...and a worse time to be a San Diego buyers' agent.
San Diego is in a housing crisis and the simple explanation for it is that we have a tremendous backlog of new housing--the politicians aren't helping us either. NIMBY-ism, water restrictions, and traffic density are core issues which restrict housing and, while they are legitimate issues, the county has a 65,000 unit backlog of new housing.
Experts believe that San Diego County needs 170,000 housing units built from 2012-2025 to meet demand and population growth- some 15,000 housing units each year. Over the past five years, San Diego County has averaged 2000 new housing units.. We are already 65,000 units behind and, if we continue at this anemic pace, we will end up 120,000 housing units short in 8 years. That is pushing up prices of existing homes.
You might think that rising housing prices, and double digit rent increases, will halt population growth in the County. While it might, SANDAG believes the region will grow by another million people within 25 years. Increased demand for housing and restricted supply means one of two things to your clients: they have to move out of San Diego County or home ownership is now, more than ever, the only defense against this housing shortage. Your role, as a buyer's agent, is now more important than ever to your clients' futures.
We are here to help you--here are three ways we can do that.
1- TBD approvals: this isn't a pre-qualification, this isn't a pre-approval, this is a full underwriting approval for the buyers' credit and income. We take an application, gather up supporting documentation, submit the file to the underwriter, and have a clean approval within 5 business days. What this means is that we can close a transaction in 21 days, giving your buyers a competitive advantage when they make offers.
2- "Selling" the buyer to the listing agent: a lot of the buyer's agents we work with ask us to speak to the listing agent when they make the offer. We communicate to them that we have that underwriting approval and, more importantly, tell them exactly what that means. It means that the only issues for a full loan approval are property related: appraisal, homeowners insurance and title insurance. When we explain the process to the listing agent, and represent the strength of the buyer, more offers get accepted.
3- VA and FHA condo approvals. So many condominium buyers are shut out because the complex lacks an agency approval, The perception is that VA and FHA condominium complex approvals are burdensome and lengthy--nothing could be farther from the truth. Debra and I are experienced experts at VA condo approvals-- we have approved over 130 of them in the past 8 years and we get those purchase transactions closed in 45 days or less. FHA condo approvals are easier for us because we have a HUD-delegated underwriter who has the ability and discretion to approve the complex FHA-eligible
This is a great time to be a real estate agent in San Diego County, especially if you list a lot of properties. Representing buyers however, is difficult. We're here to make that job easier on you.
Posted at 09:26 AM in 92130Realtors.org, Blue Collar Beach Towns, Carmel Valley Realtors, FHA Loans, Jumbo Mortgage Capital, La Jolla Real Estate , Mission Valley Condo Loans, Mortgage Financing, Oceanside Townhouse For Sale, Real Estate, San Diego Condo Loans, Show me a Good Deal, Solana Beach Real Estate, Value Investing, Veterans Admin Home Loans | Permalink | Comments (0)
It's been a great run. Back in late 2011, we were pounding the table for investors to buy a single-family home in San Diego County, especially in what we called "Blue Collar Beach Towns". Then, you could purchase a single-family detached property for $250,000. We were nervous so we advised investors to put at least 25% down and only buy a property where the rent could cover the pre-tax housing expenses (mortgage, taxes, insurance, estimated maintenance). If you were one of our investors, you are probably sitting on over $100,000 of profit today. That means you will have almost tripled your investment in a period of about 5 years or earned an internal rate of return in excess of 27%.
It's been a great run but it looks like the party is over. We think the first half of 2017 is going to be a good time for investors to take some money off of the table, especially if they have a plan for that money in the next 3-4 years. This doesn't mean we think the market is going to crash, like it did in 2008-2012 but we think the prices are going to soften and perhaps decline 10-15%.
The three reasons we loved San Diego single-family homes, as an investment in 2012, are the same reasons we don't love them today: median price and median income, price-to-rent-ratio, and mortgage rates direction. We still like single-family homes for owner occupants but we just don't love them as investments.
The 2016 median income in San Diego County is $73, 500 for a family of five. This translates to a maximum monthly mortgage of approximately $2050 (PITI) or a $344,000 mortgage. Add a 20% down payment and the family of five, earning the median income in San Diego county, can afford to purchase a home for $430,000. A median-priced home, in San Diego county, was $495,000 this past summer. That's a 15% premium.
Keep in mind that. back in late 2011/early 2012, a veteran could purchase a single-family home, in Oceanside CA, for zero down payment and her mortgage payment would be cheaper than rent. Today, if that same veteran purchased a median priced home in San Diego County, the mortgage payment would be $2800. There are tax benefits to owning versus renting so let's make the after-tax costs of owning a home $2500. That same home can be rented for $2200; this is after a rental shortage in San Diego County spiked rents these past few years.
Look at 3792 Atlas Street as an example. It is being offered for rent at $2200 and the Zillow Zestimate is for a $528,100 value. Even if a home buyer had 20% down payment, their after-tax mortgage cost would be about $2300; $100 month more than they could rent the property. It still makes sense to own that property, if you intend to live in it for 7-10 years but it just isn't a compelling investment when looking at the price-to rent ratio anymore.
Finally, we think the carrying costs for real estate (aka mortgage rates) can only go up from here. Interest rates may start climbing in a couple of months or it could take as much as a year for mortgage rates to rise. Eventually, mortgage rates are going to be 1-2% higher than they are today. More importantly, the threat of higher mortgage rates is starting to affect pricing now. Back in 2014, people still thought rates could come down so they weren't too particular about paying 5% more than last year's prices; they figured they could refinance into a lower rate soon enough. Today, the opposite is true.
What does this all mean to you?
If you are a real estate investor, it might make sense to sell that San Diego County investment property, especially if you plan to use the money in the next 4-5 years. If you don't plan to use the money, and want to avoid paying capital gain taxes, I have two ideas for you:
1- Consider the Greater Phoenix area. You will increase your income (the capitalization rates are better) and there is still some upside appreciation to be gotten there (not a ton but better than San Diego County). We refer our clients to Greg Swann of Bloodhound Realty.
2- Consider placing the proceeds from the investment property sale into a Delaware Statutory Trust. This is a security so we don't handle these transactions but we refer our clients to investment adviser Tony Krvaric of Krvaric Capital.
What if you just want to buy a home to live in?
There is no greater place to live (in my opinion) than San Diego County. We have beaches, mountains and deserts. Our climate is second to none and our business environment is relatively robust. Unemployment, in San Diego County, is less than the rest of California and the rest of the country. San Diego County is a great place to own a home.... BUT....
...we think the short-term prospects of higher prices are unlikely. Even with the Great Recession, if you bought and held a home fir ten years, you made money in San Diego County. Our advice then is to be judicious when buying an owner-occupied home in 2017. We suggest that you do three things:
1- Establish your holding period. If you plan to move in less than 7 years, you could lose money. If you plan to live in the property for at least ten years, you should make money.
2- Call us to run a rent v. own scenario for you. This is where we analyze the price-rent-ratio. For traditional, 20% down payment transactions, it can still make sense to own for the long-term in San Diego County.
3- Negotiate, be patient, and shop around. You don't have to get a home at 15% under list price to get a good deal but we don't' think you have to pay list price to get a home in 2017. Sales have slowed in San Diego County, ever so slightly, but they have slowed.
Inventory is still under three months which suggests that this is a seller's market, That could all change once prices start softening (they are showing signs of that now). If you are an current investment property owner, the first six months of 2017 will be an excellent time to sell and realize your profits. If you are a potential home buyer, we think you are going to have more options next year than you do today.
This beautiful, end town home has upgraded cabinets, granite counters, and tile and hard wood flooring in the well-maintained community of Rancho Rose in Oceanside. Rancho Rose Community has a resort-style pool and hot tub, nestled beloe swaying palm trees, and a guest equestrian facility on the property.
This Oceanside town home has granite and tile throughout the kitchen and all three bathrooms. The living room has rich-looking hard wood floors. You can park in your attached 2-car garage and relax or barbecue on your enclosed patio. Ample guest parking.
Upstairs, there are three bedrooms: the master suite is attached to the master bathroom and the other two bedrooms share a jack and jill bathroom.
You can finance this home, with no down payment with your VA benefit or use a conventional loan with 5% down payment. an FHA complex approval is pending with World Wide Credit Corporation.
Near the Home Depot and shopping, this Oceanside town home is convenient to Camp Pendleton and was built in 2004.
Compare financing options
View the Rancho Rose HOA documents
Here is how to make an offer:
if you are represented by an agent, he/she will prepare an offer for you. If not, call Brian Brady at 858-777-9751.
If the offer includes financing, the seller requests that you be cross-approved with Debra Brady of World Wide Credit Corporation. Here is how to do that:
1- Fill out an online loan application
2- Call Debra at 858-412-7585 to get a list of documents needed to upload to a dropbox. These documents will include: last two paystubs, 2015 and 2014 W2 forms, last two months' bank statements, and a copy of your ID.
3- Upload the documents to the Dropbox Debra sets up for you
The seller requests that the escrow company be Ticor Title in Solana Beach and that the title policy be issued by Fidelity national Title- Mark Boeh.
Zillow Chief Economist Stan Humphries confirms what I"ve been saying for five years now; Millennials prefer renting to owning a home. Millennials can be defined as the generation born from in the early 1980s to the early 2000s. If you want to be more definitive, let's say 1981 through 2002 (or today's 12-33 year olds.) This is a HUGE demographic, some 80-90 million Americans.
They ain't buying homes. Here's why:
(1) older Millennials got burned in the real estate boom and bust last decade. They were the "last in" on the Federal Reserve-induced boom and bought at the top of the market. When the balloon popped, they got caught holding the bag. So many of them short sold those properties or lost them in foreclosure because...
(2) ...they don't have the income. 1in 7 can't find work and over 4 out of 10 of the best educated millennials are underemployed.
(3) they have a giant debt-load, thanks to the student loan program.
(4) Millennials are mobile, uncommitted, and untethered by choice. Laying down roots doesn't appeal to this financially-strapped generation. As they struggle to find meaningful, well-paying work, they are postponing marriage and child-rearing--two key factors which encourage home ownership.
What's that mean for San Diego real estate? As millennials postpone the home purchase decision, the median age of first-time home buyers will rise. The linked article about the Zillow research suggest it could rise to as high as 33 years old (nationally) by the end of the decade--that number was around 28 years old last decade. In San Diego, we typically add 3-4 years to the national average because of our high home prices. Stated simply, we may not feel the full effect of millenial homebuyers for another 15 years.
How can an investor capitalize on this? Give 'em what they want--rental housing. As wage inflation kicks in, there will be an upwards pressure on rents. As rents rise, the price of multi-family properties rises too. Investors can purchase 3-4 unit properties today, with 25% down, and have positive cash-flow based on existing rents. There are over two dozen properties for sale today in San Diego County, three of which are in Oceanside (my favorite investment location) which meet the positive cash-flow test.
I think you're going to see rents double in the next 10 years and I believe multi-family properties could increase as much as 50% in value during that time. Investors have a chance to double or triple their money in the next ten years. Contact me to analyze the numbers and risks associated with this advice.
Mortgage bonds had a rocky ride this week but still finished at the same level they did last Friday. Wednesday spooked the market and it dropped a half-point, suggesting that rates would rise .125%. Unexpected strength today buoyed the market and kept mortgage rates at their July, 2014 levels.
You can follow the national average mortgage rates at Bankrate.com. San Diego mortgage rates tend to be .125% LOWER than the national average. Average rates as of Ausust 1, 2014:
30 Year fixed conventional average= 4.21%
15 Year fixed conventional average= 3.28%
30 year fixed VA/FHA average= 3.75%
30 year fixed VA/FHA jumbo avg.= 4.125%
5/1 adjustable rate conv. average= 3.53%
CAUTION: San Diego home prices up but the price increases are decelerating. That's fancy double-speak for "you're making money but not as quicly as you did last year". I don't know if that's the beginning of the end of the boom or the beginning of the boom. Let me explain:
Six years ago, I said to pounce on the homes under $400,000 because the median income was well above the amount required to support a mortgage on a median-priced home. I was right; those home are all up at least 20% (which means you would have doubled your down payment investment in 6 years). Today, median income does not support a mortgage for a median priced home. That sends a cautionary signal to me UNLESS....
...there will be inflationary pressures on wages. Wage push inflation is usually the last part of an inflationary cycle. Anyone who eats or drives a car knows that price inflation is real but wages haven't kept up with commodities prices increases. It looks like wages are about to explode. That's good news for real estate prices as it introduces a whole new round of buyers, willing to pay higher prices for homes.
While caution should be shown towards home prices, we could see another 20-25% upside in San Diego home prices, then everything turns to $***. Maybe. Bottom Line: buy what you can afford, live in it, and think long-term in real estate. Flippers will eventually get burned.
Solana Beach, CA has four condominium complexes which are approved for VA home loans as of September 28, 2012. They are:
Del Mar, CA has no condominium complexes which are VA approved and there is one complex pending in Rancho Santa Fe, CA. 12Mortgage.Com
makes VA loans up to $1,000,000. The 2012, zero-down VA loan limit in
San Diego County is $477,000. Loans higher than $477,000 and less than
$1,000,000 may require a downpayment but do not have a monthly mortgage
If you do not see your complex on this list, it may require a review from the Veterans Administration before a loan can be funded there. Please read about how we are able to help veterans by expediting that review process or call Brian Brady at 858-777-9751
Should you buy a home or rent one, in San Diego?
As always, that depends. If you're looking for a home in La Jolla, you may never find a one which is less expensive to own than rent, in today's dollars. The physical beauty of the seaside burg is stunning and La Jolla has traditionally traded at a steep premium to rent v. own parity.
Nick Timiraos suggested that buying conditions are getting better for San Diego, in the Wall Street Journal:
Home ownership is also looking more affordable because after several years of declines, apartment rents will rise by around 4% this year, says Mr. Nadji. He says rents are poised "to pick up even more momentum across the country next year."
Rising rents are one reason a would-be home buyer should consider purchasing a La Jolla home rather than waiting for prices to reach parity there. If inflation kicks in, and onc day it will, rents could increase a level far above what the mortgage payment, for a La Jolla home, would be today.
Even cities where it is still cheaper to rent than own have seen big boosts in affordability. In San Diego, the monthly cost of owning a home has averaged around 83% more than renting over the past two decades. During the third quarter, owning was 22% more expensive than renting, according to John Burns Real Estate Consulting
Take note of this figure. In many San Diego sub-markets, (mostly the beach cities), housing prices will never reach parity with today's rents. Like the La Jolla example, inlaftion may cure that in 2-3 years. Still, some San Diego County markets have already reached parity meaning, it's cheaper to own rather than rent. Even in some beach cities, like Oceanside or Imperial Beach.
I searched active Oceanside homes for sale and found one which is listed for $189,000. With about $7,000 down payment, and an FHA loan with a 4.88% APR, the monthly mortgage payment would be $1250, some $50-$100 below what it might fetch in rent. That's one of many Oceanside properties which are at or below parity for the rent V own model.
I also found plenty of similar opportunities while searching for homes for sale in Chula Vista. There were many more recently built homes, which command premium rents, listed under $250,000.
San Diego entrepreneur Bill Lyons intends to make these home searches easier when he releases his new website, Revestor.com. Revestor organizes current listings, by capitalization rate or cash flow, to offer homeowners a chance to "rate" properties, by comparing the listed price to current rental data.
San Diego is still selling at a slight premium but this may be as good as it gets. If mortgage rates continue to stay low, because of the Fed's printing press and quantitative easing, the bubble for low rates will soon pop, and inflation will kick in. Locking in a price, and a low mortgage rate, might be the best way to insure you won a piece of our sunshiney paradise.
Posted at 11:02 AM in Blue Collar Beach Towns, Current Affairs, Da' Fed, Economy, FHA Loans, Financial Planning, Investment Strategies, La Jolla Real Estate , Mission Valley Condo Loans, Mortgage Financing, Mortgage Rates Report, Opinion, Real Estate, Recession, San Diego Condo Loans, Solana Beach Real Estate, Triple Crown Condos, Value Investing, Veterans Admin Home Loans | Permalink | Comments (0) | TrackBack (0)
This just in, about February sales, from the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.).
The statewide median price of an existing, single-family detached home sold in California was $271,320, down 2.8 percent from a revised $279,140 in January and was down 2.5 percent from the $278,190 median price recorded for February 2010. The February 2011 median price was the lowest since May 2009, when it was $263,440.
Why are prices declining?
Perhaps the shadow inventory is being released. It is widely believed that most buyers will be looking to move in the summer which means the best time to list a property would be April, May or June. Expect more of this slow decline for the next 3-4 months. After that, it's a crap shoot, If the California unemployment rate stays north of 12%, this might be a tepid summer for real estate. Until Jerry Brown's tax hike is defeated, expect the unemployment rate to remain over 12%.
Here are other highlights of C.A.R.’s resale housing report for February 2011:
- The Unsold Inventory Index for existing, single-family detached homes was 7.3 months in February, up from 6.7 months in January 2011. The index was 6.0 months in February 2010. The index indicates the number of months needed to deplete the supply of homes on the market at the current sales rate.
- Thirty-year fixed-mortgage interest rates averaged 4.95 percent during February 2011, compared with 4.99 percent in February 2010, according to Freddie Mac. Adjustable-mortgage interest rates averaged 3.35 percent in February 2011, compared with 4.23 percent in February 2010.
- The median number of days it took to sell a single-family home was 64.4 days in February 2011, compared with 39.2 days for the same period a year ago.
So mortgage rates are similar to what they were a year ago but inventory is rising and staying on the market longer? How can that be? Perhaps the first-time home buyer tax credit was really just another failed stimulus plan, stalling a meaningful recovery. The result is a bunch of wasted money; $600 stolen from nine neighbors so that one neighbor could sell his home at a higher price.
This is a perfect illustration of the broken window fallacy. We still have a lot of broken windows in California. My California real estate weather prediction? Cloudy with a chance of rain.
Yalda Alawi, the San Diego Real Estate Lady, offers a free book about short sales, at the end of this article:
The documentation required to process a short sale is commonly referred to as a “Short Sale Package” and is usually submitted by the agent representing the seller or the seller of the property themselves if they are attempting to do the short sale on their own. Here’s a sample short sale package:
Note that items may vary depending upon the lender.
If you plan to work with a real estate professional and can have your last two years tax returns as well as past two months bank statements and pay stubs together with your hard ship letter and authorization to release information statement for them at your initial meeting you’ll give them a running head start and they will love you!
This is ONE Page from the 40 Page Book “The Homeowner’s Guide to Real Estate Short Sales”
Request your FREE copy today: https://www.BreakForeclosures.com
Call Yalda at 858.863.3860 or, do what I do and stalk her on Facebook.