Several months back I posted a sort of snap-shot of the real estate market in the areas I service most often. As this post continues to be the most read on my blog, I thought it could use a little freshening up! So what are the real questions and answers?
Q: Is the real estate market getting better?
A: For whom? Let's be more specific.
Q: Ok. Are home prices increasing in Contra Costa County?
A: Yes; dramatically.
Q: How long are they likely to increase?
A: With no sarcasm intended...the answer is and always will be, "Until something changes!" (Read, wouldn't we all like to know?)
If you're looking to buy a fixer-upper and flip it, or if you are ready to take that that jump and risk and buying at auction, then cleaning it up and renting it out,...that ship has sailed!
Or has it?
Looking at the graph below, home prices have risen consistently over the last four years.
(click on all images for a larger view)
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| Median Home Prices in Contra Costa County between March of 2009 and March of 2013 |
So looking above, at trends over the last four years, it appears prudent to invest in real estate. (I honestly believe it always is: Yes, even in a seller's market) If you bought in March of 2009, or March of 2012, you did well! Sincere congratulations. And what is it going to look like in March of 2014? It's hard to tell. Let's widen the lens a bit:
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| Median Home Prices in Contra Costa County between March of 2007 and March of 2013 |
The chart above illustrates the same data going back two more years; to March 2007. What do you think now? It looks like we have a lot of room for growth!
Go back yet again, to 10 years back.
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| Median Homes Prices in Contra Costa County between March of 2003 and December of 2012 |
Median home prices in Contra Costa County are, for practical reasons, back to where they were before the bust; before the boom.
So back to the question at hand:
Q: Is the Real Estate Market Getting Better?
A: Again, I have to ask: For whom?
Are you a home buyer?
Do you have enough cash to cover a down-payment and closing costs on a conventional loan? Are you looking to purchase using an FHA or VA loan and need to ask for a seller's credit in order to close? Are you a cash buyer who thinks cash is going to land you any house you choose to write on?
Are you a home seller?
Are you willing to wait for the ideal buyer? Are you willing to negotiate with the 'best' buyer? Are you willing to do inspections on your own and possibly make repairs proactively in order to market the availability of your home to FHA and VA buyers?
Keep in mind that home prices (thus, median home prices as well) are a function of several factors:
- Interest Rates (the cost of borrowing money)
- Demand (the number of willing and able buyers)
- The supply of homes on the market (what the industry calls 'inventory')
- Relative confidence in the economy (am I going to have a job it 6 months?)
- ...and many other factors.
Look at the four charts below as they apply to your specific area's of interest. If you don't see your area, drop me a line and I'll e-mail you market data for your specific market(s).
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| Above: Homes for Sale in Walnut Creek - Homes Sold in Walnut Creek - New Listings in Walnut Creek 2 years back |
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Above: Homes for Sale in Alamo - Homes Sold in Alamo - New Listings in Alamo 2 years back
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Above: Homes for Sale in Brentwood - Homes Sold in Brentwood - New Listings in Brentwood 2 years back
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| Above: Homes for Sale in Oakley - Homes Sold in Oakley - New Listings in Oakley 2 years back |
The number of homes for sale in each area have fallen dramatically over the last two years.
The number of homes sold continues to remain almost predictably cyclical.
The number of new listings is down a bit, but appears to be reacting to continued price increase and limited inventory.
Q: So what does this mean to you?
A: After reading this blog post, it simply means that you're better informed. The best indicator of future events is past event. That said, it's only the best indicator, not a precise and fool proof indicator.
More to come!
(Previous post below)
Is the Real Estate Market Getting Better?
Not if you're an investor, or looking to do your first flip! If you're trying to buy auction properties (foreclosed homes) on the courthouse steps, the environment is like the proverbial feeding frenzy. Lots of buyers. Very few homes. Investors' margins are dwindling as the supply of foreclosed homes at auction continue to dry up.
However, if you're in a position to sell, you're in the strongest seller's market that I've seen in the 6 years I've been practicing real estate. How might today's market conditions help you in your current circumstance?
"I'm upside down in my home. Should I short-sale now even though the market is going up?"
That is a complex question that depends on a number of important circumstances, unique to each homeowner. That said, considering that the Mortgage Forgiveness Debt Relief Act of 2007 applies to homes that close escrow on or before December 31st of 2012, and the limited supply of homes on the market are driving prices up quickly, I can guarantee one thing; it's definitely time to
stop guessing and get the facts. My partner,
Macky Hensel, and I are truly experts at closing short sale transactions. (see our contact information below to have your questions answered).
"Should I sell my home now that I'm in the black?"
This seems like is a more cut and dry question, but this answer too depends on a number of critical factors as well. Although we're in an excellent market to sell, home values are still well below where they had been several years back. As a rule, a down market is an excellent time to upgrade, but not an ideal time to "get out of the market." Lets look at a simplified illustration of how upgrading in this market, even though it's a seller's market, is ideal:
Imagine that you want the buy a larger house, or you'd like to move to a more convenient or sought after area, so you're selling your current residence. We'll call this property "A", which was originally purchased at $500,000, but now has an assessed value of $300,000. This is a difference of 40% or $200,000. One might say, "We are going to lose $200,000 if we sell." But now you'd like to purchase property "B", a home that originally sold for $800,000. For simplicity's sake, we'll say that this property also dropped by 40%. That puts the new purchase price at $480,000. This is a difference of $320,000. One might say, "We saved $320,000 when we bought." Compound that virtual savings with the literal savings of historically low interest rates, and you may just land that home you've dreamed of...locked into a 30 year fixed rate mortgage...at or below 4%.
US 30 Year Mortgage Rate data by YCharts
The example above is a simplified example of how to upgrade in this market. There are many variables that change the value of a given property, but this example is not unrealistic at all. In fact, in many communities the larger, more sought after homes took the biggest hit. In other words, the bigger they are, the harder they fall.
Perhaps the best thing you could take from this post is that the real estate market is simply a market; not good or bad; not better or worse. "Is the Real Estate Market Getting Better?" By itself, it has no "quality". Your unique circumstance; your point of view make it so.
I'll leave you with this "Taste of Wisdom" from Mark Twain:
" Always tell the truth. You'll surprise some and amaze the rest."
Until next time.
