Irvine Real Estate News

 

Aug. 20, 2019

Homebuilders see more short term profit in building single-family rental communities

 

Homebuilders see more short term profit in building single-family rental communities

 

If you can’t buy, rent? That’s the stigma renters used to tolerate, but no longer. According to CNBC’s Diana Olick, demand for single-family rental homes is surging while homebuilders are rethinking how they do business by redesigning and reimagining the sector — and becoming landlords themselves.

 

“While builders have always sold some of their new homes to investors as rentals, the strong demand has some moving into the space exclusively,” says Olick. An example she used is a new housing project in San Antonio, TX, where a builder is creating a gated community of 250 three and four-bedroom homes are renting for anywhere from $1,800 to $2,300 per month. The community includes luxury amenities such as a pool, a fitness center, a community kitchen and party space, as well as a dog park and dog-washing station.

 

Olick explains how close-quarters condo rentals are no longer the trend, taking the idea of an apartment and going horizontal instead of vertical. While nearly all apartment rentals consist of studios, one and two bedrooms, there are very few three and four-bedroom homes for rent. “We saw a growing need coming out of the downturn, to provide three- and four-bedroom homes to the renter society,” said one of the homebuilders she quoted.

 

A major shift in the demographics is finding homebuilders shifting their thinking as well. “Empty-nesters are done taking care of their homes. They want to downsize, they want portability, mobility in the lease. The millennial household formation, they’re not really dialed into taking care of a home, they want to go out and do the same thing that the boomers are doing, which is enjoy life, not work hard for their house,” said the builder.

 

Last year, approximately 43,000 single-family homes were built for rent, the largest number in nearly 40 years according to National Association of Home Builders analysis of U.S. Census data. The built-for-rent share of housing starts is also rising, nearly double its recent historical average (from 1992-2012). This is beginning to answer the need for not only empty-nesters but for millennials as well, who often are not yet in the position to take on a mortgage or simply are choosing not to. Many are not married, have no kids but definitely have dogs, making them gravitate toward renting a home instead of a condo so they can open a back door and let their canines romp.

 

While homeownership has always been touted as the American Dream, you’d think those earning six figures would buy instead of rent. But that is no longer the case. Many can afford to buy a home but simply decide to avoid the hassle of homeownership. Unlike renters, homeowners are often hit with hidden costs, more responsibility, and fewer amenities than rental dwellers.

 

With the high costs of land, a labor shortage, and expensive materials, builders are struggling to build neighborhoods of entry-level homes and expect to make a profit — a likely reason for the shift toward rental properties and communities. Big homebuilders like Lennar and Toll Brothers have begun building homes specifically to sell to investors as rentals. They see less risk in the short term in the build-for-rent market.

 

Source: CNBC, TBWS

 

Rates Currently Trending: Neutral 

 

Mortgage rates are trending sideways to slightly higher so far today.  Last week the MBS market improved by +19bps.  This was enough to move rates slightly lower from historically low levels. We saw high rate volatility at the end of the week.

 

Posted in News
Aug. 13, 2019

The Sky is NOT Falling

Buyer demand may not be as hot as prior years, but the Housing market is not collapsing either.

No Housing Collapse: The underlying housing fundamentals have stabilized significantly compared to last year’s slide.

Little kids often have a tough time climbing under the covers and swiftly dozing off to sleep. Instead, they look under their bed to make sure there is nothing there. They look in their closet and then close the door tight. They make certain that the nightlight is brightly shining. There are even times when they will ask dad or mom to be absolutely certain that there are no monsters in their room. Finally, they anxiously fall asleep. For buyers or sellers wondering if there are any monsters lurking around the corner, they can be rest assured that the sky is not falling, there are no surprises on the housing front anytime soon. Reports from the housing trenches are that many buyers expect the market to drop like a rock and that is when they will finally be able to purchase. That simply is not on the horizon. Sitting back and waiting on the sidelines will prove to be a waste of time. Last year, major cracks in the housing market emerged. The HOT market continued from 2012 through the start of 2018, until the underlying fundamentals quickly eroded. From May through August of last year, the active inventory climbed by 17%, demand dropped by 10%, and the Expected Market Time (the amount of time it would take from hammering in the FOR SALE sign to opening escrow) rocketed upward. The Expected Market Time continued to soar by climbing an additional 56% from August through the end of the year, compared to a 7% average from 2012 through 2017.

Posted in News
Aug. 13, 2019

Foreclosure activity drops through most of U.S. in first half of 2019

 

Foreclosure activity drops through most of U.S. in first half of 2019

 

It was not that long ago when one could drive through neighborhoods of lovely homes and see "for sale" signs up everywhere, vacant homes, and uncut lawns. The financial crisis causing the foreclosure of millions of homes was a scary time. The good news is that the days of rampant foreclosures resulting in scores of empty homes are thankfully now not even viewable in the rearview mirror throughout most of the nation.

 

According to a recent ATTOM Data Solutions report, foreclosure filings in the first half of 2019 are down 18% compared with a year earlier. Realtor.com's Clare Trapasso writes that the 296,458 filings in the first six months of the year represented an 82% drop from the worst of the foreclosure crisis in the first half of 2010, quoting the data company's chief product officer, Todd Teta. "Foreclosures are continuing to come down. Homeowners who can't make their payments are able to get out of their debt by selling their homes rather than going through foreclosure. Increased home prices are allowing them to sell the home for more than they owe."

 

The figures were judged by taking into account default notices, scheduled auctions, and bank repossessions in more than 2,200 counties to come up with its findings.

 

There are still a few metropolitan areas that are seeing a rise in foreclosure filings and price drops as a result -- a point of interest for potential investors. Teta admits that because of price stabilization and increasing values, however, lenders are becoming more confident when taking a home through a foreclosure, knowing they might easily recoup or minimize their losses by foreclosing and then selling the home.

 

Source: ATTOM, Realtor, MarketWatch, TBWS

 

Rates Currently Trending: Neutral

Mortgage rates are trending sideways this morning.  Last week the MBS market worsened by -22bps.  This was enough to move rates slightly higher last week. We saw high rate volatility throughout the week.

Posted in News
Aug. 12, 2019

July jobs numbers bode well for real estate


July jobs numbers bode well for real estate

According to the Bureau of Labor Statistics, Realtor.com and a report by Forbes' reporter Carolyn Feeney, the much-anticipated July jobs report released Friday morning offers a mixed bag for real estate. The good news is that the employment numbers are still tight, offering a kind of safety net for the housing market. But a weak increase in construction jobs promises little relief for the ongoing housing shortage and affordability struggles first-time buyers face.

The U.S. labor market showed a solid performance in July with the addition of 164,000 new jobs while the unemployment rate held steady at 3.7%. Wage growth also increased one-tenth of a percentage point to 3.2%, exceeding expectations.  According to the report, July marks 106 straight months of job gains and cements the longest period of economic expansion in U.S. history.

How does all this affect real estate? With jobs in abundant supply, even those who lose their jobs should be able to find other positions quickly. Job security is related to consumer confidence, which fuels home buying demand and protects the overall stability of housing, according to Feeney. Low inventory is still a factor, however. A July data analysis by Realtor.com showed that inventory growth continues to shrink.

Realtor.com's Chief Economist Danielle Hale said in a recent statement, "It was only 18 months ago that the number of homes for sale hit its lowest level in recorded history and sparked the fiercest competition among buyers we've ever seen. If the trend we're seeing continues, overall inventory could near record lows by early next year."

New construction is the key. While health care, financial services, and technology industries see steady growth in employment, the jobs report highlights the construction industry's challenge to hire skilled labor as just one of the several barriers to ramping up new-home building.

The new Fed rate cut could offer benefits to people with adjustable-rate mortgages and commercial loans as well as spur bigger job gains moving forward and keep employment high. "Employers are hiring. People have money to spend. Houses remain an attractive purchase for Americans," says Feeney.

Source: Realtor, Forbes, US Bureau of Labor Statistics, TBWS 

 

Rate Currently Trending: Neutral 

 

 

 

Mortgage rates are trending sideways this morning.  Last week the MBS market improved by +47bps.  This was enough to move rates lower last week. We saw high rate volatility last week.

 

Posted in News
July 16, 2019

NAR Chief Economist sees promise in housing market

 

NAR Chief Economist sees promise in housing market

 

A a recent report by National Association of Realtors' Chief Economist Danielle Hale details how and why the housing market is looking more promising over the next few months. "I don't think we'll get back all the way to...the frenzy we saw at the beginning of 2018," she says. "But it's certainly a possibility that home sales and prices will pick up, especially if mortgage rates stay low."

 

When mortgage rates are at historical lows, the market tends to heat up, offering a tangible incentive for people to buy. Freddie Mac's latest mortgage rate survey revealed those historical lows recently. "We're seeing a tug of war happen as the fixed income market flashes warning signs while the equities market continues to march higher with optimism," Sam Khater, Freddie Mac's Chief Economist, said. "The data suggests the economy is weakening but is still on very solid ground with high consumer confidence and a strong labor market. Closer to home, the housing market continues to slowly improve and gain momentum as we head into the second half of the year, which is good news and should keep the economy growing."

 

Realtor.com's Clare Trapasso reported that said that the report also indicates that a number of homes for sale are expected to decline again over the next few months because the growth in inventory is starting to slow, slipping from 2.9% annual growth in May to 2.8% in June. "We're not seeing as many new listings come up on the market," Hale said. That could be because homeowners looking to trade up to bigger, nicer residences can't find anything in their price range. It was only 18 months ago that the number of homes for sale hit its lowest level in recorded history and sparked the fiercest competition among buyers we've ever seen."

 

Source: NAR, Realtor, TheMReport, TBWS

 

Rates Currently Trending: Neutral

Mortgage rates are trending sideways so far today.  Last week the MBS market worsened by -20bps.  This was enough to worsen rates or fees.  Last week we saw a good deal of volatility and we are likely to see the same this week.

 

Posted in News
July 9, 2019

Rentals surge as housing tries to catch up

Rentals surge as housing tries to catch up

 

According to real estate analytics firm RealPage, demand for rental apartments reached a five-year high this spring, spurred by new household formation and home sales not being able to keep up. The demand is also pushing rental prices up, which may eventually make renters decide to become homebuyers.

Right now, 28 Woodbridge properties are listed for rent on the MLS. 521 homes for lease are available elsewhere in Irvine. Some of them are listed here.

"The number of new apartment move-ins in the second quarter of 2019 increased 11% over the same period last year," says the report. "The demand surge drove the national occupancy rate to 95.8%, compared with 95.4% at the end of the second quarter of 2018."

The increase was attributed to economic uncertainty in the second quarter that had already slowed the market in the first quarter. RealPage's chief economist characterized this phenomenon as playing "catch-up."

While much of that new supply is targeting higher-income earners, the market for lower-cost rentals is much tighter. The asking price for homes continues to increase, while the cost of procuring a mortgage is at one of its lowest points ever, with income growth being the key in turning the tide as well as more abundant housing opportunities.

Last week, the Trump administration announced it would explore using federal programs to reduce local barriers to housing construction, such as restrictive zoning.


Source: Realtor, RealPage, TBWS, https://WoodbridgeRental.com/

 

Rates Currently Trending: Neutral

Mortgage rates are trending sideways this morning.  Last week the MBS market improved by +8bps.  This caused rates to move sideways on moderate volatility for the week.

Posted in News
July 2, 2019

Investors are buying up a record number of homes

According to data release by CoreLogic, big private-equity firms, real-estate speculators and others that buy properties comprised more than 11% of U.S. home purchasers in 2018.

What does this mean? It means that with investor purchases of U.S. homes at an all-time high, rising home prices have done little to dampen demand for flipping homes or turning them into single-family rentals. The investor purchases are near twice the levels before the 2008 housing crash. While this can pose a challenge for millennials and other first-time buyers who are increasingly looking to buy starter homes but are forced to compete with deep-pocketed cash buyers, it also means demand is still high, and real estate remains healthy.

Right now there are about 1,000 homes for sale in Irvine alone. Check them out!

"Big commercial property owners like Blackstone Group LP and Starwood Capital Group began buying thousands of homes out of foreclosure during the housing bust," says realtor.com's Laura Kusisto. "Many economists credit investors with helping to stabilize the housing market in 2011 and 2012 by buying with cash when prices were low and mortgage credit froze."

But, she adds, analysts expected those purchases to slow as the market rebounded and properties could no longer be had for bargains. The reverse happened, and demand for properties has intensified. "While these purchases dipped slightly when the market started to recover in 2015 and 2016, they have rebounded to surpass the previous peak of six years ago," says Kusisto.

She explains how investors are an especially powerful force at the bottom of the market, where all-cash deals often dwell. CoreLogic discovered that investors purchased one in five homes in the bottom third price range in 2018, up 5 percentage points from the 20-year average of less than 15% — homes that first-time home buyers would logically be buying.

Source: Realtor, CoreLogic, TBWS

 

 

Rates Currently Trending: Neutral

Mortgage rates are trending sideways so far today.  Last week the MBS market improved by +2bps.  This caused rates to move sideways on relatively low volatility.

Posted in News
June 18, 2019

Last Call

There is not a lot of steam left in the best time of the year to sell a home and get it under contract.

 

Last Call: In order for sellers to cash in on the most lucrative time to sell a home during the year, they better open up escrow soon.

 

It is that time of the year for the family vacation. That includes airports, long lines at the TSA checkpoint, connections, and a bit of stress and anxiety. Inevitably, countless travelers with kids in tow will find themselves running to their connecting flight. The sense of urgency is intense. As if to mock the situation, the flight crew announces, “LAST CALL for flight 93!” Frantically many will barely make it, gasping for air while boarding the plane. Still others will arrive at the gate only to find that the “cabin door has been closed.” This is also the time of year when many sellers come on the market thinking they have an ample amount of time to market their home to take advantage of the Summer Market, but that simply is not the case. Yes, summer has just begun, but the Summer Market for housing already started in May. The housing market shifts from away from the Spring Market with the distractions of the end of the school year, especially graduations. From there, the distractions of summer and the family activities take hold: family vacations, trips to the beach, trips to the pool, family reunions, summer camps, and picnics. Life gets in the way for many that are looking to purchase a home. As a result, housing downshifts from the best time of the year to sell, the spring, to the second-best time of the year, summer.

 

Posted in News
June 11, 2019

Home prices on the rise with predictions for more of the same

While homebuyers may not be as pleased these days, sellers have smiles on their faces. The news (statistics always lag behind a bit) is that national home prices notched a stronger annual gain in April than in March, marking the first time in over a year that prices have accelerated from one month to the next.

That data comes from a recent report from CoreLogic, a national real estate information services provider. Prices were up 3.6% for the year and 1% for the month in March.

Annual price gains in CoreLogic’s national index have been flat or declined every month since April 2018, but the company believes that “the pickup in sales between March and April” helped soften some of the slower growth in prices.

Sales as reported by the National Association of Realtors were slower in April than in March: they ran at a 5.19 million seasonally adjusted annual pace in April, down from a 5.21 million pace in March. But CoreLogic expects home prices to keep going up, and forecasts a 4.7% rise over the coming 12 months. The company also analyzes housing stock in major metro areas for their values compared to their “long-term, sustainable level.” By these measurements, markets including Las Vegas were overvalued, while (believe it or not) San Francisco was undervalued.

The company’s chief economist points out that price growth nationally is strongest for lower-priced homes, keeping buying conditions challenging for first-timers.

Source: Corelogic, NAR, TBWS

 

 

Rates Currently Trending: Neutral

Mortgage rates are trending sideways so far today.  Last week the MBS market improved by +13 bps.  This caused rates to remain very low. Rates experienced relatively low volatility.

 

Posted in News
June 5, 2019

Top 5 Trends

Sometimes it is a great idea to step away from the noise swirling around housing and focus on the trends.

Top 5 Housing Trends: With five months of the year in the rearview mirror, there are crystal clear trends in 2019. Everybody seems to have an opinion about the direction of the housing market. “Up!” “Down!” “The housing run has peaked!” “I’m going to wait for values to come crashing down.” In the end, there is way too much noise that is not rooted in facts, ignoring the data. It is time to step aside from the commotion and look at the trends that have surfaced in 2019.

Here’s a breakdown of the “Top 5” current Orange County housing trends:

1. There are a lot more homes on the market. In fact, this is the highest active inventory level since 2011. There are 7,479 homes that are currently FOR SALE. That is 27% more than last year, an additional 1,605 homes. At the start of the year, the difference was 2,204, so this trend is beginning to diminish. The big rumor is that there are a lot more homeowners opting to sell and flooding the market. The reality is that there are nearly the same number of sellers coming on the market year after year. In 2017, from January through May, 18,264 homes were placed on the market. In 2018 there were 18,199. And, there were 18,180 this year. No flood. Instead, fewer and fewer listings have been converted to sales due to muted demand. With less success, the active inventory has grown.

Posted in News