Real Estate Still Searching for Stability
As our economy struggles its way through a recovery, real estate is bouncing around in search of stability. Meanwhile, we have been busier than ever and growing to meet increasing demand for our legal services. Today’s Blog will cover where we are at nearly one quarter through 2014.
Anyone watching the real estate market knows that we are in recovery mode. Prices are up, foreclosures are down, and even Washington seems to have stopped fighting over the Budget. But behind these signs, there is still a lot of uncertainty:
1. Home Prices: Six years ago, the market was glutted with foreclosed properties and short sellers trying to unload their upside down homes. According to MDA Dataquick, in 2007, the Sacramento median home price was nearly $400,000. By 2009, that had fallen nearly 50% and by mid-2012 it was down to nearly $175,000.But an emerging investor market fueled by hedge funds such as Blackstone started gobbling up all the low cost properties and this fierce competition kept for sale inventory low. This imbalance between too little inventory and too much demand started driving up-prices and encouraging more owners to put their homes on the market. By mid-2013, the investor priced houses were gone and momentum brought more homes to the market while higher prices and rising interest rates on loans thinned the number of qualified buyers. Today, according to the Sacramento Assn. of Realtors (SAR), active listings are up 87% from 1 year ago and the median sales price is $203,000 – up 62%! On the other hand, closed sales are down 17%, closed short sales are down 65%, and days on the market from listing to sale have increased over 100%. These statistics suggest that the Spring real estate market should be active but pricing may flatten to meet demand.
2. Foreclosures: Without question, the rate of foreclosures have steadily fallen here and nationally as economic recovery and new laws pushing lenders to be more open to short sales and modifications have eased the pressure. However, while the number of homes in the foreclosure process (default through sale) are down 27% from this time last year, new foreclosure starts are up 57%. It is now clear that the courts will not stop lenders from foreclosing and laws cannot compel them to either modify or accept a short sale. So it appears that lenders are now moving to clear out delinquent properties and get what they can from the increased pricing.
3. Short Sales: Here’s the wild card. Short sale inventory is up 62% from this time last year while completed short sales are down 65% from the same period… nearly a 130% shift! It’s not clear why this is happening but here’s three factors I am aware of: 1) Buyers want the certainty of an active sale rather than the uncertainty and long time lines of a short sale; 2) Buyers are frustrated with some Lenders forcing their deal to go trough a price verification process such as auction.com; 3) rising prices are making short sales less attractive to Buyers…and to Lenders.
We’ll have a clearer picture as the 2014 Spring real estate market unfolds. There’s nothing dramatic expected that would change the above trends so more likely than not we’ll be continuing the market recovery as the inventory of upside down properties slowly is resolved. We’ve been saying for years that recovery should take until about 2015-16. That still appears accurate.
BPE Law has been assisting our clients with their real estate, business, and other legal needs ever since we started doing business. We’re active in the communities in which we live and in protecting and expanding our clients’ opportunities for business and real estate ownership … and providing assistance when they’re challenged. If you have questions concerning real estate, business, or any other legal matter, give us a call at (916) 966-2260 or e-mail me at firstname.lastname@example.org. Our flat fee consult for new clients may get you the answers you need for the questions you have.
The information presented in this Article is not to be taken as legal advice. Every person’s situation is different. If you are facing a legal issue of any kind, get competent legal advice in your State immediately so that you can determine your best options.