July 31st Market Update

Pandemic, what pandemic?  Judging by the Pending Sales data out this week from the National Association of Realtors, one would be hard pressed to see any reason for concern about the economy.  Instead of being a market filled with doubt and trepidation, maxresdefaultNAR’s data tells the story of a very hot seller’s market.  There’s really no other way to interpret the kind of rise in actively listed homes currently under contract.  Sellers are dictating price and terms and if you’re a buyer, you just have to bite your tongue, jump in the water and be prepared to paddle like mad.  This is one crazy real estate market.

To understand – or try to anyway – what’s happening, let’s start with why the market is red hot.  Most people will tell you with interest rates at all time lows, the housing boom is being driven by a desire to lock in what is essentially, free money to buy a home.  This makes total sense (Reach Out To Tim Here).  Inflation is running at just under 2% and when you consider the mortgage interest tax deduction, the government is essentially paying you to borrow money to buy a house.  Realtors will also point to the severe shortage of available inventory.  If you are just a casual observer you may not have noticed, but I can tell you as a long time professional, as soon as a home comes on the market, it is sold and often with multiple offers.  But don’t take my word for it, look at the data.  NAR says there are 350,000 fewer homes for sale right now than there were one year ago.  Further, that the available inventory based upon the current sales pace, will be absorbed within 4.5 months.  NAR considers a balanced market not favoring buyer nor seller, a market when it will take 6 months to sell all the available homes.  Naturally, anything longer than 6 months would therefore constitute a buyer’s market and in contrast less than 6 months a seller’s market.  At 4.5 months available inventory, we are definitely in a seller’s market.

Okay, so we have very few homes available given record demand that is in part being driven by low borrowing costs.  What else might be driving this incredible demand in the shadow of COVID-19?  How about that the increase is being driven by a recognition that having a nice home to shelter in place during a pandemic is pretty important and even more so if you also need a good place to work from since many of us are working from home (Search For Homes Here).  This means you need rooms and space – more rooms and space presumably – than you currently have.  Perhaps you’re also running the First St. Family Room Elementary or the Corner Lot Dining Room Middle School, the Cul de Sac Kitchen Table High School or the ever the fun, Where The Heck In My Home University (also referred to as My Home U.), let alone its wildly popular Who’s Old Room Is It Anyway, Dormitory.   Our homes have become the classroom, the playground and the office.  It’s even the stay-cation destination everyone is taking their family to this summer.

 

Speaking of summer, with community pools and beaches closed, many people are searching for and buying homes with swimming pools like never before.  Just try and find an available pool home or worse an available pool contractor to build one for you should you DSC03663own a home without a pool (Visit Tim’s Facebook Here).  It’s darn near impossible and certainly not for use in 2020 and probably not for summer 2021 either.  And if that were not justification enough for a sizzling real estate market, there’s the whole “exodus” from the City to the Suburbs while trying to escape the virus.  It begs the question, is this real?  Sure seems like it…

As a 30 year veteran of the world of real estate, I can tell you that this past spring’s shut down pushed the traditionally hot spring real estate market into the summer season.  So not only are we seeing an unusually hot summer real estate market, but we are also seeing the red hot spring market delayed into the summer, compounding an already imbalanced marketplace.  This has magnified the intensity of finding a home.

What about sellers?  Why aren’t there more sellers?  Property owners aren’t selling unless they are trying to upgrade, take advantage of remote working opportunities by leaving the area all together or have concerns about the economy.  The largest group of potential sellers, the seniors, are choosing to stay put.  “Why would I want to sell now,” they ask?  Why allow people/home shoppers into their home when it increases their likelihood of contracting the illness?  And why go traipsing through a stranger’s home where they might expose themselves unnecessarily?  Not to mention the whole, “Where would I go anyway” problem, when “There’s nothing on the market!”  So not only is demand at a fever pitch, but supply is T I G H T, tight!  Just to put final point on this, here are a couple stats I track from my local market of the Conejo Valley along the LA/Ventura County line.  In February we had about 43% of all active listings under contract indicating a very, very strong market.  However by May, following the government mandated shutdown, that number plummeted to 26%.  Ouch.  But then, suddenly the market rebounded!  As of this week, our local inventory is down around 18% from June 1.  This is in part because 50% of all active listings are under contract.  Wowza!  That is a serious turnaround and an indication we are in a serious seller’s market.  What about the other 50% that are not sold you ask?  Likely those homes are either in slower selling high end or those available homes are probably a little overpriced.  Just because it’s a

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1203 Clayford Ave, Westlake Village

seller’s market, it doesn’t mean sellers can ask for the moon, the sky and the stars, and get it.  And by the way, while rates are at historic lows, this is only true for conforming and government backed financing.  In other words historically low rates are available for conventional conforming or high balance conforming loans backed by Freddie Mac or Fannie Mae.  If you want a jumbo loan, it’s a lot more challenging and even the major banks like B of A, Chase, Wells and Citi, who were the leaders in Jumbo financing, are reluctantly making jumbo loans.  Even if you are a straight forward 20% down/80% or better loan to value borrower, you aren’t guaranteed you’ll successfully get a jumbo loan approved.  In many cases you have to not only be well qualified but also have to have your deposit accounts with the banks loaning you the money.  Even then they are not fast nor eager to make the loans.  I just called 3 banks and 3 brokers/correspondent lenders yesterday inquiring about jumbo financing for a buyer with 5% of their own money and 20% from a parental gift and I found one lender who said they could offer a competitive rate.  The others were, “Sorry can’t do it” though one told me could do it but only with a 5/1 or 7/1 ARM and the 7/1 was at 5%.  Not exactly compelling.

Finally, I’d like to touch base about the economy and the concern that we are headed for a bumpy ride.  There can be little doubt that the effect on the economy by the virus has not yet worked its way through the system.  Aside from restaurants, entertainment, hospitality and leisure, many folks aren’t really feeling the negative financial impact of the virus just yet but I’m afraid this is going to change.  The ripple effect of closing restaurants on their staff, the supply chain (think the delivery people, the farmers and ranchers, the food and alcohol wholesalers, the company that cleans the linens, etc.) and the closure’s effect on other area business, is going to be devastating.  Presently there’s still a “hang on/hold on” attitude but sooner or later many of these businesses and entertainment venues, are going to have to let go and shut down completely.  It’s already happening but will likely get a lot worse before it gets better.  Real estate will not come out of this unscathed.  Businesses without income will stop paying rent and shut down.  Landlords no longer receiving rent and without prospects of replacement businesses, will default; defaulting mortgages means stress on banks and investors which in turn will lead to foreclosures and an increase in the distressed supply.  Evictions of tenants who are unemployed will lead to greater shared living environments and unfortunately an increase in homelessness.  This will complicate virus mitigation and could very likely lead to irrational political solutions that will muddle things further.  All this portends to some dramatic changes in the coming months and years for the real estate market.  However… given all the afore mentioned demand components coupled with the demographic shifts of the growing population of Millennials’ entering the home purchase market for the first time, I expect the bulk of the real estate losses to be largely mitigated.  That’s not to say there won’t be pain and some softening of prices, rather that there should be enough buyers to absorb most of any potential increase in supply.  I certainly expect that investors will be salivating at the prospect of buying distressed real estate again.  Therefore, if you are a buyer, while there will be more homes available as a result of the economic impact of the pandemic, don’t expect a huge market shift into a crazy good buyer’s market.  There’s a lot of forces at work that will keep values from repeating the epic collapse of 2008-2012 and the Great Recession.  Therefore, when you how-to-buy-home-sellers-market-blogfind a good home, you should buy it.  If you are a potential seller however, you probably want to think about accelerating your schedule and sell now while we are still in a full blown seller’s market.  “Strike while the iron’s hot,” it is said.  I can’t see any real benefit in waiting.

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First Time Homebuyers Episode 7: “How Much Home Can You Afford?”

Hallo, Bonjour, Hola, Hello, Greetings!

Welcome to yet another episode of our First Time Homebuyers podcast series!  In this episode, we discuss small amounts of accounting, taxes, and the dive into discussing how you can calculate and budget how much home you can afford based on your level of income!

So, take a seat and enjoy the podcast! We would love to hear your feedback! You can reach us on Facebook, Twitter, LinkedIn, or Instagram.

If this podcast seems like it’s the right fit for you, and you’d like me to assist you in this process and make it painless and easy, give me a call (805-427-3008) or send me an email (Tim@1000OaksRealEstate.com).

You can also check out our listings here!

Enjoy the podcast below, and stay tuned for future episodes!

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First Time Homebuyers Episode 6: Repairs Part 2

Greetings, and welcome to another new episode of our podcast series for First Time Homebuyers.  This is a multi-part series geared towards buying your most crucial and important investment in your life for the first time, and hopefully it can be your dream home the first time around.

This is part two of our sixth episode; repairs! We had a lot of information to cover regarding the aspect of repairs in the purchase of the home, so we split it into two separate episodes. So, take a seat and enjoy the podcast! We would love to hear your feedback! You can reach us on Facebook, Twitter, LinkedIn, or Instagram.

If this podcast seems like it’s the right fit for you, and you’d like me to assist you in this process and make it painless and easy, give me a call (805-427-3008) or send me an email (Tim@1000OaksRealEstate.com).

You can also check out our listings here!

Enjoy the podcast below, and stay tuned for future episodes!

 

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First Time Homebuyers Episode 6: Repairs

Greetings, and welcome to another new episode of our podcast series for First Time Homebuyers.  This is a multi-part series geared towards buying your most crucial and important investment in your life for the first time, and hopefully it can be your dream home the first time around.

This is part one of our sixth episode; repairs! We had a lot of information to cover regarding the aspect of repairs in the purchase of the home, so we split it into two separate episodes. So, take a seat and enjoy the podcast! We would love to hear your feedback! You can reach us on Facebook, Twitter, LinkedIn, or Instagram.

If this podcast seems like it’s the right fit for you, and you’d like me to assist you in this process and make it painless and easy, give me a call (805-427-3008) or send me an email (Tim@1000OaksRealEstate.com).

You can also check out our listings here!

Enjoy the podcast below, and stay tuned for part two of the episode coming out this weekend!

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First Time Homebuyers Episode 5: The Offer

Hello, and welcome to yet another episode of the podcast in our new series, “First Time Homebuyers.”

This is a multi-part series in which we take a deep dive into buying your most crucial and important investment in your life for the first time, and hopefully it can be your dream home the first time around.

Episode 5 discusses some of the necessary the offer, starting with the importance of pricing and terms and continuing on to cover everything important with writing an offer. So, take a seat and enjoy the podcast! We would love to hear your feedback! You can reach us on Facebook, Twitter, LinkedIn, or Instagram.

If this podcast seems like it’s the right fit for you, and you’d like me to assist you in this process and make it painless and easy, give me a call (805-427-3008) or send me an email (Tim@1000OaksRealEstate.com).

You can also check out our listings here!

Enjoy the podcast below!

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First Time Homebuyers Episode 4: The Realtor

Hello, and welcome to yet another episode of the podcast in our new series, “First Time Homebuyers.”

This is a multi-part series in which we take a deep dive into buying your most crucial and important investment in your life for the first time, and hopefully it can be your dream home the first time around.

Episode 4 discusses some of the necessary and important things to look out for when selecting the agent or broker to represent you as a buyer. So, take a seat and enjoy the podcast! We would love to hear your feedback! You can reach us on Facebook, Twitter, LinkedIn, or Instagram.

If this podcast seems like it’s the right fit for you, and you’d like me to assist you in this process and make it painless and easy, give me a call (805-427-3008) or send me an email (Tim@1000OaksRealEstate.com).

You can also check out our listings here!

Enjoy the podcast below!

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First Time Homebuyers Episode 3: What To Look For

Hello, and welcome to yet another episode of the podcast in our new series, “First Time Homebuyers.”

This is a multi-part series in which we take a deep dive into buying your most crucial and important investment in your life for the first time, and hopefully it can be your dream home the first time around.

Episode 3 discusses some of the necessary and important things to look out for when purchasing real estate. So, take a seat and enjoy the podcast! We would love to hear your feedback! You can reach us on Facebook, Twitter, LinkedIn, or Instagram.

If this podcast seems like it’s the right fit for you, and you’d like me to assist you in this process and make it painless and easy, give me a call (805-427-3008) or send me an email (Tim@1000OaksRealEstate.com).

You can also check out our listings here!

Enjoy the podcast below!

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First Time Homebuyers Episode 2: Financing

Hello, and welcome to the second podcast in our new series, “First Time Home-Buyers.”

This is a multi-part series in which we take a deep dive into buying your most crucial and important investment in your life for the first time, and hopefully it can be your dream home the first time around.

Episode 2 discusses financing, and the different options you may take as you try and secure a home loan. So, take a seat and enjoy the podcast! We would love to hear your feedback! You can reach us on Facebook, Twitter, LinkedIn, or Instagram.

If this podcast seems like it’s the right fit for you, and you’d like me to assist you in this process and make it painless and easy, give me a call (805-427-3008) or send me an email (Tim@1000OaksRealEstate.com).

You can also check out our listings here!

Enjoy the podcast below!

 

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Pending Home Sales Data: Yikes, Or Is It?

www.nar.realtorIn light of the surprising, or not so surprisingly low pending sales data released by the National Association of Realtors today, I thought it might be a good time to comment on the current status of the real estate market.

With the data today showing a 33.7% year over year decline and a 21.8% month over month decline in pending home sales, one could easily and not incorrectly conclude that the real estate market sits atop a precipice of a potentially catastrophic declining value.  And since the pending data may still reflect activity from pre-lockdown early March, the sales numbers carry the potential to be even uglier next month.  The question most people are asking is, “What’s next?”  Well next is more crummy data, but bad data doesn’t necessarily portend to a significant drop in real estate values, or does it?

While it is true that the number of new contracts and escrows dropping nearly 40% cannot be viewed as anything but bad especially if you’re a Realtor, there are underlying reasons that the market may prove to be more resilient and resist market pressure to collapse (Reach Out to Tim Here).  Take for example the surprising new home sales data which reported yesterday that sales were actually up month over month by .6%.  And while this still reflects a 6% decline year over year, one has to wonder if sales are up even a little, why are they up?  To answer this mystery, you only have to look at the available resale inventory to understand, supply is anemic and therefore, new homes are one of the places a buyer can find a selection with which to purchase.  But why is supply anemic if sales are off?  Why aren’t prices plummeting?  Why isn’t inventory ballooning if demand has dropped so much?

Is the Glass Half Empty or Half Full? – Words from the WindIf you’re a glass a half full kind of person, I guess, the easiest answer is that people just aren’t panicking.  Sellers, most of whom are sitting on a mountain of equity, aren’t approaching selling with a “cut and run” attitude and instead have an expectation that the economy is going to bounce back pretty quickly once everyone reopens.  All you need to do is look at the stock market to understand that they are not alone in this belief. Clearly Wall Street feels the same way since the stock market has remained incredibly buoyant in light of nearly 40 million people out of work and an expected 2nd quarter decline in GDP in excess of 8% and perhaps an even higher decline in the 3rd quarter.  Of course, if you are a “glass half empty” kind of person, you’ll say the markets are myopic which is obvious for all of the opposite reasons I just listed.

To understand the real estate component of this discussion, you need to consider the effect that short supply has on the existing pool of buyers.  That is, there’s very little available active for sale home inventory for these buyers to purchase, so they have to behave like it’s still a seller’s market.  This of course explains the bump up in new home sales, as I’ve suggested (Search for Homes Here). Moreover, if you extrapolate from that data that demand is somehow still exceeding supply, then naturally you’d conclude prices must remain firm in spite of an economic slowdown.  What this doesn’t explain however, is why if we are in an economic collapse, there are any buyers other than bottom feeders at all?  The answer here may surprise you: Not everyone is being affected by the economic downturn in the same way.

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Without going into a big long thing about economic inequality, let me just say that for many, the only real impact the virus lockdown is that they are working from home.  Perhaps those most terribly affected by this pandemic economy are those folks in service jobs like dining and entertainment, hospitality, leisure and travel.  And while this is a huge segment of the economy, it’s possible the a majority of the common workers in these industries was not and is not part of the current active buyer pool.  For those who are actively house hunting, it’s been pretty difficult to find a great home and the pandemic has actually only made it worse (Visit Tim’s Facebook Here).  The virus may have caused certain buyers to bail, but historically low rates have brought others in and coupled with a large number of potential sellers sitting on the sidelines not wanting to move during a pandemic or worse, wind up homeless in a pandemic, the supply of available inventory is still lower than the demand for that inventory.  Thus, prices have remained stable.

Going forward, we’ll just have to wait and see.  One thing is clear however, the pandemic is compelling some buyers to accelerate their desire to own their own home as sheltering in a place in a home that isn’t particularly desirable, is a great motivator.  I expect the data to continue to defy logic at least until the late fall when it should be clearer that we are either quickly bouncing back or inHow to Buy Land | realtor.com® for a prolonged economic struggle.  Until then, if you haven’t lost your job and have been waiting to own your own home, find a good one and buy it because as Will Rogers famously said, “Buy land.  They ain’t making anymore of the stuff…”

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First Time Home-Buyers: Episode 1 – Saving Money

Hello, and welcome to the first podcast in our new series, “First Time Home-Buyers.”

This is a multi-part series in which we take a deep dive into buying your most crucial and important investment in your life for the first time, and hopefully it can be your dream home the first time around.

Episode 1 starts off with the beginning of the process; saving up the cash for that down payment.  So, take a seat and enjoy the podcast! We would love to hear your feedback! You can reach us on Facebook, Twitter, LinkedIn, or Instagram.

If this podcast seems like it’s the right fit for you, and you’d like me to assist you in this process and make it painless and easy, give me a call (805-427-3008) and send me an email (Tim@1000OaksRealEstate.com).

You can also check out our listings here!

Enjoy the podcast below!

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