Market Conditions

2014 Housing Market Predictions

2014 Housing Market Predictions from Realtor.com

1. Inventory Should Gradually Stabilize and Return to Traditional Seasonal Levels

The beginning of 2013 could be characterized as the “year of low inventory” as buyer demand ramped up and homeowners waited for further price increases and evidence of a solid economic recovery before putting their homes on the market. The year began with a significant shortage of inventory (reported by realtor.com®), and then as early as February the level of shortages started to decline slowly. As 2013 comes to a close, inventory is approximately the same as a year ago. However, homes are selling faster than in 2012, with the median age of the inventory down by 11 percent.

2. More Homeowners Are Likely to Return to Positive Equity

Rising prices helped 2.5 million homeowners who were previously underwater regain positive equity status during the second quarter of 2013. However, approximately 7.1 million homes were still in negative equity at that time and an estimated 10 million homeowners, or about 21.1 percent of all homeowners with a mortgage, remained “under-equitied,” with less than 20 percent in home equity. The good news is that prices are expected to continue rising in 2014, which will lift more homeowners into positive territory. According to realtor.com®, median list prices for homes in October rose 7.57 percent above the same month of 2012.

3. Mortgage Rates Are Expected to Rise

Mortgage rates increased approximately 100 basis points in 2013 and are likely to rise in 2014. The new chairman-designate of the Federal Reserve, Janet Yellen, is expected to continue the policies of Chairman Ben Bernanke, including keeping mortgage rates low by buying blocks of mortgage-backed securities. However, the Fed has considered tapering its bond-buying activity as the economy improves, which could lead to a slight increase in interest rates.

4. Foreclosure Activity Is Expected to Slow

Foreclosure sales are likely to play a minimal role in the housing market in 2014. September 2013 was the 36th consecutive month with a year-over-year decrease in foreclosure activity. Foreclosure inventory has dropped to multi-year lows, down nearly 33 percent since the end of 2012. Foreclosure starts were down 39 percent in the third quarter of 2013 to the lowest level since the second quarter of 2006.

5. Further Declines in Home Affordability Are Expected

The National Association of REALTORS®’ Home Affordability Index, which compares home prices with income, dropped to a five-year low in 2013 as price increases outpaced income growth. If the U.S. economy begins to grow at a faster pace and incomes begin to rise, though, the affordability index will slide further from rising mortgage rates.

~Article courtesy of Realtor.com

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Real Estate Update

Real Estate Update From Bank of America

Remember that the Fed has been purchasing $85 billion a month in bonds to help lower unemployment and stimulate the economy overall. Last week, Fed Chairman Ben Bernanke noted that these purchases are by no means on a preset course and that bond buying could be reduced at a faster pace, a slower pace, or even increased for a time, depending on the economic outlook. Bernanke also mentioned the word deflation last week for the first time in recent memory, and this could pave the way for QE to last into 2014.

The bottom line is that the Fed’s decision on QE will be data dependent. If inflation starts to rise and economic reports continue to be strong, the Fed could consider tapering its bond purchases sooner rather than later. Whether this will lead to higher home loan rates, and how much higher, remains to be seen.

Speaking of key data points released last week, the Consumer Price Index rose by 0.5 percent from May to June due to rising prices in gasoline, food, clothing, medical costs and housing. This number was above expectations and the second highest reading this year. It is important to note that the year-over-year Core CPI (the reading that strips out volatile food and energy prices) ticked down a notch, which is likely why the Fed continues to say that inflation remains tame.  

In the housing market, housing starts declined by nearly 10 percent in June from  May to 836,000. This was below expectations and the lowest level since August 2012. The drop was attributed towards a big decrease in apartment construction. Building permits, a sign of future construction, also fell by 7.7 percent, below expectations.

Meanwhile, retail sales in June declined to 0.4 percent from 0.5 percent in May. It’s important to note that retail sales make up 30 percent of consumer spending. The latest Jobs Report showed a lot of part-time jobs were created and confirmed that wages for most people have not increased. Without wage growth, we should not expect any robust retail sales or pickup in economic activity. This is another data point the Fed will be watching as it makes decisions regarding QE.

The above data is nationwide.  Mammoth has low inventory which typically is a marker for a changing market.  While there aren’t a lot of new building permits, the remodels have picked up, as many of the REO’s and short sales that have been purchased, are being renovated.  Interest rates have increased slightly, but current rates coupled with current pricing make now a great time to BUY in Mammoth.

The high altitude in Mammoth makes it an ideal place to train. I am sure you have noticed all the runners in town.  Check out my weekly update for the list of activities and upcoming races.

Mammoth encourages a healthy life style. Why not make it a part of your life style?  Families that play together stay together!

We don’t need more to be thankful for, we just need to be more thankful!

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Contract Contingencies When Buying or Selling in Mammoth Lakes

Use a Mammoth realtor or broker when making a decision to purchase in Mammoth Lakes. I happen to be one and want to share some of my experience and expertise with you.

Residential Real Estate Purchase Agreement and Joint Escrow Instructions
Buyers and Sellers are asked to sign a Residential Purchase Agreement and Joint Escrow Instructions when making an offer to purchase real property.

Contract Contingencies - What do they cover and who do they protect?    (Part 1)

Typical contingencies for a buyer are:

  1. Loan
  2. Appraisal
  3. Title
  4. Physical inspection
  5. HOA documents  
  6. Short sale advisory  
  7. Selling an existing property

Typical contingencies for a seller are:

  1. Receiving from the buyer the preapproval letter. 
  2. Receiving from the buyer verification of funds for either the down payment or the cash required to close the escrow.   
  3. Finding replacement property.
  4. Cooperation from the buyer for a 1031 Tax Deferred Exchange.

There are time frames involved in these various contingencies.  The number in the contract unless changed by the agent completing the documents is typically 7 days for proving ability to complete transaction, (preapproval letter and verification of funds) 17 days for the physical inspection and approval of HOA documents, 17 days for the loan and appraisal.

Seller Contingency

  1. As a buyer you want to present your offer with a preapproval letter and verification of funds.  It shows the seller that you are in a position to complete the contract.   It shows that you have been diligent and have planned for this purchase.  If you are making an offer on a bank foreclosure or a short sale, banks won’t even consider an offer without this documentation.  If banks won’t take seriously an offer, why should an informed seller?

Buyer Contingency

  1. The loan contingency standard time frame of 17 days is, in my opinion, unreasonable.  Banks can’t make a determination on a buyer’s ability to qualify for a loan in 17 days, so I typically request at least 30 days depending on the percentage of down payment a buyer is offering.
  2. I also will request 30 days for the appraisal, as often times, once the appraisal is completed, it still has to be reviewed by underwriting and they often seek a second opinion.
  3. The Title policy will be received by the buyer with the escrow instructions within a few days of opening the escrow.  Things for the buyer to review: Are any easements? Typically there will be easements for utilities (that is a good thing), C.C. & R.’s will also be recorded, any loans, any tax liens.  Your agent should be reviewing the title report as well.  When I see a lien amount that is close to or exceeding the purchase price, I immediately call escrow to see if a demand for the current balance can be obtained.  I want to be sure that my buyer will receive clear title.
  4. Physical inspection is paid for by the buyer.  It is a good idea to hire a professional, a third neutral party, with Home Inspector certifications.   They will go through the property and have a long and complete list of items they verify and check.  They will then give you a detailed report with photos.  This is for the buyer’s peace of mind in knowing the current condition of the property.  Often, this list is given to the seller with a request that certain items be repaired as part of the purchase process.  This request can be accepted by the seller, the seller can agree to repair some items and not others, or the seller may not agree to any of the repairs.  If this is not agreed to between buyer and seller, the contingency clause can be used to cancel the contract.  All contingencies must be removed in writing and there are special forms we use to complete that part of the contract.   It is important to complete this within the specified time frame which is typically 17 days.  If this isn’t done within the specified time frame, the buyer or seller can initiate a Notice to Perform.

I will cover the rest of these items in my next weekly blog.

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Boomerang Buyers - Buying Post Short Sale or Foreclosure

"Boomerang Buyers" are those who purchased homes and either did a short sale or foreclosed and then rebuilt their credit and bought again. Boomerang sales are on the rise. The most important factor in purchasing a home after shorting or foreclosing is rebuilding your credit - stay current on all bills (utilities, HOA's, car payments, credit cards, etc.). Here is the breakdown on waiting periods for buying again:

Foreclosure
7 years for a government backed Fannie Mae or Freddie Mac loan.
3 years for a Federal Housing Administration (FHA) loan.
1-2 years fir a FHA loan if there were extenuating circumstances (such as illness or death of a wage earner).

Short Sale
7 years for Fannie Mae or Freddie Mac with less than 10% down.
4 years for a Fannie Mae or Freddie Mac with 10% down.
2 years for a Fannie Mae or Freddie Mac with 20% down - extenuating circumstances.
3 years for an FHA loan.

Deed in Lieu of Foreclosure
7 years for Fannie Mae or Freddie Mac with less than 10% down.
4 years for a Fannie Mae or Freddie Mac with 10% down.
2 years for a Fannie Mae or Freddie Mac with 20% down.
3 years for an FHA loan.
1-2 years for an FHA loan with extenuating curcumstances.

Source: Fannie Mae, Department of Housing and Urban Development, Wells Fargo
**Each mortgage is case by case dependent on current employment, debt, savings, etc.

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Mammoth's Market is Active

The real estate market is more active, with lower inventory than we have seen in the past decade.
The primary resident market in Southern and Northern California hit bottom sometime last year.  Most of our buyers are second homeowners, so Mammoth typically follows the California trend but several months later.  There appears to be buyer confidence that we won’t continue to drop in value and buyers are coming to the marketplace prepared to make a decision.  Most buyers have been tracking the market and feel confident that NOW is a great time to make a purchase.  The combination of low prices and historically low interest rates create an environment that brings buyers to the table.

Mammoth has always been a place for families to get away, and create those family memories that can’t be duplicated or forgotten.

585 Majestic Pines Drive...This week’s property will fulfill your wish list.    It was built and designed for a local active family.  They had their eye on a particular street in Mammoth that met their desire for privacy and convenience.

Located a short walk from Eagle Lodge and over looks open space, bike trails and Mammoth Creek, this location is very unique and there are only a handful of homes that are lucky enough to claim this location.  With wildlife, sun and views in your backyard, you cannot duplicate this location or home for the asking price of $1,339,000 and it comes fully furnished. Click Here to View Listings 

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