Irvine Real Estate News

 

Jan. 27, 2020

Mortgage rates have fared better than anyone expected

 

Reflecting back on 2019, we discover that the mortgage market in 2019 had its best year since the height of the pre-crisis boom, even though it was anyone’s ball game judging by what was going on early last year.

 

“Lenders extended $2.4 trillion in home loans last year, the most since 2006, according to industry research group Inside Mortgage Finance,” says Realtor’s Orla McCaffrey. “That was also a 46% increase from 2018.”

 

Robust mortgage lending is always regarded as a good sign for housing, which has seen a rebound in price growth and home sales after a period of declining gains. “A refinancing frenzy, induced by last year’s trio of interest-rate cuts, fueled the mortgage making and helped steady the industry,” says McCaffrey. “The refinancing boom also bodes well for the broader economy, since homeowners saving on their monthly mortgage payments are likely to spend more on goods and services.”

She goes on to quote Freddie Mac’s chief economist Sam Khater, who says when a large and cyclical part of the economy—housing—is starting to improve, it’s a good sign for the economy at large. Also cited is the Mortgage Bankers Association, which estimates that refinances made up 38% of mortgage originations last year.

 

The average rate on the 30-year fixed-rate mortgage, the most popular home loan in the U.S., dropped considerably by the end of 2019, and the average rate is now its lowest level in more than three months. December sales of existing homes jumped nearly 11% from the year before, according to the National Association of Realtors. While the uptick in mortgage lending is a boon, it does not mean it will be easy to buy a home this spring, according to McCaffrey. “Major barriers including a lack of housing supply and relatively tight bank-lending standards are pushing homeownership out of reach for many Americans.” The price of homes continues to rise faster than incomes, meaning affordability will remain an issue. Still, there is an expectation that interest rates will hold steady or even keep falling — a good sign for mortgage lending in 2020, analysts say.

 

Orange County Demand: In the past two-weeks demand increased by 19%.

Demand, the number of new pending sales over the prior month, increased from 1,434 to 1,702, an additional 268 pending sales, up 19%. Demand will continue to rise from here, peaking in late April to mid-May. The current pace of new pending sales is outstripping the increase in the active inventory, which is why the market is currently getting hotter. Check out new inventory at https://www.homesforsaleinirvineoc.com/search/advanced_search/.

 

Source: TBWS & OC Housing Report

 

Rates Currently Trending: Neutral

Mortgage rates are trending sideways this morning.  Last week the MBS market improved by +30 bps.  This was enough to move rates or fees lower last week. We saw high rate volatility on Thursday of last week.  Otherwise, there was very little movement.

 

Posted in News
Jan. 15, 2020

Home buying heats up as the new decade begins, led by the West

 

New home sales numbers are coming out as we begin 2020, and they’re encouraging ones. According to Realtor’s Jacob Passy, the index of pending home sales increased 1.2% in November from the previous month, as reported to the National Association of Realtors.

 

In Orange County December Property sales were 2,412, up 37.9% from 1,749 in December of 2018 and 10.2% higher than the 2,189 sales last month. December 2019 sales were at their highest level compared to December of 2018 and 2017. 

 

“The index records transactions that have not yet closed but where a contract has been signed,” says Passy. “As a result, the index serves as an indicator for existing-home sales reports in the coming months.” This means as compared to November of 2018 contract signings were up 7.4%.

 

The wild West <US> is where sales increased substantially, bumping the increase to 5.5%, while contract signings only saw marginal changes in the Northeast (down 0.1%), South (down 0.2%), and Midwest (up 1%). When compared with last year, sales were up in all four regions.

 

Passy says the inventory of homes for sale will remain a challenge, quoting NAR’s chief economist Lawrence Yun: “Despite the insufficient level of inventory, pending home contracts still increased in November. The favorable conditions are expected throughout 2020 as well, but supply is not yet meeting the healthy demand.”

 

In Orange County the Total Inventory of Properties available for sale as of December was 4,499, down -13.1% from 5,178 last month and down -26.5% from 6,121 in December of last year. December 2019 Inventory was at a mid range compared to December of 2018 and 2017.

In the homebuilding arena, most economists expect things to pick up next year, but not enough to fully meet the demand. That means home prices should continue to increase at healthy — if somewhat slower — pace.

 

“Mortgage rates are anticipated to remain at their current, historically-low levels in 2020, but that may not be enough to make buying a home affordable for would-be buyers struggling to get enough money together to make a purchase,” says Passy.

 

Source: Realtor, TBWS

 

Rates Currently Trending: Neutral

 

Mortgage rates are trending slightly higher so far today.  Last week the MBS market improved by +5bps.  This caused rates and fees to remain mostly unchanged. We saw moderate rate volatility throughout most of the week.

 

Posted in News
Jan. 15, 2020

Bone-Dry: A Supply Problem

For years, there have not been enough homes on the market, and the start to 2020 is especially pronounced.

 

Low Supply: The active inventory is extremely low to start the year, down 34% compared to the start to 2019.

 

Life is a time crunch. Inevitably, important errands are left to the last minute. It’s happened to everybody at one time or another. With Valentine’s Day on the horizon, it will happen again. Many will head to the grocery store on February 13th and make a bee line to the greeting card aisle, only to find twenty other procrastinators hurriedly looking for the best card. Squeezing between the crowd reveals a half empty shelf with the best cards undoubtedly already taken. The whole ordeal is frustrating. Similarly, buyers this year are just as frustrated.

 

The Orange County housing shelves are half empty. It is tough being a buyer looking for a home in today’s market. The year started with 3,692 homes, the third lowest start in decades behind 2013 and 2018. There were 5,565 homes to start 2019, 51% more than January 1, 2020. There were a lot more choices a year ago, but not today. The trend of the supply problem dates to the beginning of the Great Recession, 2008. Ever since then, fewer and fewer homeowners have placed FOR SALE signs in their front yard. This trend is hardly a blip on the radar screen; instead, it has continued for twelve consecutive years.

 

Last year may have seemed like a better year with more homes to choose from, but that was caused by diminished demand due to higher interest rates. Homes that typically would have sold in prior years lingered on the market until interest rates dropped to historical lows, dropping from 4.5% at the start of 2018 to below 3 by the end of May.

 

All Irvine's active inventory can be seen at this link.

 

Posted in News
Jan. 8, 2020

Low housing inventory persist as the decade begins

While getting perspective on what the real estate market was like a decade ago can help make you appreciate the current market, it won't make some realities disappear. Back in 2010, many homeowners were desperately hoping to hang on to their homes. Others were desperate, doing everything they could to attract buyers.

Those buyers were happy with being courted by home sellers but were struggling to get financing from lenders who had seen their industry take a cautious turn after having so much flexibility for so long.

According to realtor.com's managing editor Cicely Wedgeworth (using data collected by its chief economist Danielle Hale), the past ten years have been the most consequential stretch in American real estate history —one that has fundamentally altered the landscape. "Cosmopolitan coastal cities are out; affordable midsize cities are in," she says. "Baby boomers and Gen Xers are no longer the dominant forces in buying, ceding that turf to millennials. Yet after all this time, it seems that home buyers still can't get much of a break."

In her housing trends study, Hale admits that while there will be opportunity for millennial buyers in the coming decade, in many ways the challenges buyers have faced for years are going to persist—challenges like difficulty finding the home that's right for them, and competing with other buyers, especially at affordable price points. Low inventory has been making things tough for buyers since 2015, and next year inventory could reach historic lows, with single-family home construction increasing but falling well short of keeping up with demand. The bright side? Mortgage rates are expected to remain reasonable.

 

Orange County & Irvine's housing inventory shows a similar challenge -- as of December in Orange County inventory was 3,038, down 23.7% from 3,980 in December 2019.

Irvine's inventory as of December was 267, down 14.7% from 313 in December 2019. 

All Irvine's active inventory can be seen at this link.

Here is some data on Irvine's List Price and Days on Market today.

Millennials continue to be the driving force, while achievable prices are continuing to present challenges for them. According to Hale, they often place themselves in positions to overpay, especially if they are trying to find homes in larger cities. Price points are driving them to smaller cites, where sales are expected to be healthier.

 

"Texas, Arizona, and Nevada are expected to welcome an influx of home shoppers priced out of California," says Wedgeworth. "Meanwhile, would-be buyers from pricey Northeastern markets will likely head to the Midwest or Southeast. There, they can find affordable housing as well as solid, diversified economies."

 

Millennials are no longer the new kids on the block." The largest cohort of millennials will turn 30 in 2020—historically, that's when people tend to think of buying their first home," says Hale. This means the oldest millennials will be turning 39 and the demographic will account for more than 50% of mortgages taken out in the country — more than all other generations combined.

 

While millennials (those born between 1981-'97) are big on buying experiences instead of "stuff," they are not that radically different from past generations, partnering off and starting families, which triggers home-buying decisions. Having kids is a huge driver for home sales. "But while they may be motivated, they'll face a lot of competition for the scarce homes on the market—from roughly 71 million of their peers nationwide," says Hale.

 

What about everyone else? Wedgeworth notes that Gen Xers and boomers are pretty comfortable where they are. Boomers, not quick to accept older age, are living longer, healthier lives, and staying in their houses longer, while Gen Xers aren't quite ready to retire, making them stay right where they are. What this translates into is fewer homes on the market.

 

As for new construction, Wedgeworth notes, "After the housing crash in 2008, which wiped out quite a few builders, those who remained have largely focused on higher-end developments with bigger profit margins. Although they're finally showing signs of a shift toward building more entry-level homes, faced with overwhelming demand, it will take a few years for a significant number to come to market."

 

Sources: Realtor. TBWS

 

Rates Currently Trending: Neutral

Mortgage rates are trending sideways this today.  Last week the MBS market improved by +33bps.  This was enough to move rates or fees lower last week. We saw high rate volatility at the end of the week.

 

Posted in News
Dec. 18, 2019

Orange County Housing Report: What a Difference a Year Makes

The housing market is a lot hotter than many think and 2020 is going to line up heavily in favor of sellers.

A Warm December: With an Expected Market Time of 70 days for all of Orange County, this is the warmest December since 2017 when housing was hot.

So much can change in the course of a year. From one year to the next, professional sports teams can go from the bottom of the standings to playing in the playoffs, babies go from crawling to running, and kids go from picking up an instrument for the first time to playing in the school orchestra.

It’s not an immediate change; instead, it is a slow evolution.

That is precisely how the Orange County housing market has evolved, going from a slight Buyer’s Market last year to a slight Seller’s Market today. 

Active inventory in Irvine

December is the slowest time of the year in terms of new escrows and the number of homes that pop on the market. Both buyers and potential sellers divert their attention from housing to enjoying the holiday season. Yet, despite all of the holiday distractions, it has been a slight Seller’s Market every December since 2012 other than two years, 2014 and 2018.

Many intuitively think that because it is the slowest time of the year that housing lines up in favor of buyers; it is just not true. While it may be true that demand drops to its lowest point of the year by the end of the month, so does the active inventory. The muted demand is offset by a drop in supply.

And, this year the inventory has dropped by 40% since July, shedding 3,055 homes. Demand (last 30-days of pending sales) dropped by only 22%, 556 escrows. As a result, the Expected Market Time (the amount of time it would take from hammering in the FOR SALE sign to opening escrow) dropped from 91 days in July to 70 days in the middle of December.

Housing is actually hotter today than it was in July! What happened? How is housing hotter today than July? With mortgage rates dropping all year, the housing market slowly thawed. The thaw continued through the Autumn Market as rates reached their lowest levels of the year and remained between 3.5% and 3.75%. Demand climbed and the housing inventory dropped. That is the recipe for a Seller’s Market where housing stands today. Year over year, the differences are staggering. The active listing inventory is down by 36% compared to December 2018. 

 

Posted in News
Dec. 17, 2019

The housing market continues to see strength in 2019

 

Bankrate's Natalie Campisi reports that as the third quarter of 2019 closed, homebuyers were in control, with lower rates and slowing home price appreciation. Housing inventory, however, remains squeezed.

 

Campisi quotes Fannie Mae's chief economist, Doug Duncan: "Our view is that the housing market peaked in 2017, we saw about a 3 percent drop in sales in 2018. The pace of home price increases started to slow in 2018. Starting at the beginning of 2019, rates started to come down, and then we saw this big drop in rates. We didn't expect such a significant drop-off — it was 30 points more than we forecasted."

 

According to Bankrate's weekly indexes, during the third quarter of 2019, mortgage rates fluctuated nearly 50 basis points, with the China-US trade talks prodding investors toward shelter in US Treasuries, all of which helped flatten interest rates. "Most experts predict that rates will remain flat, but there's no promise as things can change overnight," says Campisi.

 

Inventory, however, remains low. (See the low number of Irvine homes for sale here.) "On the for-sale side, the homes that are being started are priced above what many homebuyers are prepared to pay, so there's an affordability problem," says Michael Neal, a senior research associate in the Housing Finance Policy Center at the Urban Institute.

 

It's no secret that construction costs and labor shortages continue to plague the entry-level construction market. "Costly resources, including everything from building materials and permit prices to labor, drive up construction costs, which filters through to the price of the home. This is one reason folks are staying in their houses longer," says Campisi.

 

While millions of homeowners are refi eligible, many might be waiting for better deals before locking in a rate. However, experts warn that homeowners could end up losing out if there's an uptick in rates.

 

Sources: BankRate, FannieMae, WellsFargo, TBWS

 

Rates Currently Trending: Neutral

Rates are trending sideways to slightly higher so far today. Last week the MBS market improved by +10bps. This caused rates to move sideways for the week on relatively low volatility.

 

Posted in News
Dec. 10, 2019

Housing inventory expected to naturally free up over the next 20 years

 

It’s being called the Silver Tsunami. Zillow analysts report that over the 2017-2027 period, 920,000 baby boomer-held homes will be freed up yearly, with 1.17 million materializing in the succeeding years, from 2027-2037. That means 20 million more properties, (approximately 27 percent of the current owner-occupied stock) will flood the market, as the elder generation passes on or gives up their homes.

 

Zillow’s report says the boom compares to the construction onslaught before the recession and could counterbalance home-building in the next 20 years.

 

Arizona and Florida, the two states that have the most retirees, will have the highest inventory jumps, with boosts expected to top 30 percent. Zillow’s economist Jeff Tucker explains, “In many parts of the country, the Silver Tsunami will dampen new-home construction, as a flood of existing homes vacated by boomers comes on the market. The places best situated to absorb that new inventory and still drive new construction are ones with booming job markets and plenty of buildable land.”

 

The National Association of Realtors says that with inventory issues persisting, the boomer drop may be a kind of panacea for housing shortages, as existing-home inventory shrank to 3.9-months supply in October, compared to 4.3 months the prior year.

 

What is still in doubt regarding the supply side of real estate is the ability of the nation’s builders to keep up with demand due to costs, labor, and land shortages. This means accessibility and affordability concerns remain, including the need to retrofit properties.

 

Changing demographics are a powerful force. Tucker adds, “Demographic trends are critical to the real estate industry because the most common reasons for home purchases and sales are demographic life events, such as births, deaths, marriages, and divorces. Along with job relocations, these factors drive the underlying demand for housing around the country, and at the population level they can actually be predicted fairly accurately.”

 

Sources: Rismedia, Zillow, NAR, TBWS

 

Rates Currently Trending: Neutral

Mortgage rates are trending sideways this morning. Last week the MBS market worsened by -2bps. This caused rates to move sideways for the week on low volatility.

 

Posted in News
Dec. 5, 2019

OC Housing Report: Baby It's Cold Outside

The holidays are officially here, and so is the slowest time of the year for real estate.

The Holiday Slowdown: From Thanksgiving to the end of the year, it is the slowest time of the year for housing when both the inventory and demand drop to annual lows.

Starbucks does everyone a big favor. Right after Halloween, they reveal their latest holiday cups. This is a glaring reminder for buyers, sellers, and everybody involved in real estate that the Holiday Market is upon us. Costco, CVS, Albertsons, and just about every other retailer quickly follows suit, taking advantage of the busiest retail season of the year.

What happened to Thanksgiving in Orange County?


Everyone shakes their head in disbelief, feeling as if Thanksgiving has been skipped. It foreshadows that there isn’t much runway left to cash in on 2019 housing.

In the blink of an eye, the housing market has quickly changed and revealed a much different real estate environment.

There are fewer and fewer homes for sale as the number of homeowners opting to enter the fray drops to its lowest level of the year. Many sellers who have not found success, mainly due to price, opt to throw in the towel and pull their homes off the market.

At the same time, with all the holiday distractions, buyer demand drops to its lowest point of the year as well. In just the past two weeks alone, the active inventory dropped by 11%, shedding 599 homes, the largest drop of the year by a landslide.

From Thanksgiving to New Year’s Day, the average drop since 2013 has been 20%, 1,234 homes.

Many homeowners avoid placing their homes on the market from December through February, opting to sidestep the holidays and the cold winter weather. Look how few homes in Irvine there are for sale.

Ultimately, many homeowners are waiting to sell. They want to take advantage of the absolute “best time of the year” to sell a home, the Spring Market. They may be right, that the spring is the most active time of the year to sell, when demand (new escrows) climbs to a peak for the year; YET, the increase in escrow activity is met with a flood of new FOR SALE signs, competition.

In reality, Orange County housing is still hot today for all homes priced below $1 million. It is even a slight Seller’s Market from $1 million to $1.25 million. 

 

Posted in News
Dec. 3, 2019

Home Sales Report Good Numbers

Way to begin ending 2019 with a bang. According to The U.S. Census Bureau and Department of Housing and Urban Development reports home sales surged to surpass sales a year earlier by 31.6 percent, more than doubling the annual increase the prior month.

 

While sales of newly constructed homes were actually slightly lower than in September, sales during the month at a seasonally adjusted annual rate of 733,000, down 0.7 percent from September. That previous number, however, was revised from an originally reported 701,000 to 738,000 units. Sales in October 2018 were at the rate of 557,000 units.

 

According to Mortgage News Daily’s Jann Swanson, “On a non-adjusted basis, there were 57,000 newly constructed homes sold during the month, unchanged from September but up from 43,000 a year earlier. On a year-to-date basis, sales have totaled 586,000 units, 9.6 percent more than during the same period in 2018.”

 

While Irvine November Property sales were 203, up 6.8% from 190 in November of 2018 and -8.6% lower than the 222 sales last month. November 2019 sales were at a mid level compared to November of 2018 and 2017. November YTD sales of 2,373 are running -4.4% behind last year's year-to-date sales of 2,482.  

 

With the Median Sales Price in November was $885,000, down -1.4% from $898,000 in November of 2018 and up 1.5% from $871,500 last month. The Average Sales Price in November was $1,018,680, down -3.9% from $1,059,641 in November of 2018 and down -6.9% from $1,093,775 last month. November 2019 ASP was at the lowest level compared to November of 2018 and 2017.

 

At this point, 2020 might just turn out to be a good one for home sales.

 

Rates Currently Trending: Neutral

Mortgage rates are trending sideways so far today.  Last week the MBS market improved by +10bps.  This caused rates to move sideways. We saw very low rate volatility all week.

 

Posted in News
Nov. 26, 2019

Single-family rentals continue to get more expensive

 

Apartment living has its advantages, but it seems today's renters are opting for single-family homes instead of schlepping their bags of groceries up elevators. More room for their pets to roam? Possibly. After all, it's reported that 75% of renters own a furry friend. All we know is that apartment rental occupancy rates hit an all-time low. Meanwhile, single-family rental prices have also surged.

CoreLogic reports that U.S. single-family rent prices rose 3% in September over August. If we compare this to last September, however, the national rent increase has remained flat. Looking around for comparisons, Phoenix saw the highest year over year rent price increase, 6.7%, while Miami saw the lowest, 1%.

Low rental home inventories seem to spur the growth of single-family rental prices. September is also the 65th month in a row where low-end rentals spurred national rent growth, according to HousingWire's Julia Falcon. "Rent prices among this segment, defined as properties with rent prices less than 75% of the regional median, increased 3.8% year over year in September 2019, the same as in September 2018," she says.

Upscale rentals (more than 125% of a particular region's median rent), increased 2.9% in September, slightly up from last September's 2.5%. But Phoenix is still the rising star, having seen the highest year-over-year increase for the 10th year in a row, at 6.7%. Phoenix also had an annual employment growth of 2.4%, which is higher than the national employment growth average of 1.4%.

"Metro areas with limited new construction, low rental vacancies and strong local economies that attract new employees tend to have stronger rent growth," says Falcon.

Source: CNBC, CoreLogic, TBWS

Rates Currently Trending: Neutral

Mortgage rates are trending sideways this morning.  Last week the MBS market improved by +1bps.  This caused rates to move mostly sideways for the week on low volatility.

 

Posted in News