On Tuesday it was widely reported that home sales are down but holding steady (not exactly new information).
Across the country, pending home sales plunged 8.7 percent in the West, and tumbled 4.3 percent in the Midwest. In the South pending sales surged 7.8 percent and climbed 0.6 percent in the Northeast.
One question that should be asked is how much of a role does the change in the conforming loan rate for California (and other states) play into slowing sales. The current California conforming loan limit is $729,750 through December 31, 2008. Then it will change to $625,500(not every county) and regular conforming of $417,000 is still the gold standard. If a buyer makes an offer, the lender has to be able to lock the loan for 60 days and with the conforming loan limits dropping over $100K, that’s dramatic for Californians. Thus the performance anxiety.
How does that actually break down? Today, your purchase price would have to be below $905,000 with 20% down payment (loan amount: $724,000) and a 2 week close! Maybe you found a vacant condo; possession in 2 weeks is EASY! Just in time for New Year Eve festivities.
The new limit makes your purchase $780,000 and 20% down(loan amount: $624,000). WOW!! What a difference, you now have $125,000 less purchasing power.
What does that mean if you are looking to buy a 2 bedroom single family home in San Francisco? Let’s look at district 5 and 7. In San Francisco $905K and $780K can be night and day. There are 10 homes in District 5 under $905K and 4 of those are under $780K, all four of those are in Glen Park. There are ZERO homes under $905k in all of District 7 from Pacific Heights all the way across to the Marina and the Presidio. However there are 75 TICs and condos under $905K and only 17 of those are in district 7(11 of which are TICs).
One of many lenders, I speak to on a regular basis, Jann Van Heuver of Princeton Capital whom I spoke to this morning said, "deals can be closed within 2-3 weeks due to slower sales and the availability of appraisers and underwriters to get the loan processed." So if you’ve got your ducks in order, 20% down and can get an offer accepted this week. She could probably get it done!
Most banks however have already changed their guidelines to reflect the $625,500 limit; Jann is one of the few out there who I have spoken to who can still get it done.
San Francisco is still a very active market and one of the more active in the country. Prices seem to be holding over all in the single family home market here in San Francisco as a whole. Yes, there are neighborhoods that have seen dramatic changes but overall sales in the city are pretty strong.
Buyers may find this an attractive market in San Francisco as the overall average list price of single family homes in the last 12 months to sold average price is down overall 17% but that is overall. One has to dig down into the data, neighborhood by neighborhood for specificity. If you would like something more detailed to your specific needs please contact me at my office (415)447-8881 and I can assist you in your home search and help you understand the details of the market better.
A seller may want something more detailed to really look at your neighborhood, district and home type. There is an old adage here in Real Estate though, if it looks good and priced right? It will sell here in San Francisco and we see that happening everyday.
The National Association of Realtors (NAR) forecasts existing home sales totaling 4.96 million this year, rising to 5.19 million next year and 5.55 million in 2010. It predicated new-home sales at 486,000 in 2008, declining to 393,000 in 2009 and rising to 446,000 in 2010.
Housing starts, including multifamily units, will probably total 934,000 units in 2008, easing to 731,000 next year before increasing to 772,000 in 2010, the NAR forecast. It forecast the 30-year fixed-rate mortgage averaging 5.6 percent in the first quarter of 2009, rising to 6.0 percent by year-end and averaging 6.2 percent in 2010.
Pending sales of existing U.S. homes fell by a smaller-than-expected margin in October, data showed Tuesday, raising cautious optimism of some stability in the distressed housing market.
NAR’s Pending Home Sales Index, based on contracts signed in October, slipped 0.7 percent to 88.9 from an upwardly revised reading of 89.5 in September. October's reading was 1.0 percent lower than a year earlier. Economists polled by Reuters ahead of the report were expecting pending home sales to drop 3.2 percent. There is no doubt that this market is different than 2004 – 2007. In speaking to buyers, it feels like many buyers are paralyzed with the question, "will prices go down any further?" The real question is whether your job is stable; you’ve got the down payment and what are the financial and tax benefits to buying with interest rates so low? Is that $3,000/month rent the best you can do? Call me and I can do a rent vs buy analysis for you if you’re still renting and thinking about buying.
Some sellers haven't gotten the message that if they are interested in selling; negotiate with that buyer who brings in an offer. A seller should not walk away from an offer that is under asking. An agent in my team just closed a fantastic condo with buyers in Noe Valley/Liberty Hill under asking with a smart seller’s agent who worked together with us and everyone is happy. A seller’s agent should call the buyer's agent and get a grasp of the buyer's motivation. If the buyer is a "bottom feeder" they may walk away and make an offer on another property. If that buyer is serious, they will enter into negotiation to buy that home because, "they like it and it fits their needs!"
How can my blog help you get better handle on the market? Send me an email with any suggestions and I will try to incorporate them into my blog.
Are you looking to buy or sell real estate? Give me a call at my office (415)341-8881 or pop me an email at: herb@herbalston.com and lets sit down and look at your goals?
I have finally started a blog and I will probably live by the same rules that Guy Kawasaki lives by. I recently saw him interviewed at the commonwealth club and he said, "I don’t want to blog every day… sometimes, I have nothing to say."
Don’t expect a blog every day but when I have great information, I’ll blog. I’m a statistics person and will do my best to keep you up to date on the latest market statistics. On occasion, some enlightening comments.
Wow, your blog was very enlighting! Very well written and I was holding on to every word! I was wondering if you had more infomation about the Houston TX market. I would like to learn more about the stats there!! Can't wait to read your next blog! I had to be the first to make a comment!!!
Posted by: London Carter | December 13, 2008 at 07:32 AM