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RSS FeedAt The Approval Experts we continue to make a conceited effort to inform real estate buyers and sellers in San Diego of the current market conditions. We will discuss our opinion in this article of where we believe the market is headed into the summer of 2011. We are monitoring a number of aspects that effect market conditions and therefore we feel it is imperative to share this information with our clients.
The last two years has been a very interesting ride for many. Millions of sellers lost their homes to foreclosure or had to sell their home through a short sale process across the U.S. The government set up a number of programs to assist those in financial distress avoid further complications. Many banks went through their portfolio and managed to sell a number of their toxic assets through the foreclosure process, which also helped with the inventory shortages we experienced. The short sale and foreclosure market had very little competition in early 2009, but as spring of 2009 rolled around we saw the buying pools grow as many investors and home buyers found that interest rates and incentives made buying very appealing once again. This demand continued into 2010 and as such the market began seeing a number of changes in regards to supply and demand.
The unfortunate aspect of the real estate industry is that the banks still control a number of the current sales within San Diego County. Although March 2011 did see an increase in traditional sales, we can attribute some of these sales to price increases over the last 2 years. We have seen an influx of sellers due to profit taking. Buyers who purchased at the end of 2008 and the first half of 2009 in San Diego County likely have equity. These buyers in late 2008 and early 2009 are slowly becoming sellers and in doing so they are also avoiding the 2 year capital gains rules with the IRS.
Investors have been slowly backing away from the market as banks are doing their best to avoid disclosing further toxic assets to their investors. We are now seeing more banks looking to sell foreclosures for premiums, which in turn pushes up the value of additional inventory. Unfortunately, the only real benefit here is for the banks as most buyers aren’t looking to flip their homes in the short term and the percentage of traditional sellers is still quite low in comparison. Lack of information for traditional sellers can be extremely detrimental when listing a home as many sellers don’t understand how the banks operate, ultimately causing large price adjustments then necessary to keep up with market values. The programs the government has instituted to help sellers with the short sale process, including HAFA and HAMP have done very little and in some cases actually created bigger problems.
Looking ahead we expect to see the banks continue their control of inventory. The shadow inventory will remain, which will likely control supply and demand for some time to come. The buyers are once again leaving the market, even with these astronomically low interest rates. It’s evident that in order for the housing market to pick up we need to focus on improving the overall health of the economic markets and employment numbers both locally and nationally. The strength of the real estate market is heavily dependent on economic data, which at this point is very indecisive.
There is a notable increase in rents over the last 12 months throughout various areas of San Diego County, which will certainly affect a number of buyers who are currently on the fence. Rents have increased for an obvious lack of supply in the markets. We will be monitoring the status of rents as it pertain the buying pool over the next few months. Another factor that has the potential to effect the status of both rental prices and home values is inflation. Although many economists believe we are not in an inflationary period, it’s hard to argue that the dollar’s value has been decreasing at extremely rapid rate over the last 18 months. Look for this to play a significant role over the months and years to come. This could be an entry point for some investors as rents and values have the potential of rising in an inflationary period, although we have to take into consideration that rates would have to increase to curb inflation, which could have a negative impact. It’s obviously tough to make a firm prediction in terms of inflation, but it’s safe to say that we have printing ourselves out of the current values and inflation becoming more evident daily.
Look for our updates in the weeks to come as local and national news impact our markets here in San Diego County.
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Tags: Agent, Banks, buy, Buyers, California, Cardiff, Carlsbad, Del Mar, Encinitas, Foreclosure, North County, San Diego, San Elijo Hills, Short Sale
This entry was posted on Saturday, April 23rd, 2011 at 10:10 am and is filed under Blog, Featured. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.