Wednesday, February 27, 2013

For Many, 2013 Will Be the Year to Finally Buy a Home

Bidding wars. Buyers paying cash. Homes selling for more than asking price.

Are we entering another housing bubble? No. But prospective buyers in many markets may be shocked at the competitive nature of the home-buying process these days.

The number of homes for sale fell to a 13-year low in January, leaving would-be buyers chasing a shrinking supply of homes just before the spring selling season.

"On a national scale, the market is clearly rebounding," says Greg McBride, senior financial analyst at Bankrate.com. "It's not that the prices are crazy, but the buyers outnumber the available homes for sale."

There was an average of 4.8 months of supply of existing homes for sale in the fourth quarter, according to the National Association of Realtors (that is, it would take 4.8 months to sell off the inventory at the current pace).

Six months' supply is closer to normal, says Celia Chen, a housing economist with Moody's Analytics, an economic research firm. In 2010, it went as high as 10 months. "Prices are starting to rise as a result of the strong demand relative to low supplies," says Ms. Chen.

That said, prices still are about 30% below their peak, she says. And the reasons for the slim pickings aren't good news. Lenders are taking their time putting bank-owned properties on the market, in part to keep prices up.

Plus, prospective sellers are waiting until prices rise before listing their homes for sale. About 11.9 million homeowners are still underwater—that is, they owe more on their mortgage than the home is worth—according to estimates from Moody's Analytics.

"When you're underwater, you're much less likely to list your home," Ms. Chen says.

And that means a potentially tough time for buyers. "You might have to look and shop around a lot," says Keith Gumbinger, vice president of HSH.com, a housing-market data provider. "Competition for the most attractive properties is going to be stronger than you think."

Real estate is local, of course. Inventories aren't as tight in Michigan and Ohio, for example, where many distressed homes are on the market, or in Oklahoma, where the market is more stable. But buyers may find their choices limited in parts of Arizona, Florida, Colorado, Texas, California and the Washington, D.C. area, among other places.

If you're in a tight market, consider these strategies to smooth the process:


1. Stay calm

Don't spend more than you can really afford.

"There's a renewed frenzy" in the market these days, says Christy Dean, a real-estate agent with Walt Danley Realty, focused on the luxury market in Paradise Valley, Ariz.

Buyers can get caught up in the hype, and that can mean spending too much, she says.

"I've seen it happen so many times. The wife is about to have their first or second baby. They have to have a house on this street," she says. "Don't get house poor. Be conservative."

2. Make your best offer

Remain calm, yes, but be realistic. When bidding on a home with multiple offers, you need your offer to stand out.

"Be bold," says Hal Lehrman, owner of Brooklyn Properties in New York. "Usually, the best buyer we have on a bidding war is the guy who lost the last bidding war. He's ready. He doesn't want that to happen again."

The danger is overpaying, but if it's the right house for you, that risk is tempered by other considerations. "In a rising market, you look back five years from now, you're not going to care about that extra $5,000," Mr. Lehrman says.

3. Check credit

Before setting foot in an open house or lender's office, check your credit reports atAnnualCreditReport.com (you can get one free report annually from each of three credit-reporting companies at this website). "If you see anything that doesn't appear correct or needs updating, a good time to make those changes is before you're in the process," says Mr. Gumbinger.

Consider buying your credit score as well. (One option is MyFico.com.) With your score in hand, you're in a position to negotiate, he says. You can say to the lender: "I'm looking for a 30-year-fixed [mortgage], I have a Fico [score] of 760, I can put 20% down. What sort of interest rates and closing costs can you offer me?"

4. Account for assets

In competitive markets, buyers need a lender's preapproval in hand before looking at homes.

"Preapproval is absolutely a must," says Vince Malta, a Realtor in San Francisco and a regional vice president for the National Association of Realtors.

Be prepared for a stringent underwriting process. Lenders want to see a consistent income stream. And a gift or funds transfer must be well documented, Mr. Malta says, in part to ensure you're receiving a true gift, rather than a phantom loan. "If it's not properly documented, it won't be counted toward your down payment," he says.

One benefit to a preapproval is that it sets a price limit on your home shopping, Mr. McBride says. "There's no sense falling in love with a place you can't afford to buy because you can't get approved for the loan."

5. Bring a big down payment

If possible, bringing more than 20% to the table will help your offer remain competitive.

"Anything that helps the down-payment side of it is a persuasive thing for a seller," Mr. Lehrman says. "It reduces the possibility that there will be a bank problem."

6. Be nice

If you're competing for a house with other buyers, stand out by making life a little easier for the seller. For example, be flexible about the closing date.

"If all things are equal—the seller is getting the same dollar amount from me or the next person—but I give the seller the flexibility of the settlement date that he prefers, maybe the seller is going to say, 'Money's not everything,' " says Dominic Cardone, a partner at Keller Williams Real Estate in Media, Pa., and a regional vice president with the National Association of Realtors.

7. Find a good agent

An experienced real-estate agent may alert you to homes before they come on the market. Plus, if your agent is respected, that can help you stand out with the seller's agent.

By Andrea Coombes

Wednesday, February 13, 2013

Third of O.C. buyers paid cash for homes in 2012

One in three buyers paid cash for Orange County homes last year, helping to drive an unexpected housing market resurgence.

Buyers bought a total of 10,760 homes in 2012 without a mortgage, a record high number in figures dating back to 1992, DataQuick Information Systems reported Wednesday.


That's 31.3 percent of the 34,380 homes sold last year. The average for the previous 20 years was 11 percent of all home sales.

Orange County's cash deals accounted for 7 percent of 145,797 all-cash deals made in the state, also a record.

DataQuick attributed the record number of cash purchases to high levels of investor interest and higher lending standards that make it much harder for many buyers to get a home loan.

Statewide, investors and vacation-home buyers accounted for about 55 percent of the all-cash transactions, DataQuick reported.

"It's clear that a lot of today's housing market recovery is being fueled by people putting their own money into homes," DataQuick President John Walsh said. "Some cash buying is part of a normal housing market, but we're at twice that normal rate."

Orange County averaged just over 4,100 cash buyers a year prior to 2012.

Walsh said that there's always a pool of empty-nesters, retirees, wealthy shoppers and overseas buyers who pay cash in any given year. But prior to the credit crunch that hit in 2007, no more than 10 percent of all Orange County homes sold without help from a bank or other lending institution.

In 2008, the proportion of cash buyers jumped to 16 percent in the county and rose steadily to 28 percent in 2011.

In addition, the ZIP code that includes Laguna Woods, a community of residents over 55, led the state in cash buying. DataQuick reported that 74 percent of the sales in Laguna Woods' 92637 were to cash buyers, the highest percentage among California ZIP codes with 100 or more deals.

Record numbers of buyers are paying cash despite 2012's record-low mortgage rates as buyers either were unable to get home loans or used cash to get an edge over other shoppers bidding on homes.

"The lending pendulum has swung to the opposite end of the spectrum," Walsh said. "Even a lot of well-qualified buyers can't get loans."

The statewide median price for a cash deal was $205,000, up 17.1 percent from 2011. California buyers using a mortgage paid a median price of $305,000 in 2012, up 10.5 percent from 2011.

In Southern California, nearly 78,000 buyers paid cash for a home last year, DataQuick figures show.

Just under 25,000 buyers paid cash in Los Angeles County, and nearly 29,000 paid cash in the Inland Empire. The Bay Area had just under 23,000 cash deals in 2012.

Written by,
Jonathan Lansner and Jeff Collins

Thursday, February 7, 2013

HOME PRICES KEEP ACCELERATING

Steady increases indicate that housing recovery gaining ground

San Diego home prices are up again, fueling optimism that the real estate market continues to rebound, said the S&P/Case-Shiller Home Price Index released Tuesday.

Local prices rose 0.9 percent in November from October and are up 8 percent from a year ago, based on the monthly report, which has a two-month lag. November marked the 10th straight month of home-price gains for the San Diego region, one of 20 major metro areas tracked by Case-Shiller. It also marked the fifth straight month of year-over-year increases.

Nine other major cities enjoyed price gains, when comparing prices from October to November. On a year-ago basis, only New York saw a drop in home values, at 1.2 percent. Nationally, Phoenix, one of the hardest-hit areas during the downturn, showed the most year-over-year progress. Prices there increased 22.8 percent when comparing November to the same month a year ago.

“Regional patterns are shifting as well,” Tuesday’s report said. “The Southwest — Las Vegas and Phoenix — are staging a strong comeback with the Southeast — Miami and Tampa — close behind. The Sunbelt, which bore the brunt of the housing collapse, is back in a leadership position. California is also doing well, while the northeast and industrial Midwest is lagging somewhat.”

When looking at all 20 areas tracked, prices were basically flat, at 0.1 percent, from October to November. But they’re up 5.5 percent when comparing November to the same month a year ago.

Case-Shiller analysts say San Diego’s current home prices have returned to fall 2003 levels, about two years before the market peaked.

“Housing is clearly recovering,” the housing report said. “Prices are rising as are both new- and existing-home sales. Existing-home sales in November were 5.0 million, highest since November 2009. New-home sales at 398,000 were the highest since June 2010. These figures confirm that housing is contributing to economic growth.”

Written by,
Lily Leung

Wednesday, February 6, 2013

COUNTY FORECLOSURES AT LOWEST LEVEL SINCE 2006

Improving economy, rising values, help for borrowers is credited.

San Diego County closed out 2012 with foreclosures at their lowest level in six years, says a report released Wednesday from local real estate information company DataQuick.

The consistent drop in the number of people losing their homes to bank repossessions appears to be a product of an economy on the mend, increasing home values and government-led deals with major banks that promise borrowers alternatives to foreclosure, DataQuick officials said.

December foreclosures plummeted to 355, the lowest level since December 2006, when 288 were recorded. December’s total is nearly 18 percent lower than November’s and half of the December 2011 numbers.

Default notices, the first official filing in the foreclosure process, totaled 878. That’s up 7.2 percent from November but down nearly 30 percent from the same month a year ago.

Why is this happening?

“Home values increased through most of 2012, and the rate of increase picked up toward the end of the year,” DataQuick President John Walsh said in this week’s report, referring to California as a whole.

“That means fewer and fewer homeowners are underwater, where they owe more than their homes are worth.

“That in turn means they can sell and pay off the mortgage, or perhaps refinance at today’s low interest rates,” Walsh added. “This trend alone suggests we’ll see a continued decline in foreclosure rates this year.”

Both foreclosure and mortgage defaults in San Diego County showed drastic fluctuations between about 2007 and 2011. But 2012 marked consistent decreases in both categories and are far off their peaks.

The county’s foreclosure level is now 82 percent below the all-time high of 2004, logged in July 2008.

With mortgage defaults, the county is 77 percent below the peak of 3,832, which was recorded in March 2009.

There are several factors that have helped push down the county’s amount of housing distress.

The first one is home-price dynamics. They’ve stayed flat or gone up during the past 11 months and rose 20 percent from start to finish in 2012. Active home listings have fallen to at least a three-year low, causing would-be buyers in certain hot spots to compete for limited supply.

Another continued theme in the distressed-market story is the rise of short sales, which overtook foreclosure resales in market share in 2012, marking a pivotal moment in the local housing market.

Nearly 30 percent of home transactions in December were short sales, near the all-time high of 31.2 percent set in January 2012, DataQuick numbers show. Short sales let struggling homeowners sell their properties for less than what they still owe with lender approval.

Let’s not forget settlements between major banks and federal regulators.

A $25 billion deal was entered in the spring that settled long-standing accusations of mortgage abuses against five companies: Bank of America, Citi, Wells Fargo, Chase and Ally. The banks promised to provide relief to troubled borrowers.

About two-thirds of that help arrived to state borrowers in the form of short sales, according to a report from a watchdog appointed to oversee the terms and progress of the deal.

Written by, 
Lily Leung