Archive for the 'Market Trends' Category
I am excerpting and condensing from today’s report by Property Radar.
CALIFORNIA, JULY 15, 2015 — California single-family home and condominium sales gained 8.5 percent in June. On a year-over-year basis, sales were up 16.4 percent from June 2014.
After a mediocre May, California real estate sales took off in June. The year-over-year jump was the largest since October 2012 likely due to improving economic conditions and fear of continue reading…
I am pasting this market update from “Property Radar,” a newsletter I have subscribed to for years.
California Median Home Prices and Sales Retreat in May
Median Home Prices Fall 1.8 Percent to $396,750,
Sales Down 3.5 Percent
“With the exception of a few counties, price increases have slowed considerably. You cannot defy gravity. The environment of rising prices on lower sales volumes was destined not to last. Higher borrowing costs since the beginning of the year and decreased affordability was bound to impact sales sooner or later. We may also be seeing the fourth year in a row where prices jumped early in the year, only to roll-over and head lower later the rest of the year.”
This is exactly what I have been seeing lately in Nevada County and Lake of the Pines.
Yes, there is good news for California home buyers, but home sellers take heed and pay close attention. I am excerpting and quoting from Madeline Schnapp’s post (Director of Economic Research for Property Radar) on her June 2014 report.
California single-family home sales were down 12.6 percent from June 2013.
Year-to-date sales for the first six months of the year are the lowest since 2008.
The lack of distressed property inventory (foreclosures and short sales) and rapid increase in median prices have definitely taken a toll on demand.
The June 2014 median price of a California home reached its highest level since December 2007.
But . . . the nearly uninterrupted double-digit monthly increases in median home prices from August 2012 through March 2014 have slowed considerably.
That’s good news for buyers who were finding themselves rapidly priced out of the market.
Going forward, we expect low sales volumes and flat prices until increased supply or looser credit forces prices even lower.
Did you get that? Forces prices even lower.
Like all markets, real estate is cyclic. Right now, buyers are gaining a bit of ground on sellers who have had it their way for the past couple of years.
Here’s the link to Schnapp’s full report: http://www.propertyradar.com/reports/real-property-report-california-june-2014
Combined Home Sales for Lake of the Pines, Alta Sierra, South County, Peardale/Chicago Park, Grass Valley, Colfax/Weimar, Penn Valley, Nevada City and Auburn Ca. in 2013
Home sales for Lake of the Pines, Alta Sierra, South County, Peardale/Chicago Park, Grass Valley, Colfax/Weimar, Penn Valley, Nevada City and Auburn Ca. in 2013. As we finalize our look at our local Real Estate happenings, we have combined our areas into one one report for you. For this analysis, we’ll look at sales data from the Nevada County Association of Realtors for the first quarter of 2013. This analysis shows the “average” sold data for homes that were not short sales.
Number of homes sold 149
Average Days on the Market (DOM) 111
Median Asking Price at time of sale $353,931
Asking Price per square foot $161.76
Median Sold Price $341,819
Percent sold price to asking price 97.35%
The average size of homes sold 2,104 sq ft
High sold $1,650,000
Median sold $290,000
Low sold $99,000
This analysis of home sales for Lake of the Pines, Alta Sierra, South County, Peardale/Chicago Park, Grass Valley, Colfax/Weimar, Penn Valley, Nevada City and Auburn Ca. in 2013 covers the first quarter of 2013.
Home sales for Nevada City, Ca. in 2013. As we move up the highway from Lake of the Pines we come into Nevada City, Ca. For this analysis, we’ll look at sales data from the Nevada County Association of Realtors for the first quarter of 2013. This analysis shows the “average” sold data for homes that were not short sales. continue reading…
Here are some aspects, and some risks, of the auction for you to consider.
You cannot place the bid yourself. We have to do it for you. That’s because we have the required “ticket” to the auction–a real estate license. Our license promises the auction house that we have vetted you properly, and that you are financially qualified to make the purchase if you are the successful bidder.
There are extra costs involved in winning a bid. Sometimes the costs are modest, a few hundred dollars, called a “technology fee” or something like that. These fees are tacked on to the price. Sometimes the fee is not modest at all, a one percent surcharge. If the property is $250,000 then the surcharge is $2,500. I have seen the surcharge as high as five percent! You read that right. So whatever is the final bid, add five percent. On a $250,000 purchase it would be $12,500. Yikes.
As in any California real estate transaction, you will make an earnest money deposit (EMD) when you open escrow. The difference here is that the amount is set by the auction house, $5,000 is typical, and it is non-refundable. No matter what. It will apply to the purchase price as long as you complete the purchase. But if the purchase fails, kiss your earnest money goodbye.
The auction house will dictate the escrow company, title insurance company, the “closing” company, the time frames, and even the type of contract used. It will all be stacked in their favor. You, and your agents, will have very little to say about this, and very little recourse if things go wrong.
Auction properties are sold strictly “as-is,” and the sellers are not fooling around. There is no, repeat no investigation period once your bid is accepted, to be more exact, once they have your non-refundable earnest money deposit. You should do all of your investigations before you give them your money. Sure, you can keep investigating once you are in escrow, but if you find something horrible, something that makes you want to cancel, well that’s tough, because they are not going to give you back your money. Not. going. to. give. you. back. your. money.
All of that sounds pretty scary, but there are upsides.
The bidding process is exciting and fun.
Sometimes you can score a great deal for yourself.
It will often go much smoother than I have described. Last year we bid and won a lovely home for a young couple, first-time buyers. They were able to purchase a home below market value, a home they could not have afforded otherwise. The closing agents we worked with were competent and pleasant. Our “kids” are very comfortable, and very happy, in their new home, the wonderful home they won at auction.
Let’s dispense with anecdotal examples. Let’s swerve around wishful thinking. Let’s take an honest look at the hard evidence–actual sales of homes at Lake of the Pines, California.
For this analysis, we’ll compare sales data from the Nevada County Association of Realtors for two six-month periods:
(1) August 12, 2011 through February 12, 2012
(2) August 12, 2012 through February 12, 2013
This will give us a year-on-year comparison.
Lake of the Pines is divided into two real estate sub-markets. Lakefront homes and everything else. Lumping lakefronts in with everything else drastically skews the results. For the purpose of this article, I will exclude 10 lakefront homes sold, 8 in the first six-month period, and 2 in the second six-month period.
Aug 12, 2011–Feb 12, 2012 Aug 12, 2012–Feb 12, 2013
Number of non-lakefront homes sold 36 44
Average Days on the Market (DOM) 88 90
Asking Price at time of sale $255,478 $256,277
Asking Price per square foot $135/sq ft $135/sq ft
Actual Sold Price $244,420 $246,425
Sold price per square foot $129/sq ft $130,000
Percent sold price to asking price 95.6% 96.1%
Conclusion. The real estate market at Lake of the Pines, excluding sales of lakefront homes, is statistically unchanged from 201/2012 to 2012/2013. The six-month periods examined are traditionally the “slow season” sales periods (fall and winter). It will be interesting to compare the “fast season” periods (sping and summer) later on in 2013. Based on last year’s flurry of investor purchases of lower-end homes, I predict that the “fast season” data will show a modest year-on-year improvement.
There are about 2,000 homes at Lake of the Pines. I bet you would like to know how the real estate market in this community is performing this year. You will be pleased and surprised to learn that continue reading…
One of my clients (let’s call him “Mike” because . . . uh . . . that’s his name) wrote to ask:
“Hi Bob, Question……How much lower than asking price have you seen REO’s <foreclosures> go for? I know there are a lot of determining factors. Say everything is in our favor, time on market , maybe bank has cashed in on insurance policy, etc. What is the lowest you have seen a property listed for 239k,or 229k go for?…….Mike”
You have to remember a few things.
(1) At what price did the REO first come on the marke,t and how long has it been at this current price?
(2) The bank is basing the asking price on Broker Price Opinions (BPOs). If BPOs come in at a certain price, the bank has rules about how much discount below that price it can accept.
(3) How severe is the pain? How much is the bank losing?
(4) How much house are we talking about? An 87% accepted price on a lower-end house might equal $18,000 discount (acceptable) but an 87% loss on a mid-range house might be $60,000 (not acceptable).
Here’s a recent scenario at Lake of the Pines:
A lower-end property goes on the market at $160,000, sits there getting stumpy little offers for a while. Bank reduces the asking price to $150,000. More low offers. Sits there, and sits there. Bank reduces the price to $140,000. This time an offer comes in at $120,000 with a request for $8000 in seller credits to buyer for “health and safety” repairs. Bank counters at $130,000 but gives the $8000 credit for an adjusted price of $122,000. Buyer accepts.
There’s your 87% discount off the asking price, a price that has already been reduced twice. It is actually a 76% offer on the original price, but it took months of sitting, a bunch of lowball offers, and two price reductions to get there.
Right out of the gate, first week on the market, the bank is probably not going to take less than 90-95% of the asking price.
This is the second of three formulas for buying a rental property. In this version the rental is purchased with a down payment of 20% and a fixed rate loan of 80%.
Here are the assumptions:
- You have $50,000 sitting in a non-productive instrument, perhaps a savings account, mutual fund, low-yield bond, or your funds are in a CD that is getting ready to mature, or the cash is buried in a coffee can in the back yard.
- The tax benefits or liabilities are not computed (see your CPA or tax lawyer).
- The purchase price and rent are hypothetical and will vary by location.
- The property will need some fixing prior to renting.
- Property taxes are based on the California ad valorum 1% rate plus a bit of miscellaneous supplements.
- Closing costs are customary for northern California for a loan-financed purchase and include inspections.
Here are the Assumptions
|Purchase a Rental with a Loan Formula|
|Down payment @20%||30,000|
|Loan costs (1 point + $1500)||2,700|
|Closing costs (escrow and title)||3,500|
|Fixup and holding costs||13,800|
|Total Cost to Purchase||50,000|
|Rent earned on the property||1,430|
|Monthly principal and interest @4% 30 year fixed||573|
|Monthly property taxes||150|
|Monthly property management||95|
|Total monthly expenses||1,003|
Summary: If you can buy the property for $50,000, fix it up for $13,800, and get $1430 rent, you will net $427.00 per month. (Remember, income taxes on the net are not computed in this formula, nor are the mortgage tax deduction and business expense deductions calculated).
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