> Market is in turnaround mode! My recent posts have mentioned that the market activity is turning around. Well, April's activity continues to provide more evidence that we could have seen the bottom! How can this be?
- Buyers are all but tripping over each other to submit offers for homes in the more affordable areas of Santa Clara, San Mateo, Santa Cruz, and Monterey counties.
- In Santa Clara County, there have been only four months in the past ten years where we've seen as many or more homes sold!
- The number of initiated AND completed sales or closings are trending upwards in Santa Clara, San Mateo and Monterey counties. Only Santa Cruz County has relatively-flat transactions. Monterey County continues setting records.
- The Days of Unsold Inventory (DUI) has improved (decreased) substantially. The DUI for single family residences in Santa Clara County for under $450,000 is an astonishing 28 which means when freezing inventory, ALL homes would sell in a month!. Anything less than 45 represents a Seller's market with market characteristics of multiple offers, high percentage selling above list price AND, price APPRECIATION.
- Median prices have increased in all four counties.
> Buyer's Markets? -- OK, yes, there are some of those too! Areas of Santa Clara County experiencing a buyer's market condition are: Mountain View, Los Altos, Los Altos Hills, Palo Alto, Willow Glen Los Gatos, Los Gatos Mountains, Saratoga (coolest market in Valley). To refresh you, characteristics of a buyer's market are longer days on market, higher number of homes available for sale, lower probability of multiple offers with most sale prices below list prices and price depreciation.
> Mortgage Refinance Tips -- Some of you may know that I used to "do" mortgage loans and advised my clients on a couple of handy "rule-of-thumbs" as quick indicators to see if refinancing would be a financial benefit to the borrowers, not the loan officer!
- First, the rate should be more than 10% difference, obviously lower, than your current rate. That means if your currently at 5.50%, the new rate should have a rate at least 10% under this or 4.95%. (For the math, you'd subtract 10% of 5.50 or 0.55 from 5.50 to equal 4.95%.) A rate lower than this level should benefit you and amortize the costs (no free lunch!) of the loan so you can more quickly start accruing the savings AFTER the cost of doing the loan, AND
- Second, it matters most how long you plan on keeping the LOAN. If you plan a sale in a year or so, it probably does NOT make financial sense to refinance.
> Sales per Day -- The amount of average sales per day in April reached 55.5 for Santa Clara County. The last time this figure was this high was in April 2005 when the market activity was nearing a crescendo! Inventory or the amount of available single family residences for sale has dropped 33% from the levels of April 2008. Normally, inventory levels trend higher this time of year but has been going the other way. This shows a "tightening" market and a swing toward a seller's market in many areas.
> Foreclosures up and NOD's down - How can that be? -- Recently, the San Jose Mercury News reported that the number of foreclosures rose but the number of Notice of Defaults (NOD's) issued have dropped. Remember, the moratoriums placed on banks during the holiday months? Well, there have been moratoriums in place for six of the past eight months. With those moratoriums relaxed, banks are back to foreclosing. Another artificial barrier has been the state of California where they will institute a lengthening of the process so banks have to wait about seven months instead of the current four. These governmental barriers actually prolong the pain as well as exacerbate the problems of separating those that can't make consistent mortgage payments with those who can. For current homeowners wishing to trade up or trade down, the impact on values in many neighborhoods continue.
> Median prices. Stuck at $450,000 for Santa Clara County these past few months, moved up to $470,000 in April. Median prices (the middle transaction) for an entire county are actually worthless to use as part of a strategy for buying or selling. Each area, down even to the neighborhood, has differing dynamics of supply and demand so needs to be looked at accordingly. We've observed that market mix has helped bring down median prices due to more low-priced homes closing as a percentage of total closings. We have also seen the opposite occur in 2007 when higher-priced homes sold and the lower-priced homes were engulfed with the sub-prime loan issues and didn't sell as frequently.
> Some are Hot, Some are Not -- Sales of affordably-priced homes mainly in the less than $450,000 level are HOT. On the other hand, sales of higher-priced homes are virtually dead, as some would say, in the more expensive areas. If you are considering a sale in an expensive area, you probably want to sell quickly rather than waiting but in any case check with a Realtor knowledgeable about current market conditions to guide you in positioning your home for maximum activity and price while minimizing time on market. And, if you are considering a purchase of a home in an expensive area, get ready to buy! Why, get ready? I think we'll see list prices reduced and sale prices dropping more.
> Want to sell with multiple offers? The percent of completed sales or closings with a sold price greater than list price stands at 33.4%. This level, back up a bit, means that fully one out of three sellers received more than their asking price. Oh, and another 7.7% of sellers received their full list price!
Want to hear a little secret? Some of those sellers receiving either their list price or something higher had to reduce their list prices to generate one or more offers. These figures don't calculate what the sale price to original list price ratio is but only what the current list price was at the time of sale.
> Traffic Jam! If your GPS unit has live traffic updates, it still won't be able to help with those lenders who are clogged with loan applications. With the lowest mortgage rates since the '60's continuing, the demand by borrowers trying to refinance has created an avalanche of work for the lenders. Things to remember are:
- First, rates for refinance loans average about 1/4 point higher than similar program purchase loans.
- Second, the process can take as much as 60-90 days as purchase loans get first priority due to the impending event of close of escrow.
- Third, there's no cash-out refi's as that option effectively disappeared.
> Investor's Reawaken - We've mentioned that investors have not been doing much lately with multi-unit residential properties. A couple of reasons are more stringent loan application and increased down payment requirements lenders have imposed. But, there are now 83 investor properties in escrow in Santa Clara County -- much higher than in recent months. The days of unsold inventory (DUI) for this type of property has dropped to 148 from more than triple current levels. Two-thirds of the activity is in the less than $600,000 price range.
Thanks for reading -- what are your thoughts and comments?
