Update on the Housing Market in Ventura County and Camarillo

In these first few days of February, the markets are feeling better than in times past. Value are up which is good for most existing homeowners and interest rates have continued to remain at historical lows making it a good time for most trying to enter the market or expand their existing real estate portfolio.  While the stock market has recently had some correction, the market has already stabilized after a few days of correction.  This is important because if your wealth isn't in real estate, its in stocks and bonds through your IRA's and 401k's and 529's, etc.  When that portfolio is doing well, you will almost always feel better about taking more risk in real estate.

And that risk has paid off recently!  Values for single-family homes in Ventura County are up by 8.8% from the same time a year ago and some cities are experiencing even greater growth.

Values for single-family homes in Camarillo, for example, are up by 10.5%. However, activity levels are down.

In January, the number of single-family homes sold in Ventura County is down by 1.5% from the same time last year, but it is the lowest number of homes sold in at least the last 5 years.  In Camarillo, the numbers are worse with the number of sales down 8.5% from a year ago and looking back over a 12 month period, they are down by 15.4%.

So, buyer activity is good, but needs improvement.  Many are still not fully committed to buying. Many of the first-time homebuyers (many of which are Millennials) are not pulling the trigger on a home purchase like they have in the past.  Some are just to freaked out by the last wave of foreclosures, many are just now starting to find jobs and feel good about their prospects of keeping their jobs and many just have no plans to buy because they feel it ties them down in terms of job prospects.  In addition, even though lower interest rates have helped the real estate markets, it has also had an affect that I am not sure has fully shown itself yet.  That is, those that own property now, if they refinanced their home at the bottom and are holding a mortgage with an interest rate below 3% or in the low 3% range, they are going to have to really need to move up in order to walk away from it.  As a result, I believe we will see the average time a property is held get extended beyond what we have come to be familiar with.  I can't tell you how many calls I get of current homeowners who want to buy a bigger house, but keep the smaller house and rent it.  That is causing fewer entry level homes to be available and when their are fewer homes available, values have a tendency to rise.  So, entry level demand is low and the supply of entry level housing, both resale and new developments, is lower than we would expect.

But, that has not stopped Sellers from trying to sell into this market.  In Camarillo, the number of single-family homes for sale is up by over 20% from the same time a year ago and over the last 12 months is up by over 42%.  The numbers for Ventura County are almost exactly the same.  So, when your number of sales is declining and the number of homes for sale is rising, the results, generally are a rising inventory of available homes.

In January, inventory levels of homes for sale in Ventura County was up by 21.8% from a year ago and inventory levels in Camarillo were up by 42.7%.  These increased inventory levels are why most economists are predicting values to rise slowly during 2015, but if they continue to rise to higher levels and we don't see more Buyer demand, values, I'm afraid will have to come down.

One additional positive sign is that we continue to see "Bounce-back-Buyers" coming back to the market.  These are people that experienced foreclosures or short sales during this last cycle.  They have re-established their credit, begun to save and are now taking advantage of the reduced timelines for those who experienced this housing distress over the last 6 or 7 years.

It is still a unique time in that it is a great time to buy with interest rates still very low and bound to go up AND it is a good time to sell as values have now almost recovered from their peaks prior to the crash.  If you know anyone who might be interested in taking advantage of this market, please have them call me right away for a confidential real estate evaluation.

Ventura County Inventory Levels Continue to Rise

Inventory levels of Single-Family homes in Ventura County continues to rise.  The number of single-family homes available to purchase in Ventura County is up 37% from the same time a year ago based on the last 12 months of closings.  

The number of homes for sale is up by 26% from the same time a year ago and the number of closings is actually down by 18%.  So, this gap has created a growing number of homes on the market.  We have seen increases in all areas of the housing market with the exception of the market over $1,000,000.  The inventory of homes available in this market is flat on a month-to-month basis as well as looking back 12 months.  Certainly you know the phrase that "all real estate is local" but that is certainly true here.  While these numbers reflect the general trends, your tract, your neighborhood, your city might look different than this.  So, if you are located in Santa Rosa Valley or Camarillo or Thousand Oaks or if you are located in The Pinnacle or Village at the Park or Lynnmere or Rancho Santa Rosa, these numbers and this assessment may not apply to you.  Call me if you are interested in a more local review of the situation for your particular piece of real estate. 

The biggest drop that we have seen in terms of overall activity is one of the things that I have been concerned about (and that we continue to hear about in the news) and that is the entry-level buyer.  We keep hearing that first-time homebuyers are not participating in this market and the data would seem to support that claim.  Because these buyers are missing from this market, the result has been a decline in the demand for housing in our middle market, where most of activity happens.  Just look at the chart below and see the drop we in had in the activity level in sales from $400,000 and below.  

This market over the last two years has made up over 32% of the total sales in all of Ventura County, yet in October, it only accounted for just under 18% of our total number of sales.  We need to see this market return, otherwise it stagnates the move-up activity and really begins to shut down the real estate markets.  In order for this to happen, we will have to see a drop in the First-Time Homebuyer Affordability Index (FTHB HAI).  The FTHB HAI is made up of three basic ingredients:  Median Home Price, Median Income and Average Mortgage Rates.  All three of these have dropped dramatically during the period of time when the real estate/mortgage markets crashed around 2006.  The good news is that values and mortgage rates all came down but the problem is that so did the Median Incomes in California.  Below, you can see how all three factors were affected during this period of time.  

Median Price

Average Mortgage Rates

Median Income

While we have seen the California Median Income recently come up off of its lows, we did not hit the bottom until the 1st Quarter of 2012.  In order for things to improve for First-Time Homebuyers in areas like Camarillo and Thousand Oaks and Moorpark and Simi Valley and Oxnard and Ventura, we have to see the Median Incomes rise faster than either Mortgage Rates and/or Median Prices.  This means jobs, jobs, jobs!  We need better jobs and we need more jobs.  We need our college graduates to get to work.  Once this starts to improve, I am confident the market will continue to look a lot more normal.  

Have a great day and don't forget to let me know if there is anything I can do to help you, your family or friends with any of their real estate needs.  

Safety in Real Estate...in spite of our fear!

"Real estate cannot be lost or stolen, nor can it be carried away. Purchased with common sense, paid for in full, and managed with reasonable care, it is about the safest investment in the world." - Franklin D. Roosevelt

It seems like our world these days is so unstable.  Maybe it's just me but it seems like everything is in flux.  The stock market hits record high and then plunges. Interest rates are at their lowest levels in the history of the mortgage market yet every day we keep hearing they are bound to jump. What happens to the housing market when that happens?  Real Estate markets in Ventura County and around the US have plummeted since 2006, hit bottom around 2012, jumped by 20-25% over the next 12 months or so and then have begun to show signs of weakening.  ISIS and Al Queda continue to exert their presence on the World's stage causing a heightened sense of fear.  And now we need to be concerned about our neighbor or co-worker or my child's friend coming down with Ebola.  Peak election season always causes worry because politicians on both side convince us to vote for them or their party because of something we should be afraid of.  Fear inspires us.  It motivates us to take action...sometimes to act and sometimes to cower. Fear sells. Fear gets our attention because it makes us sit up and listen. Even in Real Estate it works.  "Buy now before prices go higher." "Sell now before prices drop even further." "Be aggressive with your offer so that you compete with the multiple buyers." "Take this offer.  It might be the only one you get."  See how that works?  Crazy.  

Yet, with all of this fear and instability happening around us, for most of us, we can always find peace and comfort AT HOME. This is the place where we usually find comfort and rest. It's the place we long for. I saw the quote above from FDR and thought it was so true.  He was speaking about the economics of HOME and that is certainly true.  But, to be honest, most of my clients aren't really thinking about the economics when they walk through the door for the first time.  It's more emotional than that.  They are asking themselves questions like..."Does it feel right?" Does it fit my family?" Can I see myself here long-term?" "How's the neighborhood?" "How are the schools?" "Does it have a pool?" "Does it have an attached garage with direct access?" "Is the backyard big enough for my kids?" "Is the backyard small enough that I don't have to spend all weekend caring for it?" Each one of us has our own needs when it comes to housing and that is what makes my job enjoyable.  Each client has a new set of parameters that create the ideal home and it's my job to get as close to that ideal as possible.  Sure, money plays a part.  As FDR says, "purchased with common sense" is important.  Today I suspect he would replace "paid for in full" with "paid for with financing you can afford".  Money is a factor, but once you have hit that parameter, the rest is all emotion.  

During the most difficult of times in real estate when values began to plummet in 2006, the thing I had to remind people who were losing their home is that HOME truly is where your heart is.  I know it is trite, but it's true.  Like any investment, you take risk and most of the time, if you are able to own a home long enough, it will also payoff financially, but when it doesn't you have to remember that HOME is where you are with your family and those who love you.  

I hope you find peace today in your HOME. If you are not at "Real Estate peace" and would like help finding it, please call me for an immediate, peaceful, confidential consultation.  

Have a great day!

Are US Real Estate Markets really rolling?

Today there was an article by Jason Lange from Reuters that the "U.S. housing recovery rolls on as groundbreaking rises".  Here is the link to the article http://www.reuters.com/article/email/idUSKCN0I619U20141017

The article goes on to explain that people are starting to build again.  Normally, people look to this number to dictate whether or not the Housing Markets are strong.  Personally, I think there are other indicators of the Housing Market strength than this number.  Certainly, by itself, it is meaningless.  You have to take into consideration all of the factors before looking at this one number and making a judgement that anything is "rolling" anywhere.  Obviously, being a Realtor, I am always looking for good news to share about the real estate markets. We have been through so many years of pain that all signs of good news come with hope.  However, given how hard the U.S. Housing market got it, you can't blame me for being a little skeptical about the good news especially when the market seems so fragile.  Let me explain.

There are 3 things I am worried about.

1. Yes, values are on the rise.

But, if you look at the data closely, you will see that in Ventura County, the Median Price of single-family homes increased by 43% from December 2011 to July of 2013.  Amazing!!!  But why did that happen? Was it sustainable? Most of the growth during this time frame came from a massive influx of investor capital not only into Ventura County, but into any real estate market that Wall Street Capital thought could produce a return.  Much of this capital was buy and hold strategy taking a lot of the normal inventory off the market permanently, or at least until the strategy turns to "buy-hold-SELL".  What happens then? What happens when Wall Street decides that its time to sell these assets? Will there be enough non-Wall Street buyers to sustain prices? Most think that each investor will have their own thoughts and needs on when it is the right time to sell these assets so the impact won't be as great as the increases I have outlined above.  Since July of 2013, values are only up 1.3%.  This is actually below the rate of U.S. Inflation in August of 2014 of 1.7% as outlined by the U.S. Bureau of Labor Statistics.

2. Interest rates can't sustain these levels.  The article even mentions this when it says that the Housing Market "suffered a setback last year" (right about July of 2013) "when interest rates spiked".

I don't even think we will need a "spike" for rising rates to have an impact on this market.  When the average homeowner has a rate of 3.75% on their 30-year mortgage, will they make the same move-up purchase they would have if rates are now 5%? Will the First-Time-Homebuyer be able to even enter the market if rates are at 6%? I suspect not unless the U.S. economy or the DJIA is up significantly to offset the higher rate.  We will have to see continued declines in the jobless rate and similar increases in the Labor Force Participation Rate and overall wage growth in order to sustain increasing interest rates.

3. My last concern is the increasing trends we are seeing in the level of available inventory.  Inventory of single-family homes in Ventura County is up 58.9% from the same time a year ago. While these levels are historically in line with a healthy real estate market, the increasing trend is far from healthy.  What will happen to these inventory levels when we begin to see the homes that are breaking ground now hit the market? With groundbreaking up 6.3%, per the article, I am concerned that the additional increases of homes available for sale will continue to put downward pressure on home values going forward.

On the surface, things are better.  I am happy Wall Street money came in and injected the markets with some much needed capital, but let's not be deceived by the reality of the situation.  These markets are much more fragile than it appears.  If you are thinking about selling or buying in this market, give me a call so we can sort through your goals and how they fit into the existing markets and, remember, all real estate is local, so your specific market might look completely different than the general markets outlined above.  Call me anytime for a confidential evaluation.  Have a great day!

John Wise

Case-Shiller Home Index - Highest Levels in 5 years!!!

Case-Shiller Index came out recently and as you will see from the chart below, the 20-City Index is now showing that values in these markets are now back to levels we saw almost 5 years ago.

For those of you that have been paying attention, this should not come as any surprise. Values have been on the rise in the last 6 to 9 months for many reasons, but the sharp increase off the bottom has many worried that this is also a bubble that is going to pop just like it did back in 2006/2007. For those of you who want to be frightened by the current market and its similarity to 2005, check out this article from DSNews http://www.dsnews.com/articles/commentary-dj-vu-all-over-again-2013-08-23.

My own feeling is that this jump off the bottom was inevitable. So many people had been waiting and waiting to buy that once it appeared we had it the bottom, there was bound to be an increase. I do expect that the big increases will slow down over the the next quarter as we move into the Fall and Winter seasons which are typically slower because people are paying attention to getting back into their lives after summer and then the business of the Holiday Season. But in addition to that, we are starting to see inventory levels rise and that will also begin to slow things down. As more and more property becomes available to sell, the competition to buy those properties is beginning to wade. I have taken more calls in the last 2 months from people that tell me "I think its finally time for me to sell." that I have at any time in the last 7 years.

Most of the time, when you have a bubble that is ready to pop, it is because it has become bigger than it should be. Outside influences that aren't normal and pressuring it to go higher and higher. In this market, I think the values have risen for good reasons, normal reasons. Buyers looking for opportunities to own a home, move up or finally buy that rental property. Investors looking to buy low and sell high. The only unnatural element is the subsidized interest rates. As we see those rise, and the first step has already begun, it will also put pressure on values increases to slow down or stop. But, it appears that we are now in a market that is still favorable to Sellers who now have values back at levels that many thought they would never see again, and for Buyers who can still take advantage of lower borrowing costs and values that are still increasing.

If you need any help or would like a confidential review of your situation, I would look forward to hearing from you. Have a great day!

Case Shiller says home prices are up again!

The Case Shiller Index is one of the most nationally recognized indicators on the overall health of the real estate markets around the country and the came out today with their report that states that we had another national rise of 2% year-over-year from August 2011 to August 2012. The closest big city index for Camarillo Sellers and others in Ventura County real estate is the Los Angeles index and it reflected a 2.1% year-over-year gain as well.  You can read the full report at http://bit.ly/SvgbC5.

However, they did have some long-term housing concerns.  The most near-term risk the the infamous "fiscal cliff" that we face the beginning of 2013.  The consensus is that the DC politicians will figure out whatever they need to do to pass the buck on this down the road to the next president, the next Congress to deal with.  But, given the politics of the day, there is certainly some risk that we will hit January 1, 2013 without a solution to this large problem.  If it does happen, it will have a negative impact on both the equity markets and the real estate markets.

The second risk identified as a more long-term risk is that of the Baby Boomer generation selling and downsizing their current homes.  This may leave a gap of buyers at the higher end causing larger homes to come down further in value than they already have.

Zillow.com reports that Camarillo values are up 4.3% year-over-year and with national prices rising now for the last few months, I would expect that trend to continue in the short term.  But, if you are thinking about selling your home in the 93010 or 93012 zip code, now may be a good time to take advantage of the window of opportunity that presents itself in this market.

In the meantime...have a great day!

...and the summer bubble continues!!!

Ok.  Last month, the Case-Shiller index had the largest month-to-month gain in its history.  As I outlined in my last blog entry, I suspected that most of this increase was due to an overall lack of inventory pushing values higher.  Well, today, Case-Shiller came out with the news that their index has jumped by 6.9% from the 1st quarter of 2012 to the 2nd quarter of 2012.  This also is the largest gain, quarter-to-quarter, in the history of the index.  In addition, their 20-City index rose by 2.3% just from May to June. This is also the largest month-to-month gain (last month was 2.2%). For all the details, please go to the Standard & Poors website for details.  http://www.standardandpoors.com/indices/sp-case-shiller-home-price-indices/en/us/?indexId=spusa-cashpidff--p-us----

So we are seeing some sustained growth which is really good news, but I wanted to put the inventory issue into perspective.  In Ventura County, we have had 8,461 sales of Residential Properties in the last 12 months.  As of today, we have 1,323 Residential Properties on the Active market.  That is an inventory of 1.88 months.  To get more specific, in Camarillo alone, we have had 932 sales of Residential Properties in the last 12 months.  As of today, we only have 115 Residential Properties on the Active market.  That is an inventory of only 1.5 months.  That is insanely low.  A natural/neutral inventory of homes where it is not having an impact on value one way or another is typically around 4 months.  Someone asked me this past weekend at my Open House at 350 Commons Park Dr. in Camarillo why inventories were so low.  There are a few basic reasons.  First, if you own a home today, unless you are forced to sell via a distressed sale (Short Sale or Foreclosure) or a job or life relocation, then you are likely going to do everything you can to hang onto your real estate and what is still a depressed level.  Second, the level of new bank-owned homes has not jumped like most have expected.  This is the infamous "Shadow Inventory". Most experts are now predicting that this "Shadow Inventory" will not have a dramatic impact on values over the next few years as we continue to see the level of bank-owned homes decline.

Unless we see some major shifts in the market for Seller's I would anticipate that the inventory levels would stay low and that values would continue to rise until we get back to some normalcy as it relates to the numbers of buyers and sellers.  Expect that it will be a Seller's market through the end of this year.

If you are thinking about Selling your home, now is a great time to call me to discuss strategy.  If you are thinking about Buying a home, there is no time better to be represented by a Realtor who is working hard to quickly identify opportunities that fit your requirements than now.  Do not try to do this on your own. I appreciate you taking the time to read this blog entry and...as always...if you know anyone who is thinking about buying or selling in the next few months, your advocacy is my greatest form of advertising.  Thanks for your referral!!!