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California Real Estate May 2013 : Page 18

Taking the Hot? Warm? Getting Warmer? Temperature of California’s Housing Markets How are California’s housing markets faring in 2013? REALTORS ® in seven counties take the temperature in their corner of the Golden State. By Marcie Geffner Santa Clara County “Red hot.” That’s how Carl San Miguel, broker/owner of Highland Properties in Campbell, characterizes the housing market in Santa Clara County. “There’s probably no section of Silicon Valley that hasn’t been affected by the shortage of inventory, which is down about 40-50 percent from what it was a year ago,” he says. One constraint is that sellers are afraid they won’t be able to fi nd their next home since so few properties are for sale. Some sellers take a chance, prepared to rent for a while, if that becomes necessary, San Miguel says. Others decide not to move forward. Buyers who need a Federal Housing Administration (FHA) or U.S. Department of Veterans Affairs (VA) loan are feeling the most pressure since sellers tend to choose offers that appear to present a stronger fi nancial position. “Buyers who’re trying to get an FHA or VA or 5 percent-down deal are being left out because the competition is driving the price up,” San Miguel says. “They can’t say they’ll pay more because [the appraisal won’t support it].” Orange County For-sale inventory is down by half or more in Orange County, too, says Len Herman, a REALTOR ® at Keller Wil-liams Realty in Mission Viejo. Multiple offers are the new normal in this market, which Herman says seemed to swing from one extreme to the other with no stop at equilibrium. “We went from having a lot of inventory and no buyers to having a lot of buyers and no inventory.” That combination has led to rising prices and a concom-itant drop in short sales as homeowners regain positive equity. “With prices starting to go up, the renewed hope is that some of the underwater homes will become afl oat,” Herman says. Higher values could motivate lenders to modify more loans, allowing homeowners to keep their residence, but might also prompt more people to move since they’ll be able to avoid the diffi culties of a short sale. “We’re hoping inventory increases and mortgage rates stay low,” Herman says. “We’d love every buyer who wants to buy a Continued on page 26 18 CALIFORNIA REAL ESTAT E • M AY 2013 Illustrated by Leigh Guldig

Hot? Warm? Getting Warmer?

Marcie Geffner

Santa Clara County <br /> <br /> “Red hot.” <br /> <br /> That’s how Carl San Miguel, broker/owner of Highland Properties in Campbell, characterizes the housing market in Santa Clara County.<br /> <br /> “There’s probably no section of Silicon Valley that hasn’t been affected by the shortage of inventory, which is down about 40-50 percent from what it was a year ago,” he says.<br /> <br /> One constraint is that sellers are afraid they won’t be able to find their next home since so few properties are for sale. Some sellers take a chance, prepared to rent for a while, if that becomes necessary, San Miguel says. Others decide not to move forward.<br /> <br /> Buyers who need a Federal Housing Administration (FHA) or U.S. Department of Veterans Affairs (VA) loan are feeling the most pressure since sellers tend to choose offers that appear to present a stronger financial position.<br /> <br /> “Buyers who’re trying to get an FHA or VA or 5 percentdown deal are being left out because the competition is driving the price up,” San Miguel says. “They can’t say they’ll pay more because [the appraisal won’t support it].”<br /> <br /> Orange County<br /> <br /> For-sale inventory is down by half or more in Orange County, too, says Len Herman, a REALTOR® at Keller Williams Realty in Mission Viejo.<br /> <br /> Multiple offers are the new normal in this market, which Herman says seemed to swing from one extreme to the other with no stop at equilibrium. “We went from having a lot of inventory and no buyers to having a lot of buyers and no inventory.” <br /> <br /> That combination has led to rising prices and a concomitant drop in short sales as homeowners regain positive equity. “With prices starting to go up, the renewed hope is that some of the underwater homes will become afloat,” Herman says.<br /> <br /> Higher values could motivate lenders to modify more loans, allowing homeowners to keep their residence, but might also prompt more people to move since they’ll be able to avoid the difficulties of a short sale.<br /> <br /> “We’re hoping inventory increases and mortgage rates stay low,” Herman says. “We’d love every buyer who wants to buy a home to be able to find a home to buy.”<br /> <br /> Santa Barbara County<br /> <br /> Santa Barbara County is hot, too.<br /> <br /> Along the coast, homes priced at more than $5 million are “finally moving” while homes priced at less than $1 million are experiencing “upward pressure” on prices, says Laurel Abbott, a REALTOR® at Prudential California Realty in Santa Barbara.<br /> <br /> Younger buyers whose parents have “seeded their accounts,” to use Abbott’s expression for downpayment gift money, face heavy competition for the few entrylevel homes on the market.<br /> <br /> “A bit of resentment is starting to build, especially if they put in seven offers in four months and none of them has been successful,” she says.<br /> <br /> In the northern area, for-sale homes are so scarce that some offers are substantially higher than asking prices and some buyers are waiving appraisal contingencies, says Misty Means, a REALTOR® at Prudential California Realty in Los Olivos.<br /> <br /> Comparable sales are so few that each has a huge impact when it becomes the newest comp for everyone else in the neighborhood, Means says.<br /> <br /> A rush to complete short sales before the feared expiration of mortgage debt forgiveness tax relief at the end of 2012 slowed that sector early this year, but Means says activity has picked up since then.<br /> <br /> Oakland<br /> <br /> Buyers are waiving appraisal contingencies in Oakland as well, says Cameron Platt, broker at Harcourts Platt Inc. Real Estate in that city.<br /> <br /> Investors, all-cash buyers and first-timers priced out of San Francisco are houseshopping, despite rising prices and slim selections, Platt says.<br /> <br /> At one small residence, 20 people were waiting on the front steps when the agent arrived to hold an Open House. “She didn’t even have time to put a sign up,” Platt says.<br /> <br /> The biggest drag has been a governmentmandated inspection of each home’s sewer lateral at the time of sale. “If the house wasn’t built in the last 10 to 15 years,” Platt says, “it’s probably not going to pass. That adds another $6,000 to $12,000 to a home purchase because the work has to be done within 180 days of closing.” The requirement has had what Platt describes as a “chilling effect” on sales.<br /> <br /> Still, the mood is upbeat.<br /> <br /> “We’re hoping more sellers take advantage of the rapidly rising prices and put their home on the market, so we can satisfy the buyer demand,” Platt says.<br /> <br /> Marin County<br /> <br /> In Marin County, the housing market is “warm and getting warmer,” says Jack Wilkinson, broker-associate at Bradley Commercial in San Rafael.<br /> <br /> Local trends include shrinking supplies of for-sale homes, increasing multiple offers, rising prices, declining sales of bank-owned homes, and continuing high barriers to new home construction.<br /> <br /> All that has brought people Wilkinson calls “twofers”—those who are selling their current residence and buying a more costly one—back into the market.<br /> <br /> “Not in large numbers,” he says, “but for years, we didn’t see any.” <br /> <br /> One constraint is financing, which is difficult for many buyers to get because they’re self-employed or not traditionally employed and consequently must submit copious income documentation.<br /> <br /> “There is so much more paperwork,” Wilkinson says.<br /> <br /> Madera County<br /> <br /> Short sales and bank-owned properties are still prevalent in Madera County, but the market is warming up, says Esther Riffel, a REALTOR® at Century 21 M&M Associates in Madera.<br /> <br /> “Houses are selling quickly,” Riffel says. “We do have a lack of inventory, so there is a demand we can’t quite meet. That does cause some bidding wars and prices are on the increase because of that.” <br /> <br /> Investors and all-cash buyers are active, putting pressure on buyers who need financing. <br /> <br /> “Conventional or FHA buyers are getting beat out by cash buyers. Sometimes, they are investors. Sometimes, they aren’t. For buyers, it’s frustrating,” Riffel says.<br /> <br /> Lender-approved short sales are more likely to close than they once were, but Riffel says the process is still slow.<br /> <br /> “Short sales are still taking four to six months,” she says. “For a buyer or even a seller to wait that long—it’s very taxing.”<br /> <br /> Inland Empire <br /> <br /> Ken Scott, broker/owner of Ken Scott Real Estate in San Bernardino, says the Inland Empire housing market is also warm, defined as a mixture of hot and cold.<br /> <br /> “People are chomping at the bit to buy houses, Scott says. “But sales are flat because we have absolutely nothing to sell them.” <br /> <br /> Strong demand and little supply have triggered “dozens and dozens of offers on any property that’s halfway decent,” Scott says.<br /> <br /> Much of the action involves individual investors, limited liability companies and investment groups.<br /> <br /> “For an economy that’s supposed to be as bad off as we are, it’s astounding the amount of cash that’s floating around,” Scott says.<br /> <br /> Distressed properties still account for a large share of the transactions. Short sales, in particular, are still common, having become— if not easy—at least easier than they used to be.<br /> <br /> San Bernardino County’s abandonment of its plan to use its governmental power of eminent domain to seize mortgages has been a cause for great relief.<br /> <br /> “That could have been a real boat anchor on our market,” Scott says. “Everyone seems to feel a little bit less scared and less up in arms now that that’s off the table.” ® <br /> <br /> Marcie Geffner is a Los Angeles-based freelance reporter. Follow her: @marciegeff.

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