Market Overview September 2010

8/8/2019 Market Overview September 2010

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As the Caliornia housing market grows more

ttractive, home buyers are more optimistic

han they were a year ago, according to the

atest survey by the Caliornia Association

REALORS.

While in 2009, only 8% o home owners

elieved their homes would go up in value over

he next year, that number has grown to 23%

n 2010.

Home buying conditions are ideal:

Mortgage interest rates are at all-time lows

not seen since 1971. Te benchmark 30-year,

xed-rate conventional mortgage was 4.44%

by mid-August 2010.

Aordability is excellent nearly hal

o home buyers can aord the median-

priced home in Caliornia and nearly 47%

can aord the median-priced home in

Southern Caliornia.

Sellers are meeting market realities by lowering

the prices on nearly one-quarter o U.S.

homes listed or sale in June 2010, according

to rulia.com. Tats up 9% rom May 2010.

Lower property values mean that owning

a home is now less expensive than renting

in almost every Southern Caliornia

community.

Investors are stepping in and paying cash

or distressed properties, reducing the

number o oreclosures negatively impacting

neighborhood home values. Distressed

homes sell at as much as 15% less than non-

distressed homes.

Mortgage applications leapt on rock-bottom

ates, according to the Mortgage Bankers

Association, with demand or home renancing

eaching its highest level in 15 months by

mid-August.

he return o the jumbo loan

According to Steve Cook, journalist and analyst

or Real Estate Economy Watch, high-end sales

icked up through the spring and early summer

2010. By mid-July, jumbo mortgage rates

reached ve-year lows, welcome news to home

buyers and sellers.

Only a year ago, jumbo loans were nearly

7%, and hard to get at that rate, says Cook.

ougher lending standards that oten included

down payments as high as 20% to 40% made

it hard or many buyers. Only a handul o

lenders were making jumbo loans that exceed

Fannie and Freddies conorming loan limits,

which currently vary by locale rom $417,000

to $729,750.

Te average U.S. rate or a 30-year xed jumbo

mortgage ell to 5.47% on June 29, the lowest

since 2005, when the real estate boom was

near its peak, says Cook. Just a year ago, the

average rate on a 30-year jumbo mortgage was

6.86%, he says.

A single percentage point has a huge impact

on demand at all price levels. A home owner

with a 30-year xed-rate $800,000 mortgage

at 6.86% pays $5,247 a month, poses Cook.

I he were to renance at 5%, his monthlypayments would be reduced by $952. Suddenly

buyers can aord properties that were out

o their price range simply due to the drop

in rates.

More lenders, like Wells Fargo, are aggressively

marketing jumbo loans. While strict

underwriting guidelines are still there,

the lower rates on jumbo loans have opened

the luxury market back up again, says

Mike Reza, president o HomeServices Lending,

an aliate o Wells Fargo Caliornia,www.HSLCA.com.

Renoation loans no aailable

A home may not eel like home until you make

it your own. Even well-designed homes require

updates every ew years.

Te typical home sold in 2009 was built in

1991, according to data rom the National

Association o REALORS, and most homes

80% to be exact were built beore 1980,

according to U.S. Census data.

From updating a kitchen or bath to add

room, renovation nancing provides qua

borrowers with the means to purchas

renance properties in need o improvem

says Mike Reza. Te borrower can ch

a xed-rate or adjustable-rate loan, b

on the projected post-improved valu

the property.

o qualiy or a renovation loan, borro

must meet standard credit qualications

as they would or any other loan. Te pro

or getting the loan are that the property

qualiy or the loan program, the total

must be supported by a bank appraisal, an

ater-completion appraised value must sup

the homes value and the new mor

amount, says Reza.

Almost any kind o home improve

can be nanced with a renovation

including new roo, HVAC, plum

electrical, hazard abatement, and cosm

changes such as paint, siding, landsca

foors and appliances, he notes.

Te rst consideration is the property

and whether its underlying value will sup

the renovations you want to make. Youll

to talk to a lender with a renovation spec

such as HomeServices Lending. He

she will tell you how to get started,

what documentation youll need to get a q

loan approval.

Beore you go any urther, youll nee

complete all inspections o the home, inclustructural, termite, or septic, i applic

Tese should help you determine the sco

the work you need to do.

I you are getting a HUD-aliated loan,

as the FHA 203K home improvement prog

your renovation specialist will introduce y

a HUD-approved consultant who will help

assess your needs. Te consultant will go

your inspection reports and meet you at

property to inspect it and assist you with

and cost estimates. He or she will itemiz

Copts of

miguel nunez

DRe# 01220521

858-481-1029 | @rators.co

www.rators.coSAN DIEGO COUNTYMARkET OvERvIEw a monthly real estate report | September 2


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prospective renovations and improvements

into a work write-up, a document you can

use as your renovation guide when you hire

your contractors.

You should interview several contractors

beore hiring anyone. Get recommendations

rom riends and relatives, and ask or

reerences. Also request copies o the

contractors license and insurance, whichis required in most states. All contractor

documentation should be given to your

renovation specialist.

Your contractor or contractors must provide

a detailed estimate and scope o the work

to be done, including materials and costs.

Tat way you, the contractor, the appraiser,

the HUD consultant and the lender all have

the same expectations based on this nal

work write-up, advises Reza.

Te lender will send an appraiser to see i

the property will support the cost o the

renovations compared to the value o similar,

nearby properties. Once approved, your

loan can proceed to closing and the unds

will be disbursed according to the terms

o your contract. Draws are paid to your

contractors by an assigned draw specialist

when the draw inspection is complete. All

work must start within 30 days o closing

and must be completed within six to nine

months, i renovations are over $50,000.

Once all work is completed, the draw

specialist will give you a letter o completion

to sign and return or the release o nal

unds. In some cases, the lender may require

a nal inspection by the appraiser to insure

that all proposed work has been done and

provide a completion certicate.

I you are buying or selling an older home,

a renovation loan can help you add value to

the property that will be enjoyed or years

to come, says Reza. For more inormation,

contact Mike Reza: [email protected].

Reerse mortgages, seniors 62 andolder benet

Another eect o the our-year housing

recession is the gain in popularity o reverse

mortgages. Older home owners who want

to tap their homes equity saely are more

protected under todays stricter guidelines.

Conventional reverse mortgages are only

available to home owners age 62 or older, who

occupy the home as a principal residence,

and who either own their home outright

or have substantial equity in the property.

Creditworthiness and monthly income are

not actors, but home owners are expected

to pay hazard insurance and property taxes

and to maintain the property.

Reverse mortgages work in an ingenious way,

and they can be a blessing to home owners

who want to stay in their homes. With a

conventional loan, principal and interest

are included in the monthly payment. With

a reverse mortgage, interest is added to the

loan balance each month as no monthly

payments are required.

Approximately 90% o reverse mortgages

are FHA-insured Home Equity Conversion

Mortgages (HECM). Te HECMguarantees that the FHA will meet the

lenders obligations to the borrower, limits

loan origination costs, and ensures ull

repayment o the loan to the lender up to

the maximum claim amount.

Reverse mortgages are based on the

homes current value, borrowers age and

existing interest rates, explains Dr. James

Gaines, research economist or the Real

Estate Center at exas A&M University.

Borrowers can choose to receive loanproceeds in a single lump sum payment or

as periodic predetermined payments, a line

o credit, or both.

According to Dr. Gaines, reverse mortgages

have advantages and other considerations

that should be reviewed careully by

borrowers. In act, the FHA insists that

home owners be counseled to make sure

they understand the transaction beore they

are allowed to sign or the loan.

Adantages o a reerse mortgage

No xed due date

No repayment required as long as the

home remains the principal residence o

the borrower

Nonrecourse loan the amount can never

exceed the selling price

Borrowers hold title to property

Loan proceeds not taxable

Flexible options or receiving loan

proceeds

Considerations in choosing a reersemortgage

Loan-to-value ratios typically yield only

65% to 80% o the homes present value.

Upon death the loan is considered due

and payable, which requires the sale o thehome or renancing the home.

Te loan becomes due and payable i the

borrower ails to remain in the home o

12 months, pay taxes or maintain the

home.

erms and conditions o reverse mortgage

may be dicult to understand; borrowers

are required to attend a HUD-approved

counseling session.

Using a reerse mortgage to buy a nehome

Te reverse mortgage industry was developed

to enable seniors age 62 and above to stay in

their homes and utilize mortgage proceed

to supplement their income. But not al

seniors want to remain in their curren

home.

Some seniors want to downsize, or trade

their two-stories or one level, or live in a

home with barrier-ree Universal Design

that makes it easier to reach cabinets, turndoorknobs, use a wheelchair, and more,

says Kevin Kaltenbach, reverse mortgage

supervisor or HomeServices Lending

LLC. Others may want to relocate closer

to amily, or enjoy the activities o a senior

community.

Now thanks to the FHAs reverse mortgage

or purchase program, seniors can use the

advantages o a traditional reverse mortgage

to buy a new home.

Kaltenbach explains, Like FHA

conventional reverse mortgages, the reverse

mortgage or purchase program allow

seniors to buy a new home with no credit

or income requirements, and no monthly

payments or as long as they occupy the

home as their primary residence, maintain

the home, pay property taxes, and so on.

How it works is that borrowers either

sell their current home to und a down

payment, or keep their current home as a


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SAN DIEGO COUNTY

San Diego County is enjoying a heated sellers maret in homes priced under $1 million. Lie other areas oSouthern Caliornia, supply builds once homes price aboe conorming and conorming jumbo ranges. while upscaleand unique homes arent expected to sell at the same pace as more aordable homes, inentory leels o one oto years supply are typical. Once supply approaches or surpasses the to-year leel, the maret is consideredstagnant, so homes priced $1 million to $3 million are denitely in a buyers maret, and inentories o homes pricedhigher are stagnant.

All Properties - Listings Sold by Calendar Quarter9 Quarters through June 30, 2010

.. . . .

$388 $358 $298$320 $316 $336$340 $337 $351

7,187

9,0829,193

8,900 8,8958,2718,413

7,399 7,089

$0

$50

$100

$150

$200

$250

$300

$350

$400

$450

2008/ 2 2008/ 3 2008/ 4 2009/ 1 2009/ 2 2009/ 3 2009/ 4 2010/ 1 2010/ 2

0

3,000

6,000

9,000

12,000

15,000

Avg Sale Price Listings Sold Units

1-year avg. price trend: Up 11 %2-year avg. price trend: Down 9.6 %

1-year sales trend: Down 2.1 %2-year sales trend: Up 20.2 %

Average Sale Price (Thousands) Homes Sold

The heated sellers maret in homes under $1 million h

encouraged an 11% gain in prices, but sales olume h

sloed only slightly due to the momentum.

with oer 3,400 sales associates

58 ocesacross Southern Caliornia

the Central Coast, Prudential Calio

Realty is the name to trust when buy

or selling a home. Our agents close m

than $12 billion in sales volume and

over 16,000 transactions each year.

also provide every aspect o domestic international relocation to corporati

around the world. As one o the top

brokerages in the nation and the lar

aliate in the Prudential Real Es

international network, we have

resources and connections to protect y

interests and make sure your experie

is a successul one.

Prudential Caliornia Realty is proudbe a member o HomeServices o Ame

Inc., a Berkshire Hathaway aliate.

For more inormation,

.prudentialcal.c

rental investment i they have enough cash to

put toward the new home purchase, he says.

Te down payment can only come rom the sale

o the current home, the sale o other assets, or

savings. Te borrowers may not use cash rom

credit cards, bridge loans, seller nancing or

seller contributions to closing costs.

Te total o the down payment plus theproceeds rom the reverse mortgage must be

enough to pay or the new home. Te sale

o the current home and the purchase o

the new home can be completed in a single

transaction.

Homes eligible or purchase include single-

amily homes, HUD-approved condominiums,

planned unit developments, two- to our-unit

properties, and manuactured homes built

ater June 15, 1976. Reverse mortgages to

purchase may not be used on co-ops, secondhomes, boarding houses, bed and breakasts,

or homes on leased land.

Borrowers must occupy the home as their

primary residence within 60 days o the

closing date. I they are purchasing new or

ongoing construction, the construction must

be complete and a certicate o occupancy

must be issued prior to the loan application.

For an aging population that is living longer

and likely to outlive savings or outspend Social

Security and other retirement unds, reverse

mortgages or purchase can be a legitimate

option, says Kaltenbach. o learn more,

contact Kevin Kaltenbach at mortgage@

prusocal.com.

Advice or buyers: Now is the time to take

advantage o near-record low mortgage rates you cant lock in a rate until you have a signed

contract. However, you can get preapproved

or a loan.Tis positions you like a cash

buyer, one whose oer sellers are likely to

accept over others. Already having nancing

underway is a big advantage in negotiations.

With home prices still well below peaks, and

interest rates at record lows, you will be in a

strong position to get the home you want.

Advice or sellers: Many buyers may need

to close quickly to take advantage o terricmortgage interest rates. Delays in the sales

transaction or any reason could cause their

rates to go up. You can assure a quick sale by

complying with all requests or inspections,

disclosures, and repairs well in advance o the

closing date.


4/5

13.1

6.8

5.8

4.9

4.5

3.7

2.7

2.1

0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0

$900K and over

$800K - $899K

$700K - $799K

$600K - $699K

$500K - $599K

$400K - $499K

$300K - $399K

Under $300K

Detached homes priced under $399k are selling as ast

as they can close. The remaining maret is ell-balanced

in aor o buyers and sellers. Only hen homes are

priced $900k and aboe does the maret turn in aor o

buyers.

Detached Properties - Inventory in Months

Attached Properties - Inventory in Months

Attached homes are also selling ell, ith a healthy

balanced maret or homes priced under $699k. Only

homes priced $900k and aboe are in a sluggish buyers

maret.

20.2

9.5

11.1

7.6

6.6

4.7

3.6

2.6

0.0 5.0 10.0 15.0 20.0 25.0

$900K and over

$800K - $899K

$700K - $799K

$600K - $699K

$500K - $599K

$400K - $499K

$300K - $399K

Under $300K

$251

$245

$389

$0 $100 $200 $300 $400 $500

Sold

Pending

Active

SellersdemandWhen liand Penof Activpricing

The chasm beteen actie detached listings price per

square oot and those o solds is ast, urther i llustratingthe greater actiity in the more aordable price points.

Detached Properties - Pricing Reality for Sellers, per square foot

Attached homes are also selling signicantly aster in the

more aordable price points, judging by the gap beteen

actie listings price per square oot and solds.

Attached Properties - Pricing Reality for Sellers, per square foot

$239

$231

$369

$0 $100 $200 $300 $400 $500

Sold

Pending

Active

Sellers shoudemand whWhen list prand Pendinof Active prpricing coun


5/5

2,955

3,352 3,3103,122

3,070

2,515

2,340

1,590

2,134

1,782

2,0722,055

0

1,000

2,000

3,000

4,000

0

1,000

2,000

3,000

New Listings Listings Absorbed

New Listings 2055 2072 2134 1782 1590 2340 2515 3070 3122 2955 3352 3310

Listings Absorbed 2028 2096 2014 1626 1504 1672 1904 2232 2454 1876 2018 1992

2009/08 2009/09 2009/10 2009/11 2009/12 2010/01 2010/02 2010/03 2010/04 2010/05 2010/06 2010/07

Detached Properties - Monthly Listings Taken and Absorbed12 Months through July 2010

Since the rst o the year, sellers hae fooded the maret

ith ne detached home listings, hile absorption rates

appear to be fattening. Sellers should careully consider

inentory leels and competing homes hen pricing their

homes or sale.

Attached Properties - Monthly Listings Taken and Absorbed12 Months through July 2010

1,376

1,518 1,5431,5171,507

1,335

1,201

871

1,058

937

1,0791,053

0

300

600

900

1,200

1,500

1,800

0

200

400

600

800

1,000

1,200

1,400

New Listings Listings Absorbed

New Listings 1053 1079 1058 9 37 871 1201 1335 1507 1517 1376 1518 1543

Listings Absorbed 1005 1078 995 864 821 843 936 1172 1201 949 992 991

2009/08 2009/09 2009/10 2009/11 2009/12 2010/01 2010/02 2010/03 2010/04 2010/05 2010/06 2010/07

while sellers added inentory in 2010, absorption rates

ere able to eep up. Hoeer, sellers should note that

absorption rates appear to be fattening, so they should

careully consider inentory leels and competing homes

beore pricing their home or sale.

.. . . .

$551 $498 $393$439 $424 $449 $462 $468 $486

5,193

6,594

6,7006,352

6,476

5,7055,927

5,360

5,019

$0

$100

$200

$300

$400

$500

$600

2 008/ 2 2008 /3 20 08/ 4 2009/ 1 200 9/ 2 2009/ 3 2009 /4 2 010/ 1 2010 /2

0

2,000

4,000

6,000

8,000

10,000

Avg Sale Price List ings Sold Units

1-year avg. price trend: Up 14.5 %2-year avg. price trend: Down 11.9 %

1-year sales trend: Down 1.8 %2-year sales trend: Up 20.8 %


Detached Properties - Listings Sold by Calendar Quarter9 Quarters through June 30, 2010

Detached home prices recoered almost to the to-year

aerage by Q2 2010.

.. . . .

$344 $311 $229$258 $241 $252 $263 $242 $255

2,227

2,8402,888 2,941 2,8722,891

2,993

2,589

2,381

$0

$100

$200

$300

$400

200 8/ 2 2008/ 3 200 8/ 4 2009/ 1 20 09/ 2 2009/ 3 20 09/ 4 201 0/ 1 2 010/ 2

0

1,000

2,000

3,000

4,000

Avg Sale Price List ings Sold Units

1-year avg. price trend: Up 5.6 %2-year avg. price trend: Down 25.9 %

1-year sales trend: Up 1.1 %2-year sales trend: Up 10.9 %


Attached Properties - Listings Sold by Calendar Quarter9 Quarters through June 30, 2010

Ater a to-year drubbing, prices rose nicely in attached

homes under $1 million.

2010 Prudential Caliornia Realty Independently oned and operated. Objectie data used in this report proided by Real Data Strategies. Inc. An independently oned and operated member o the Prudential ReaEstate Aliates, Inc. This is not intended as a solicitation i your property is currently listed ith another broer

Documents

Market Overview September 2010