Coastside Market Update: January 2013 & January 2014
The local housing market continues to gain strength, yet appears to be starting off the year slower than last year. There are four major factors at play keeping the growth from growing at the rate of last year. Nationally, existing-home sales in the West dropped 7.3 percent to a pace of 1.01 million in January, and are 13.7 percent below a year ago.
Sales in the West are affected by tight inventory in many areas, pushing the median price to $273,500, up 14.6 percent from January 2013. Home resales, which peaked in July, have declined in five of the last six months. (NAR = National Association of Realtors)
Regionally, on the San Francisco Peninsula, which includes South San Francisco down to Woodside, sales in January 2013 were 244 and in January 2014 were 236, so their numbers dropped a little more in line with the national news, but only smaller with a 3% decrease. (SAMCAR = San Mateo County Association of Realtors)
The Half Moon Bay Coastside has not seen that type of decrease in sales, in fact January 2014 – at 13 sales – is on par with a year ago, January 2013, which had 11 sales. An increase of 118%. Our numbers are quite small so is one month really statistically valid? Don’t know but now you know the facts about our local market. (SAMCAR)
My opinion on the reason for an increase in sales is that a number of our January sales were from summer/fall 2013 listings who were ready to accept an offer coupled with buyers who knew the inventory was going to continue to be limited.
1) Tighter credit as a result of new lender compliance rules
On Jan. 1, 2014, the latest update in the Dodd-Frank Wall Street Reform and Consumer Protection Act went into effect. The law gave the Consumer Financial Bureau The “qualified residential mortgage,” or QRM, could most likely affect the number of people who successfully obtain home loans. Alternatives are being developed as I write. It is more important than ever to understand the loan process.
43% Debt to Income: The new lending rules will limit people from taking out a mortgage or refinancing an existing one that puts their overall household borrowing at more than 43 percent of their income.
Total debt inclusions: That new debt cap also includes a wide swath of common forms of debt that count toward the total, including student loans, most fees and points related a home purchase, and property taxes.
More documentation: It also tightens rules on documentation, and lenders who improvise to give customers easier terms will be open to consumer lawsuits if the loans go bad. The average FICO credit score on conventional loans used to purchase homes in November 2013 was 756, according to the most recent data from Ellie Mae, a company that produces mortgage underwriting software. The average score for denied applications was 729.
What this means for agents, brokers and their clients: There may be fewer loan choices making it more challenging for many borrowers to qualify. The loan process will also probably take longer due to the increased compliance. These changes make it more important than ever to work with a skilled Realtor and Loan Officer. We may see more transactions fall out of contract after acceptance during the loan contingency period or a delay in making offers until financed buyers learn the new rules, their options and are fully prepared.
2) limited inventory
Coastside: The numbers below are a comparison between January 2013 and January 2014. In general, right now, we’ve got about 2-3 months at the entry level price range and about 5-6 months at the $1 Million and up market price ranges. Therefore, I view this as two distinct markets right now.
Half Moon Bay – 33 in 2014; 28 in 2013
El Granada – 15 in 2014; 10 in 2013
Moss Beach – 7 in 2014; 7 in 2013
Montara – 4 in 2014; 6 in 2013
Regional: San Mateo County – 464 in January 2014; 545 in January 2013.
The message of very limited inventory is what I’m hearing from all my Peninsula (and San Francisco) colleagues. This is the time to remind past sellers that they may have more equity than they think and to get an “equity checkup”.
National: Total housing inventory at the end of January rose 2.2 percent to 1.90 million existing homes available for sale, which represents a 4.9-month supply at the current sales pace, up from 4.6 months in December. Unsold inventory is 7.3 percent above a year ago, when there was a 4.4-month supply. (NAR)
3) higher prices
Coastside: If you bought a Coastside home in 2013 you have probably built some equity already. Predictions show a smaller increase this year, but still increasing.
Half Moon Bay: Median $1,155,000 – 2014; Median $672,500 – 2013
El Granada: Median $710,000 – 2014; Median $559,000 – 2013
Moss Beach: Median $824,000 – 2014; Median $540,000 – 2013
Montara: Median $760,000 – 2014; Median $700,000 – 2013
Pacifica: Median $627,000 – 2014; Median $564,200 – 2013
San Mateo County: San Mateo County – Median January 2014: $992,500; Median January 2013 – $695,000
Nationally: Nationally, the median existing-home price for all housing types in January was $188,900, up 10.7 percent from January 2013. (NAR) First-time buyers accounted for 26 percent of purchases in January, down from 27 percent in December and 30 percent in January 2013. This is the lowest market share for first-time buyers since NAR began monthly measurement in October 2008; normally, they should be closer to 40 percent. (NAR)
4) higher mortgage interest rates
The 30-year fixed-mortgage rate is about a full percentage point higher than it was a year ago. According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage slipped to 4.43 percent in January from 4.46 percent in December; the rate was 3.41 percent in January 2013. (NAR)
And we can’t ignore . . .
FLOOD INSURANCE: The Homeowner Flood Insurance Affordability Act is in transition. “Since going into effect on October 1, 2013, about 40,000 home sales nationwide were either delayed or canceled because of increases and confusion over significantly higher flood insurance rates. (NAR). Congress is considering legislation – now in the Senate according to the San Mateo County Board of Realtors legislative representative – to halt new flood insurance rates so the Federal Emergency Management Agency (FEMA) can complete an affordability study and determine the full impact of the law.
It was just announced tonight that relief is on the way for homeowners in flood prone areas. Legislation was just passed that may help sellers and future homeowners be able to plan for their insurance costs. (Insurance Journal)
CASH BUYERS: All-cash sales nationally comprised 33 percent of transactions in January, up from 32 percent in December and 28 percent in January 2013. (NAR)
- flood insurance info update: http://www.insurancejournal.com/news/national/2014/03/04/322194.htm