December 7th, 2009
When the Talking Heads on television news say that our economic recovery in 2010 will be flat and protracted everyone nods their head…What would you say if I gave you a forecast that the US will exceed government growth projections by 100% ?
OK…it’s been suggested in the past that I was dropped one too many times as a baby…and that may be true…but this time I have substantial evidence from a leading economist that we’re in for a much stronger period of growth in 2010 than the media is forecasting.
Over the weekend there was a great article in the Wall Street Journal, by James Grant…including some historical information about recoveries from recessions that I had never seen before…and want to share with you. Mr. Grant is well respected in economic circles…and apparently, much better educated than most in the history of U.S. recessions, and the following recoveries.
I’ll leave the article for you to read…please do, it is one of the best written pieces I have seen for a long time…but here is the “Executive Summary”:
- Every past recession has been followed by a period of rapid expansion in the economy
- Low cost of money is fueling rapid stock market growth, and industrial investment
- Employment, and inventories are at historic lows…and consumption is increasing
All of this points to a fast climb out of the economic ditch we find ourselves in at the moment.
What does this mean for homeowners and home buyers during 2010?
If Mr. Grant is at all correct…and there are several other recent articles suggesting that last Spring was the “bottom of this present recession…we are already reaching the recovery phase. Historic lows in inventory and historic lows in the value of the dollar mean increasing factory orders and increasing employment.
We have seen home price increases in our local North San Diego County area for each of the past eight months….averaging over 1% for seven months in a row….think about that for a minute…seven months times one percent….Seven percent growth in price in less than 3/4 of a year!
Put that in perspective…what’s the best rate you can get on your money at a bank?…..Maybe 3%….housing is beating the pants off any investment you have at a bank…even counting the associated purchase costs…is this starting to sound familiar?
Always one to say “I told you so”…I can’t resist the temptation to do it again….and here’s the Good news…there are still lot so of opportunities out there right now…more than you can count…for investors or first time buyers. Existing homeowners….who have equity…are also starting to move to better locations, better schools, shorter commutes…and lower property tax situations.
Stay tuned for more information…I’ll be putting out several more posts in the next two weeks that should surprise you with news about short sale changes, local housing inventory numbers, and market situations that you just can’t find anywhere else!
Take Care
Tags: 2010, homeowners, North San Diego County, recession, recovery
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October 28th, 2009
This afternoon I took a look at the foreclosure and pre-foreclosure information in the San Diego County Assessor’s database….the numbers are almost unbelievable!
We hear stories about the ”Shadow Inventory” of foreclosures out there…the “Foreclosure Tsunami” waiting to break…unfortunately those stories may just be TRUE!
San Diego County is one of the locations you could call “Ground Zero” for foreclosures….and there is no other part of this town that is any harder hit than the Escondido area…and my home town…Valley Center…so I picked these zip codes to illustrate how things are changing in a hard-hit area.
These Charts are my own research…straight from the Assessor’s database…I pulled all of these numbers today…to calculate the monthly sales volume for each zip code I took the past three months worth of sold data for all housing types…and divided by three…pretty tricky eh?
Now…you have to promise me something…promise you will READ the comments below the charts…they are IMPORTANT…but won’t make sense without the chart data.
First…here is a comparison of homes in each local zip code that are in some stage of the foreclosure process…Escondido has four zip codes, 92025 through 92029…Valley Center is 92082:
The sheer number of present and upcoming foreclosures is staggering…More than 90% of these homes are going to hit the resale market…with a HUGE impact.
Let’s look at that in the context of the number of sales in an average month here…I took the past three months of sales and averaged that to a single-month average number of sales…and compared this “Shadow Inventory” to the present sales:
These Foreclosed or “about to be Foreclosed” homes represent on average OVER A YEAR of sales inventory!
Ask yourselves two questions:
- Do we think that unemployment is going to increase the number of foreclosures?
- How deep is the “Pool of Buyers” for these homes?
In the North San Diego County area we’re seeing over a 1% per month price appreciation for the average home…many first time buyers were again priced out of the market this fall
This data shows me that we should have downward pressure on prices at some point…and those folks need to be ready to STRIKE when the prices drop! It won’t happen a third time!
The elimination of Federal Mark-toMarket rules have allowed banks to hold LOTS of homes off the market…but how long can they keep that up?:
a.) Six more months
b.) Eight more months
c.) Twelve more months
d.) For Ever
If I get to grade this little test there will be no points given for “d” as the correct answer….
Just like the earlier bubble…what goes up will come down…right now bank inventories are up…OK…for now…but the savvy buyers will be READY when the inventories start to come down!
Hope this was helpful…if you ever have questions or referrals for Escondido or Valley Center I’m here to serve you!
Free search for homes anwyhere in San Diego County: www.bobdavisrealty.com No Signup Required…Free Home Value Tools…
For Detailed Info on North San Diego County, Valley Center, Escondido
Call or Email Bob Davis: 760-525-0123 bob@bobdavisrealty.com
CalDRE Lic.# 01719018
Tags: chart, escondido, Foreclosure, prices, San Diego County, shadow inventory, Valley Center
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October 1st, 2009
If you own a home in a rural area you should be asking yourself, “What plans do I have if there is a wildfire?”
My home is in a rural area…and as I’m writing this the Santa Ana winds are blowing like crazy…happens every year…and it never bothered me in the past…until we had the fires in 2007 and we had to evacuate…what a lesson that was!
We thought we were prepared…had most of the important things ready to pack when we went to bed the night before…but when the phone rang at 4:15 am with the reverse-911 call…and I looked out my front door and the air was full of smoke, falling ashes, and burning embers all of that “planning” seemed pretty weak!
That phone call touched off 15 minutes of running around…and the tension was as thick as the smoke…most of the important things made it into the cars…but we learned a lot during that evacuation and during the next week when we couldn’t get back home because of the evacuation orders.
You can’t even begin to describe how frustrating it is to need something and not be able to get to it because you can’t get back to your home (best case) or because it was destroyed… so I’d like you to think about four really important lessons we learned:
- Where are the animals? Our pets are family…when they smell smoke and see people panic they go into panic mode. Our friends lost two dogs that just ran off into the night…and were killed in the fire.
- Lesson #1…go out now and buy crates for the cats and dogs…if you can…keep them indoors when you are under a fire evacuation warning…and keep them on a leash at all times when outside…they panic and run off…and you can’t chase them with a fire at your door.
- Where are your valuable/non-replaceable photos and paperwork? What about checkbooks, bills that are due, passports, birth certificates, DD214’s, tax records?
- Lesson #2…now… in a non-panic time…make a list of your most important papers and buy a box (or two) for that stuff…when you are concerned pack it up and immediately put it in the trunk…two minutes saved now is an eternity in an evacuation. Think about computers too!
- What are you going to wear when you’re out of your home? Where are your toiletries? Medicines? Glasses/Contacts?
- Lesson #3…pack for a week…or even two…if you have to run out unexpectedly do what a friend did…take the laundry basket(it’s always full at my house) which is always close to the bathroom…throw everything from the bathroom sink into the basket and go…those are all the clothes you like to wear…it’s easy to find a place to wash the clothes and it takes no time to plan.
- Where are you going to stay? What will the kids do all day?
- Lesson #4…the minute you are safe and sound start calling the better local hotels/motels…especially if you have pets!!..the best ones fill up almost instantly…and no-one wants to stay in a creepy place. After the excitement wears off kids get bored fast…and trust me…you don’t want them watching Maury Povich…perhaps this is a good time to go to Disneyland…you have to stay in a hotel anyway…make it fun!
OK…I hope this helps…my favorite quote is, “Chance favors the prepared mind”…hope this helps you prepare!
Tags: evacuation planning, lessons learned, pets, rural area, santa ana winds, wildfire
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September 28th, 2009
When you hear three of the most influential members…or past members…of the U.S. financial establishment putting out the same talking points it’s time to sit up and take notice!!
Over this past weekend there was news that will affect home buyers and home owners that want to refinance.
Alan Greenspan started it all with a comment in a Bloomberg article that, “In the next two to three years, we are going to have serious problems.”
The next voice to join the chorus was Kevin Earsch, one of the Federal Reserve Governors. His statement was, “Prudent risk management suggests that policy will likely need to begin normalization before it is obvious that it is necessary, possibly with greater force than is customary.”
Take a CAREFUL note of the “Greater Force” comment….originally…before a revision…that was also attributed to Greenspan in the first Bloomberg article.
Finally, we get to Scott Alvarez, the Fed’s General Counsel, who warned that, “audits of monetary policy by the U.S. Congress could lead to higher interest rates and reduced confidence in central bank policy.”
Three different people…all important players at the Fed…all singing the same song…higher interest rates…and rate increases at a faster pace than we have seen in the past.
It should be pretty clear where we are headed!! Remember the “Greater Force” comment…my guess is we will be seeing a lot more of that one soon!!
So What Now…buyers or re-fi’s would be well advised to “get while the gettin’s good” …a one point increase in the rate for a $300K loan wipes out a $50K price reduction in less than 5 years of payments…and after that the higher interest rate gets ugly fast…something like an additional yearly cost of over $1500.
$1500 is a start on a nice vacation…now let me think…do I want to take a vacation…or make some bankers wealthy…Hmmmm…
Here are the links to these articles mentioned in this post:
http://www.bloomberg.com/apps/news?pid=20601013&sid=acVqrXjLdOP4
http://www.bloomberg.com/apps/news?pid=20601068&sid=a.mUYSOrA7kA
http://www.bloomberg.com/apps/news?pid=20601068&sid=adDANopNzewM
Tags: alan greenspan, buyers, Federal Reserve, higher interest rates, Kevin Earsch, loan, re-fi
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September 15th, 2009
Foreclosure activity dropped sharply in Silicon Valley last month, but it’s too soon to declare the housing crisis over, the expert who compiles the data cautioned. But at least some of the decline may be due to loan modifications worked out under an Obama administration program. Read the whole article
Tags: Foreclosure, mortgage, notice of default
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September 9th, 2009
If you’re one of the folks trying to buy a home in the San Diego area right now you may be feeling a little pressure…lots of other buyers and not many available homes…listings are sold in one or two days…but let’s step back a little and look at this from an outside perspective…and I think you’ll like the results!
The last time this fast-paced market was in full force was about 2003-2004…prices were above $500K for an average home…condos were in the $350K range…and all sorts of new and untried loan products were emerging just to allow the average person to squeak their way into a home.
Today we have nice homes in the $300K range…nice condos under $250K and starter condos just over $100K.
Affordability is at an all time high…and those questionable loan products are long gone…replaced by the tried-and-true fixed rate mortgages…and at rates that are still under 6%.
Yes, making ten or twenty offers before you get a contract accepted is trying…no doubt…but weigh that against the reward…a home that you can really afford with a payment that never increases!
And, to be fair to the sellers, right now they are enjoying the best market in the past three years.
Prices are down…but that means the home you move-up to is also a bargain. Sellers can expect to have ten to twenty offers to choose between…many with all-cash or great conventional loan terms attached.
Gone are the days of worrying about how long it would take to sell…and what happens if any particular buyer can’t perform…because there is always a line of folks right behind them eager for the chance to own a home.
Looking at this in perspective we have a healthy market, each side in a transaction is getting something they want, and the keyword here is sustainable.
The lenders are actually qualifying buyers based on income…what a novel concept!
Four years ago we all wondered how can this last?…and it couldn’t. Today we have a clear path to sustainable growth in prices…sustainable because once again loans are tied to income…limiting price growth to something approximating wage growth…and that is the time-honored recipe for stability and success in the Real Estate market!
Tags: affordability, buyers, home, lenders, San Diego, sellers, stability, sustainable
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