Residential Marketing Solutions

Rent or Buy? An Honest Look at the Real Estate Market

Rent or Buy? An Honest Look at the Real Estate Market

For many people, owning a home is a key part of the American dream. Nearly three-quarters of Americans believe that owning a home is a higher measure of achievement than having a successful career, raising a family, or earning a college degree. According to the National Association of Realtors (NAR), owning a home builds financial security. The net worth of an American homeowner is almost 40 times the net worth of a non-homeowner.

Rental Rates Continue to Rise

According to Fannie Mae, almost 70% of renters would purchase a home if their lease ended now. This makes sense, as rent prices continue to soar in many parts of the country. The average price for a one-bedroom apartment in Southern California is 18% higher than it was last year. Rental price increases will likely continue.

During the pandemic, many landlords had rental rate freezes placed on their properties. These freezes have lifted now, giving landlords the freedom to increase rent prices at will. The University of California Lusk Center for Real Estate predicts continuing rent increases over the next two years.

Is It A Good Time to Buy A Home?

Data suggests the housing market has stabilized. As inflation rates slow, mortgage rates are dropping. Currently, 30-year, fixed-rate mortgage rates average 6.43 percent nationwide. Mortgage rates are even lower for first time homebuyers thanks to mortgage rate discounts instituted by Fannie Mae and Freddie Mac.

Despite the benefits of owning a home, many prospective buyers hesitate due to high interest rates, low home supply, or lack of large downpayment. However, first-time buyers shouldn’t wait. Now is the best time to purchase a home.

Low Down Payments & Greater Chance of Approval

First-time buyers can purchase a home without saving for a 20 percent down payment. In addition to low down payment mortgages, buyers can access down payment assistance through their local housing office.

Getting a mortgage without a big down payment has never been easier. Mortgage lenders recently lowered minimum credit score requirements for FHA, USDA, and VA mortgages. In addition, Congress passed a law to change the way that medical debt is factored into credit scores, raising FICO scores by an average of 22 points.

Low Inventory Will Bring Home Prices Up

Low inventory will likely bring home prices up over the next month and into next season. According to NAR, each state averages less than 20,000 homes for sale each year despite high demand. 57% of homes listed for sale in the U.S. are sold within a month. The supply of existing homes for sale is 2.6 months nationwide. Prospective buyers should act fast to ensure the best price.

Strategic Sales and Marketing offers a variety of real estate sales and marketing services. Our team has years of experience working with the real estate industry and understands the steps required to identify and connect with potential buyers. Please contact us for more information about our services.

 

 

Delivering Excellence in Sales

Delivering Excellence in Sales

New home buyers rely on their on-site sales associate to guide them through one of the largest decisions of their life. Since each transaction is unique, it is the inexperienced sales associates that fail more often.  To deliver an extraordinary experience, it’s important that new home sales associates understand both construction and real estate. This helps ensure the best chance of success. Great new home sales associates know that they are Seller’s agents, while still giving each prospective home buyer an outstanding experience.

Selling isn’t something a new home sales associate does “to” a homebuyer; it’s something they do “for” the homebuyer. Although licensed agents must pass a test to ensure they understand real estate laws and requirements, sales training and coaching is not a state requirement.

Just like an athlete will regularly train to win a race, the highest caliber of new home sales associates constantly hone their skills.  Equally important is understanding that the initial sale is only 10% of the job, as new home construction is a specialized side of real estate.  Keeping the home buyer engaged through option selections, design center appointments, construction progress, and the last 30 days of their escrow are steps that cannot be overlooked.

What Makes A New Home Sales Associate Successful?

First, they must have a thorough understanding of their builder’s unique buying proposition.  What makes that community, design, and location special?  Next, they must know the local area intimately.   Finally, their role is to communicate this information into the benefit of living in that area, home, and neighborhood, to the prospective home buyer.

Concise and clear communication in a friendly manner is another key to success.  Award winning new home sales associates look for innovative ways to market their homes, are responsible for generating leads, retain existing clients, and work with new technology.

The outstanding new home sales associates find ways to stay motivated, investing in training courses, and reading books on sales techniques. They understand that relationships come first. They know a sale cannot exist without a good business relationship.

Cornerstones for success is they must be client-focused, creative, energetic, and passionate about their role. Successful agents follow the “5 times in 21 days” rule of follow-up by phone, email, text message, or mail. Knowing no home “sells itself” they keep in front of their prospective buyers and help them overcome obstacles that may arise.  To help understand their competitive market, they visit local open houses, this helps to create excellent rapport with realtors.

Real Estate Sales and Marketing Services

Strong partnerships can provide new home sales associates with the support and tools they need to excel.  Our leadership team, with combined 70 years of experience in new home construction and real estate sales, provides each team member with this support through all stages of their professional journey.

Strategic Sales and Marketing offers a variety of real estate sales and marketing services. Our team has years of experience working with the real estate industry and understands the steps required to identify and connect with potential buyers. Please contact us for more information about our services.

 

 

Understanding How Mortgage Markets Are Priced

Understanding How Mortgage Markets Are Priced

Mortgage rates have steadily increased since the start of 2022. During the last week of September, average 15-year fixed and 30-year fixed mortgage rates climbed to their highest levels in fifteen years.

While recent actions taken by the Federal Reserve to slow down the economy and reduce inflation have had an undeniable impact on current mortgage rates, this isn’t the only factor driving mortgage market pricing. The cost of mortgage-backed securities can have a direct impact on residential mortgage rates. This is because mortgage companies lose money when they issue loans when the market is down. When the price of MBSs drop, mortgage providers typically increase mortgage rates. When the price of MBSs goes up, mortgage rates go down.

Recently, we had the opportunity to speak with Judy Downey-Fortson, an experienced loan originator with Loan Depot Builder Division. She gave us her opinion on what happened with the mortgage markets at the end of September.

Can you tell us about your experience in the real estate market?

“Being a loan originator is a lot like working on a production (assembly) line. As an originator, my work places me in the middle part of ‘the line’.  Up the line, is the secondary market group working with the mortgage-backed security market (MBS). Down the line is the servicing and securitization group.  It’s not actually a line, but a circle when you have loans that need to be securitized.”

Can you explain what mortgage-backed securities are?

“Mortgage-backed securities (MBS) are like buckets full of loans which investors purchase. The price these investors are willing to pay constantly changes.  The difference between each bucket is a ½ point in rate. These are referred to as coupons. The loans that can go into a bucket (coupon) can be as high at 1.125% above the coupon’s value.  For example, a 5% bucket (coupon) will contain rates up to 6.125%.  So, rates at 6.25% would need to go into a different or higher bucket.”

“As loans are placed or secured in each bucket, there is a good understanding for what investors will pay for that bucket. This understanding is based on recent MBS sales.”

What causes the higher discount point costs reflected in recent rates?

“Mainly its Inflation.  As rates increase, a new bucket needs to be re-introduced. This is called the 7% bucket and it hasn’t been seen for over 20 years. So, now the question on everyone’s mind is what, or if, investors will pay for a 7% coupon.  There is no recent history of this 7% bucket.  This means the value of this new bucket is either big time gambling or speculation.”

“Investors make their returns off a ‘hold time’ for the investment. Prepaying a mortgage or refinancing to a lower rate could mean the investor does not make a return. If investors believe that rates will be coming down in the next 12-18 months, they may pay more for the 6.5% bucket, even though it will have a lower return then the new 7% bucket.”

“In 2019, there was a spike in rates which lasted about 8 months. Rates fell quickly in 2020 and a refi boom happened.  The investors who bought the higher rate buckets experienced losses due to rapid refi’s and shorter holding times on those buckets of funds.  Therefore, we are not seeing rates being offered at a premium (at zero points or rebate to the customer).”

So, what happened during the last week of September? 

“Global economics and England were the spark.  Prior to the first week of September, England announced that it would be implementing large tax cuts. Think of putting money in peoples’ pockets for them to spend. That’s a key ingredient to fuel inflation. Worldwide investors feared that it would ignite more inflation and bring about a deeper recession. This is the main reason we had volatile reactions in our own U.S. bond market.”

“On Monday, September 26th, large tax cuts were announced, and the bond market tanked over a full point. This caused mortgage rates to skyrocket and lenders to reprice multiple times and face rates that came with points”.

“By September 28th at 1 p.m., revisions were made to the UK policy and a new bond purchasing program similar to quantitative easing in the U.S was introduced, and the market drastically improved. This unexpected new bond purchase program in the UK was the trigger needed to reverse the powerful trend in MBS markets today.”

With the resignation of England’s new PM after only 45 days, we’re seeing an extremely volatile global market that’s struggling with inflation.  Bond yields were well over 4% and dropped back down to around 3.7%, which provided better pricing.”

What’s the best course of action for homebuyers?

“ARM loans or 2/1 buydowns as we anticipate rates to improve in the next 12-18 months. Adjustable-rate mortgages are great for people that plan to pay off their mortgage quickly or expect to sell their home in a short amount of time. However, these loans do have slightly tighter ratios for qualifying.”

If inflation continues to increase and rates keep going up, homebuyers could face higher interest rates and higher monthly mortgage payments. Anyone looking to buy a home should lock in a lower mortgage rate now.”

Thank You, Judy for such an insightful look at the market!

Strategic Sales and Marketing offers a variety of real estate sales and marketing services. Our team has years of experience working with the real estate industry and understands the steps required to identify and connect with potential buyers. Please contact us for more information about our services.

 

Will Home Prices Go Down?

Will Home Prices Go Down?

Analysts, home shoppers, renters, homeowners are all wondering whether home prices will reduce at the same margin that costs to build go up.  There are conflicting answers however. Looking closely at housing demand we see the need increasing, not decreasing.   With rent, land and the cost of construction going up, it’s hard to say “no” to owning a home today.  When asked if rent will increase over the next 7 years, you will have a hard time finding someone that would say “the cost to rent will be lower”.

In seven years, home prices will not be lower from today. It’s unlikely anyone believes they will. The price adjustments occurring now will be small and mainly for homes that had unrealistic prices to start with… let’s face it, it should never cost $800,000 to live in Boise!

Instead of waiting for home prices to go down, prospective buyers are weighing the pros and cons and taking action now.  Many sellers are offering attractive financing packages to create a more affordable payment.  The rule is: If you can afford the payment on a 7-to-10-year fixed loan, fix your payment now and take advantage of the tax deductions that you won’t get with renting. Statistically, most homeowners move every 13 years according to the National Association of Realtors.

Take a look at the recent data from the Mortgage Bankers Association (MBA), which proves all of the above to be correct.

Tax Breaks for Homebuyers

High demand for rentals continues to drive rent prices up with zero deduction to the tenant, while building wealth for the property owner.  It is no secret that one of the cornerstones of building wealth is investing in real estate.  Anyone looking for tax breaks should consider buying a home instead of renting.

Homeowners can take advantage of several tax deductions including:

  • Mortgage Interest Deduction
    Homeowners can deduct interest paid on a loan related to building, purchasing, or improving their primary home up to $750,000.
  • Mortgage Points Deduction
    Homebuyers pay “points” to their lender when they take out a mortgage. These points are a form of prepaid interest paid up-front in exchange for a lower interest rate. In most instances, mortgage points are fully deductible the year they’re paid.
  • State and Local Taxes (SALT) Deduction
    The SALT deduction allows property owners to deduct payments made for property taxes and income or sales tax payments up to $10,000.

Housing Affordability

For renters, the choice to buy often comes down to affordability. Average rent for a vacant unit in Orange County jumped to $2,570 per month in 2022, up 18.5% from the spring of 2021. Most Southern California renters are already paying more than they would for a 30-year mortgage. This makes a 7-to-10-year fixed mortgage a feasible option for many renters.

Strategic Sales and Marketing offers a variety of real estate sales and marketing services. Our team has years of experience working with the real estate industry and understands the steps required to identify and connect with potential buyers. Please contact us for more information about our services.

 

 

 

 

Real Estate Wire Fraud More Common Than Most People Believe

Real Estate Wire Fraud More Common Than Most People Believe

In 2020, a third of all real estate transactions involved some sort of wire fraud attempt. Today, wire fraud is the single largest threat to real estate transactions.

The goal of mortgage wire fraud is to get buyers to deposit their down payment and closing costs into an account owned and controlled by scammers. Wire fraud can cost victims tens of thousands of dollars and may jeopardize their ability to buy a home. With median home prices above $400,000, it’s not uncommon for homebuyers to wire 20% or more to satisfy their closing obligations.

This type of scam isn’t limited to first-time buyers. It happens to seasoned real estate brokers as well. Recently, we discussed wire fraud with a real estate broker with over 30 years of industry knowledge who wanted to share the shocking experience with us.

Real Estate Wire Fraud Only Happens to Other People…Or Does It? Here Is One Real Estate Broker’s Real Story (Identity Hidden)

“Early Monday morning, my heart sank when I read the email from my attorney that the title company had not received the wire for our closing.  I panicked…. hadn’t I been emailing my attorney about the wire?” The victim discovered that they were not communicating with the attorney, because his firewall and email had been hacked by scammers.

“My attorney told me that I needed to immediately call my bank.  I felt sick and disoriented all at the same time as I replayed the past events in my mind. I had logged onto the secure website. I received the instructions from the title company and both my attorney and spouse were cc’d on them.  How could this be happening? How could I, an experienced real estate broker, be scammed?”

The purchase was scheduled to close on Monday, May 23rd. The wire was sent on Thursday May 19th to be sure of an on-time closing.  Due to the out of state transaction, an attorney (rather than escrow) oversaw the legal documents and arranged the closing with a title company. There’s an in-person meeting that takes place the day of closing and the buying parties are normally in attendance.  The buyer had been trying to confirm the receipt of the wire with the title company since Friday, but no one was returning calls or responding to emails

“After learning I had been scammed, I realized we missed a crucial step in the wiring process.  It was the very thing I had warned others about for years. By going too fast we did not take the time to pick up the phone and directly verify the correct account and routing numbers before sending the wire.  Just one phone call, and I could have saved a huge amount of stress and significant financial loss.”

“Please let this be a warning to every home buyer and real estate professional. Wire fraud does not just happen to other people who may be unsavvy about real estate practices.  It can happen when we don’t stop and carefully inspect every step of the process. It is my hope that through my example we can help educate others.”

In this case, the bank receiving the wire had flagged it as potential wire fraud. This was only because the wire specifically named the title company as the recipient, so the bank did not allow it to go into the scammer’s account. This was done entirely at the bank’s discretion. There is no law that requires banks to review and match wire and account names.

Understanding Mortgage Wire Fraud

The most common type of real estate fraud involves Business Email Compromise/Email Account Compromise (BEC/EAC). Using spoofing techniques, hackers mimic the email address, phone number or website of trusted people and businesses. The hacker often sends multiple fake emails to gain the victim’s trust. Eventually, the victim is presented with fraudulent wire instructions.

Most people don’t realize they’re communicating with scammers until it’s too late. Once the money is gone, it’s extremely difficult to recover. This is what makes this type of cyber-attack so dangerous.

Preventing Wire Fraud

Always verify wiring information including exact wire account numbers, by calling directly, don’t use the number provided on the instructions.  You should call the title or escrow company at the number listed on their official website. Do not use links in emails, only use phone numbers that have been previously verified.  It’s also important not to wire money to any account provided by your real estate agent. Real estate agents do not have access to the account information of your settlement agency. These extra steps may take a few minutes of your time, but could save you thousands of dollars and protect your ability to purchase a home.

Buying a home is one of the biggest decisions a person can make. Don’t let mortgage wire fraud ruin your chances of owning a home. Communicate often with your escrow officer or attorney via phone and don’t hesitate to ask questions if anything seems suspicious.

Strategic Sales and Marketing offers a variety of real estate sales and marketing services. Our team has years of experience working with the real estate industry and understands the steps required to identify and connect with potential buyers. Please contact us for more information about our services.

2022 Home Design Trends

2022 Home Design Trends

In 2022, home design trends center around flexibility and comfort. With people spending more time at home, homeowners are looking to create spaces that meet a variety of needs. Many of 2022’s home design trends inspire feelings of stability and comfort, while maximizing space for functionality.

Long Banks of Windows

Homeowners everywhere are looking to bring the outside in. Long banks of multiple windows create a space full of light. This has been proven to put homeowners at peace and feel more connected with nature.

It’s not uncommon to see multiple banks of windows spanning two or more walls. Nano Walls and floor to ceiling windows are becoming more common as well.

Kitchen Islands

Most people consider kitchen islands a necessity in the modern home. Over the past few years, these islands have become the hub of the kitchen. When designing an island, flexibility is key. This space is used for multiple purposes including craft projects, homework, and meal prep. In addition to providing extra counter space, it’s not uncommon for kitchen islands to include a dishwasher, prep sink, trash pullout, beverage fridge, and open shelving.

Outdoor Living Space

As people become more conscious of their health and well-being, outdoor living spaces are becoming an essential part of everyday life. Current trends focus around creating an extension of interior spaces. Outdoor living rooms provide a welcome escape from the indoors. A properly designed outdoor living space allows homeowners to relax and unwind, while enjoying the fresh air and natural surroundings.

Space for Pets

According to the ASPCA, approximately one in five households adopted a pet during the pandemic. Many people quickly realized their existing living space didn’t provide what their furry friend needs. Many architects now incorporate a pet bathing area into the laundry room space.  Today, Millennial homebuyers are hitting the market looking for homes which provide pet amenities.

Heated Elements

Heated island countertops and heated floors are some of the most sought-after features in new homes this year. Recommended by home design and remodeling professionals, a heated bathroom floor provides a spa-like experience at home. Heated island countertops provide a welcoming place for friends and family to gather.

Shiplap

Shiplap adds character and texture to bathrooms. Depending on how it’s installed, shiplap can effectively accentuate the height, width, or length of bathroom spaces.

Bar Rooms

Another popular addition, homeowners around the country are turning their formal living spaces into bar and entertainment rooms. Bar rooms provide a private and cozy setting for relaxing and entertaining guests.

Strategic Sales and Marketing offers a variety of real estate sales and marketing services. Our team has years of experience working with the real estate industry and understands the steps required to identify and connect with potential buyers. Please contact us for more information about our services.

 

 

Interest Rates Rise – Homebuyers Consider Alternative Loan Programs

Interest Rates Rise – Homebuyers Consider Alternative Loan Programs

According to Mortgage News Daily, the average rate of a 30-year fixed mortgage increased to 3.7% on January 18th, 2022. This is 83 base points higher than this time last year and the highest it’s been since early April 2020.

Throughout 2020, mortgage rates set over a dozen record lows. Low mortgage rates increased homebuyer demand, making home prices rise throughout much of the country. Low inventory combined with high demand spurred bidding wars in several states. As a result, many homes sold for well above their sale price in both 2020 and 2021. In November 2021, home prices ballooned by 18.1% year-over-year. Home prices are still up double digits from this time last year.

Since the pandemic began, the Federal Reserve has purchased large amounts of mortgage-backed bonds to keep mortgage rates low. Although many expected this practice to continue through the first quarter of 2022, Feds have started pulling out of the Mortgage-Backed Security (MBS) market. This has caused mortgage rates to rise.

Despite lenders compressing their margins to keep rates low, many are already hitting 3.75%. This has had a major impact on refinancing in 2022. According to a recent survey by Mortgage Bankers Association, applications to refinance in January 2022 were down 50% from the previous year.

How the Recent Interest Rate Increase Impacts House Payments

At 3.7%, homebuyers looking to spend around $350,000 on an existing home will end up paying approximately $125 more each month than if they’d bought before mortgage rates went up. This may make home ownership inaccessible to many first-time homebuyers. If home prices continue to rise and mortgage rates exceed 4%, demand for homes may cool.

Alternative Loan Programs Offer Lower Interest Rates & Fast Loan Processing

Alternative financing and nonbanks provide bank-related lending services to individuals looking to buy or refinance their home. Alternative lenders fund mortgage loans through credit. They sell mortgages to investors, while managing payment collection from consumers. With fewer financial criteria, non-traditional mortgage lenders provide an easier path to securing a loan. This makes home ownership possible for many underserved individuals.

Most nonbank lenders offer similar services to legacy banks with lower down payments, reduced interest rates, and fast loan processing. Home loans offered by alternative lenders include fixed loans, Federal Housing Administration loans, United States Department of Agriculture loans, jumbo loans, and reverse mortgage loans. Nonbank lenders also offer refinancing options focused on lowering monthly mortgage payments.

Alternative funding has been increasing in popularity since the housing market crash in 2008. A recent study found that 40% of consumers believe nonbanks are a better option than traditional banks. As legacy banks raise their rates, it’s likely more homebuyers will turn to alternative financing to obtain a loan. Even with traditional banks attempting to reduce rates and simplify the loan process, it’s unlikely they’ll be able to compete with nonbanks in terms of loan processing time and interest rate reduction.

Strategic Sales and Marketing offers a variety of real estate sales and marketing services. Our team has years of experience working with the real estate industry and understands the steps required to identify and connect with potential buyers. Please contact us for more information about our services.

 

 

 

2021 Year in Review

2021 Year in Review

The housing market in California has remained hot for most of the year, with home prices reaching record highs month after month. Fueled by the pandemic, California home prices have increased in every market, with Orange County at 17.1% higher than 2020. Despite higher prices, there are still multiple buyers offering on homes and their search time is increased throughout much of the state.

Fast Paced Market Conditions

Low mortgage rates and low inventory have allowed the California housing market to maintain a healthy pace throughout 2021. Home sales experienced a slight decline in September and October. However, the California housing market has outpaced 2020 home sales and will likely continue to do so through the end of the year.

Home sales in California increased over 13% this year. In an effort to beat out the competition, many buyers offer bids above the asking price. In October, a staggering 60.2% of California homes sold above the asking price.

Home Prices Increase

According to the California Association of Realtors (C.A.R.), the median home price increased in all major regions of the state. Five regions increased by double-digits. Driven by low mortgage rates, buyers seeking more living space, and short supply of available homes on the market, the California housing market remains extremely competitive.

High selling prices are encouraging more sellers to list their homes for sale and a recent survey showed that 70% of Californians believe that now is a good time to sell a home. (can you name the source)

High demand for homes statewide means that fast moving market conditions will likely stick around until next year. C.A.R.’s 2022 California Housing Market Forecast predicts a decrease in existing single-family home sales next year, possibly due to a lack of replacement property. However, supply and demand imbalances and supply line delays due to the pandemic will keep home prices rising.

Home Prices Starting to Level Out

In September, home prices began to level out in California. A second drop in October caused the median home price to fall below the $800,000 threshold. This is the first time that home prices have dipped below $800,000 in seven months. Low mortgage rates are keeping qualified buyers interested; The Pacific West Board of Realtors reports that homes throughout California state are selling at an average of 11 days on market. Orange County is at an average 8 days on market.   Based on this data, we are advising home buyers looking to take advantage of low mortgage rates and fix their home price to act fast.

Strategic Sales and Marketing offers a variety of real estate sales and marketing services. Our team has years of experience working with the real estate industry and understands the steps required to identify and connect with potential buyers. Please contact us for more information about our services.

Mortgage Rates Expected to Rise Late 2022 – Early 2023

Mortgage Rates Expected to Rise Late 2022 – Early 2023

Home sales in the U.S. are hitting peaks not seen since before the housing bubble burst in 2008. However, the current housing boom is very different than any we’ve seen before, where most analysts determined that there may not be a bubble to burst, although prices may drop slightly by the end of 2022 or early 2023.

Some economists believe that mortgage rates may rise a full percentage point by the end of 2022. Others argue the increase won’t happen until well after that point. Whatever the case, when mortgage rates rise, the housing boom will likely return to pre-pandemic numbers.

Low Mortgage Rates Bring More Buyers Into the Market

During the pandemic, mortgage rates dropped to 3%, reducing monthly payments by 12%. This has allowed more people to buy a home. Young people who would have normally waited are buying now, driving demand and home prices up. In addition to low mortgage rates, remote work is causing buyers to shift from apartment living to single family homes in suburban areas.

The U.S. is currently experiencing a housing shortage. Freddie Mac estimates that 2.5 million homes would need to come on the market to combat the current shortage. Low supply caused home builders to increase production at the end of 2020. Unfortunately, high material costs have made construction difficult. Building permits and new builds are down 30-40% since the mid-2000s.

Despite what some economists say, the current boom is definitely not a housing bubble. Current home prices can be explained by low supply and low mortgage rates. Unlike the housing bubble of the mid-2000s, we’re seeing more credit-worthy borrowers hitting the market. Bank requirements are much stricter than they’ve been in previous years. In order to secure a loan, homebuyers need a high credit score and a sizeable down payment.

Buyers Need to Act Fast to Take Advantage of Low Rates

The current market has led to frantic buying across much of the country. Record-low mortgage rates, remote work, and a shift in housing type demand are driving the boom. As homebuyers compete, bidding wars drive prices up and many U.S. homes are selling above their asking price.

Prospective buyers looking to take advantage of low mortgage rates should act quickly. It is unclear how long the current rates will stick around. Once these rates rise, buyers will ultimately pay more in interest and payments to own a home, even if home prices drop.

Strategic Sales and Marketing offers a variety of real estate sales and marketing services. Our team has years of experience working with the real estate industry and understands the steps required to identify and connect with potential buyers. Please contact us for more information about our services.

 

 

 

 

 

Home Prices Continue to Rise in California – Here’s What it Means for Buyers & Sellers

Home Prices Continue to Rise in California – Here’s What it Means for Buyers & Sellers

Fueled by strong demand and low inventory, home prices in California continue to rise. According to the California Association of Realtors, the median price for a home in California has risen $182,000 since May of 2019. This breaks down to an increase of over $7500 per month.  Although as home prices and costs to build are rising, buyer demand in California grows.

California Home Prices Reached Record Highs in May

In May 2021, Southern California home prices experienced a year-over-year increase of 33.1%. In the Inland Empire, median home prices gained 28.9%.

Fierce competition is leading many prospective buyers to offer above the asking price and potentially the home’s appraised value. In some instances, buyers are including escalation clauses for the home of their dreams, where they will pay higher than whatever the last offer was.  Many are offering non-refundable deposits and no loan contingency.  Many home builders have started their presales up to 6 months in advance of their sales center opening and model completion, selling completely off virtual tours.

As a comparison, in 2020, an average of 20.3% of California homes sold above their list price. By February of 2021 that number increased to 42.1% of homes in the metropolitan areas of Los Angeles. According to recent data from the California Association of Realtors (C.A.R.), 70% of homes in California sold above their list price this year. Is this sustainable?

No.   Although these trends are continuing, in the long run, the market will pivot and change.  Many will be priced out of the market and decide to wait for stabilization and if interest rates increase, some will not be able to qualify.

Seller’s Market

We have seen a shift since the first quarter of 2021 eliminating Seller concessions.  This coupled with low inventory and high demand translates that California is now a Seller’s market. According to C.A.R.’s monthly Consumer Housing Sentiment Index, 59% of homeowners believe it’s a good time to sell.

Homes are selling at record speed, with many selling in just 7 days. The National Association of Realtors reported that nearly 90% of U.S. homes sold in April were on the market for less than one month. Current homebuyer interest is being fueled by low mortgage rates, shortage of available homes, and an influx of buyers seeking larger living spaces.

The trend to watch will be aging Californian residents will begin selling their homes in favor of moving out of the state. This is due to the potential tax increase proposed by the State to tax equity from a home sale should you invest in property out of state.

Strategic Sales and Marketing offers a variety of real estate sales and marketing services. Our team has years of experience working with the real estate industry and understands the steps required to identify and connect with potential buyers. Please contact us for more information about our services.