally, buyers from China were among the most likely to pay for their home entirely in cash.
    While Chinese buyers are a good bet to remain active investors in U.S. real estate in the coming years, purchases by U.K.-based buyers may drop off as a result of the recent Brexit vote. The U.K. was the only foreign country that purchased more U.S. real estate in this year’s survey than in 2015.
    “Sales activity from U.K. buyers could very well subside over the next year depending on how severe the economic fallout is from Britain’s decision to leave the European Union,” Yun said.
    Interested in learning more about this facet of the current market?  As with everything else regarding the local property market, give us a call!  We can arrange for you to receive important information on the subject.  Through the international affiliation with Christies, we have access to the latest facts and figures to assist you.  In fact, on a personal level, our own experience includes years of overseas professional residence assignments that we can leverage to your advantage.
    Our contacts: Peter: (415) 279-6466; Jane: (415) 531-4091.

    Friday, July 08, 2016

    BREXIT: Will it affect US Housing?

    Well, we've all heard of the UK decision to leave the European Union (EU) and numerous opinions of what it may portend. Here's a new one! What effect, if any, will it have on US housing prices?

  • The United Kingdom’s unexpected vote to leave the European Union, otherwise known as “Brexit,” was not accounted for in global financial markets prior to the vote. Thus, stock market volatility is sorting out the anticipated effects going forward.
  • While the financial market volatility will persist, the direct impact on the U.S. is minimal.
  • U.S. economic fundamentals remain strong, as they are based on domestic activity.
  • Indirect impacts may actually bode well for U.S. housing markets, as investors seek safe, stable investments.
  • However, more volatility may be in store in the weeks to come.
  • To say that global financial markets were not pricing in Brexit prior to the vote is an understatement. Financial markets have gone haywire overnight, with many recalling the sell-off following the Lehman Brothers collapse in 2008. While volatility will stay with us for some time, the current situation is nothing like the 2008 financial crisis. And though no market was spared again, Europe’s fragile markets suffered from a severe lashing and will likely to continue on the rollercoaster ride.
    Nevertheless, the Brexit vote still does not mean that the U.K. will leave soon; the referendum is not legally binding, and only Parliament can pass the legislation to leave the EU. Even if this happens, it would take at least two years for the EU and the U.K. to renegotiate their bilateral agreements. However, since no one yet really understands the full implications of Brexit, a period of volatility and much uncertainty is likely to persist.
    Who Wins and Who Loses?
    Unfortunately, it is easier to surmise Brexit’s direct effects than its indirect effects. In principle, the exit decision should have little direct impact on the U.S. or global economies. The U.K. economy accounts for only 4 percent of global gross domestic product. Also, U.S. exports to the U.K. comprise only 0.4 percent of our GDP, while the U.S. receives just 3 percent of its imports from the U.K. Additionally, our country’s bank exposure to U.K assets represents only 3 percent — thus a potential U.K. recession would have a limited impact on U.S. financial systems.
    Among all parties impacted, the outlook for the U.K. is the haziest, followed by the uncertainty that will shadow over the EU. And while the direct impact on the remaining 27 EU countries is somewhat limited, the indirect effects cannot be fully foreseen at this point. The volatility and debate over what the next steps should be will not bode well for confidence or economic growth, and it may lead to further loosening of monetary policy.
    Indirect Effects on the U.S. Could Help Our Housing Markets
    Brexit’s indirect effects on the U.S., however, may not be so gloomy. First, the Federal Reserve’s decision to raise interest rates will most likely be further delayed due to this development. Also, with global financial uncertainty seemingly everlasting, U.S. Treasuries are continuing to look very attractive and will probably woo many investors. Both factors are going to keep interest rates low — particularly mortgage interest rates.
    Also, U.S. economic fundamentals are essentially unchanged, and the country should continue to post solid job and wage growth. U.S. housing markets may further benefit from global uncertainty, as they are still perceived as safe, relatively stable, and to some extent underpriced, especially when compared to London’s exorbitant real estate market.
    If we can help in your house search, or aid in getting your home sold to your best advantage, call us. We're always available! Peter: (415) 279-6466; Jane: (415) 531-4091.