A Message from Rick Turley
Trying to read the tea leaves in this economic recovery is not easy. We’ve come a long way from the depths of the recession early last year, but after a sharp bounce-back over the past year, the housing sector and other segments of the economy seem to now be lurching forward in fits and starts. One day we’re encouraged by economic and housing reports, and the next day scratching our heads over disappointing numbers.
A few examples this past week alone:
• Existing-home sales nationwide fell 5.1 percent in June, but remained nearly 10 percent higher than they were last June, according to the National Association of Realtors. Lawrence Yun, NAR chief economist, said the market shows “uncharacteristic yet understandable swings” as buyers responded to the end of the federal tax credit.
• Closer to home, sales of new and resold homes and condos in the Bay Area inched up 1.3 percent in June from May but fell short of a year ago – down 3.1 percent, according to MDA DataQuick, the La Jolla-based real estate research firm. The median sale price was still 16.5 percent higher than last year, thanks largely to fewer foreclosures re-selling and more high-end activity.
• The mid- and upper-end of the local housing market finally appears to be gaining some momentum. Million-dollar home sales in Silicon Valley, San Francisco and even Lake Tahoe last month surged to their highest level in about two years, according to Coldwell Banker Residential Brokerage’s monthly luxury housing report.
So what to make of all this? First of all, such roller coaster recoveries are not unexpected. Historically, we’ve seen sharp rebounds initially after a recession ends and then slower growth a year or two into the recovery. We’d love to have a strong v-shaped recovery, but that often doesn’t happen.
Additionally, the softening of the housing market nationwide and in the Bay Area was not surprising with the expiration of the federal tax credit. Economists believed that many buyers and sellers pushed their transactions through quickly to meet the deadline, perhaps taking away sales that would have otherwise occurred during subsequent months.
John Walsh, MDA DataQuick’s president, said, “The next few months should be very interesting: We’re about to see how well the housing market can fly on its own. The tax credits no doubt stole some demand from the rest of this year, and soon we’ll have a better sense of just how much.”
Here in the Bay Area, we’ve seen slow but steady improvement from last year’s recessionary depths. While it will undoubtedly take the housing market some time to return to normalcy, it appears we’re continuing to move in the right direction. The question now is whether that growth will continue, and how fast.
The headwinds created by high unemployment and muted economic growth will remain challenging for the housing market. But the market is also being pushed along by strong tailwinds – attractive housing prices, historically low mortgage rates, recovering financial markets and improving stock portfolios of buyers. Only time will tell how it all plays out.
Rick Turley
President, San Francisco Bay Area
Coldwell Banker Residential Brokerage
tel 415.437.4505
rturley@cbnorcal.com
Your Questions Answered
We were recently asked from a homeowner how to get out from under their current home without having cash to buy a better place. Of course, a buyer would need 5% or more in cash to put down, but we thought this snippet from the Wall Street Journal answered the question well.
Doubling Down on Housing by M.P. McQUeen- Some intrepid homeowners are intentionally taking a loss on their current house—and writing a big check to retire their old mortgage—in order to buy twice the home for not much more money. Others, eschewing conventional personal-finance advice, are even opting for “cash-in” refinancings, paying thousands of dollars out of pocket to settle old loans—and then taking out new mortgages with lower payments, shorter durations or both.
Katie Everett, a real-estate broker in Denver, says none of her clients kicked in cash when selling their homes last year. This year, “about half are willing to bring money to closing, anywhere from $5,000 to $45,000,” she says.
Are these people crazy to be tying up even more of their cash in their homes, in effect doubling down on what has been a losing bet thus far? After all, any number of variables, from the employment picture to the credit markets, could weigh on housing for years to come.
Yet economists say trading up to new homes or refinancing existing ones can be smart—even if it means plunking down more cash to get out of old mortgages. People living in less-desirable neighborhoods might be able to find better homes in tonier ones that offer better appreciation potential. And with mortgage rates so low, such buyers can keep their monthly payments manageable, even though the new homes are more expensive. View the full Wall Street Journal article.
To sum up, it seems this market is trying to stabilize although it seems new processes and ideas for staying afloat are being brought to the surface weekly. If you have questions about the San Mateo Coastal Real Estate market; we’d love to help! Navigating the market right now can seem overwhelming, but our goal is to help you each step of the way! Let us know how we can help you or if you’re interested in buying a home in the San Mateo area! We look forward to hearing from you!
Kathy & Michael Rain
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