Falling Prices, Low Rates Prod California Homebuyers
Favorable home prices, record-low interest rates, and the belief that rates will rise in the near future were the primary motivators leading home buyers to purchase, according to the CALIFORNIA ASSOCIATION OF REALTORS®’ (C.A.R.) “2009 Survey of California Home Buyers”.
MAKING SENSE OF THE STORY FOR CONSUMERS
· Sixty-eight percent of buyers said price decreases motivated them to buy a home, while 39 percent reported low interest rates helped them move to a better location. Twenty-three percent claimed the likelihood that rates will move up as the motivating factor.
· Housing affordability has improved dramatically in response to the decline in home prices along with historically low mortgage rates, creating a tremendous opportunity for home buyers in California. Home sales in California rebounded in 2008 and early 2009, reflecting the combination of favorable prices, low mortgage rates, and home buyer tax credits, fueled primarily by sales of distressed properties that accounted for more than half of the state’s transactions.
· Forty-nine percent of all buyers purchased a home through a traditional market sale, while 38 percent purchased a REO/bank-owned property, according to the survey. Reflecting the difficulty in closing short sales–properties selling for less than the loan amount–only 13 percent of buyers purchased a short-sale property.
· Home buyers who purchased a REO or bank-owned property experienced the highest level of difficulty in obtaining financing, compared with a more traditional transaction. They rated the level of difficulty as 8.9 (on a scale of 1 to 10 with 10 representing the greatest level of difficulty in obtaining financing) compared with a 7.7 for home buyers with a traditional market sale and 7.6 for short-sale home buyers.
Searching For A Bottom In The Housing Market
With consumer confidence rising in May to its highest level in eight months, housing starts increasing more than 17 percent in May compared with the previous month, and sales of existing homes climbing 2.9 percent in April nationwide, it appears that the housing market may be stabilizing.
MAKING SENSE OF THE STORY FOR CONSUMERS
· Although sales of existing, single-family homes rose 35.2 percent in May in California , compared with a year ago, the median price declined 30.4 percent. Some industry analysts predict that as specialized adjustable-rate mortgages, known as option ARMS and Alt-A mortgages, reset over the next 18 to 24 months, prices could decline further before stabilizing.
“We are seeing strong buying activity, particularly in those boom and bust markets, where prices have declined significantly. Buyers are coming in and fighting over properties – there is multiple bidding in California and Florida,” says Lawrence Yun, chief economist with the NATIONAL ASSOCIATION OF REALTORS®.
Sales of existing homes are soaring as many investors and first-time buyers purchase distressed properties. Yun estimates that about 50 percent of current sales involve distressed properties, and
he expects the trend to continue as foreclosures rise in the months
ahead.
Although some economists predict home prices will continue to decline in the coming months, California’s median home price rose
for the third consecutive month in May, posting the largest month increase on record for the month of May.
Some buyers are trying to time the bottom of the market and purchase once it appears that prices are consistently and steadily rising. Many housing forecasters advise against this approach as buyers should not view their homes solely as investment opportunities. Historically, the average annual rate of return on a home lived in for five years or more is nearly 12 percent, based on data C.A.R. has collected over the last 40 years.
May home sales increased 35.2 percent, price declined 30.4 percent
Home sales increased 35.2 percent in May in California compared with the same period a year ago, while the median price of an existing home declined 30.4 percent, C.A.R. reported last week. “With affordability for first-time buyers at a record high, sales of existing, single-family homes continued to remain above the 500,000 level for the ninth consecutive month,” said C.A.R. President James Liptak. “Buyers are beginning to realize that the combination of favorable home prices, historically low mortgage rates, and first-time home buyer tax credits, may not align again for many years.
“The sales gains over last year have diminished in recent months,” he added. “This trend is expected to continue through the end of the year, as limited inventory at the moderate and low end of the market constrains sales activity,” he said.
Closed escrow sales of existing, single-family detached homes in California totaled 556,590 in May at a seasonally adjusted annualized rate. Statewide home resale activity increased 35.2 percent from the revised 411,770 sales pace recorded in May 2008. Sales in May 2009 increased 2.9 percent compared with the previous month.
The median price of an existing, single-family detached home in California during May 2009 was $267,570, a 30.4 percent decrease from the revised $384,540 median for May 2008, C.A.R. reported. The May 2009 median price rose 4.2 percent compared with April’s $256,700 median price.
Fast Facts - Week of June 22, 2009
Calif. median home price - April 09: $256,700 (Source: C.A.R.)
Calif. highest median home price by C.A.R. region April 09: Santa Barbara So. Coast $840,000 (Source: C.A.R.)
Calif. lowest median home price by C.A.R. region April 09: High Desert $106,530 (Source: C.A.R.)
Calif. First-time Buyer Affordability Index - First Quarter 2009: 69 percent (Source: C.A.R.)
Mortgage rates - week ending 6/18/09 30-yr. fixed: 5.38% Fees/points: 0.7% 15-yr. fixed: 4.89% Fees/points: 0.7% 1-yr. adjustable: 4.95% Fees/points: 0.6% (Source: Freddie Mac)
RE/MAX Has National TV to Itself
BY INMAN NEWS, TUESDAY, JUNE 9, 2009.
Inman News
RE/MAX International Inc. was the only real estate franchise promoting its brand in national television advertisements during the first three months of the year, the company said in announcing a new series of 30-second spots.
Last year, RE/MAX had a 50 percent share of national TV ad impressions generated by real estate franchises, the company said, citing figures from Nielsen Monitor-Plus.
Century 21 was next with 23 percent, followed by Coldwell Banker (21 percent), and ERA and Prudential, which each had 3 percent of national TV ad impressions in the category.
Impressions are an estimate of how many times an ad is seen, which depends largely on how often it airs and the popularity of the program it appears on.
During the first quarter of 2009, RE/MAX had a 99.9 percent “share of voice” for national TV advertising — meaning no other franchises ran ads on national television in the first three months of the year.
Century 21 announced in January that it would stop running national TV ads to increase the company’s online presence. ERA, another company under the Realogy Corp. umbrella, stopped running ads on the national broadcast networks three years ago (see story).
While Century 21 and ERA have said they get more bang for their buck from online advertising, RE/MAX is trumpeting its dominant position in national TV advertising as a competitive advantage.
“While many of the real estate industry’s biggest players are scaling back their TV buys due to economic realities … RE/MAX remains committed to being visible where consumers still spend a significant amount of their leisure time — in front of a television set,” RE/MAX boasted in a press release.
The press release was tied to three new 30-second spots featuring “straight talk” from RE/MAX Chief Executive Officer Margaret Kelly, that are running during prime-time network programming, newscasts and cable TV. The ads are posted on RE/MAX’s YouTube channel.
In one of the spots, Kelly urges homeowners who have been worried about what their property may be worth — or would-be homebuyers wondering if their dream home may now be affordable — to “ask a RE/MAX agent, or go to RE/MAX.com.”
“We’ve all heard about the trouble in the housing industry,” Kelly says in the ad. “The fact is, with all the talk of a national real estate market, your town, your neighborhood, your home, or the home you’d like to buy are each unique. The national conversation may not apply at all.”
RE/MAX says it “vigorously promotes its brand” with a mix of television, cable, radio, print and Internet advertising, and has recently made the move into social networking. In addition to YouTube, RE/MAX also maintains a presence on Twitter, Facebook and LinkedIn.
