8 Experts Predict What The 2017 Housing Market Has In Store

8 Experts Predict What The 2017 Housing Market Has In Store

  • Mortgage rates are likely to continue to increase throughout 2017.
  • There will not be any easing in inventory, and affordability will still be a challenge in big markets.
  • The potential is there for a large number of first-time buyers to enter the buying market, but they will face new challenges.

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 BY CAREYBOT

It’s been one unprecedented 2016, between the Brexit vote, the continued persistence of low mortgage interest rates and an election that seemed to temporarily throw markets for a loop.

What will the 12 months encompassing 2017 hold in store for housing?

Inman asked eight different experts to give their take:

  • Steve Cook, editor of Real Estate Economy Watch
  • Doug Duncan, senior vice president and chief economist at Fannie Mae
  • Mark Fleming, chief economist at First American
  • Matthew Gardner, chief economist at Windermere
  • Svenja Gudell, chief economist at Zillow
  • Ralph McLaughlin, chief economist at Trulia
  • Rodney Ramcharan, director of research at University of Southern California’s Lusk for Real Estate
  • Jonathan Smoke, chief economist at realtor.com

Here’s what they told us.

Mortgage rates

Steve Cook

Steve Cook

We’ve been spoiled with historically low interest rates, which haven’t risen despite threats to do just that over the past few years. No more.

“The kind of rates we were getting earlier this year, down to 3.5 percent — those days are over,” said Cook.

Where will they go?

“We will likely still see volatility in mortgage rates over the next two, three, four months as [President-elect Donald] Trump unveils cabinet members and specific policies he wants,” said McLaughlin.

Svenja Gudell

Svenja Gudell

And the Federal Reserve is due to hike rates, too, which often puts pressure on mortgage rates one way or another. “I think in December we’ll see the Fed raising rates and we’ll see more Fed hikes in 2017, and with that, I wouldn’t be surprised if the 30-year fixed mortgage rate hits 4.75 percent,” said Gudell.

“I don’t believe we’ll see any pullback until after the inauguration, but even the best-case scenario suggests that the historically low rates that have been in place for the last few years are firmly in the rear-view mirror,” said Gardner. “My forecast is for the 30-year fixed rate to rise above 4.5 percent by year’s end, and worst case scenario, knock on the door of 5 percent.”

What does it mean?

Doug Duncan

Doug Duncan

Whether or not the rate increase will affect homebuyers(and especially first-time homebuyers) remains to be seen, but Duncan believes it’s at least partially contingent on income growth.

“If income growth picks up, then the rise in interest rates will affect refinancing, but not the home purchase activity. If incomes start to grow more strongly, it probably won’t affect buying as much as refinancing,” he said.

Rodney Ramcharan

Rodney Ramcharan

“Just looking at the pricing data in terms of interest rates, the spike in interest rates should definitely slow things down,” said Ramcharan.

Fleming said that if mortgage rates get closer to 5 percent by the end of 2017, he would expect home sales to decline by about 4 percent from First American’s original projection — or by about 200,000 sales.

At what point would rising mortgage rates start to significantly dampen buyer demand?

“When I’ve looked at this topic historically in the past, what you tended to see was an absolute level that the market reacted to, and in years past that absolute level was closer to 6.5 and 7 percent,” said Smoke.

“But there are plenty of people who believe that because we’ve had a decade of historically low rates that the new threshold for that might be in the mid 5’s or even as low as 5 percent. So if we see them jump more than we’re anticipating, getting into the 5s, then we start to run into that issue.”

A headshot of Jonathan Smoke

Jonathan Smoke

However, Smoke thinks that in the meantime, there’s a lot that buyers can do to mitigate the effects of rising rates, including looking for lower-priced homes, putting more money down or changing term lengths on a mortgage’s fixed-rate component.

“If Trump goes ahead with his infrastructure plan, which is probably a smart thing to do and a no-brainer as far as Congress is concerned, it will stimulate the economy and probably increase pressure on rates,” added Cook.

Inventory

Housing inventory — or the lack thereof — was a big deal in 2016, and it will continue to be a problem next year, experts believe.

“Historically, you’d want to be much closer to a million homes built or sold, and we’re roughly at half of that, so I don’t think builders are going to have an easy time magically ramping up,” said Gudell.

Inventory will likely fluctuate by market and price point, too. “For people at high ends and expensive properties you may very well see a surge, and the expectation is that tax cuts will come,” said Ramcharan. “Prior to Trump being President-elect, there was a slowdown at the top end.”

How mortgage rates will influence inventory

Because most housing inventory comes from the existing market (as opposed to new construction), what potential sellers decide do in 2017 will have an impact on the market as a whole — and rising mortgage rates might not be great for sales.

Mark Fleming

Mark Fleming

“We’ve had effectively a 30-year tailwind run of declining mortgage rates,” said Fleming. “At this point in time, maybe they go up or down a little bit, but the long-term trend over the past 30 years has been lower and lower and lower mortgage rates.”

Consequently, existing homeowners with low mortgage interest rates might not be able to afford to move into a bigger house if it also comes with a higher rate.

“How do we address the fact that the existing homeowner, the largest single source of housing supply, has a built-in financial disincentive to make that supply move?” asked Fleming. “You’re making that decision to supply as a function of what you can afford to buy, but all else held equal, because you lose that low rate and have to get a new mortgage at a higher rate, you might not be able to buy your own home back from yourself without an increased monthly payment.”

Where’s the entry-level housing?

“The thing that’s missing is entry-level housing available for sale, but also, all of the apartment-building that is going on is all class A properties, which is the most expensive — no one is building class C properties,” said Duncan.

Sellers unwilling to budge

“Household psychology has affected people; they’re willing to take less risk than they were in the past,” said Duncan. “You can see that in the remodeling data. People are staying in place and remodeling their existing homes with a higher probability than in the past.”

“The median tenure in homes is at an all-time high,” noted Jonathan Smoke. “Part of [that] is … the reasons people are purchasing tie into life events.

“Where this can be particularly important is with retiring baby boomers,” he added. “There’s a cohort of baby boomers who might think it’s in their best interest to stay put and make improvements so they can age in place.”

Affordability

A basic economics lesson: When inventory (supply) is thin on the ground, and demand is unchanged, you can expect prices to go up.

“Home construction is at full tilt and it’s still not filling the bill, particularly affordable housing,” noted Cook. “The average price of a new home is increasing still; we’re not serving the mid to lower-tier market with new home construction. So you’re not going to see much relief in affordability.”

Mortgage rates and ability to buy

“If you’re located in San Francisco, Los Angeles, Seattle, New York or Miami, rising mortgage rates might very well have an impact on you because you’re already stretching your budget as it is to get into a home that you can barely afford at historically low mortgage rates,” Gudell added. “In these places where affordability is already an issue, seeing these small bumps will already have a slight dampening effect, and we’ll see that effect not on all buyers but specifically first-time homebuyers or lower income folks.

“People who are repeat buyers or buying higher-end homes won’t feel it so much.”

The big picture

Headshot of Ralph McLaughlin

Ralph McLaughlin

“We still think affordability is going to be a challenge in some of the largest markets in the U.S. — L.A., the San Francisco Bay Area, the Pacific Northwest — but that said, the U.S. is still a very affordable place to buy a home,” said McLaughlin.

“Outside the big metros, things look pretty rosy for homebuyers. In many places, buyers wouldn’t have to spend more than 20 percent of their income to buy a home.

“In some of the unaffordable markets, we may see pressures alleviate somewhat, but at the same time, nationally we are starting to see wages pick up, and we think that benefits those on the lower income distribution more than middle or upper income.”

Still, “we are going to have to see many months or even years of solid wage gains to make up for price gains,” he added.

“In general, home values will slow their climb next year,” said Gudell. “Currently we’re looking at 6-percent-ish annual appreciation; next year it’ll probably be half that, so a little bit of relaxation there, which will also feed into being more of a buyer’s market by the time we reached 2018.”

Millennial and first-time buyer trends

The biggest pool of potential homebuyers didn’t make huge strides toward homeownership in 2016 — so what will millennials be doing in 2017?

“Our surveys of the prime first-time homebuying age people suggests a very high, 90 percent-plus, want to eventually own a home,” said Duncan.

“What has tended to be the case is that they’re saying ‘just not right now,’ and that’s driven by the fact that their incomes haven’t risen as far as they need to and they’ve delayed getting married and having a baby relative to prior groups at this age point.”

Duncan added that he thinks we might be at the bottom of the decline in the homeownership rate.

“Builders are seeing millennials, whose first home they are purchasing used to be the first move-up home, sort of leapfrogging that entry-level, and part of that may be there simply isn’t sufficient supply of the starter homes; they’ve just delayed buying until they could get the house that they wanted, the more midsized or first move-up house.”

A headshot of Matthew Gardner

Matthew Gardner

And Gardner thinks there is big potential for first-time buyers in 2017.

“Although we have seen modest improvement in this buyer sector, I believe that the possibility of continued interest rate increases, in concert with a tightening labor market, will get many would-be buyers off the fence and into homeownership.”

Wild cards

What else should agents and brokers be on the lookout for in 2017?

“You’re not going to see any new government incentives to first-time buyers,” said Cook. “You’re not going to see an additional reduction in the mortgage insurance premium for FHA loans. That’s not the kind of thing the new administration wants to do.

“On the other hand, a reduction in regulation is going to make it easier for lenders to be more creative; you’ll probably see more innovation in mortgage lending. I think nonbanks will thrive in this environment,” he added.

Interest from first-time buyers and changes in mortgage rates mean that agents and brokers might have to deal with some new challenges, too.

“The potential is there for the market to have the most first-time buyers, certainly on an absolute volume basis but also on a shared transactions perspective,” said Smoke.

“For the industry, this is the biggest shift we need to be able to contend with because it likely means elongated length of time that people are spending in that journey, especially the first-time buyer, but it potentially also means higher cancellation rates and lower conversion rates.

“You’re going to have more challenges with people contending with needing to qualify for and buy a home in the environment we’re in now instead of in the environment we were in the last two years,” he concluded.

“I see prices at the median perhaps not growing as fast but prices at the top end are likely to boom,” said Ramcharan. “If a Trump Presidency entails greater inflation or risk, high-end homes are a great hedge against inflation and risk, so for people at the top end, I see that there’s a natural tendency now to shift the wealth away from equity markets into high-end homes.”

Who’s able to buy a home is also going to change (slightly), as is where they are looking. “The homeownership rate will grow, and they’ll be less white and a little younger,” said Gudell. “Unfortunately, I think all of us will be spending more time in the car as more people have to look for more housing outside the city center as homes become much more expensive in the urban area,” she added.

And how big is the threat of reliving another 2008-like slump?

“It’s been close to seven years since we had a recession,” noted McLaughlin, “and they tend to move in 7-to-10 year cycles; if it’s not next year then the chances go up. There aren’t any signs yet that that is imminent; there are a lot of signs that suggest otherwise, but there are a lot of wild cards at this point that both buyers, sellers and agents need to be aware of.”

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Study Shows Real Estate Leaders’ Outlook for Housing, Economy Softens for 2017 – EIN News

Study Shows Real Estate Leaders' Outlook for Housing, Economy Softens for 2017 - EIN News

BELLEVUE, WA--(Marketwired - Dec 7, 2016) - Top real estate executives' confidence in the U.S. economy and housing market for 2017 has softened compared to two years ago, and 42% have grown less confident in the world economy since January, according to the latest Imprev Thought Leader Real Estate Confidence study.

"Real Estate leaders are clearly less bullish about the coming year than they were two years ago," says Renwick Congdon, Chief Executive Officer of Imprev, a top provider of automated marketing services for real estate. "In fact, confidence for 2017 is lower across nearly all questions related to housing and the economy."

"When we compare past studies, an interesting trend emerges: Executives and broker-owners are less confident in the global economy and far more confident in their local economies at the end of each year than they were at the beginning. In fact, their confidence grows stronger the closer the economy is to home," Congdon explains. "This year, while only 4% of leaders say their confidence in the world economy has grown this year, 35% say their confidence in their own local economy has grown; while 13% have gained confidence in the U.S. economy, 26% have more confidence in their own state's economy."

[Chart 1]

Respondents included nearly 240 broker-owners and top executives at leading franchises and independent brokerage firms, making Imprev's study one of the most comprehensive in real estate. This group was responsible for more than half of all U.S. residential real estate transactions last year.

Study key findings:

  • 2015 vs. 2017 U.S. Economic Outlook - Real estate leaders are split in their view of the economic outlook for 2017: 30% think it will improve and 23% think it will deteriorate. 44% think the U.S. economy will stay the same, while 2% think it will "improve significantly" and 1% believe it will "deteriorate significantly." One Midwest broker owner noted he's most concerned with "keeping agents productive no matter what the economy does." Looking back at Imprev's 2014 study responses, this year's outlook is less hopeful. In 2014, 45% of study participants said they thought the U.S. economy would improve (compared to this year's 30%). This year, the number of executives who believe the U.S. economy will deteriorate next year more than doubled, moving from 9% in 2014 to 23%. One Southwestern broker owner shared his negative view bluntly: "It's the economy, stupid," he commented.

  • 2015 vs. 2017 Housing Demand Outlook: Leaders are less bullish on housing next year compared to their outlook for 2015. Nearly half (47%) of study participants thought housing demand would improve in 2015, and now just over one-third (35%) think housing demand will improve in 2017. The number of those who think housing demand will deteriorate in 2017 has doubled to 13% from 6% for the outlook for housing demand in 2015.
  • 2015 vs. 2017 Housing Market Confidence: Overall, the vast majority (74%) of real estate executives and broker-owners are "somewhat confident" in the housing market for 2017. That's down from 79% from the Imprev study two years ago. While 5% of leaders are "not at all confident" in the housing market in 2017 -- up from 3% in 2015 -- 21% are "very confident" in the housing market for next year, and that's also up from 18% in 2015. A broker owner of a major franchise office pointed to three reasons for his tempered enthusiasm: "Low inventory, slow development and a lack of new home construction."
  • 2015 vs. 2017 Brokerage Profitability Confidence: Two years ago, 43% of real estate leaders responded that they were "very confident" that their brokerage business would be more profitable in 2015. But the percentage of those who are very confident in greater profitability has fallen to 39% for 2017. A larger regional broker owner, who runs an office of more than 1,000 agents, identifies rising costs as a major concern. "It's about expenses versus shrinking profits," she said. Moreover, 12% of real estate leaders said they are "not at all confident" that their brokerage business will be more profitable next year, more than double the percentage -- 5% -- from two years ago. 
  • Agents may be getting younger, but leadership average age is getting older: Despite the agent population getting younger (average age of a Realtor is 53 years old in the latest NAR study, down from 57 years old in 2014), the leadership population in real estate is getting older: In the 2014 Imprev study, 88% of broker-owners and executives were over 40 years old. In this new study, 92% are over 40 years old, while more than 36% are over the age of 60 (up from 2014's 32%). A move towards younger agents is creating other challenges for brokerages. A Minneapolis and St. Paul broker owner wrote, "While recruiting younger, less experienced agents has improved for us this year, we've noticed increased difficulty in recruiting the top talent." The owner of a boutique brokerage in Southern California added her biggest challenge in 2017 is "developing managerial depth."

The annual Imprev Thought Leader Real Estate Confidence Survey, which debuted in 2012, was developed by Imprev to provide insight on key business challenges top executives face, encouraging an exchange of ideas and solutions among industry thought leaders.

The study was conducted from October 18 to November 1, 2016. 15% of the respondents represented firms with more than 1,000 agents; 17% represent firms with 501 to 1,000 agents; 42% represent firms with 101 to 500 agents; and 26% represent firms with 100 agents or fewer.

Demographically, 69% of the participants are male, 31% are female. More than one-third (36%) are 61 years old or older, 32% are ages 51 to 60, 23% are ages 41 to 50, 8% are ages 31 to 40, and 1% are under the age of 30.

About Imprev
Imprev, Inc. powers Automated Marketing Services, including Marketing Centers and Listing Automation, for many of the largest brands in real estate, enabling them to deliver powerful marketing technologies and services to their agent communities. Built for brokers and designed for agents, Imprev products empower agents to effortlessly market their listings, their brokerages, and themselves by providing custom digital, print, and social media marketing -- in one consolidated platform. Established in 2000, Imprev is headquartered in Bellevue, Washington. Discover more at www.imprev.com.

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News media contact: 
Kevin Hawkins, for Imprev, Inc. 
206-866-1220
Email Contact

How Fed rate changes affect home buyers

How Fed rate changes affect home buyers - The Boston Globe

All signs point to an interest rate hike by the Federal Reserve, and soon, so how will that affect a buyer’s chances of getting a loan?

The Federal Reserve, “the Fed,” is the central bank of the United States. Founded in 1913, the Fed’s responsibilities fall into four general areas:

 Supervising banks and financial institutions to ensure the safety of the nation’s banking and financial system;

 Influencing the nation’s monetary policy by setting short-term interest rates based on recent economic data;

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 Maintaining the stability of the financial system and containing risk that may arise in financial markets;

 

 Providing certain financial services to the US government and financial institutions and foreign official institutions and playing a major role in operating and overseeing our nation’s payment systems.

The decision-making arm of the Fed is the Federal Open Market Committee. The committee consists of 12 members. They meet eight times a year to review current market conditions and decide to lower or raise short-term interest rates, buy or sell Treasury securities, or provide cash to banks in a financial crisis. All of these can affect interest rates and credit conditions.

 

Buying, selling Treasury bonds

 

One process the Fed uses to influence rates is called “open-market operations,” or the buying and selling of US Treasury bonds. Treasury bonds are how the nation borrows cash to fund government operations. When the Fed buys these Treasury bonds from individual banks, it increases the banks’ excess cash reserves.

Excess reserves are a waste — the money is just sitting there, not earning interest — so banks are incentivized to lend it. That means less expensive borrowing and lower interest rates for everyone. Specifically, the interest rate affected most immediately is the federal funds rate, charged when banks lend to one another.

On any given day, some banks may need to raise money on a short-term basis — if, for example, they have fallen below their cash-reserve requirement or need to raise money to make a loan to a corporate customer. So one bank will lend money to another bank, charging the federal funds rate, and that rate will be higher or lower depending on how much excess reserves are in the system.

 

Federal funds rate, mortgage rates

 

The federal funds rate has less of a direct effect on mortgage rates, which are longer term and driven more by supply and demand in the mortgage market. But the Fed’s interest rate decisions and other actions can move mortgage rates. Mortgages are often packaged into securities that are bought by investors. The Fed can influence demand in that market by purchasing those securities. However, a number of increases in the federal funds rate could send mortgage and other longer-term rates higher. This is important because the rate that banks charge one another is their “cost of funds”; when their cost of funds is low, the interest rates they can charge consumers are lower.

Generally, the interest rate on a home loan follows the rate of 10-year Treasury bonds. The Fed had been buying these bonds since 2007, when they introduced the “Quantitative Easing” effort, which involved purchasing hundreds of billions of dollars in mortgage-backed securities and Treasury bonds. That helped to bring down mortgage rates after the housing crisis.

When the Fed or any investor buys more bonds then expected or available, then demand is high and the price is low. This drives down the cost of the bonds. The Fed can drive short-term interest rates down through cost of funds and long-term rates through buying Treasuries. The price of Treasury bonds is driven by the market’s inflation expectations. If investors believe inflation will increase, then the price of Treasury bonds will rise. On the other hand, if they believe inflation will decrease, then the price of Treasury bonds will fall. If the rate on Treasury bonds moves up or down, you will generally see interest rates on home loans follow.

 

How does this affect you?

 

High interest rates make borrowing more expensive, so you end up paying more for home and car loans. On the other hand, your savings and money market accounts will earn higher interest. When interest rates are kept low, the opposite occurs. People earn lower interest on savings, but they can more easily borrow money.

Rates can and do change every day. Luckily for you, there are financial mechanisms in place that allow home loan officers to quote you a rate and honor it when it comes time for you to close. If you are thinking of buying a home, you should check with your local licensed lending officer to lock it in while the rates are still low.

Freddie Mac: Market response to higher rates will be negative

Freddie Mac: Market response to higher rates will be negative | 2016-12-02 | HousingWire

November’s sudden spike in interest rates could have negative consequences for the housing market in 2017, according to Freddie Mac’s monthly Outlook.

If President-elect Donald Trump passes a fiscal stimulus plan in early 2017 which includes infrastructure spending and tax cuts, it could bring higher real economic growth. The downside, however, will be that this growth could be partially offset by a rise in interest rates, according to the report.

“Much like in 2013, we expect housing markets to respond negatively to higher mortgage rates -- they will drive down homebuyer affordability, dampen demand and weaken home sales, soften house price growth, and slow the growth in new home construction,” Freddie Mac Chief Economist Sean Becketti said. “And mortgage market activity will be significantly reduced by higher mortgage rates, especially refinance originations, which are likely to be cut in half.”

However, the economy is still expected to have a better year in 2017 with growth of 1.9% year-over-year. Freddie Mac expects 2017 to end with unemployment at 4.7%, and says this year’s slower hiring rate is due to the market being at full employment.

At this point, the market is 100% sure that it will see a rate hike in December, and experts speculate over how many rate hikes will occur next year. Freddie Mac estimates that the 30-year fixed rate mortgage will hover at just over 4% at the end of 2017.

However, it stated that this increased interest rate could slow the pace of housing starts to about 1.26 million, and will decrease total home sales by 220,000 units. Through all of this, Freddie Mac predicts that home prices will continue to increase, hitting a pace of 4.7% in 2017.

Bay Area missing from ‘hottest markets’ in 2017 housing forecast

Bay Area missing from 'hottest markets' in 2017 housing forecast

Where’s San Francisco? Where’s San Jose?

Realtor.com’s 2017 housing forecast rubs a crystal ball to predict the nation’s 100 top markets — and if you’re used to seeing the Bay Area at the top of “hot” housing lists, this new set of rankings may surprise you. The San Francisco-Oakland-Hayward metro sits in the 37th position for 2017, while the San Jose-Sunnyvale-Santa Clara metro occupies the 39th spot.

Why so low?

The rankings are based on the projected price appreciation for each given market as well as its volume of sales. And while San Francisco and San Jose do well in the price category, with projected housing appreciation of 8.41 percent and 8.26 percent, respectively, sales activity looks dismal. The two metros are expected to barely eke out sales increases next year: The number of homes sold are expected to go up just 1.17 percent in San Francisco and 1.26 percent in San Jose.

Compare that to Arizona’s Phoenix-Mesa-Scottsdale metro, ranked No. 1 for 2017 — it will show a healthy mix of appreciation (up 5.94 percent) and sales (up 7.24 percent), according to the forecast. The extended Bay Area boasts just one metro in the Top 10 markets: Sacramento, where realtor.com projects price increases of 7.18 percent, along with sales increases of 4.92 percent.

While the Bay Area is otherwise shut out, five of the Top 10 markets are on the West Coast: Los Angeles-Long Beach-Anaheim (No. 2 on the list); Sacramento-Roseville-Arden-Arcade (No. 4); Riverside-San Bernardino-Ontario (No. 5); Tucson, Arizona (No. 9); and the Portland-Vancouver-Hillsboro metro in Oregon and Washington state.

Jonathan Smoke, realtor.com’s chief economist, projects that the national market will moderate in the next year, with median prices rising 3.9 percent and existing home sales increasing just 1.9 percent. Tight inventory, it seems, is a national problem.

Smoke also predicts that the post-election uptick in mortgage rates “may price some first-timers out of the market.”

Yet he and the rest of the data team at realtor.com forecast that millennials (at 33 percent) will dominate the 2017 pool of buyers, with baby boomers (at 30 percent) close behind. And the team sees millennial buyers flocking to Midwestern “hotbeds,” including Madison, Wisconsin; Columbus, Ohio; Omaha, Nebraska; Des Moines, Iowa; and Minneapolis.

Bay Area housing market shows signs of cooling

Bay Area housing market shows signs of cooling

Repeat, repeat, repeat: The Bay Area housing market is showing definite signs of cooling.

That message — heard again and again in recent weeks — is amplified once more by a report from the California Association of Realtors, showing pending sales across the region down 11.6 percent in October on a year-over-year basis.

“Prices have risen to a point where they’re starting to eat into demand,” said Jordan Levine, an economist for C.A.R.

The report shows pending sales for October were down year-over-year in San Francisco by 21.2 percent, in Santa Clara County by 12.5 percent, and in San Mateo County by 5.0 percent. The report does not break out numbers for Alameda and Contra Costa counties.

But given the dramatic size of the regional decline, Levine said, “You can extrapolate that this is something we’re seeing in the East Bay, as well. It’s not just a San Francisco and Santa Clara phenomenon.”

The report also says that multiple offers are down across the state — for the seventh consecutive month. In October, 59 percent of California properties received multiple offers, down from 63 percent in September and from 64 percent in October 2015.

Again, Levine emphasized that buyers are suffering from sticker shock and therefore feeling less competitive.

“It’s a question of finding the funds you need for a down payment,” he said. “When prices get to the levels that we’re seeing, you’re still having to come up with a pretty decent down payment — even if you’re a first-time home buyer getting an FHA loan for 3.5 percent down.”

Levine did some quick math: In Alameda County, where the median price of a single-family home is $780,000, that FHA loan would translate to “more than $27,000 cash you’ve got to put down, not counting other closing costs …” he said.

“I just think that affordability is becoming an issue on the demand side. A lot of folks will be challenged to get into home ownership.”

Real estate tracking firm CoreLogic’s next county-by-county analysis of the Bay Area market is scheduled for release Wednesday.

Bay Area real estate market cooling off, new report indicates

Bay Area real estate market cooling off, new report indicates – Silicon Valley

A new report confirms what many have been saying for several months now: The residential real estate market is losing steam around the Bay Area.

Sales are sluggish and the rate of price appreciation should continue to decelerate in 2017, according to the PropertyRadar information service.

“Prices can continue to skate higher for a while, but at some point you run out of people willing to pay, and prices correct,” said Madeline Schnapp, the Truckee-based firm’s director of economic research.

Looking at the first nine months of 2016, the report shows a 10.3 percent year-over-year decline in sales across the region. Broken down by county, the number of single-family homes and condominiums sold fell by 11.3 percent in Alameda County, 10.1 percent in Santa Clara County, 9.1 percent in San Mateo County and 8.2 percent in Contra Costa County. And in San Francisco, sales tumbled 13 percent.

Even in the inland counties — heretofore a safety valve for buyers seeking affordability — sales were lackluster. Sales activity fell by 9.4 percent in Napa County and 2.4 percent in Sonoma County, while Solano County sales sneaked up by just 1 percent.

Ironically, it is a sign of economic health — the diminishing number of foreclosures and distressed properties — that is contributing to the market’s slowing. According to the report, distressed property sales — down 35.7 percent on a year-over-year basis for the first nine months of 2016 — have declined so dramatically that they now are a drag on overall sales through the region.

When the Bay Area was in the throes of recession early in 2009, distressed property sales — “short sales” of underwater properties and sales of foreclosed properties — accounted for an astonishing 69.1 percent of all sales in the region. In the first nine months of 2016, distressed sales accounted for only 8 percent of total sales.

Because most distressed properties sell for $500,000 or less, their diminishing numbers contribute to the shrinking supply of affordable homes. During the first nine months of 2016, sales of homes priced at $500,000 or less fell 26.7 percent on a year-over-year basis throughout the region, while sales of distressed properties in that same price category fell 45.7 percent.

Here’s the upshot. An increasing number of buyers who can’t qualify for, say, a $780,000 house — which in September was the median price of a single-family house in the Bay Area — are left without many options. County by county, these were the September median prices, as charted by PropertyRadar: $505,000 in Contra Costa; $730,000 in Alameda; $950,750 in Santa Clara; $1.137 million in Marin; and $1.18 million in both San Francisco and San Mateo.

Realtors react to new conforming loan limits for 2017

Morning Briefing: Realtors react to new conforming loan limits for 2017

Realtors react to new conforming loan limits for 2017
The announcement by the FHFA that it’s increasing the 2017 conforming loan limits for mortgages acquired by Fannie Mae and Freddie Mac has been welcomed by real estate agents.

The new limits of $424,100 on one-unit properties and a cap of $636,150 in high-cost areas are up from $417,000 and $625,500 respectively.

California Association of Realtors’ president Geoff McIntosh says that the raised limits will benefit thousands of Californians the chance to become homeowners and give stability to the market.

“The FHFA recognizes that home prices have recovered, not just in California but also across the nation. Many higher-priced areas of the state will benefit greatly from the higher limit,” McIntosh said.

San Jose eases rules to build granny units to increase housing stock

San Jose eases rules to build granny units to increase housing stock

SAN JOSE — The Bay Area’s largest city has taken steps to ease restrictions on building in-law units, a plan city leaders say will help deal with skyrocketing rents and homelessness in Silicon Valley.

“We need housing at all different levels. People who work in Silicon Valley can’t find a place to live,” said Vice Mayor Rose Herrera, who spearheaded the effort to relax city policies, a change approved by the City Council last week. “This doesn’t take taxpayer money and it empowers people by allowing single family homes to be part of the solution.”

 

The changes, approved by the City Council last week, will help residents including Michael Lerner who’s building a tiny cottage in his backyard for his 20-year-old son.

 

“Many millennials are not ready to push out into the world,” said Lerner, 54, who owns a home repair business. “It’s an investment. This will provide my son a way to live off of the property after I’m gone by (him) being able to rent out the front while living in the back.”

The 10-by-12-foot home Lerner started building six months ago meets current building requirements. But city officials estimate that there are as many as 2,721 illegal secondary units in San Jose neighborhoods, not all of them up to code. The city issued just 13 permits for secondary units last year.

New state legislation signed by Gov. Jerry Brown in September coupled with changes approved by San Jose leaders will soon make it easier for people to build these accessory units — often called “granny units” — on their properties. Herrera says the in-law units will play a vital role in solving Silicon Valley’s affordable housing crisis.

The city joins several other Bay Area cities, including Mountain View and Redwood City, in easing restrictions on in-law units. Palo Alto and Los Altos are considering similar ordinances. San Jose is also weighing a possible amnesty for illegally built units.

Secondary units, including backyard cottages and some studio apartments, are typically more affordable than market-rate rentals because of their smaller size and use of existing land.

 

Single-family homes are the most common type of housing in San Jose with more than 173,200 units. According to the Bay Area Council, if just 10 percent of Santa Clara County homeowners built a second unit, it could add more than 34,000 units to the housing stock.

City leaders are making it less cumbersome to build by allowing secondary units on smaller lots, loosening design requirements, reducing setbacks and relaxing required parking requirements. The changes go into effect Jan. 1.

Many changes were spurred by Senate Bill 1069, authored by Sen. Bob Wieckowski, D-Fremont, which made the units easier and less expensive to build throughout the state. The law, which also goes into effect Jan. 1, speeds up permitting processes and eliminates or reduces parking requirements and utility hook-up fees.

Wieckowski said that few of these units were being built a few years ago, largely because of the high amount of fees homeowners had to pay.  The cost of building secondary units, including obtaining city building permits, can range from $8,000 to $15,000.

“It’s the biggest thing that’s happened in 15 years to relieve some of these barriers and return that power to the homeowner,” Wieckowski said.

The League of California Cities and the California State Association of Counties opposed Wieckowski’s bill, arguing that it took away cities’ power to regulate these units and could hinder a neighborhood’s character.

Lerner’s backyard cottage — which will cost $10,000 when it’s done — means his son can move out of the family’s 3-bedroom house into the backyard unit. Lerner, who lost his high-tech job when the economy tanked, plans to rent his son’s room for $650 a month — providing extra income for the family and an affordable room for a struggling renter.

The handyman said he’s happy to see City Hall cut through some of the red tape, though he’s still grappling with complaints from a neighbor who’s unhappy about the unit’s windows facing her yard. He plans to address her concern by planting trees.

Though it’s a complaint-driven system, San Jose residents with illegal granny units can be fined up to $2,500 per day per violation after multiple warnings. That’s why Herrera also suggests an amnesty program to forgive those who built illegal structures and help bring them up to code.

“If people try to do it in the shadow, sometimes you end up with things that are not safe,” Herrera said. “We want to make sure they are constructed properly and safe for people to live in them.”

Numerous cities across the U.S. have used granny units to increase housing supply and stabilize skyrocketing rents, but experts say they also can help elders age at home.

“With the changing demographics, it helps aging family members to downsize into a unit and live with their children,” said Andrew Aurand, vice president for research at the National Low Income Housing Coalition in Washington, D.C. “In high-cost markets, anything is a help in terms of development.”


Changes to San Jose’s zoning code, effective Jan. 1

  • Homeowners in two-family neighborhoods can build one secondary unit.
  • Instead of requiring 6,000 to 8,000 square feet of land for granny units, homeowners only need 5,445 square feet.
  • Size of granny units increases from a maximum of 700 square feet to 800 square feet.
  • Homeowners can now build studio apartments as secondary units.
  • Materials used to construct the secondary units can be similar to those used on their main house.
  • Allow uncovered parking for a granny unit to be on the driveway.
  • In certain cases, eliminate parking requirements, as per SB 1069.

Home Listing Power Words That Will Help You Sell Faster (and Some That Won’t)

Home Listing Power Words That Will Help You Sell Faster (and Some That Won't) | Realtor.com®

Your listing details are more than a simple description of your house. They’re the key words and phrases that can help your home fly off the market in a weekend’s time—or keep it sitting there like a lonely kid waiting for a dance on prom night.

Don’t just take our word for it. CoreLogic researchers analyzed listing details of over one million sales in 2016, dissecting which words had positive and negative effects on the property’s duration on the market.

Want to make sure you’re marketing your home with all the right buzzwords to sell faster and for more money? Read on.

Little phrases with a big impact

First, let’s start with what you’re all dying to know. The listing phrases that boosted home sales the most were “fenced backyard,” “open concept,” “natural light,” and “updated kitchen”—so if your home has these features but your listing doesn’t reflect it, add them in! 

On the flip side, phrases such as “gourmet kitchen,” “ceramic tile,” “golf course,” and even “custom built” led to more time on the market. This sounds counterintuitive at first, right? But researchers say these words can indicate expensive homes, which may have less demand than lower-priced, more affordable homes.

Don’t show your hand

While the CoreLogic study is the most recent of its type, it’s not the first one to study power words and phrases. Another study conducted between 1997 and 2000 on 20,000 Canadian listings found that words such as “beautiful,” “move-in condition,” and “landscaping” helped sell property. Words such as “good value,” “motivated,” and “must sell” meant more time on the market and less money. Desperation words!

“You’re sending the message [to buyers] to negotiate down,” says Harriet Reynolds, a Realtor® with Gardner Realtors in Metairie, LA. “I usually say, ‘Come and see this beauty and make an offer’ or something like that. But if we’re really in a bind, we might use them.”

“These phrases do tend to bring out the buyer that is only looking for the deal and will lowball you,” adds David Fry, Realtor and co-owner of The Fry Group in Vadnais Heights, MN. “The flip side of that argument: The idea is to get buyers into the home and fall in love with it. In a market with a strong amount of inventory, it can be a way to get attention.”

The key takeaway? Ask your Realtor if those negotiation-ready words are a good idea. If in doubt, steer clear.

Renovated? Mean it

The terms “well-maintained” and “renovated” can have a positive impact on a listing. But don’t throw them around casually.

Let’s get real: Slapping on a new granite countertop doesn’t quite qualify as a “renovated kitchen,” Reynolds says, and she advises sellers to use the term only if they’ve included new appliances and cabinets. If they’ve done just a few cosmetic updates, stick to the phrase “updated kitchen.” Likewise, use “well-maintained” instead of “renovated” if you haven’t put in some serious work.

“If I see ‘completely renovated,’ my head would tell me that the home was gutted and there was all new everything,” says Chastin Miles, a Realtor with Rogers Healy and Associates in Dallas. “But in actuality, too many agents will put that and simply mean new carpet and new paint.”

And that can be a big turnoff for potential buyers.

“If you give an inaccurate description or oversell your description of the home, you’ll lose the buyer the minute they walk in the door,” Fry says.

Don’t embellish your home’s condition

“’Excellent condition’ means it needs to have updated everything,” Reynolds says. “I went into a house labeled as ‘excellent,’ and there was rotten wood on the structure on the back porch. You’d be surprised how often that happens.”

Keep your agent in the know of any details you can’t see—like if the home might need some plumbing work or foundation work. If it does, it’s not in “pristine” or “excellent condition.”

“An agent sometimes will take a home that is decorated or staged nicely and say it’s in excellent condition,” Miles says. “Most times they don’t even know about issues because they don’t ask the right questions.”

Why does it matter? A home inspector will suss out those flaws, which will almost assuredly affect your profits from the sale, and prolong its time on the market while you and the buyer start a new round of negotiations. Don’t hide your home’s flaws—own up to them.

“If buyers are expecting imperfections, they will generally look past them if they are warned ahead of time,” Fry says.

Leave out useless words

While you can write your listing, it’s still best to let your Realtor do it—she has the know-how.

“A Realtor is familiar with the market and the lingo,” Miles explains.

Of course, it’s your house—you can influence as much of the listing as you like. But your agent should ask enough questions to get a seriously thorough picture of your home, Miles says. So give her as much information as you can, and highlight the positives.

Just make sure to leave out excessive words. Phrases such as “spacious,” “large,” and “must see” can become useless due to their ubiquity, Miles says.

“Let the description tell about any special features in the home, anything important that buyers want to know,” he says. “To me, that’s a more effective listing description than just fluff.”

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What do you think? Did we miss out on any buzzwords that might get you to check out a listing? Chime in on the discussion on House Talk.