Post about "Real Estate"

What To Expect In 2014: San Diego & Southern California Residential Real Estate Market Prediction

San Diego’s real estate market correction has been nothing short of extraordinary over the past 12-18 months. It has taken some by surprise and rewarded those homeowners who have withstood the market correction of the past 8 years, as well as those who took a risk and entered into the market in the depths and despair of the local market recovery.A home that was purchased for $300,000 in 2011 or 2012 would now be worth about $450,000 in 2014. This is due in part to an over-correction of the market in the first place, but also in part to a long-term real estate listing shortage; there is simply not enough homes to buy and the demand is greatly outweighing the supply.This article identifies what happened in the past 12 months and what to expect in the next 12.The San Diego housing market started out incredibly strong for 2013, but sales hit an air pocket once it became apparent that the Federal Reserve’s intent was to wind down its monthly securities purchases (a.k.a Quantitative Easing) in mid-2013.The market was ON FIRE for the first six months of the year, but the earlier-than-expected talk about “tapering” by the FED briefly sent mortgage rates soaring up to 5% right in the middle of the key home buying season. Up to that point, prices were increasing each month at a rate reminiscent of the peak/boom years from 2004 to 2006, and when the interest rate increase was coupled with higher home prices, many potential buyers suddenly developed a case of cold feet, leading to a slowdown in the sales of new and existing homes. (source: Wells Fargo)At the same time, potential home-sellers saw homes on their street sell for prices that they could not believe. The San Diego market has been brutally beaten down in price since the great recession began in 2007. Some areas of San Diego experienced a 60% decline in their real estate values due to the massive amount of short sales, foreclosures and distressed properties that were a cause and effect of the recession. Many people lost their homes or did a short sale to the point at which nearly 40% of the market between the years of 2009 and 2012 were distress sales in the market. There was a lot of fear and uncertainty throughout the market and economy both locally and nationally – ironically this was the best time to be purchasing real estate.At the height of the peak market in 2005-2006, there was about 5000 homes on the market, and at that time people thought it was an incredibly low amount of homes for sale. This amount includes all homes and condos throughout the entire county from the $50,000 condo in El Cajon to the multimillion dollar mansion in Del Mar. Buyers were clamoring for every property that hit the market; there were offers being written on hoods of cars and a bidding frenzy of demand. This was the mentality that, along with loose lending requirements, created the momentum for prices to get as high as they did. We all know what happened after that.Flash forward 7 years later and we are fully in recovery mode for 2013 in the San Diego market. In April of 2013 there was only 4000 homes available throughout San Diego. This was a ridiculously low number of homes available for sale – even less than the 2005 market and at this time there were much more people and many more homes developed and built since 2005, making it that much more significant. Also at this time, mortgage rates were at historic lows in the low 3%’s. (source San Diego Association of Realtors; Dataquick)This time around, lending standards are tight, and only buyers with good credit could purchase, allowing for a more-sensical approach to the market compared to the sensationalism that preceded us in the booming years.It was this environment of an incredibly low supply of homes combined with incredibly cheap money to borrow which led to the red hot market in the early part of 2013. It was only as prices rose quickly throughout the year, interest rates began to increase as a result of the overall improving national economy as well as more listings hitting the market where things began to shift.All the homeowners who purchased at or near the peak of the market, and who bit, fought and scratched to stay in their home and make the payments and avoid foreclosure or short sale no matter the adversity they faced now realized a market where the prices were again where they originally bought, and could finally have the opportunity to sell and get out of the home that became a ball and chain.Take for example a young couple who purchased in 2006 in North Park – They bought their home, a 2 bedroom, 2 bath 1000 square foot residence for $625,000. They expected to live there for a few years, save money, build equity and then buy a bigger home that they could raise a child in. Their mortgage is at 6.25% and they owe nearly $550,000.In 2011, their home is worth $425,000. They have a 2 year old. The home is too small but they are $125,000 underwater and $200,000 below what they originally paid. This was the point in which many folks cut their losses and did a short sale or let the property go to foreclosure. This couple however had a good $75,000 of their own money in the house and they would be dammed if they let that home go. They made due, and now in 2014 that home is worth $625,000 again. Now they can sell and take the proceeds into a newer, bigger home so they can continue building their family. There are many, many families just like this in San Diego that only 12 months ago were nowhere close to having the move-up choices that many sellers now have. This as well as record prices caused many new sellers to put their home on the market through the middle and to the end of 2013. The amount of active listings rose as high as 8000 properties, doubling the amount for sale just a few short months prior.The increase in interest rates, prices as well as available properties all served to settle the market in 2013 from its white hot start.As we moved into winter, mortgage rates pulled back to less than 4.50% and employment conditions improved. Many listings sold, and demand revived a bit toward year-end.The total amount of volume of transactions was the highest since the peak/boom years. Your average condo increased by 30%, and your average home increased by nearly 20% in value. By all accounts 2013 was a banner year for real estate and homeowners equity. (source remain in a supply-constrained market, and this will continue for the next few years. This has been due in part to so many consecutive years where no new properties were being built or developed. Nationally, the US needs to build 1.2 Million dwellings to keep up with population growth and to replace properties that are no longer habitable. Between 2007 and 2013, an average of 350,000 dwellings were actually built, leaving nearly a million-dwelling deficit of homes for 6 years. It is because of this that we have a housing shortage today, and will continue to have a housing shortage for the next several years as we build, develop and grow our way into full recovery. A normal market in San Diego would have about 15,000-18,000 homes for sale at any given time. Last April of 2013 there was only 4000. In November it was nearly 8000. As of January 2014, we have under 6000. This supply-constrained market will headline San Diego real estate for the foreseeable future as we cannot build new homes the way places like Phoenix or the Inland Empire can. Rather, we must re-sell our way out of this housing shortage. As long as we have a lack of supply, we will continue to see prices rising to meet the demand of the market. (source buffiniandcompany, yahoo news)Rising home prices will encourage more homeowners to put their homes on the market, adding much needed inventory to the marketplace. As a result, the real estate industry appears to be generally upbeat going into 2014. Homeowners also seem to be more upbeat.With all this in mind, I expect prices to continue to rise throughout 2014. The level of increase will be tempered by how high increases in interest rates will be as well as the fact that the government won’t be supporting the housing market as much as they have been in years past.2014 will be one of the most balanced and normalized markets than in any year in the past decade. We will see prices approach and surpass the peak values seen in 2006 (if they haven’t happened already in your neighborhood).Move-up buyers have the best opportunity to make a move this year – up to this point its been the bottom part of the market that has recovered fully, which pushes its way up the affordability ladder to allow more mobility for more expensive homes and potential sellers (including the example of the family in North Park) and sellers who have been waiting on the sidelines now have a great selling environment to take advantage of.Many analysts predict that San Diego will experience appreciation in the 10-14% range, but I believe we will see a more modest 6-9% improvement because the large moves have already been made and we have “corrected” the over-correction.Nevertheless, the market and our economy are doing quite well as we move further into a broad-based long range economic recovery. Here’s to a wonderful and successful 2014.

“Time” Is A Major Real Estate Wealth Growth Tool, So Use ‘IT’ And Watch

In this report I use figures from my area of the world … I know they don’t apply all over the world, but they should encourage you to get the figures for yourself.After all no report is going to make your money grow … it’s the knowledge you gain and “Your Application Of The Knowledge” that makes your financial wealth Grow.In another report I gave you a concept I borrowed from Phil Ruthven, a truly wonderful speaker on economics, on how he looks at Home Ownership.Now I want to look at the Tools we have available to help us Grow!real estate wealth,So folks, if you want Real Estate Development, you must use all the tools available to you to get some. Of all the tools you have, the single most important one is TIME.real estate wealth,1. Time is your greatest friend. Time to buy good investment property and let it double in value every 8 to 10 years or better.real estate wealth,2. Federal Government Real Estate Investment Tax Deductions are another tool the Government uses to tell you in Words, Dollars and Cents that they want you to get wealthy so you can look after yourself to your final days. real estate wealth,3. Correct Financial tools are also vital to your wealth development. See my report of Finance. I will go into some further detail in this section on the use of Evergreen Lines of Credit and how they work.4. Good Real Estate Management is the next tool. Well-managed and well-maintained real estate investments, that houses good quality tenants is also essential. Trying to do this work yourself, is a mistake. See my report on Property Management. real estate wealth,In Australia, it has been instilled in our consciousness, that we must all own our own home. And there is nothing wrong with the concept. It’s just that we should have been told to rent it out; Don’t live in it.By buying a house TO LIVE IN, while we are young, we are wasting the wealth creating tools of Time, Double Income, (if married) Property Income and Tax Deductions. No wonder so many people have to play catch up later in life. real estate wealth,So the first clue to Real Estate Wealth Development is don’t buy a residential property for you and you partner to live in. You buy a house as an investment and you rent elsewhere.Growth Tool No. 1 – TimeTime is your greatest friend. Real Estate is a long-term investment and by being loyal to it, the real estate will reward you handsomely all through your life. real estate wealth,You can prove this to yourself, as I did, by getting the figures of average house sale prices, from the Australian Bureau of Statistics for Brisbane, the largest City in Australia.To save you the trouble I got the figures and I painstakingly went through them in order to validate the old wives tale that, ” real estate doubles every seven years.”Well, it does better than that, you’ll be pleased to know.I was able to get the figures from 1973/74 to 1994/95. I think I started there because that was when I arrived in Brisbane on transfer from Melbourne. real estate wealth,That is a twenty-two years period, during which we had several credit squeezes, a few recessions and a few good times as well.In 1973/74 an average house price for the whole of Brisbane was $23,234.00. That average includes the best and worst house and suburb.Seven years later, in 1980/81, it was $43,470.00 an increase of 87%.However by the next year, the eight-year, it had risen to $56,757.00 giving an increase of 144% from 1973/74. So you see that it more than doubles by the eight year. real estate wealth,Going on a further seven years from 80/81 to 87/88, the $43,470.00 went up to $83,679.00; a further 92%.Interestingly, going on one more year to the eight year, it had again increased to $113,917.00 giving an increase of 162% from 1980/81.A further seven years from 87/88 to 94/95, the price of the average house in Brisbane went up to $163,325.00; a further 95% increase.
real estate wealth,Unfortunately the Bureau amalgamated the Shires of Logan and Caboolture into this statistical base and I could not extract the figure for the eight year.However on the evidence of the previous 22 years I believe it is safe to assume
the increase would be at least 5% making it an increase of 100%. real estate wealth,So these figures prove that over a period of 22 years the asset has increased by seven times its original value and all you would have to do is buy it at the beginning.I hope this gives you some idea of why TIME is so important to growth. And remember that I am talking about average prices, I am not talking about hot inner suburbs that will obviously do much better.If you REALLY understand these figures; you should ask yourself why you are willing to miss out on buying good real estate by stopping negotiating for the sake a few hundred or a few thousand dollars. I’ve seen this done many times because of stubborn-ness. Crazy! real estate wealth,For goodness sake it’s the Real Estate Asset that is in short supply; not money. If you have found real estate that fits your criteria; BUY IT!The Real Estate Development CoachCopyright Colm Dillon, October 2003All Rights Reserved.