Source: 5 Criteria for Pricing a Home
Luxury Market Activity: Luxury demand has increased by 11% in the past month.
Demand for homes above $1 million reached a height at the start of May of 542 pending sales. After dropping by 19% by mid-July, totaling 436, it has climbed its way back to 483 pending sales, an 11% increase.
The peak in the Orange County luxury inventory occurred a month ago at 2,756 homes. Since then, the inventory of homes above $1 million has dropped by 3% and now totals 2,666. With elevated demand and fewer luxury homes coming on the market, look for the trend in a falling luxury inventory to continue.
For homes priced between $1 million to $1.5 million, the expected market time dropped from 120 days to 114 in the past two weeks. For homes priced between $1.5 million to $2 million, the expected market time decreased slightly from 162 days to 159 days. For homes priced above $2 million, the expected market time dropped from 334 days to 304 days.
As expected, the Orange County housing market slowed in July a bit, transitioning from the red hot Spring Market to the beginning of the Summer Market. It was as if housing downshifted a gear, from 5th to 4th; it was still cruising, just not as fast as the spring. August typically looks a lot like July, maybe increasing a smidgeon, but still slower than the peak of the real estate market, March through mid-June. This cyclical phenomenon is easily explained by logically looking at the timing of the year. There are plenty of summertime distractions, especially in Southern California, from splashing around in the waves to traveling on the annual family vacation. The distractions lead to less buyer activity and demand drops. That’s the typical, annual real estate cycle in Orange County. Spring is the busiest time of the year. Summer is the second busiest. Then, there is the Fall and Winter Markets, where demand continues to downshift until it drops to its lowest level of the year by the end of December.
This year has been quite a bit different as demand increased by 5% in the past month. It feels like June, the tail end of the Spring Market, and not at all a typical summer. Demand, the number of new pending sales over the prior month, increased from 2,783 to 2,935 in the past month. Compare that to last year at this time when demand decreased by 2% from 2,810 to 2,762 (6% less than today’s level). Demand has not been this high since 2012 when it reached 3,544 pending sales; however, 17% were short sales that took a very long time to sell and often never closed. Today, only 1.2% of demand are short sales. Stripping short sales from demand, the last time it was this high dates all the way back to 2005, prior to the great recession.
Many may wonder why housing is so hot this summer. It took the market a while to get to this point. Housing has healed. Foreclosures and short sales are scary stories from the past, currently representing less than 3% of all closed sales. In 2012, they represented 31%. Now that housing has been restored and distressed properties are only an asterisk, the market has been blossoming. Throw in rock bottom interest rates, even lower than last year, and you have a recipe for strong demand. And, it does not look like interest rates are going anywhere fast. The Federal Reserve raised the short term rate for the first time in nine years back in December of last year. They hinted at four more hikes in 2016. So far, NOTHING. It doesn’t appear that there will be a change until December, if at all.
Low interest rates are only part of the reason for hot demand. This year, like every year since 2008, fewer homeowners are opting to sell. There are 30% fewer homes on the market compared to 2000 through 2007. People are staying in their homes a lot longer and are just not moving. On average, the current turnover rate for homeowners is 23 years. That’s a far cry from the days of lore, prior to the Great Recession, when homeowners moved much more frequently.
With a low supply of homes and strong demand, it’s no wonder that there’s a heat wave in housing.
FOR IMMEDIATE RELEASE:
Henberger Properties & Berkshire Hathaway HomeServices- August 1, 2016
Henberger Properties is joining Berkshire Hathaway HomeServices opening operations in Newport Beach and San Diego. Together with the Berkshire Hathaway HomeServices brand, Jerry Henberger shared that “We will continue to grow and expand, offering our clients new levels of professionalism and service. Henberger believes “this is the finest platform partner possible when investing in real estate. Affiliates realize the strength of the brand — inspired by world-renowned Berkshire Hathaway, Inc. — and the depth of its real estate tools, technology and services. We will capitalize on our brand and all it has to offer.” Warren Buffett’s evolution of Berkshire Hathaway HomeServices is a validation of the strength and resilience of the housing market. In 2015, home prices nationally rose 4%, following a 6.4% hike in 2014, according to Clear Capital, a provider of real estate data and analysis. Henberger shares this belief, “Berkshire Hathaway is the fastest growing brand in real estate since 2013. I believe it will be the number one brand very soon. The world-wide acceptance of the Berkshire Hathaway name and reputation will pave the way for our international clients with goals of investing in Southern California real estate.”
The Henberger Properties team evaluates market trends and uses accurate, timely information to close real estate transactions. Jerry’s practice focuses on sellers and select buyers who want results and to be part of the process. Too often buyers and sellers are left out of the process. We educate our clients, earning a lifetime partner in real estate investments. This is why Jerry Henberger and Berkshire Hathaway is the right choice for investors of real estate. “We work with our clients throughout the process, well after the sale of an individual property”.
The synergy of these two organizations, combined with Jerry’s training in the luxury residential and commercial investment properties, creates a positive dynamic for managing client real estate investment portfolios. Jerry’s credentials include:
CPM – Certified Property Manager
ACP – Accredited Commercial Professional
Institute of Luxury Home Million Dollar Guild
Certified Luxury HomeMarketing Specialist (CHLMS)
Berkshire Hathaway HomeServices,
Newport Beach, CA 92660
Analyzing the market trends in real estate is just as important as your other investment tracking strategies. I do my best to inform clients how to find and negotiate the best deal possible and market statistics play a big part. Understanding can mean success or failure and will determine if you overpay for a property.
As an example, homes that are selling in an FHA range of loans – (ceilings of $625,000) represent 68% of the demand but only approximately 42% of the available homes for sale in this range. This means that the nicest homes in this price range will get multiple offers and will only last a few days before going into escrow. On the flip side, luxury homes priced over $1,500,000 represent only 4% of the demand but 22% of the inventory!
It is a sellers market for the lower priced homes and a buyers market in the luxury home market.
So what doe this mean for you? Here are my top 5 recommendations to keep in mind when buying a home:
1.) Stay on top of the listings on a day to day basis.
Use speciality websites like HomesinSouthOrangeCounty.com or FindHomesinOC.com to track your searches. These are updated regularly rather than sites like Zillow or Redfin.
2.) Work with your broker or agent making sure they know what you want.
Often times agents learn about homes before they are ready to hit the MLS. You can possibly avoid the arduous process of open houses and multiple offers.
3.) Don’t think too long before visiting these homes. If you see something you like, go and see them right away with your agent.
I, like other agents will prioritize your needs if you have an active search plan in process involving your agent. I am always available to take calls in the evening and on week-ends.
4.) Make sure you have a team working for you.
Make sure you are ready during all stages of a purchase. I strongly recommend a pre-approval qualification letter be put ready from your mortgage banker so when you find your home, your offer will be strong and stand out. Our team consists of a broker, a mortgage banker, a transaction coordinator, a title officer, an escrow officer, a property inspector, a handyman, a team of termite and repair professionals, a roofer and more. You will need all of these professionals before you move into your new home.
5.) Make sure you have a plan to address any special needs.
i.e. If you have a home that you need to sell, share that with your broker. Brokers like me are experts in helping you with transitional ownership. Selling your home and buying your home can put you in a disadvantage if you don’t have a plan in place.
Our next blog post will address transitional ownership. This will highlight both the journeys of rent-to-own as well as sell-and-then-buying a new home.
Call or email today to discuss your needs and to get a plan working for you! : email@example.com
Vice President, Commercial Division, Luxury Property Specialist
The active inventory increased by 130 homes in the past two weeks and now sits at 5,862. Every price range, except for homes priced below $500,000, experienced a slight increase. The inventory was growing at a much more rapid rate at the beginning of the year when the worldwide stock and financial markets were taking a beating, but as soon as stability was restored, so was Orange County housing demand. Higher demand means more pending sales. More pending sales means fewer active listings on the market. Now that demand is sizzling hot again, homes are not staying on the market and the inventory is not rising as fast. We can expect this trend to continue through mid-June, the start of the Summer Ma
rket. From there, the inventory will rise and peak in mid-August and reach levels similar to 2015.
Last year there were 169 fewer homes on the market, 3% less. So far this year, the same number of homes have come on the market compared to one year ago today. Historically speaking, the inventory is well below the long term average of 9,238, an incredible 37% less. There just are not enough homes coming on the market compared to a decade ago.
Vice President, Commercial Division, Luxury Property Specialist
The Orange County housing market is firing on all cylinders and sellers are in the driver’s seat. Multiple offers are back, values are on the rise, and the appraisal is quickly becoming the biggest obstacle in closing. Demand is stronger than one year ago and it appears as if this will be the best Spring Market since 2005.
The Spring Market runs from March through mid-June. This is when more real estate activity takes place than any other time of the year. More buyers are bumping into each other in their quest to secure a home, and they are currently flooding the housing market. The historically low interest rates are adding fuel to the fire, allowing buyers to afford even more home.
Mistakenly, many believe that the Summer Market is the best time of the year to sell. It’s just not true. In mid-June, summer distractions creep into the housing market starting with graduation. Graduation, family vacations, the beach, the pool, hiking, and picnics slows the home buying pr
ocess down a bit. Instead, that is when many of the pending transactions that were put together in the Spring Market close. As a result of all of the summer distractions, there is a cyclical downshift in buyer activity and demand.
For now, buyers below $1 million are experiencing an extremely challenging time securing a home. Below
$750,000 is nothing short of crazy. There are homes that have the look and feel of an auction type of atmosphere. These new homes that hit the market cannot be shown until Saturday at a specific time that coincides with the REALTOR’s “mega open house.” Buyers are quite literally bumping into each other and everybody gets the sense that the bidding process is about to begin. The bids come in the form of multiple offers, the more offers secured, the better the price and terms for the seller. During the negotiating process, offers are pit against each other to drive prices even higher. The end result, only one buyer gets to purchase the home and often at a premium.
In order to find success, many buyers are getting creative. Family pictures combined with personal notes detailing why a house is the perfect place for them to call “home” are included with many offers to purchase. Hand delivered offers to the listing agent at their office, or even the open house, is another strategy. Finding out what the sellers want prior to writing an offer is very important. From a quick closing to renting back, getting the seller what they are looking for can really help secure the deal and enable a buyer to achieve success.
When the housing market tilts heavily in favor of the seller, it is an invitation for new sellers to overprice. Many sellers initially hit the market overconfident and overzealous and price their home off the radar screen. What sellers need to understand is that rapid appreciation is a thing of the past, dating back to when Orange County was underpriced and extremely affordable. In March 2012 the median sales price was $400,000. In March 2016, the median was $625,000, that’s a 56% increase in four years. Since homes are not rapidly appreciating today, the best strategy to employ for a seller is to price their home close to its Fair Market Value. As a result, the realistic value will generate multiple offers, which w
ill ultimately allow them to get their price, and often even more. Values are slowly rising and continue to push the envelope, making the appraisal process a major hurdle to closing the sale.
Is the luxury market hot too? In terms of demand, yes, it is stronger this year than one year ago today. In terms of supply, there’s a lot more homes in the luxury end compared to last year. The end result, it has a more sluggish feel to the market. From $1 million to $1.5 million, demand is up 19% and the inventory is up 22% compared to 2015. From $1.5 million to $2 million, demand is up only 2% and the inventory is up 24%. Above $2 million, demand is up 7% and the inventory is up 22%. So, above $1.5 million, demand may be up, but the extra inventory means many home sellers are having a tough time achieving success due to the increased competition. For these sellers it all boils down to price, condition, amenities, and location, and sellers only have control over price and condition.
Vice President, Commercial Division, Luxury Property Specialist
RE/MAX Prestige Properties