Glen’s SF East Bay Real Estate Market Update October 31, 2016

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Glen’s SF East Bay Real Estate Market Update

October 31, 2016

 

“Distressed inventory for sale is virtually non-existent in many of the nation’s hottest housing markets, and when a distressed property is listed for sale in those markets, it often sells quickly and at little or no discount,” says Daren Blomquist, senior vice president at ATTOM Data Solutions. “The scarcity of discounted distressed inventory is chasing away cash buyers and other bargain hunters, but it’s certainly good news for home sellers, who nationwide realized the biggest home price gains since purchase in nine years.

“We are seeing the average seller home price gain since purchase start to wane in some of the highest-priced markets where appreciation is beginning to cool, indicating those markets are past their prime as sellers markets,” Blomquist continues. “Meanwhile, there are still a number of buyers markets across the country where a high level of lingering distress and relatively weak demand from owner-occupant buyers provides investors with plenty of bargain-buying opportunities.”

“The lead-up to the election had no impact on home sales or demand; pent-up demand, historically low mortgage rates, relatively strong job creation, and significant demographic tail winds created the best real estate market in a decade,” says Jonathan Smoke, chief economist, realtor.com®. “Because our November elections come at one of the slowest times of the year for sales, it’s unlikely we will see much disruption to the normal seasonal pattern.

Housing, currently, is projected to maintain relatively status quo.

– RISMedia

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Here are some highlights for the 38 East Bay Cities that I track:

  • Inventory decreased 13.8% in the last 30 days but is still about 2.25 times more than what it was at the beginning of the year. Inventory is slightly greater than where we were last year at this time. Our monthly supply is now 39 days. As a reminder of what we mean by “months supply;” If no more homes come onto the market, and homes continue to sell at the same pace as they have been over the last 12 months, then the “months supply,” (in this case 39 days), tells us that’s how many days it would take to sell the remaining number of homes we currently have available for sale in any given market.
  • The number of pendings, (homes that are in contract), has remained about the same. That’s slightly less than what we experienced during this time last year. The pending active ratio increased slightly to 1.22. This supply and demand ratio signals whether we’re in a sellers or buyers market. Typically, a number well above 1, (more inventory with less pending) favors sellers. A number below 1 favors buyers. This is at a slightly lower level than we saw last year at this time, (1.32), and this may be an indication of moving towards a more “normal” or balanced market combined with the typical late fall/winter slowdown.
  • The percentage of homes “sitting” has increased slightly from last month. 49% of the homes listed now remain active for 30 days or longer, while 26% stayed on the market for 60 days or longer. This may be due more to a shortage of “fresh” new inventory coming onto the market.
  • The “distressed” market, (foreclosures and short sales) are no longer much of a factor representing only 3% of the active listings and 2.2% of sales over the past 4 months.
  • Median Price recovery on a city by city is beginning to see a slight increase. This is typical as we approach Winter. 17 out of the 33 East Bay cities tracked are now at or above their median price “peak” levels with another 12 cities within 20%. That means that only 4 cities are still well below their peaks, falling into the 20% to 30% range. The Median Price for the East Bay has decreased from $650,000 to $625,000 over the last 4 months, also typical for this time of year.

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  • The month’s supply for the combined 38 city area remains at 39 days. Historically, a 2 to 3 months supply is considered normal in the San Francisco East Bay Area.

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  • Our inventory for the East Bay (the 38 cities tracked) decreased to 2,653 homes actively for sale. This is still well above the December 2012 low of 1,086 and slightly greater than last year at this time of 2,577. We’re used to seeing between 3,000 and 6,000 homes in a “normal” market in the San Francisco East Bay Area. Pending sales remained about the same now at 3,233, slightly lower than where we were last year at this time of 3,412.

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  • Our Pending/Active Ratio is 1.22. Last year at this time it was 1.32. This is moving towards a more balanced or “normal.” (a ratio of 1 with an equal number of listings and pending sales).

sales

  • Sales have decreased from the last (4 month period) now at 9,029 for the 38 cities tracked. This is down 3.7% from what we saw last year at this time.
  • Sales over the last 4 months, on average, are 3% over the asking price for this area down slightly from last year’s 3.7%. This is down over the past 4 months from 4.4%

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Recent News

 

What does President Trump mean for the housing market?

8 ways our new commander-in-chief could affect homeownership for the next 4 years
BY THOMAS MITCHELL, Inman News, November 9, 2016

Political pundits around the country were stunned last night when Donald Trump secured enough votes to beat Hillary Clinton to become the next President of the United States. While supporters from both sides are still reeling from emotions, we woke up wondering what that would mean for real estate.

It’s common for the president to use housing as a vehicle to lead economic recovery, and with Trump being a licensed broker, real estate professionals have been keen to see how his policies would affect them.

“The last time we had real estate dealmakers as U.S. Presidents were founding fathers Thomas Jefferson and George Washington, who loved their property holdings and made sure the U.S. Constitution protected them,” Inman publisher Brad Inman wrote earlier this year. “That was a big deal.”

How will an impending Trump presidency change the real estate market? Here are eight possible outcomes.

Will he use real estate to kickstart the economy?

Trump has used real estate himself as an investment, and although he hasn’t said much about his housing platform, what he has said indicates that he’s interested in boosting homeownership.

Much of Trump’s platform has centered around deregulating the financial market in order to more fully revive it, and that alone could also give a boost to real estate.

What will happen to mortgage rates?

Many different factors affect mortgage rates — they change each day based on what the market is doing — and last night, we saw a little bit of market panic, which can be expected due to an unforeseen event (most polls showed a Clinton win).

However, as of this morning, they have already bounced back a bit.

similar effect was seen post-Brexit, with markets dropping after the unexpected vote to leave the European Union, but a few months later, it’s business as usual again.

The international economy also has an effect on the exchange rate, and there could be some disturbance as the result of an unforeseen event.

“Mortgage rates are falling because investors are seeing safe yields in U.S. mortgage backed securities, reflecting their confidence in the relative safety of the U.S. housing market,” wrote Trulia chief economist Ralph McLaughlin this morning in a statement. “Furthermore, the Fed is likely to delay a December rate hike because of global economic turmoil. Both effects mean short term win for borrowers, and we’ll likely see an increase in mortgage refinancing if rates continue to plummet.”

Could it become easier to borrow money?

One way that a Trump presidency could make it easier for consumers to own homes would be to lower premiums for FHA loans or cutting guarantee fees for Fannie Mae or Freddie Mac.

Neither of those have been specifically mentioned as priorities for his campaign — and Fannie and Freddie present their own problem, as seen below.

Will there be cutbacks in federal programs?

In the 1980s, Ronald Reagan cut back on many federal programs (such as mental health care) in order to trim the national budget.

Some programs, such as those involving affordable housing, might have more of an effect on real estate than others, but Trump has not indicated which programs he would be most likely to target for cutbacks.

“While local and state policies are likely to be unaffected, major programs — such as the Low Income Housing Tax Credit and Section 8 housing vouchers — could be on the table for reform,” said McLaughlin.

What about regulations?

This is something that Trump — and the Republican party as a whole — has been vocal about.

Banking regulations

In July, the party approved its 2016 platform. That platform includes significant changes to the Consumer Financial Protection Bureau (CFPB), and there has been talk of repealing the Dodd-Frank Act, which imposed regulations on lenders, and replacing it and the CFPB with something else.

Loosening regulation on lending could potentially boost homeownership by making it easier for consumers to obtain loans.

Building regulations

In August, Trump also told a meeting of the National Association of Home Builders, “There’s no industry, other than probably the energy industry, that is more overregulated than the housing industry … Twenty-five percent of costs to build a house are regulations. I think we should get that down to 2 percent.”

If construction is deregulated to some extent, this could mean more affordable homes for consumers.

Employer/independent contractor regulations

What happens to the Patient Protection and Affordable Care Act (PPACA, also known as Obamacare) and Occupational Safety and Health Administration regulations is up in the air now.

And if Republicans are successful in getting rid of some or all of PPACA or OSHA, then that could mean lower operating costs for small business, including real estate brokerages. It could also mean that agents are no longer required to purchase their own health insurance as independent contractors if PPACA is repealed or amended.

Will the mortgage interest deduction go away?

Last year, a tax plan that Trump shared specifically and explicitly mentioned that he would preserve the mortgage interest deduction.

Trump’s current plan (more abbreviated than the previous version) does not go into detail about the mortgage interest deduction.

Will there be reforms at Fannie Mae or Freddie Mac?

Fannie Mae and Freddie Mac, two government-sponsored enterprises (GSEs), are currently under government conservatorship — and although figuring out what to do with the behemoths is bound to be difficult, it’s also likely to fall into Trump’s lap.

The GSEs are projected to run out of funds in 2018, so if we don’t have a plan by the time that happens, we’ll need one.

What about immigration?

This is a big unknown — if Trump does, indeed, tighten immigration policies as outlined in his platform, then the United States could see some softening in markets that rely heavily on overseas investors, who might face additional difficulties or hurdles in purchasing property.

However, Trump’s immigration policy has undergone many changes since he first announced his candidacy, and immigration reform won’t be an easy bill to push through, so it’s difficult to determine whether this will influence the real estate market to any large degree.

Homebuyers Reflect Uncertainty Toward the Market

By Scott Morgan, DS News, November 7, 2016

U.S. homebuyers were overall more pessimistic about the market in October, according to the latest Fannie Mae Home Purchase Sentiment Index[1] (HPSI). The index last month dropped another 1.1 points to 81‒‒the third decrease in as many months‒‒and four of the six components that comprise the HPSI fell during October as well.

“The HPSI fell in October for the third straight month from its record high in July, reaching the lowest level since March,” said Doug Duncan, senior vice president and chief economist at Fannie Mae. “Recent erosion in sentiment likely reflects, in part, enhanced uncertainty facing consumers today.”

“Since July, more consumers, on net, have steadily expected mortgage rates to rise and home price appreciation to moderate,” Duncan said. “Furthermore, consumers’ perception of their income over the past year deteriorated sharply in October to the worst showing since early 2013, weighing on the index.”

“Since July, more consumers, on net, have steadily expected mortgage rates to rise and home price appreciation to moderate,” Duncan said. “Furthermore, consumers’ perception of their income over the past year deteriorated sharply in October to the worst showing since early 2013, weighing on the index.”

Distressed Home Sales Plunge to Nine-Year Low

RISMedia e-News, RealtyTrac, November 12, 2016

Distressed sales—including bank-owned (REO) sales, sales of homes actively in foreclosure, and short sales—accounted for 12.9 percent of all U.S. single-family home and condo sales in Q3 2016. According to ATTOM Data Solutions’ Q3 2016 U.S. Home Sales Report, these numbers are down from 15 percent in the previous quarter and down from 15.9 percent in Q3 2015 to the lowest share of distressed home sales since Q3 2007, when distressed sales accounted for 12.3 percent of all home sales.

The peak in share of distressed sales was Q1 2009 at 43.9 percent of all U.S. single-family home and condo sales.

The report also shows that all-cash purchases accounted for 25.9 percent of all single-family home and condo sales in Q3 2016, down from 27.4 percent in the previous quarter and down from 29.2 percent in Q3 2015 to the lowest level since Q3 2007, when all-cash purchases accounted for 24.3 percent of all home sales.

The peak in share of all-cash purchases was Q1 2011 at 44.8 percent of all U.S. single-family home and condo sales.

“Distressed inventory for sale is virtually non-existent in many of the nation’s hottest housing markets, and when a distressed property is listed for sale in those markets, it often sells quickly and at little or no discount,” says Daren Blomquist, senior vice president at ATTOM Data Solutions. “The scarcity of discounted distressed inventory is chasing away cash buyers and other bargain hunters, but it’s certainly good news for home sellers, who nationwide realized the biggest home price gains since purchase in nine years.

“We are seeing the average seller home price gain since purchase start to wane in some of the highest-priced markets where appreciation is beginning to cool, indicating those markets are past their prime as sellers markets,” Blomquist continues. “Meanwhile, there are still a number of buyers markets across the country where a high level of lingering distress and relatively weak demand from owner-occupant buyers provides investors with plenty of bargain-buying opportunities.”

The outcome of the presidential election has called into question prior indicators of an interest rate rise in December, with analysts now expecting the Federal Reserve to keep the key rate unchanged as markets respond to the result. Housing, currently, is projected to maintain relatively status quo.

“The lead-up to the election had no impact on home sales or demand; pent-up demand, historically low mortgage rates, relatively strong job creation, and significant demographic tail winds created the best real estate market in a decade,” says Jonathan Smoke, chief economist, realtor.com®. “Because our November elections come at one of the slowest times of the year for sales, it’s unlikely we will see much disruption to the normal seasonal pattern.

Here are Oakland’s most expensive and most affordable neighborhoods for 2016

By Riley McDermid, SF Business News, November 11, 2016

Oakland remains one of the nation’s most expensive and in-demand cities, but there are still some bargains to be found for renters, new data from real estate tracking site Zumper suggests.

Zumper provided the Business Times with rental data for average one-bedroom in the city for 2016, which showed a shift for demand from Oakland’s most expensive neighborhoods like Central and North Oakland into lower-priced ones nearby, including Lower Hills and San Antonio.

“Whether it’s a migration of residents from the most expensive neighborhoods to the less pricey ones or just general interest from potential Oakland tenants to stay close to the bustling city center without paying as much, this shift seems to be surging the prices in these less expensive areas,” Crystal Chen, a spokesperson for Zumper, told the Business Times.

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