Santa Barbara Real Estate Market-Still Robust!

The real estate market in the Santa Barbara area is still moving forward.  Comparing this October to last year’s, we had 52% more closed sales of single family residences and planned unit development units (all to be referred to as houses).   Looking at our year-to-date total, we have surpassed the number of sales every year in the past 11 years except 2004, which had just a few more sales than we have this year.

Our condos have also been flying off the shelf.  There were over 64% more sales this October than there were last October.  Overall, the number of condo sales is up about 45% over last year. 

Our year to date median price of $799,000 is basically the same as it was last year.  We are seeing the bulk of our sales occurring under this price, but we are still seeing high-end properties continue to sell.  Last year in October, only six properties closed escrow over $2,000,000 and none over $4,000,000.  This past month, we had eight properties close escrow between $2,000,000 and $4,000,000 and six properties over $4,000,000 which represents more than 13% of the monthly sales.    

The year to date median for condos is $400,000 but this is almost 4% less than last year’s median.   This can partially be attributed to the fact that almost 40% of the condos that sold this year were either short sales or bank owned (also known as “distressed”), and those types of properties tend to be sold a bit less than market value. 

At the beginning of the year, it was easy for first buyers to find affordable properties.  There were quite a few houses under $500,000 back in January; now there are four available, most with two bedrooms and one bath.   It is interesting to see that 15 houses did close escrow this month under $500,000, which shows that they the potential to buy in that range is still possible. 

It is important to note that over 1/3 of the houses sold above their list price.   There are still multiple offer situations in every price range.   Some properties have had more than 10 offers.  I just participated in a multiple offer situation on a well-priced house and there were 16 offers with the assumption that the price went well over the list price.  There is still pent up demand for buying.

The percentage of distressed houses that closed escrow this month was around 28%.  As of this writing, we have a total of 29 distressed houses in the Multiple Listing Service (MLS) with 13 of them in escrow.  For condos, the percentage was 39% of the closed escrows were distressed.  Currently, there are a total of 9 distressed condos in the MLS and all of them are in escrow.    It appears that the number of available distressed properties is shrinking in numbers. 

One of our biggest issues is the lack of inventory.  As of this writing, we have 42 houses that are priced under the current median of $799,000.  That represents just 11% of our available inventory of houses.   The median price of the houses in escrow is $815,000.   Once these properties close escrow, we will most probably see an upswing in our median price.  As Table 1 indicates, overall we only have 3.2 months of inventory, which means it would take that long to sell the current inventory.  Note that in the city of Santa Barbara and the area we refer to as Goleta (comprises most of “Noleta” and the city of Goleta) there is less than 2 months of inventory.  Higher end properties usually take longer to sell, but 5.9 months of inventory for Montecito actually represents a balanced market.  The number of sales for both Carp/Summerland and Hope Ranch are statistically too low to have an accurate basis for months of inventory. 

Based on the above information, here is a plea to our financial institutions, “If there really is a Shadow Inventory, please, please, please release them onto the market!”

Even with all of the good news, there are a few concerns that could cause turmoil in the real estate market in 2013.  One of those concerns is the extension to the Mortgage Forgiveness Debt Relief Act of 2007.  This Act is to expire on December 31, 2012 and at this point it does not look as if it will be extended this year.   The purpose of the Act is to prevent families who hold distressed properties from facing a hefty tax bill for trying to modify their mortgage or to seek a short sale through their lender. Even those facing foreclosure could find themselves forced to pay a “foreclosure tax” if Congress doesn’t act.

“If Congress does extend the law for federal income taxes, California is poised to follow suit for state taxes,” said Alex Creel, senior vice president of governmental affairs at the California Association of Realtors.    "Clearly nothing will happen on the extension this year," he said. Even if Congress waits until well into 2013 or even 2014 to extend the bill, it could easily make the bill retroactive to Jan. 1, 2013, so no one would be left out in the cold.  Admittedly that would put people in an awkward spot if they're trying to do transactions in 2013 and Congress hasn't acted," he said. "They would be out there wondering if the extender would go through."

The National Association of Realtors has a campaign to rally Realtors regarding this issue.  If you would like to have your voice heard regarding this issue, go to their website at www.realtor.org. 

The other concern is in regards to the Mortgage Interest Deduction (MID).  There is a possibility that this deduction may be totally removed as a write-off or else it may be modified.  Many pundits doubt that it will be totally removed.   In regards to modifying, some of the more popular proposals include eliminating the deduction entirely for second homes; converting the present MID to a 12 percent tax credit; reducing the $1 million ceiling to $500,000; and dropping the deduction in favor of lower tax rates.  There is still a possibility that it will not be modified at all.

Progress has been made in bringing stability to the housing market.  Any changes to the MID could place the housing market and the broader economy under stress and destroy wealth accumulation that is the foundation for a healthy middle class. 

Our market is doing well and buyers are out in full force.  With such a robust market, whether you are a buyer or a seller, you would be wise to enlist the aid of a knowledgeable Realtor to help you through the process.   Let’s think positively that the Mortgage Forgiveness Act gets extended and, if there are modifications to the MID, it does not adversely affect most homeowners.   

Southland Home Sales Up, Foreclosures Down

Southern California home sales 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, according to DataQuick.

Sales rose sharply in most mid- to-higher-cost markets. Sales between $300,000 and $800,000 – a range that would include many move-up buyers – jumped 41.5 percent year-over-year. October sales over $500,000 rose 55.2 percent year-over-year, while sales over $800,000 rose 52.4 percent compared with October 2011.

Gary Wood’s analysis of Santa Barbara County’s MLS sales including Carpinteria/Summerland, Montecito, Hope Ranch, downtown Santa Barbara and Goleta through October 2012 were similar. Sales rose to 100 from 83 in September. The median sales price also came up from $750,000 in September to about $815,000 in October with escrows rising from 94 to about 120 for the month. The median list price on those escrows showed the biggest upswing—going from $762,540 to almost $900,000.

Year over year, the numbers of sales are still way up with about 1,050 transactions completed compared to 780 last year. The median sales price is basically unchanged but down just a little from $800,050 in 2011 to about $795,000 now. The escrows are also still way up from 841 last year to about 1,150 this year while the median list price on those escrows has risen a little from about $825,000 last year to approximately $830,000 now.

Graph: RealtyTrac

Foreclosure resales – properties foreclosed on in the prior 12 months – accounted for 16.3 percent of the Southland resale market last month. That was down from 16.6 percent the month before and 32.8 percent a year earlier. Last month’s level was the lowest since it was 16.0 percent in October 2007. The foreclosure resales had hit a high of 56.7 percent in February 2009 during the Great Recession.

The delinquency rate for mortgage loans on one-to-four-unit residential properties fell to a seasonally adjusted rate of 7.40 percent of all loans outstanding as of the end of the third quarter of 2012, a decrease from the second quarter of 2012, and a decrease of 59 basis points from one year ago, according to the Mortgage Bankers Association’s (MBA) National Delinquency Survey.

“Mortgage delinquencies decreased compared to last quarter overall, driven mainly by a decline in loans that are 90 days or more delinquent,” said Mike Fratantoni, MBA’s Vice President of Research and Economics. “The 90 day delinquency rate is at its lowest level since 2008, and together with the decline in the percentage of loans in foreclosure, this indicates a significant drop in the shadow inventory of distressed loans-a real positive for the housing market. The 30 day delinquency rate increased slightly, but remains close to the long-term average for this metric.  Given the weak economic and job growth in third quarter, it is not surprising that this metric has not improved. ”

And foreclosures nationwide are declining as well, mostly in the 26 so-called non-judicial states that enable Trust Deed auctions, such as California and Texas. This was the largest decline in foreclosure inventory ever recorded. Judicial states’ foreclosure inventory was at 6.61 percent, and the non-judicial states’ inventory was at 2.42 percent, reports the MBA.

Harlan Green © 2012

Shadow Housing Inventory, Foreclosure Fall

The Mortgage Corner

Shadow Housing Inventory, Foreclosures Fall

 

CoreLogic reported the current residential shadow inventory as of July 2012 fell to 2.3 million units, representing a supply of six months. This was a 10.2 percent drop from July 2011, when shadow inventory stood at 2.6 million units, which is approximately the same level the country was experiencing in March 2009. Currently, the flow of new seriously delinquent (90 days or more) loans into the shadow inventory has been roughly offset by the equal volume of distressed (short and real estate owned) sales.

“The decline in shadow inventory has recently moderated reflecting the lower outflow of distressed sales over the past year,” said Mark Fleming, chief economist for CoreLogic. “While a lower outflow of distressed sales helps alleviate downward home price pressure, long foreclosure timelines in some parts of the country causes these pools of shadow inventory to remain in limbo for an extended period of time.”

Data Highlights as of July 2012:

• As of July 2012, shadow inventory fell to 2.3 million units or six-months’ supply and represented just over three-fourths of the 2.7 million properties currently seriously delinquent, in foreclosure or in REO.
• Of the 2.3 million properties currently in the shadow inventory, 1 million units are seriously delinquent (2.9 months’ supply), 900,000 are in some stage of foreclosure (2.5-months’ supply) and 345,000 are already in REO (1.0-months’ supply).
• The dollar volume of shadow inventory was $382 billion as of July 2012, down from $397 billion a year ago and $385 billion last month.
• Serious delinquencies, which are the main driver of the shadow inventory, declined the most from April 2012 to July 2012 in Arizona (3.2 percent), Pennsylvania (2.8 percent), New Jersey (2.3 percent), Delaware (2.2 percent) and Maine (2.2 percent).
• As of July 2012, Florida, California, Illinois, New York and New Jersey make up 45 percent of all distressed properties in the country.

CoreLogic also released its latest National Foreclosure Report which provides monthly data on completed foreclosures, foreclosure inventory and 90+ delinquency rates.

• The five states with the highest number of completed foreclosures for the 12 months ending in August 2012 were: California (110,000), Florida (92,000), Michigan (62,000), Texas (58,000) and Georgia (55,000). These five states account for 48.1 percent of all completed foreclosures nationally.
• The five states with the lowest number of completed foreclosures for the 12 months ending in August 2012 were: South Dakota (25), District of Columbia (113), Hawaii (435), North Dakota (564) and Maine (612).
• The five states with the highest foreclosure inventory as a percentage of all mortgaged homes were: Florida (11.0 percent), New Jersey (6.5 percent), New York (5.2 percent), Illinois (4.8 percent) and Nevada (4.6 percent).
• The five states with the lowest foreclosure inventory as a percentage of all mortgaged homes were: Wyoming (0.5 percent), Alaska (0.8 percent), North Dakota (0.8 percent), Nebraska (0.9 percent) and South Dakota (1.1 percent).

                Corelogic said that home prices nationwide, including distressed sales, increased on a year-over-year basis by 4.6 percent in August 2012 compared to August 2011. This change represents the biggest year-over-year increase since July 2006. On a month-over-month basis, including distressed sales, home prices increased by 0.3 percent in August 2012 compared to July 2012.

                So we see the Federal Reserve’s commitment to keep interest rates at historic lows for as long as it takes to revive the housing market, and bring down the unemployment rate to more acceptable levels, is already showing results.

 

Harlan Green © 2012

Good News for the Housing Market

The housing market’s been giving mixed signals, flashes of hope mixed with sudden bad news. There’s no sign yet that a real recovery has taken hold, but some new data are optimistic.

Home prices and sales are on the rise. DataQuick says the average sale price for the past 30 days was $189,500, up $7,000 from a month earlier. Sales are also up 8.2 percent during this time. In Southern California, for example, DataQuick says the market is continuing its “step-by-tiny-step trek back toward normalcy.”

Shadow inventory is shrinking quickly. The so-called shadow inventory refers to distressed properties that aren’t listed for sale but probably will be—homes on which borrowers are grossly delinquent or already in foreclosure, or that banks have already repossessed. CoreLogic says in April, 1.5 million homes were in the shadows, which equates to a four-month supply, down from a six-month supply a year earlier. A smaller shadow inventory can be positive for prices because it means there are fewer distressed homes poised to come on the market.

Foreclosures are up. In the fall of 2010, the robo-signing scandal erupted over how banks were using faulty paperwork to evict borrowers. They cut back on processing foreclosures, building up a backlog of distressed properties. In March, banks agreed to a $25 billion robo-signing settlement, and new data show banks are restarting the foreclosure machinery. In May, banks filed to foreclose on 205,990 properties—a 9 percent increase during April, according to RealtyTrac. The foreclosure pickup hurts the people who are losing their homes but helps the housing market in the long run because it lets banks get through the backlog and eventually move on.

Borrowers are building more equity in their homes. Our colleagues at Bloomberg News report that homeowners have made the biggest jump in home equity in more than 60 years. Half of borrowers who are refinancing are paying down some of their debt and reducing their loans. They’re also refinancing into shorter-term loans that have higher monthly payments but let them pay down principal quicker. Overall, mortgage debt is down 7 percent since 2007—a small consolation for the decline in home values, which are down 23 percent over the same period.
Finally, if you’re looking for more data and a big-picture view, check out Harvard’s annual State of the Nation’s Housing report that’s out today. It also sees signs of recovery in the market and says unless something comes along to dent the broad economy, the housing picture should become even brighter.

Weise is a reporter for Bloomberg Businessweek.