Timely Real Estate News……………………………….1 May 2016
Federal Reserve keeps current rates, “no comment” about future
This may seem like a government reality TV series — the audience (bankers, mortgage lenders, borrowers, investors) breathlessly awaiting word from on-high — thumbs up or down? The Fed answered, sort of — no rate increases for April and offers “no comment” for June, the next time the panel meets.
The Fed’s assessment of the American economy was mixed. Officials contrasted the relatively strong labor market to the slowing growth in the overall economy, which has been hampered by sluggish business investment and exports. According to a statement released after the two-day meeting, the Fed expects “economic activity will expand at a moderate pace and labor market indicators will continue to strengthen,” The policy statement was adopted by a 9-1 vote.
While household income and confidence indicators all looked positive, the Fed officials viewed consumer spending, which has been the main engine of economic growth, had weakened since their last policy meeting in mid-March. In the eyes of analysts, however, as the no-rate increase policy continued for this month, the Fed’s new statement about the economy made a significant change in deleting a previous warning about risks from the global economic and financial developments that had roiled markets earlier this year.
Some took that as an indication that the central bank could raise rates as early as June.“ We shall have to wait and see,” Carole Schiffer stated. “My clients are always aware of the interest rates and measure their investments and purchases based on current trends. The prospect of rising interest rates always stimulates motivation to buy or sell now. We’re still in a very active market.”
Pricing your home can be a challenging road if not careful
Let me put it to you this way — “pricing your home is both an art and an in specific science.” In a good market, houses go up in value, but the ‘things’ inside them do not necessarily as well….and if the market is telling you something, you better listen.
Fortunately, the real estate market is very transparent. We have officially recorded transfers of property data (closed escrows), and we have tools that enable us to track sales by area on a daily basis. We can provide consumers with excellent information about what nearby properties have sold for and what competitive properties are selling for.
What is happening today with the explosion of real estate search capabilities? The trap many buyers face is that online estimates of a home’s true value, may be way off. For example, Zillow has an average margin of error of a reported 8% at the least, meaning a home selling for $1 million, could be off by $80,000 and a $3 million home, it could be off by as much as $240,000. That’s huge.
Another mistake that homeowners make is that they look at what’s for sale (unsold) in their market and think that’s what the market is — not true: It’s what sold, not what’s listed. The other properties are your competition, and that is how I advise my clients to assess our listing (asking price).
We all have made improvements in our homes over time, but what many homeowners do is to overestimate the value of their amenities such as granite counters, bathroom finishes, high-end appliances, etc. Amenities do have value — don’t get me wrong —but they do not have the value that the majority of home owners want to ascribe to them. It can be very difficult for a seller to understand that buyers do not always, in fact generally may not attach the same monetary value to your granite counters that you do. Only an experienced real estate agent who knows your neighborhood is going to give you an objective, honest appraisal of their contribution to the home’s overall value.
Don’t think for one minute that if you have something that may not be “perfect”, buyers are not quick to discount the non-perfect item substantially more than the homeowner because they generally always do.
And finally, sellers are sometimes swayed by their “needs” — they price the home that delivers the amount of $$ they need to move out and on. Buyers could care less about your needs. And likewise, homeowners don’t give discounts on buyers’ needs either.
Today’s market brings us much more informed buyers (and sellers). The Internet is a wonderful tool that is prevalent in every decision-making process. I see it every day in my travels within the real estate world. “The Internet is useful and helpful in so many ways — and we at Coldwell Banker have the most robust and complete online support programs of any real estate company in the world today. We’re the best.” But at the end of the day, it comes down to personal service and knowledge. You’ll need an experienced, qualified, dedicated real estate agent to make the best deal and close it!“…like me!
More Americans still regard real estate as their best investment choice.
According to the latest Gallup poll the best long-term investment is still real estate. For the last two years, Americans have believed that for long-term investment real estate is their best choice: Real estate has increased its lead over four other investment choices as well. Thirty-five percent of Americans now choose real estate, compared with 22 percent for stocks and mutual funds, 17 percent for gold, 15 percent for savings accounts/CDs and 7 percent for bonds.
Real estate and gold have switched positions over the last five years as gold prices tumbled and home sales recovered from the 2007-2009 housing market collapse. In August 2011, 34 percent of Americans named gold for the best investment for the long term, compared with 19 percent for real estate.
Stocks and mutual funds, in spite of making major gains in the past five years after the historic 2008 stock market crash, have struggled to gain favor in the public’s eyes. In August 2011, with the Dow Jones Industrial Average still below pre-crash levels, 17 percent of Americans chose stocks and mutual funds as the top long-term investment.
According to Gallup, the Dow in April 2016 is above its pre-crash high of 14,164 by more than 3,500 points, but the percentage choosing stocks or mutual funds as the best long-term strategy has grown only to 22 percent. That figure did reach 25 percent last April, but dipped slightly this year after the Dow’s roller-coaster ride in recent months.
Meanwhile, as the average sale price of new homes in the U.S. increased from $259,300 in August 2011 to $348,900 in February of this year, the percentage of Americans picking real estate as the best long-term investment almost doubled. During approximately the same time span — from August 2011 to April of this year — gold prices plunged from $1,910 to $1,254 per ounce, and the percentage thinking gold would be the best investment was cut in half.
Interesting sidebar to “why” real estate is tops…..Combined results from the 2015 and 2016 Gallup polls that asked about long-term investment preferences reveal some clear differences among key subgroups. Here are some highlights from the survey: 1) Men are more likely than women to think gold is the best investment. Women are more likely than men to favor
savings accounts. 2) College graduates are more than twice as likely as non-grads to favor stocks — 37 percent to 17 percent. Those without a degree are more likely than grads to favor gold (21 percent to 12 percent) and savings (19 percent to 8 percent) and 3) Americans younger than 30 are the least likely (26 percent) age group to think real estate is the best investing choice and are the most likely (26 percent) to favor savings.
Existing home sales up, new home sales not so much
It goes with the real estate territory: We often see what appears to be conflicting stories in our media all the time. For example, what happens nationally doesn’t always reflect what happens on the Westside of Los Angeles. Home prices may be up in some areas, down in another. Homes sales (think “volume”) is up in some, down in others. But in a series of reports released by highly respected data-gathering firms, we see these stories in our national media, too.
In data released last week, the Commerce Department stated new-home sales slipped 1.5% last month (March) to a seasonally adjusted annual rise of 511,000 units, reflecting a consecutive three month drop in housing starts. While sales are still running slightly ahead of last year at this time, builders are not seeing signs that give them much optimism either.
But on another front, the National Association of Realtors said last week that sales of existing homes rose 5.1% in March to a seasonally adjusted annual rate of 5.33 million, a partial rebound after a sudden drop in February.
Fewer existing properties are being listed for sale, causing prices to rise. The number of listings has dipped 1.5% over the past 12 months, despite a foundation of demand caused by lower mortgage rates and healthy hiring levels.
Prices dipped with sales declining in Western states where land always commands a higher premium. The median new-home sales price fell 1.8% from a year ago to $288,000. The market’s stalling momentum comes amid an incomplete recovery from the housing crash of almost a decade ago. New-home sales are significantly below the half-century
“It can be very confusing, I must admit”, Carole Schiffer stated. “You are reading the same national media as I am. Fortunately, I have access to the most up-to-date real estate data available in the market, and I pass the latest information to you in our mid-month SchifferLine. We have seen sales modulate this year, down slightly from last year, which featured several large sales in March of last year. This year is a slightly different picture with no sales over $30 million. We are seeing median sales prices working on both sides of the fence — some areas are up, some down.” The best gauge for your area are the comparables that reflect real sales, not estimates.
I will keep you posted with the latest information available. Or please give me a call at 310-442-1384.
Less Americans own homes….effects of Great Recession linger
The rate that Americans own their homes fell in the first quarter to the third lowest on record, another indication that worsening finances as well as changing preferences since the Great Recession are altering behavior. The diminished interest, or ability, to own a home comes at a time when mortgage rates are low but home prices are climbing. Many economists point to the lingering effects of the 2007-2009 Great Recession when many lost much of their home equity and were under water.
The Commerce Department reported that home ownership fell to a seasonally adjusted 63.6% in the first quarter, marking the third lowest figure since the 63.5% low in the second quarter of 2015. The ownership rate was 67.8% in the quarter when the U.S. entered recession. Freddie Mac reported the benchmark 30-year fixed-rate mortgage rose to 3.66% in the week ending April 28. The 30-year mortgage has been below 4% throughout 2016, according to Freddie Mac data.
However, home prices are on the move, particularly out west. As we reported last week, home prices nationally rose at a 5.4% clip in the 12 months ending February. Some cities including Denver and Portland are seeing double-digit percentage increases.
Rents also are picking up as housing inventory lessens and landlords are responding to supply/demand and are raising rental prices to take advantage of the booming demand. According to Carole Schiffer, “…we’re seeing that all over the Westside. With inventories low, rentals are commanding higher and higher monthly rents. This is a very competitive market for all sectors for the Westside housing market….not always a good thing as affordability keeps declining.”
Please check out my beautiful new listing at 2120 Dean Circle in Mountaingate. It is 5 bedrooms/4.5 baths, with an expanded dining room that seats 18 easily, has been updated extensively in the last few years, and has an amazing view of the two Mountaingate golf courses, the city, and on a clear day some ocean view. The asking price is $2,545,000. You can see the photos on my web site, caroleschiffer.com
Happy Cinco De Mayo!
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