Multiple Offers Increased as the Market Became More Competitive

By Oscar Wei, Senior Research Analyst

To be competitive in a housing market with tight inventory and a restrictive lending environment, many buyers who wanted to have an edge over other buyers opted to make an “All Cash” offer for their home purchase. Since an “All Cash” transaction does not have to go through lengthy lending approval process, the escrow process is faster and is less likely to fall through, making the offer more attractive and more assured.  

According to results based on C.A.R.’s 2012 Annual Housing Market Survey, “All Cash” buyers has been on the rise since the mid of 2000’s, increasing from 11 percent in 2005 to 30 percent in 2012. Almost one-third of all home buyers paid with all cash in 2012, which is more than 3 times what it was in 2001 when “All Cash” buyers were merely 8.8 percent. The share of all cash buyers in 2012 was also nearly double the long-run average of 15.1 percent since 1998.

National Home Prices are Surging

The Mortgage Corner

National Home Prices Are Surging

We are seeing further confirmation of the housing recovery. The Case-Shiller Home Price Index reported the fourth consecutive year-over-year (YoY) gain in their house price indexes since 2010 - and the increase back in 2010 was related to the housing tax credit. Excluding the tax credit, the previous YoY increase was back in 2006. The YoY increase in September suggests that house prices probably bottomed earlier this year.

And this is the slow time of year when families that have already moved and put their children in new school districts.  It really means that those at the bottom of the housing bubble—Las Vegas (up 1.4 percent, 3.8 percent YoY), Phoenix (up 1.1 percent, 20.4 percent YoY), San Diego (up 1.4 percent, 4.1 percent YoY)—are finally seeing some relief from the worst economic slump since the Great Depression.

Graph: Calculated Risk

“Home prices rose in the third quarter, marking the sixth consecutive month of increasing prices,” says David M. Blitzer, Chairman of the Index Committee at S&P Dow Jones Indices. “In September’s report all three headline composites and 17 of the 20 cities gained over their levels of a year ago. Month-over-month, 13 cities and both Composites posted positive monthly gains.”

                The Federal Housing Finance Authority (FHFA) house price index posted also another monthly increase in September. This measure is up 4.4 percent YOY, a bigger YOY gain than the 3 percent rise in the S&P/Case-Shiller index. Also, the FHFA index is down just 16 percent from its peak, about half the cumulative decline in the Case-Shiller gauge. Most of the discrepancy reflects the fact that the FHFA index is much less affected by distress sales, since it covers only properties financed with conventional GSE mortgages (Fannie Mae and Freddie Mac), which have more stringent qualification guidelines.

This may be because of the continuing rise in consumer confidence.  The Conference Board’s Consumer Confidence survey rose again with buying plans for homes a special positive, said the report. The consumer confidence index rose to a new recovery high of 73.7 in November from an upwardly revised 73.1 in October. Strength is centered in the expectations component which is up 1.1 points to 85.1. The present situation component is down one tenth to 56.6.

                                                                                             Graph: Econoday

A major reason for the increased confidence is a 1.5 percentage point jump to 6.9 percent in those who expect to buy a house in the next six months. This is the latest indication of building momentum for the housing sector. Inflation expectations are another plus in the report, down two tenths for the 12-month outlook to 5.6 percent in what is a reflection of falling gas prices.

California is also doing well.  I reported last week that Southern California home sales also rose sharply in October as move-up buyers joined investors, according to San Diego-based DataQuick, shifting the mix of homes selling upward as foreclosure resales hit a five-year low. Southern California's real estate market bucked the typical fall slowdown last month, with buyers snapping up pricier homes and sales roaring up 18 percent over the prior month.

Sales hit a three-year high for an October, rising 25 percent from the same month last year. The median sale price for a Southland house last month was $315,000, equal to September and up 17 percent from October 2011.

Harlan Green © 2012

Dramatic Declines In Foreclosure Activity

September 2012 California Notice of Defaults were down 20.7 percent from the prior month, and down 48.1 percent compared to last year. There has been speculation that the banks would rush to clear inventory before the CA Homeowner Bill of Rights takes affect in January 2013, causing an increase in the number of foreclosures. Clearly this is not the case as we continue to see the number of Foreclosure Starts decline. Notice of Trustee Sales remains basically flat, up 1.9 percent from the prior month.

September 2012 California Foreclosure Sales are down 17.9 percent from the prior month, and down 30.4 percent compared to last year. However, a larger portion of Trustee Sales, 39.2 percent, are being purchased by investors compared to 27.2 percent last year.

In the other states in our coverage area, Foreclosure Starts are down with Arizona down 37.1 percent, Nevada down 40.1 percent, Oregon down 40.0 percent, and Washington down 31.2 percent from the prior month. Sales are also down with Arizona down 24.3 percent, Nevada down 19.5 percent, Oregon down 0.3 percent, and Washington down 33.5 percent from the prior month.

Click here to view all California Statistics by county, city or zip

Foreclosure Activity Continues to Fall

The "foreclosure wave" many predicted at the end of last year is beginning to look more like a drought, as foreclosure sales dropped significantly in February. Although sales to 3rd Parties, typically investors, were down month-over-month, as a percentage of all sales 3rd Parties purchased a record 37.6 percent of foreclosures, up from 20.3 percent a year earlier, and just 2.2 percent in February 2008.

Further eliminating any possibility of a foreclosure wave for months to come, was a substantial drop in new foreclosure filings in California, Nevada, and Washington. Arizona saw a modest increase in foreclosure starts, while Oregon jumped a dramatic 39.4 percent. Despite the size of the increase, it simply offset a drop in January, and showed little change in comparison to earlier months. Nevada remains far below the average number of foreclosure starts; and the dramatic changes to their foreclosure laws will likely drag out the Nevada foreclosure process for years to come.

Unlike years past, February's drop in sales was not due to the short month. Thanks to the Leap Year, California had only one less business day than usual in February (because of the Abraham Lincoln's birthday observation). The other states do not observe Lincoln's birthday, and so had the same number of business days as other months.