What a great week it was for real estate. And no, I’m not being facetious.
A number of real estate organizations released their third quarter and/or October statistical reports—revealing some very interesting and important trends in our market. Let’s take a look:
NAR Presents Four-Point Housing Stimulus Plan to Congress
Earlier this week, NAR representatives presented a four-point plan to help foster a housing recovery to support an economic rebound. The plan calls for eliminating the repayment of the first-time home buyer tax credit that was passed in the February stimulus bill and to expand the tax credit to include all home buyers.
The plan also recommends making the increased FHA and conventional loan limits permanent to stimulate home sales and stabilize prices. In addition, the plan urges that the Troubled Asset Relief Program be put back on track by targeting the funds for mortgage relief through a mortgage interest rate buy-down. Finally, the plan recommends finalizing legislation to prohibit banks from entering into the business of real estate brokerage and property management.
“The only way to overcome today’s economic turmoil is to motivate and encourage worried or cautious housing consumers to enter the marketplace,” said NAR President Charles McMillan. “Stabilizing the housing market will lead to a quicker and greater economic recovery. Our goal is to ensure there is a healthy market and sufficient capital to support mortgage lending to qualified borrowers.”
CAR Releases First Time Home Buyer Housing Affordability Index
CAR released its First Time Buyer Housing Affordability Index which showed that the percentage of households that could afford to buy an entry-level home in California stood at 53 percent in the third quarter of 2008, compared with 24 percent for the same period a year ago.
The real estate organization reported, “The minimum household income needed to purchase an entry-level home at $287,760 in California in the third quarter of 2008 was $56,100, based on an adjustable interest rate of 5.91 percent and assuming a 10 percent down payment. First-time buyers typically purchase a home equal to 85 percent of the prevailing median price. The monthly payment including taxes and insurance was $1,870 for the third quarter of 2008.”
The organization also reported, “At $56,100, the minimum qualifying income was 44 percent lower than a year earlier when households needed $100,500 to qualify for a loan on an entry-level home. Recent decreases in home prices and mortgage rates have brought affordability into better alignment with income levels of the typical California households, where the median household income is $59,160.”
NAR Presents Four-Point Housing Stimulus Plan to Congress
Earlier this week, NAR representatives presented a four-point plan to help foster a housing recovery to support an economic rebound. The plan calls for eliminating the repayment of the first-time home buyer tax credit that was passed in the February stimulus bill and to expand the tax credit to include all home buyers.
The plan also recommends making the increased FHA and conventional loan limits permanent to stimulate home sales and stabilize prices. In addition, the plan urges that the Troubled Asset Relief Program be put back on track by targeting the funds for mortgage relief through a mortgage interest rate buy-down. Finally, the plan recommends finalizing legislation to prohibit banks from entering into the business of real estate brokerage and property management.
“The only way to overcome today’s economic turmoil is to motivate and encourage worried or cautious housing consumers to enter the marketplace,” said NAR President Charles McMillan. “Stabilizing the housing market will lead to a quicker and greater economic recovery. Our goal is to ensure there is a healthy market and sufficient capital to support mortgage lending to qualified borrowers.”
CAR Releases First Time Home Buyer Housing Affordability Index
CAR released its First Time Buyer Housing Affordability Index which showed that the percentage of households that could afford to buy an entry-level home in California stood at 53 percent in the third quarter of 2008, compared with 24 percent for the same period a year ago.
The real estate organization reported, “The minimum household income needed to purchase an entry-level home at $287,760 in California in the third quarter of 2008 was $56,100, based on an adjustable interest rate of 5.91 percent and assuming a 10 percent down payment. First-time buyers typically purchase a home equal to 85 percent of the prevailing median price. The monthly payment including taxes and insurance was $1,870 for the third quarter of 2008.”
The organization also reported, “At $56,100, the minimum qualifying income was 44 percent lower than a year earlier when households needed $100,500 to qualify for a loan on an entry-level home. Recent decreases in home prices and mortgage rates have brought affordability into better alignment with income levels of the typical California households, where the median household income is $59,160.”
DataQuick Releases October Sales Figures
“Bay Area homes sold at their fastest pace in 17 months in October as buyers favored more affordable inland areas where depreciations and foreclosures have hit hardest. As a result, the median sale price continued its steep, months-long decline, falling a record 40.6 percent, or $256,000, from a year ago,” reported DataQuick.
“A total of 7,613 new and resale houses and condos closed escrow in the nine-county Bay Area in October. That was up 4.7 percent from 7,271 in September, and up 38.8 percent from 5,486 in October 2007,” continued the report.
“The median price paid for all new and resale houses and condos combined fell to $375,000 last month, down 6.3 percent from $400,000 in September and down a record 40.6 percent from $631,000 in October 2007.”
“Inland communities continued to fuel the bulk of the Bay Area's sales gains, attracting buyers searching for the biggest discounts.”
“Contra Costa, Napa, and Solano counties - where prices are down sharply and sales have risen the most - accounted for 36.4 percent of Bay Area sales in October, compared with 25.0 percent a year ago. Sales of existing single-family houses in those counties rose 126 to 187 percent last month from a year ago. Meantime, sales fell or rose more modestly in pricier San Francisco, Marin and San Mateo counties.”
So what does all of this news mean? Honestly, it’s music to my ears.
Real estate is in a very good position right now. Because you see, real estate makes up 20% of the Gross Domestic Product in this country and regardless of which side of the political fence you fall on, the fact remains that our country cannot be fixed without first fixing the housing sector. That puts us in a very good position because real estate—more so than any other industry—will be gaining a great deal of attention over the next several months—and as you can see from the figures above—it already has been. Whether that attention comes in the way of more tax benefits, home ownership credits, subsidies or interest rate stabilization, the leaders of our country are focused and diligent on fixing the housing sector which is perfect news for our industry and our business.
Couple that with the fact that we may very well be on the brink of a turn-around—based on what we are seeing nationwide and based on figures from DataQuick as well as the fact that homes are so much more affordable now—I believe we may be poised for a housing recovery. Just look at the figures from DataQuick. Sales in the Bay Area are up 38%. What that tells us is that many people feel like right now, real estate, in relative terms, may not be a bad place to park their money. Compare that to the volatility of the stock market and housing—if history is any indicator—is looking like a pretty darn good investment.
Keeping that in mind, let’s take a look at this week in real estate:
Silicon Valley—Our Cupertino Stevens Creek office reports closings are steady but openings and listings are slow. Our San Jose Willow Glen office is reporting that folks are sitting back and waiting, waiting and waiting. We have buyers and some offers are getting rejected. Our Saratoga office is reporting that the upper end is extremely slow. Buyers are being cautious given the negative economic news.
So while sales have been a bit quiet this week, the positive news I am seeing in our industry reminds me just how great this business truly is. No other sector of our economy is getting the attention and focus than that of real estate. We truly are poised for a housing recovery. How great? Only time will tell. But what we do know is that “this too shall pass” and while the recovery won’t happen overnight, it will happen…and based on DataQuick’s 38% sales increase, CAR’s first time home buyer affordability index (jumping 29% year over year) and NAR’s stimulus plans, all signs are pointing north. I’ll see you at the top.
Please feel free to pass this article on to your friends and family. I am never too busy for your referrals, so please keep me in mind.
Hope you enjoy your Thanksgiving Feast on Thursday and Black Friday Bargains! Happy Holidays to all!
Regards,
Monica Manocha Re, CMRS
Ph: 408 399 1495 Email: monica.manocha@cbnorcal.com
Web: www.monicamanocha.com
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