Vitek Mortgage Group
Thank you for reading the MtDemocrat.com digital edition. In order to continue reading this story please choose one of the following options.
If you are a current subscriber and wish to obtain access to MtDemocrat.com, please select the Subscriber Verification option below. If you already have a login, please select "Login" at the lower right corner of this box.
Special Introductory Offer
For a short time we will be offering a discount to those who call us in order to obtain access to MtDemocrat.com and start your print subscription. Our customer support team will be standing by Monday through Friday, 8am to 5pm to assist you.
If you are not a current subscriber and wish not to take advantage of our special introductory offer, please select the $12 monthly option below to obtain access to MtDemocrat.com and start your online subscription
The past year in review
In 2012 real estate markets throughout the United States (with a few exceptions) saw stabilizing and increased prices, increased demand and more confidence in the market from both buyers and sellers. The Fed has continued to keep interest rates low thus helping maintain the volume of funding available at very attractive rates. Loan programs have continued to be available for all markets, with very attractive products for entry-level or move-up buyers, and refinances were again significant to the loan industry as rates continued to drop through last year making housing affordability in our region reach all-time highs at over 50% (affordability index)
Home prices increased significantly during the year as buyers ‘got off the fence’ and decided it was time to buy, along with a decrease in inventory due to a dramatic drop in foreclosures (down 25 percent from 2011). The public knew it was time to move and took advantage of the best real estate market in more than 20 years!
Our national debt is still the biggest fear and real threat to long-term economic stability and growth, now at $17 trillion, and projected to go as high as $24 trillion, but relative to our GDP, while disappointing, we are still in line with the rest of the industrialized world. The labor markets are still troubling with lackluster growth (insufficient to meet new people entering the workforce). But when you consider the dynamics of that workforce and GDP components, an interesting model arises which could dramatically affect our local economy.
Follow the logic:
• Housing inventories are down.
• Low inventory and high demand increases home prices.
• Rising home prices brings in the need for new supply – construction will increase.
• As prices equalize between new and resale, more builders enter the market which increases employment in construction.
The residual effects: Manufacturing (appliances, carpet, plumbing and electric) increases, helping the employment picture.
The entire housing industry grows and unemployment drops, bringing more buyers back into the market because they can qualify with good-paying construction and manufacturing jobs.
The Cycle “Recycles” — AT LAST!
Current housing market
Home interest rates dropped to record lows with the 30-year hitting bottom late September 2012 at 3.25 percent. While rates moved up recently to 3.75 percent, and still well below December 2011 rates, we may not get back to those all-time lows. But we really aren’t hearing our homebuyers say, “I would love to buy, but those pesky high rate..”
Housing stats for 2012
Homebuyers sitting on the sidelines decided the bottom was here and came back strongly. At the same time, inventories started to shrink as less REO homes (bank sales) were available and equity sellers sat the sidelines to “wait and see.” Sales activity was up 14 percent from the prior year and inventory dropped by year end to less than three months. Along the Highway 50 corridor between El Dorado Hills and Placerville, where the most sales activity is centered, our inventory is down to about two months. In the strongest markets, inventory drops to 1.3 months! Equity sellers are badly needed to enter the market as short sale and REO listings will continue to decline
And how about those prices
Well, yes as you can imagine, prices increased in El Dorado and surrounding counties. In the areas represented by the Highway 50 corridor mentioned, where well over 70 percent of our activity is centered, the average home sale price increased by 11 percent. But more importantly, taking out the difference in home sizes, the average price per square foot increased 8.6 percent. Bloomberg just reported national home prices increased 8.3 percent last year, the largest increase since the year ending in May 2006.
As for the activity by listing categories, there were big changes …
Bank owned homes were 36 percent of sales in Q4 of 2011, and only 7 percent in the last quarter of 2012
Short Sales made up 27 percent of sales in Q4 of 2011, and held at 28 percent in the last quarter of 2012
Equity sellers were 36 percent of Q4 transactions in 2011 and jumped to 65 percent in Q4 of last year.
The Near Future — my forecast
Interest rates will rise only slightly this year with the Fed continuing to help keep them low by whatever methods necessary. Expect the 30-year fixed to stay at or less than 4 percent on average for the year.
Home sales will remain robust as the home prices move up, causing a higher urgency for buyers, and more sellers willing to list at reasonable prices.
Home prices will likely climb another 4 to 7 percent this year in the most active markets. As pricing pressures continue, activity in the outlying areas will become more attractive and sales more active. First-time buyers have real concerns about being priced out (and some are already), even though we presently have a 50 percent+ affordability index.
Investors will slow down on their purchases, as they see price points that make the deals less attractive, and cash buyers have “run out” of money in many cases
Continued loan availability for qualified buyers, and programs still open for low down payments, and more specialty program use like FHA 203k rehabilitation financing on ‘fixer-upper’ homes.
A continued tight rental market for ‘good’ rental units, But many renters who have been excellent payers are now at the end of their “doors shut” period to financing and are coming back into the purchase market.
Land sales will slowly begin again as builders look to create affordable inventory in new construction where this alternative has been shut down for years. More new homes coming on the market, but certainly not in large quantity.
More equity sellers entering into the market place especially in the “move-up” or “move-down” marketplace where now makes much more sense than waiting.
More second home and soon retiring or relocating buyers entering our region, as they are able to purchase without selling their present home and many are likely all-cash buyers.
It has been a long wait for this turn in the market, since August 2005, and barring any economic, domestic, international or natural disasters, 2013 and beyond are looking like solid and sustained growth in both activity and prices for local real estate.
Steve Cockerell is the branch manager at Vitek Mortgage Group on Placerville. For more information call 530-621-0222, e-mail [email protected] or visit SteveCforloans.com. The statements and opinions hereon are solely those of the author, Steve Cockerell and do not reflect any opinions of Vitek Mortgage Group, its management, owners or its affiliates.