Area Real Estate News & Market Trends

You’ll find our blog to be a wealth of information, covering everything from local market statistics and home values to community happenings. That’s because we care about the community and want to help you find your place in it. Please reach out if you have any questions at all. We’d love to talk with you!

May 11, 2021

Buyers: What are Your Chances of Getting an Offer Accepted in Today's Market?

The real estate market is downright brutal for buyers right now. But some buyers are getting their offers accepted while others aren't. 

Why is that?

Call them motivated, aggressive, savvy, etc. When it comes right down to it, they are ready, willing and able to answer YES to as many of the following questions as possible:

  • Are you willing to make the highest offer?
  • Are you willing to offer an escalation clause as part of your offer?
  • Are you able to pay all cash?
  • Is your earnest money deposit at least 3% of the purchase price?
  • Are you able to put more than 20% as your down payment?
  • Are you willing to waive the appraisal contingency?
  • Will your lender guarantee closing in less than 30 days?
  • Are you willing to rent back the property to the seller at no charge for at least 30 days?
  • Are you willing to waive all contingencies?
  • Are you willing to buy a home that needs work?

The more questions you answered YES, the greater likelihood you have of getting your offer accepted. Willingness to make the highest offer, paying all cash, and waiving all contingencies make your offer a shoe-in of getting selected.

However, what if you don't have $900,000 in cash and/or you don't want to waive all contingencies (which we wouldn't recommend you do anyway)?

Then you have to strengthen the other parts of your offer. 

Any seller would tell you that price is the #1 determining factor of the offer they choose. The price you offer has to meet or exceed their expectations. In many cases, it also has to exceed all of the other offers submitted on the property. 

With 10-30 offers being submitted on a property, price is no longer enough. You have to sweeten the deal with other terms like a shorter escrow period (aka seller gets their money quicker), waiving contingencies like the appraisal, and having as much money in your down payment as possible.  

Sellers can be incredibly picky in today's market, and unfortunately, buyers cannot. Buyers have to be prepared to pay more for a property that probably even needs some updating.  

Yes, it is crazy! We talk about it every day. But the sooner you embrace the crazy train and hop on board, the sooner it will bring you to your stop which is your new home. 

Have questions? Contact us at 949-444-1601 to find out how to become the most successful buyer in your particular situation.

Posted in Buyer Information
May 11, 2021

May Real Estate Update - Raising Rates is the Answer

The Question: What is going to slow down this crazy seller's market?

Ask any buyer what it is like attempting to purchase a home in today’s housing market and the responses will be same. It is frustrating, overwhelming, exhausting, and disheartening. We know that inventory is a huge issue right now. There are half the homes on the market today than there were this time last year. In Orange County, there are approximately 2300 homes on the active market right now and there are just over 15,000 in all of Southern California.

We hear from so many people, "I am just going to wait it out." 

Our answer, "You are going to be waiting for quite awhile." 

Which takes us back to our question and answer. What is going to normalize or balance this hot seller's market?

We can look back at 2013 when we had a similar situation. The following graphs tell the story best.

 

 

In 2013, rates and inventory were both low for the time - similar to today. As a result, we saw prices rise quickly as demand exceeded supply. But as rates started to increase, we saw demand drop. As much as buyers don't want to pay higher interest rates, they do want to see interest rates increase if they are going to have a chance at homeownership.

 

 

To put this all in perspective, as you will see below, back in 2013, the average days on market got down to a low of  about 40 days on market. Right now we are dealing with a market time of just 24 days! The direction of days of market determines the direction of home prices. As days on market decrease, prices increase - and vice versa.

 

Because prices have been on the rise for about 9 months, people think prices are going to have to drop soon. But here's the truth of the matter: overall prices will not start dropping until the average days on market for a property is over 120 days (or above the red line in the graph below). Notice how far away we are from that red line:

120 - 24 = Prices not dropping anytime soon. 

 

What does all this mean for you if you are buyer? It means that you need to be aggressive and secure a property now.  Always keep in mind that the one you let get away will be the newest comparable for the next active listing in the neighborhood. In all likelihood, this new listing will be offered at an even higher price than the one you weren't willing to pay.

Perhaps all of this craziness deters you from buying. That's ok.  The experience is part of your homeownership journey. If the stress of "overpaying" now is too overwhelming, then definitely wait.  When taking into account your purchase price and interest rate in the future, you will certainly be paying more than you are today, however, if the experience is less frustrating, then it is all worth it.  Know who you are as a buyer and what stress you are willing to take on.

What does this mean if you are a seller? It means that you hold all the cards - within reason. We have seen some "market testers" who are listing their properties well over market value and those properties are sitting. If you are looking to sell, first, find the right representation (duh, The Swan Team!). Then let your representation help you determine an appropriate list price that will get you a maximum return.  Of course, if you are selling, you most likely have to buy a new place to live. When it comes to making offers, you have to remember those amazing offers you received. What goes around comes around in all aspects of life, including buying and selling real estate.

Want to learn more about the market in your specific area?

Contact us now!

Posted in Market Updates
April 9, 2021

Real Estate Update - Waiting will be Costly

 

Housing will become more unaffordable as homes continue to rapidly appreciate and mortgage rates rise.

 

 

Ask any buyer what it is like attempting to purchase a home in today’s housing market and the responses will be same. It is frustrating, overwhelming, exhausting, and disheartening. 

 

While it may be discouraging for buyers to continue the pursuit in purchasing a home, diving into the consequences of waiting will keep them motivated. It is important to focus on the monthly payment in purchasing a home today and compare it to delaying until the end of the year. An $875,000 home purchased today with a 20% down payment yields a monthly payment of $2,999 at the current interest rate of 3.125%.

 

 

With a record low supply of available homes to purchase paired with unstoppable demand powered by historically low mortgage rates, home values are anticipated to continue to increase at a pace of about 1% per month through the end of the year. That equates to a home appreciation of 8% from now through December. At the same time, the United States economy is revving its massive engine now that it is emerging from the depths of the pandemic. Excellent job reports, increased travel, a massive personal savings surplus, and a return to some semblance of normal life again will ignite the economy and translate to a rise in mortgage interest rates. It is already occurring. According to Freddie Mac’s Primary Mortgage Market Survey®, rates started the year at 2.65%, an all-time record low, and have since risen to 3.125%. That is nearly a half a point higher in just a few months. By year’s end, rates are forecasted to hit 3.75% or higher. 

 

That means that the $875,000 home example above will appreciate to $945,000 in December. Match that up with the expected 3.75% mortgage rate, and the monthly payment blossoms from $2,999 to $3,501 per month, an increase of $502 every single month for the life of the loan. That is $6,024 per year or $30,120 in five years. This example only factors the increase in the principal and interest payment. The 20% down payment for $945,000 is an extra $14,000 down. Property taxes go up too. With the average tax rate of 1.1%, that amounts to an additional $770 annually. 

 

In the end, it all adds up to a lot more out of pocket expense on waiting until the end of the year to pull the trigger on a purchase. There is a definite cost to waiting even though the current market is extremely frustrating from a buyer’s perspective. There is a higher monthly mortgage payment. Down payments are larger. Property taxes are higher. 

 

There are some who believe that when rates rise to 3.75% that the housing market will reverse course and become a buyer’s market. There are plenty of YouTube videos that promote this explaining that a 1% rise in rates translates to a 10% drop in prices. Yet, that did not occur in 2013 when rates rose from 3.34% in January to 4.5% in July. It did not occur in 2018 when rates rose from 3.95% in January to 4.94% in November. Home prices did not fall. These theories are not rooted in fact. Instead, they are click bate for views, after all, that is how YouTubers are paid. 

It is better to look at supply and demand. While demand will decrease when rates rise to 3.75% or 4%, it will not shut off demand completely. The current number of available homes to purchase is at a record low 2,240. The five-year average (from 2015 to 2019 and intentionally excluding 2020 as the numbers were skewed due to the pandemic) is 5,552, or 148% more. That is an extra 3,312 homes on the market. Current demand (a snapshot of the last 30-days of pending activity) is at 3,162 compared to the five-year average (2015 to 2019) of 2,796, or 18% more. That is today’s trend in housing, an ultra-low supply of available homes matched up with fiery, hot, insane demand. With rising rates, the inventory will finally rise from its unparalleled, low level, and demand will decline from its torrid pace. The result will be a market that is much more manageable to navigate, yet still a Hot Seller’s Market. Homes will still appreciate, just not at its current unparalleled pace. There will still be multiple offers, just a few generated on each property compared to the double digits of today. 

 

 

The active listing inventory in Orange County has already been at a record low level and it would be hard to imagine it dropping even further, but that is exactly what materialized. In the past two weeks, the inventory shed another 109 homes, down 5%, and now sits at 2,240. It is the lowest level since tracking began in 2004. Yet, more homes are finally entering the fray. In March, there were 19% more homes that were placed on the market compared to February. Now that spring has begun, expect more homes to come on the market from now through July, with May being the peak month. Many of these homes will be gobbled up as quickly as they come on due to the ferocious pace of demand. But that will evolve as mortgage rates climb and some buyers end their home buying search with the realization that their monthly payments are increasing too much. The inventory will rise a lot more noticeably during the Summer Market.

 

Comparing year over year data will not be accurate for the remainder of the year due to COVID-19 skewing the statistics last year. Taking the prior 5-year average from 2015 to 2019 is a far better comparison. During March, there were 342 fewer new FOR-SALE signs in Orange County, 9% less than that 5-year average. This trend started in January and has resulted in 611 fewer homes on the market during the first quarter of 2021, 6% less. It is due to the lack of available replacement homes that have many homeowners alarmed about selling. They are fearful that there will be “nothing to buy,” limiting the number willing to participate in a market with such an anemic level of available homes to purchase. Yet there are strategies to avoid getting burned in selling and then purchasing a replacement home. A bridge loan, a rent back, and accepting an offer contingent on finding a replacement home are a few sound strategies in navigating today’s insanely hot market.

 

 

Demand, a snapshot of the number of new pending sales over the prior month, climbed from 3,110 to 3,162 in the past couple of weeks, adding 52 pending sales, up 2%. This is the strongest start to April since 2012. Demand is surging due to mortgage rates in the low 3% range. While rates may have risen to 3.18%, its highest level since last June, if it were not for the pandemic pushing rates to historically low levels, today’s rate would still be an all-time record low. Demand will continue to be juiced until mortgage rates eclipse 3.5% and continue to head higher later this year. That will occur on the backs for great economic news on the horizon. Until then, it will be more of the same, homes that enter the fray will procure way too many offers and home values will continue to soar. 

 

Last year, demand was at 1,584 due to the start of the pandemic, that is 1,578 fewer pending sales compared to today, or 50% less. The 5-year average from 2015 through 2019 was at 2,796 pending sales, 366 fewer pending sales, or 12% less. 

 

In the past two-weeks the Expected Market Time (the number of days to sell all Orange County listings at the current buying pace) dropped from 23 to 21 days, its lowest level since tracking began in 2004, and is a very Hot Seller’s Market (less than 60 days) where there are a ton of showings, sellers get to call the shots during the negotiating process, multiple offers are the norm, and home values are rising rapidly. Last year the Expected Market Time was at 79 days, slower than today. The 5-year average from 2015 through 2019 was at 60 days, much slower than today, but still a Hot Seller’s Market. 

 

The table below gives you an idea of just how quickly a property (based on its price) will go from active on MLS to Under Contract/In Escrow today versus last year.  

 

 

These numbers are mind-blowing! Anything under 30 days is considered a red-hot seller's market - and pretty much only homes over $2million might actually sit on the market for longer than a month.  

We hear it time and time again from buyers: "Maybe I should just wait out this crazy sellers market right now". But unless you are willing to wait a few years, pay a higher purchase price than today and pay much higher interest rates, it's best that you get in the game now! And with the best team in real estate representing you, you already have a better shot of getting your offer accepted than the other buyers.

Sellers: you hold all the cards. However, many of you are concerned where to go next. That is where The Swan Team comes in.  We can develop a plan that allows you to maximize the profit from your sale, maximize your leverage as a buyer, and only move ONCE!

Contact us today at 949.444.1601 to discuss and develop a real estate plan that is right for you!

Posted in Market Updates
March 4, 2021

Property Values Rising with No Top In Sight

Values Rising

The market velocity is extremely fast, and it is a Hot Seller’s Market where values are rising swiftly and multiple offers is the norm.

At the beginning of the COVID-19 pandemic, everybody rushed to their local supermarket to purchase toilet paper. Similar to toilet paper at the beginning of the pandemic, there are not enough homes on the market to keep up with today’s intense buyer demand. There is a run-on housing. Homes are flying off the market faster than they are coming on, and the inventory has been dropping further as the year has progressed. Housing’s momentum lines up strongly in favor of sellers. In looking closely at the housing economic model of supply, demand, mortgage rates, affordability, buyer demographics, and market velocity, the data illustrates that the current trajectory of the housing market is not going to change anytime soon.

At the start of 2020, prior to any lockdown measures and the beginning of the pandemic in the United States, mortgage rates had dropped from 3.75% to 3.5%, an excellent level that had only been reached a few times since 2013. Throw in an increase in buyer demand due to the strongest demographic patch of prime first-time home buyers, 32-year-olds, in 26 years (which will continue for the next 4 years), it was no surprise that the market was hot in February 2020. The inventory was at its lowest level since 2013, a crazy year for housing, demand was at its hottest point since 2017, and the velocity of the market was the strongest since 2013. Then the pandemic hit, demand stalled and so did the inventory. Yet, as rates dropped to record levels, 16 record lows last year, demand heated up and the inventory continued to drop. The lower rates dropped, the hotter the market became. In fact, the market dropped to its hottest point by year’s end with an Expected Market Time (the time between hammering in the FOR-SALE sign to opening escrow) of 37 days.

With mortgage rates remaining below 3%, a level never reached prior to last year, today’s housing market is one of the strongest on record, and it has everything to do with supply and demand. The current number of available homes to purchase is less than the current demand readings. The active inventory today is at 2,438 homes, and demand (last 30- days of new escrow activity) is at 2,863 pending sales. There are 425 fewer homes available to purchase compared to current demand. Homes are flying into escrow as quickly as they are coming on. The Expected Market Time is at 26 days, less than one month, the lowest level since tracking began in 2004.

For proper perspective, last year there were 4,030 homes available, and demand was at 2,479 pending sales. There were 1,551 more homes available to purchase than demand. The Expected Market Time was at 49 days, for mid-February, only 2013 was stronger. In 2013, the prior hottest year in decades, the inventory was at 3,272 and demand was at 2,887. There were 385 more homes available to purchase compared to demand. The Expected Market Time was at 34 days, the prior record level.

With an Expected Market Time of 26 days, homes priced close to their Fair Market Values procure a swarm of activity, multiple offers, 10, 20, or even 30 offers, and ultimately sell for a bit more than the asking price, and in some cases a lot more. It depends upon the home. Buyers worry about paying too much, often the record for a development. Everyone’s head immediately retreats to the last time there was a comparable buyer frenzy in housing, the years leading up to the Great Recession. However, there were over six times the number of homes available to purchase in 2006, a year before the start of the Great Recession, 16,000 homes. Homes were far less affordable with mortgage rates at 6.5%. Lender qualifications were loose with a disproportionate number of subprime, zero-down, and pick-a-payment loans, tons of cash- out refinances, and fraudulent lending practices. The transgressions of the real estate industry ultimately led to the deep recession where values plummeted. In contrast, today’s housing has an extremely strong foundation with years of tight lender qualifications, large down payments, plenty of nested equity, and limited cash-out refinances.

Buyers should not worry about paying too much in today’s environment. Mortgage rates are below 3%, demand is unbelievably powerful, the supply of homes is at record low levels, and values are lined rising swiftly. The underlying ingredients that make up today’s housing market are not going to change anytime soon. Instead, buyers should look at their family budgets and determine how much they can comfortably afford, and then aggressively pursue a home. Waiting is not really an option as home values are on the rise and mortgage rates are slowly rising right now as well.

A Tip for Buyers: In competing against a multitude of offers, sharpen your pencil, make the offer as agreeable as possible, and pack your patience. Sometimes an offer above the listed price is necessary to be the winning bidder. Stretching an offer by an additional $10,000 may be enough to get past the finish line. At today’s 2.81% mortgage rate, the additional $10,000 means that the monthly payment goes up by $41.14 and the down payment slightly rises as well. Remember, only one buyer wins the bidding war. For everybody else, it is back to the drawing board.

Active Listings
The current active inventory shed another 2% in the past couple of weeks.

The active listing inventory shed 55 homes in the past two weeks, down 2%, and now sits at 2,438, the lowest inventory level since tracking began in 2004. The low mortgage rate environment is going to continue to thrust this market forward. Homes are not coming on fast enough to satisfy current demand levels, which is why the number of available homes is dropping right now. Homes are coming off the market and into escrow faster than they are coming on. This will continue until the start of the Spring Market next month. More homeowners ultimately wait for the spring than any other time to place their homes on the market. With today’s ultra-hot housing pace, spring cannot come fast enough.

Active Listings in Orange County

There are fewer homeowners coming on the market compared to the 5-year average. During January, there were 169 fewer new FOR-SALE signs in Orange County, 6% less. This new trend is the same across Southern California. It is not COVID-19 that is currently suppressing homeowners from selling their homes; instead, it is the lack of available replacement homes that have many spooked about selling. Many are fearful there will be “nothing to buy,” limiting the number of homeowners willing to participate in a market with such an anemic level of available homes to purchase. Yet, there are great strategies to counter this argument. Sellers can agree to an offer to purchase contingent on finding a replacement property within a specified period of time. They can also rent back for a couple of months. With the market lining up so favorably for sellers, it is a lot easier for a seller to find a buyer willing to agree to these terms.

Last year in mid-February, there were 4,030 homes on the market, 1,592 additional homes, or 65% more. There were plenty more choices for buyers compared to today.

Demand
Demand continued to soar by 11% in the past couple of weeks.

Demand, a snapshot of the number of new pending sales over the prior month, climbed from 2,590 to 2,863 in the past couple of weeks, adding 273 pending sales, up 11%. This is the strongest mid-February demand reading since 2013 when it reached 2,887, virtually identical to today. Mortgage rates below 3% are instigating today’s unprecedented demand levels. Since demand is a snapshot of recent pending sales activity, if there were more homes coming on the market right now, demand would be much higher than where it is today. The lack of available homes to purchase is limiting today’s escrow activity. Demand will continue to rise as more homes become available over the next couple of months and more homes come on the market during the spring. It will most likely peak sometime in May.

Last year, demand was at 2,479, that is 384 fewer pending sales compared to today, or 13% less.

Posted in Market Updates
Jan. 29, 2021

January Real Estate Report - Are We at a Boiling Point?

 

With record-low mortgage rates, there is almost too much demand. (Not to mention: Buyers are consumed with how their current home doesn't have space or features they want in a pandemic reality.) It is like a pot of spaghetti that is boiling over. A quick fix would be to turn down the temperature. That is not that easy in housing. The only way to turn down the heat is for rates to rise. Buyers may be rooting for an easier market with less competition, fewer competing offers, and a gentler rise in values, but that would come at the expense of higher rates and higher monthly payments.

 

 
It is the very thing that buyers are eager to take advantage of that is causing all their frustrations, record low mortgage rates below 3%. It seems that everyone wants to cash in on these incredible savings at the same time. At lower rates, homes become a lot more affordable, even for Southern California’s high dollar value housing stock. It improves a buyer’s purchasing power as well, allowing a family on a budget to afford a lot more home.
Because of these low rates, demand is off the charts and everything that comes on the market is gobbled up almost immediately. Today’s demand (a snapshot of the prior 30-days of pending sales activity) is at 2,055 pending sales compared to 1,702 last year, 21% higher.
 

 

The current active inventory (the number of available homes to purchase) is at 2,627 compared to 4,023 last year. There were 53% more homes available to purchase only one year ago. With rock solid demand and an exceptionally low supply, the market is unbelievably hot and lines up heavily in the seller’s favor. The Expected Market Time (the number of months to sell all Orange County listings at the current buying pace) is at 38 days. Last year it was at 71 days, and in November 2018 it was at 122 days.
While today’s housing market may be boiling over on the backs of record-low mortgage rates, buyers should keep the pedal to the metal and not give up. Home values are on the rise and mortgage rates are slated to increase to the mid-3’s by year’s end. Waiting is quite simply not the answer. The same goes for sellers. Waiting until the second half of the year when inventory increases (meaning your property has more competition) and interest rates increase (meaning buyers have less purchasing power) could result in your home taking longer to sell and not selling for as much as you would like. If you are considering selling your home or someone you know is thinking of selling their home but want to wait until the pandemic is over...DON'T WAIT! Striking while the iron is hot is key to your success; just as working with the right real estate team is paramount to selling it quickly and for top dollar. That is where The Swan Team comes in!
Contact us now at 949-444-1601 and get the best team in the business working for you!
Posted in Market Updates
Jan. 15, 2021

What You Need to Know About Prop 19

 

With the new year comes new laws and rules that take effect. This year, the most talked-about new rules regarding real estate revolve around the approved Prop 19.
 
Take a quick read to see if you or your family members might be affected by the legal and tax implications.
 
EXPANDED SPECIAL RULES FOR ELIGIBLE HOMEOWNERS Effective April 1, 2021: Homeowners 55 years of age and older, severely disabled, or whose property was extensively destroyed by wildfire or other natural disasters may be eligible to transfer the taxable value of their primary residence to a replacement primary residence:
  • Anywhere in California
  • Of any value, but with upward adjustments, if a replacement is of greater value
  • Purchased or newly constructed within two years of the sale
  • Up to three times (previously one time), but without limitation for properties destroyed by fire
TAXATION OF INHERITED PROPERTY TRANSFERS Effective February 16, 2021: Prop 19 narrows the rules allowing properties to pass from parent to child and grandparent to grandchild without an increase in the property tax bill. The taxable value can be transferred:
  • To only those properties used as a primary home or farm by the child or grandchild
  • If homeowners’ exemption is filed within one year of transfer
  • If the value of the property is less than $1M over the original tax basis. If the property value, at the time of transfer, is more than $1M over the original tax basis, some upward adjustment in assessed value would occur.
For more information on Prop 19, visit Prop19Attorney.com or boe.ca.gov/prop19.
Posted in Market Updates
July 31, 2017

Curious About Local Real Estate?

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Curious about local real estate? So are we! Every month we review trends in our real estate market and consider the number of homes on the market in each price tier, the amount of time particular homes have been listed for sale, specific neighborhood trends, the median price and square footage of each home sold and so much more. We’d love to invite you to do the same!

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You can sign up here to receive your own market report, delivered as often as you like! It contains current information on pending, active and just sold properties so you can see actual homes in your neighborhood. You can review your area on a larger scale, as well, by refining your search to include properties across the city or county. As you notice price and size trends, please contact us for clarification or to have any questions answered.

We can definitely fill you in on details that are not listed on the report and help you determine the best home for you. If you are wondering if now is the time to sell, please try out our INSTANT home value tool. You’ll get an estimate on the value of your property in today’s market. Either way, we hope to hear from you soon as you get to know our neighborhoods and local real estate market better.

Posted in Market Updates