Good news: President Obama is expected to sign a resolution passed late yesterday by Congress extending the current limits for Fannie Mae, Freddie Mac, and FHA loans through 2010. The limits were set to expire at the end of this year. This is especially critical for California, where more than 80 percent of all loans are financed by Fannie Mae, Freddie Mac, or FHA, and will help maintain the positive signs we are now seeing in California’s mortgage market. President Obama is expected to sign the resolution today or tomorrow as part of a broader piece of budgetary legislation that will prevent a government shutdown.
While home prices in California have declined, the demand for housing has not. The market has been dominated by first-time home buyers who have faced a shortage of financing opportunities. The loan limits are set at 125 percent of local median home sales prices, up to a maximum of $729,750 in high-cost areas, including many regions in California. Sales in move-up and high-end markets have been constrained this year; the loan limits extension will help qualified home buyers in these markets to move forward with their purchases.
This report just received from the California Association of Realtors
Showing posts with label California. Show all posts
Showing posts with label California. Show all posts
Friday, October 30, 2009
Monday, October 26, 2009
California Real Estate FORECAST: 2010 and where we are now
Last week I had the opportunity to meet Leslie Appleton-Young, chief economist of The California of Realtors. She was presenting her annual analysis of the real estate market to Alain Pinel Realtors. In her observations she also offered her projections for 2010.
The following represents my interpretation of her comments, along with some of the slides of her presentation, she was nice enough to provide.
While we all know that values plummeted during the past two years, a closer look at the data reveals some interesting details which could be overlooked, or mis-understood. For example, when talking about sales, you will notice in the slide below, almost 85% of all sales in January '09 were bwelow $500,000. What isn't obvious here is that the vast majority of these sales were REOs' or bank owned properties.
While we all know that values plummeted during the past two years, a closer look at the data reveals some interesting details which could be overlooked, or mis-understood. For example, when talking about sales, you will notice in the slide below, almost 85% of all sales in January '09 were bwelow $500,000. What isn't obvious here is that the vast majority of these sales were REOs' or bank owned properties.
What is also interesting here is that the luxury market (homes over one million dollars) represented 15% of all California residential sales at the peak of the market. In July '09 these luxury home sales represented only 6% of the market. As you see below, the greatest percentage of unsold inventory is in this same luxury market.
It is Leslie's opinion that going forward, this segment of the market will be one of continued pain for those needing to sell. However, even though this next slide shows some dramatic looking depreciation since the peak, this is really a tale of two markets; one that has taken a hit, but isn't suffering nearly as much as the other market, which has been "ground zero" for the bust, yielding a very high percentage of foreclosures.
The FUTURE : 2010
Going forward, Leslie made the following observations:
In spite of high unemployment, low prices and very low interest rates, California's Affordability Index is at its' highest level in over 10 years, that there is a larger potential buyer pool. When you combine this with almost no new construction activity and a growing number of FHA loans (that permit buyers to put as little as 3 1/2% down) there is growing belief, supported by some early data that the worst of the housing crisis is behind us.
However, there are some "Wild Cards" out there, which could effect this modicum of good news. The first time buyer tax credit, which has motivated many to buy, is scheduled to expire at the end of November. As of this writing there is no assurance it will be renewed.
While sales have recently increased in these "bust markets," most of these sales and price increases are the result of investors coming in at what they believe to be at or close to the bottom, and purchasing extremely inexpensive homes that in many cases permit cash flow from rent - a very rare occurrence in most of California. These same homes have in some cases lost over 70% of their value from the peak.
Yet, as you can see below, the counties shown here have faired relatively well, at least since '08.
Going forward, Leslie made the following observations:
In spite of high unemployment, low prices and very low interest rates, California's Affordability Index is at its' highest level in over 10 years, that there is a larger potential buyer pool. When you combine this with almost no new construction activity and a growing number of FHA loans (that permit buyers to put as little as 3 1/2% down) there is growing belief, supported by some early data that the worst of the housing crisis is behind us.
However, there are some "Wild Cards" out there, which could effect this modicum of good news. The first time buyer tax credit, which has motivated many to buy, is scheduled to expire at the end of November. As of this writing there is no assurance it will be renewed.
And finally, a 2010 projection that indicates a small decline in sales, as bank owned properties decline, and a 3% overall increase in home values, as stability begins to return.
If you are interested in receiving the entire Powerpoint presentation, you can email me at pweingrow@apr.com
Subscribe to:
Posts (Atom)
