San Diego home appreciation leads U.S.

Homes are lined up near Carmel Valley.

 

San Diego County’s housing market led the nation in price appreciation in February, as the region moved out of its annual holiday homebuying lull.

The S&P/Case-Shiller Home Price Index showed Tuesday that from January to February, prices on the index rose 1 percent, highest on the 20-city measure. Prices declined over the month in 13 of the cities included on the closely-watched index.

“There’s a fundamental housing shortage in San Diego County, it’s that simple,” said Mark Goldman, a loan officer and real-estate lecturer at San Diego State University. “We have a strong housing market in San Diego as a result of a shortage. We have demand and a robust economy compared to a lot of other communities.”

The index, which lags two months, measures repeat sales of single-family homes. From February 2013 to February 2014, San Diego home values are up 19.9 percent, trailing only San Francisco and Las Vegas in annual appreciation.

Still, Goldman said he sees the local market continuing to slow, perhaps down to its historical 3 to 3.5 percent annual appreciation level.

The slowing seems to have started. For instance, the index rose from 163.28 in January 2013 to 194.07 in October, hovering around that total the rest of the year. In February 2014, it reached 196.97, highest since it was 197.45 in January 2008, but on the decline in the Great Recession.

Goldman said now that values of recovered, the market is adjusting to a new normal.

“We’re starting to see shifts in different consumption habits of homebuyer,” he said. “We’re seeing a lower desire to jump into the housing market, we’re seeing slower household formation, people are living at home longer, people are pooling resources instead of running out and jumping into that house. People are much more careful about their home-buying decision.”

David Blitzer, chairman of the index committee at S&P Dow Jones, also said despite price gains in much of the country, the market is slowing. That’s exemplified by fewer sales, housing starts, and the fact that home prices haven’t made it back to their 2005 levels. Blitzer also notes that mortgage rates have remained steady since they jumped last May, hitting affordability amid concerns over consumer confidence and tighter qualification standards.

“Five years into the recovery from the recession, the economy will need to look to gains in consumer spending and business investment more than housing,” Blitzer said in a statement. “Long overdue activity in residential construction would be welcome, but is certainly not assured.”

The average rate for 30-year-fixed mortgage in February was 4.3 percent, up from 3.53 percent in February 2013, Freddie Mac reports.

DataQuick, another real estate tracker, reported in February that San Diego County’s median home sale price was $410,000. It rose to $427,000 in March.

Las Vegas had the highest year-over-year gain on the index, at 23.1 percent, while San Francisco was second with 22.7 percent appreciation. Both were about flat from January to February. In Cleveland, where prices declined 1.6 percent from January to February, annual appreciation was 3 percent, slowest on the 20-city index. 

 

Second-Home Mortgages on the Rise; Buyers Take Advantage of Prices

Author: Krista Franks Brock April 9, 2014 0 

Second-Home Mortgages on the Rise; Buyers Take Advantage of Prices
The second-home mortgage market makes up only a small percentage of total mortgages, but the share of second mortgages has been on the rise since 2009, according to a recent report from Fannie Mae.

Since 1998, second-home mortgages have averaged about 4.76 percent of the total purchase market, but the share is rising, according to Fannie Mae.

While the purchase market increased four-fold from 1998 through the bubble years, the second-home mortgage market multiplied by 15 over the same years.

The second-home mortgage market did decline significantly during the housing downturn, but today, it’s alive and well.

In fact, while some buyers may be put off by price volatility in some states, second-home buyers are ready to take advantage of bargain prices.

Florida, California, and Arizona—all hard-hit by the housing crisis—have made up 34 percent of second-home mortgages since 1998, according to Fannie Mae. While prices declined at least 40 percent in each of these states during the downturn, second-home buyers are not deterred.

The second-home buyer weathered the financial crisis and ongoing recovery differently than the average homebuyer. For starters, a typical second-home buyer is older and more affluent than the average primary-home buyer.

Second-home buyers are also more likely to pay in cash, and when they do take out a mortgage loan, they offer larger down payments. Sixty percent of primary-home buyers’ loans have loan-to-value ratios greater than 80 percent, while just 30 percent of second-home buyers fall into this category.

Additionally, while the housing market has been slowly recovering, financial assets have shown stronger growth, helping more affluent Americans strengthen their economic status even further.

Through 2060, Fannie Mae expects the population of adults ages 45 through 64 to grow at a slower pace than that of the overall adult population in the United States. However, “assuming that Americans continue to follow similar investment patterns as they age and that aspirations of second home ownership do not wane, second homes should still occupy a significant place in the residential real estate market,” according to Fannie Mae.

The GSEs are currently major players in the second home mortgage market, originating about 60 percent of second home mortgages in 2013. The GSEs stepped up their share of this segment of the market during the crisis years when private label securities stepped back, but the GSEs have been shedding market share over the past few years.

Has the Housing Market Reached Bubble Status Again?

Author: Tory Barringer March 31, 2014 0
 
Has the Housing Market Reached Bubble Status Again?

 

With year-over-year price increases continuing on a double-digit course despite recent slowdowns, the ever-present question has once again come to the fore for market commentators and analysts: Has the housing market reached bubble status once again?

The answer—at least, according to Trulia chief economist Jed Kolko—is both yes and no.

In the company’s latest quarterly Bubble Watch report, Kolko estimates national home prices are still around 5 percent undervalued when examining long-term fundamentals like historical prices, incomes, and rents. While ongoing improvements in prices have brought the market close to a tipping point, he notes that it’s far cry from the 39 percent overvaluation in the first quarter of 2006.

“Even though recent double-digit price gains look unsustainable, current national price levels are not cause for alarm,” Kolko said in a blog post. “Sharp price gains, like we’ve had in 2012 and 2013, are not the sign of a bubble unless price levels look high relative to fundamentals.”

Furthermore, “the slowdown in price gains make[s] it less likely that we’re heading for another bubble,” he added.

While the national market is still undervalued, conditions vary widely at the local level. According to Trulia, out of the 100 largest metro markets, home prices are overvalued in 19, including eight of the 11 largest California metros. The greatest danger is along the state’s southern coast, in markets like Orange County, Los Angeles, and Riverside-San Bernardino—which make up three of the five most overvalued markets in the country. (The two remaining slots go to Honolulu and Austin.)

While the number of overvalued housing markets is on the rise, Kolko again says historical perspective is needed: “In 2014 Q1, prices were overvalued in 19 of the 100 largest metros, which is the highest number since 2009 Q4; furthermore, prices were overvalued by more than 10 percent in 4 large metros, which is the highest number since 2008 Q4.

However, at the height of the bubble, all 100 were overvalued, and 91 were overvalued by more than 10 percent.”

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