Maurie McGuire
California’s Changing Real Estate Landscape
Sellers push up list prices & Buyers compete with multiple offers –
The National Association of Realtors said existing homes sales in June rose to an eight year high. Overall sales on the south coast of Santa Barbara rose 16% year over year. Leaving the median price essentially unchanged at $1,125,000, substantially higher than the 2012 low median price of $797,000. The experts at Realtor.com see “no evidence at this time” of the speculation that drove the last real estate boom and bust. This market is driven they say, by tight supply and high demand, and with conservative lending practices helping to keep it balanced with financially qualified buyers.
With rising prices we expect to see more existing homes coming on to the market. As home owner’s equity position’s improve this will enable more people to sell their homes and free up existing inventory to meet current demands.
We are also seeing more first-time buyers especially in the under $1million price range; they currently make up approximately 30% of the market. Tight credit markets have made FHA financing more popular with this group, accounting for 22% of all condo and home purchases in the first half of 2015 according to Realty Trac, a real estate data provider.
The housing market in parts of California has become volatile, sellers are pushing up list prices and buyers often find themselves competing for homes with multiple offers. It’s a fast moving market but it comes with complications. Both sides of the transaction should understand the new financial and appraisal rules, inspection issues and how these will influence the outcome of a sale. If you’re in a high demand market, you’ll also want to know how to manage multiple offers.
Government loans like FHA or VA may take longer and require more patience from everyone involved. Plan on a 45 to 60-day escrow for a buyer with FHA financing, as opposed to 30 to 45 days from a conventional lender. With all lenders, once an offer has been made and accepted, the lending bank will require an appraisal. This process has changed dramatically in the wake of the last real estate boom in the early 90’s and bust in 2008 resulting in the implementation of the Dodd-Frank Bill. To avoid “undue influences”, appraisers are now randomly assigned by an appraisal service from a lenders’ approved pool, and they may not be familiar with the local market.
This new process has it’s challenges when an appraiser unfamiliar with the area is called to appraise a property outside their area of expertise. Imagine an appraiser from Ventura, Santa Paula or Bakersfield appraising a home on the Mesa. In Bakersfield a newer four bedroom, three bath, 2,400 square foot home on a quarter acre might sell for $375,000. And here the appraiser is looking at a 900 +/- square foot, two bedroom, one bath Mesa original on a 6,000 square foot lot that would easily list for $900,000+ and could sell over list with multiple offers. Scenarios like this can guarantee a bumpy escrow, heartaches for the buyer and seller, and frustration for the agents. Buyers should check with lenders about their anticipated funding times and whether their appraisers are local.
Appraisals in a fast moving market can also lag pricing trends that will stall transactions. Recently we represented a client buying a home where multiple buyers bid up the price to a point where the seller countered higher causing the buyer to overpay. When the house couldn’t appraise the seller agreed to reduce the price to maintain the sale.
There are no easy sells even in a hot market. An effective strategy and sale require establishing the right price, preparing the home prior to sale and strong marketing. This combination needs to be well executed to sell a home in a timely fashion. It’s only a sellers’ market if sellers price appropriately. Plan carefully and price it right and you’ll have a better chance for a successful sale.
What does this mean for you?
For buyers – there are new homes coming on the market all the time, and with school starting and summer vacations waning, there may be fewer buyers in the pool, creating less competition. For sellers – There are still many buyers looking for homes and this is a good time to sell your home.
Let us know if you’re deliberating whether this is the right time for you to make a move. We are always ready to share our successful strategies that can help sell your home quickly, efficiently and at the high end of its price range.
View the Santa Barbara County Real Estate Market CORT Data for July 2015:
South County Market Trends SB July 2015
CORT Sales By Area South SB County July 2015