Do you think the real estate market in Cali has peaked?

[NsXMas]

Interest rates recently inched up a bit. I wonder if this will have a ripple effect on the real estate here in California.

Even though the inventory of homes available in my area is at an all time low, current homes are taking longer to sell. In fact, a home that had gone into escrow in late March fell out of escrow last week. Strangely, the owner put it back on MLS for several thousand dollars more than the original escrow transaction price. Many homes have been through several open homes and still have not sold.

Do you guys think this is a sign that homes have hit their peak for now?

 

[huckster]

im not totally in tune with cali real estate, but i do remember the big value slump few years back. large number of people were way upside down, but the market did come back, and i expect in the event of another decline, it would again be short term.

the highest valued markets tend to be the most volatile, but as long as california is the location for so many people, the demand continues.

until business/industry pulls out and relocates on a major scale, california values will continue imo.

 

[MAKO]

Interest rates recently inched up a bit. I wonder if this will have a ripple effect on the real estate here in California.

Even though the inventory of homes available in my area is at an all time low, current homes are taking longer to sell. In fact, a home that had gone into escrow in late March fell out of escrow last week. Strangely, the owner put it back on MLS for several thousand dollars more than the original escrow transaction price. Many homes have been through several open homes and still have not sold.

Do you guys think this is a sign that homes have hit their peak for now?

I work in the industry and have for years. I'm also in Cali.

Bottom line is that there is never a peak when it comes to home appreciation here. However, rising rates (which will continue indefinitely thanks to the economy getting back to full speed now) will let us wave bye bye to 1st mortgage rates under 7% by year's end. Particularly if the unemployment rate regresses for the first time in two years, as it has recently.

That in turns slows down the housing market dramatically. It's all relative though because where I am, homes have appreciated at +40% per year, for five years. You do the math.

In my opinion, being someone in the financial side of it directly, appreciation will return to "normal" california rates of between 7% to 12% per year. Homes will take longer to sell, but it won't be a recessionary housing market at all. It just won't be insane as it is currently.

FYI - Thanks to the rate jump last week, new mortgage applications in the state of CA dropped by 35% immediately, and that includes both existing refis and new home purchases. That should tell you something.

 

[saxonsaxon]

Real Estate

It looks like things will cool down a bit but do not count on a slow down. U.S. population is increasing rapidly and there is only so much space to accomadate evereybody. O.K. The U.S. is still not so over-populated as let's say Japan which is the size of California and has the population of 130 mil. people. However, slowly but surely this is the future. We are getting a lot of people from higly populated places and that's a cause for concern. I have seen it the following scenario way too often. First papa comes then mama then kids then grandpas than brothers, sisters, and 10 years later half the village is here and it does not stop. Most people in India(over 1 billion people), China( over 1.3 billiuon), and the whole of Latin America (Mexico alone is over 100 mil)live in poverty and they will continue to come to the US for years to come. I was told the other day that in NYC alone there is over 1 mil. people more than in 1990. They have to live somewhere and that is one of the reasons houses are so expensive. I imagine the same goes for California. I hope our governmet will find the solution.

 

[steveny]

Re: Re: Do you think the real estate market in Cali has peaked?

I work in the industry and have for years. I'm also in Cali.

Bottom line is that there is never a peak when it comes to home appreciation here. However, rising rates (which will continue indefinitely thanks to the economy getting back to full speed now) will let us wave bye bye to 1st mortgage rates under 7% by year's end. Particularly if the unemployment rate regresses for the first time in two years, as it has recently.

That in turns slows down the housing market dramatically. It's all relative though because where I am, homes have appreciated at +40% per year, for five years. You do the math.

In my opinion, being someone in the financial side of it directly, appreciation will return to "normal" california rates of between 7% to 12% per year. Homes will take longer to sell, but it won't be a recessionary housing market at all. It just won't be insane as it is currently.

FYI - Thanks to the rate jump last week, new mortgage applications in the state of CA dropped by 35% immediately, and that includes both existing refis and new home purchases. That should tell you something.

What is your opinion of borrowers that will get caught in ARM's in a rising interest rate market. Although this will help to fuel the economy, I foresee a lot of foreclosures and maybe even an over supply of existing housing because of foreclosure rates increasing. If a borrower is trapped in a rising rate loan, loses his house to foreclosure, how many buyers will be lined up to purchase that house at the loan buy out? This, IMO will force existing home prices down. Most people who have wanted to buy or build have at this point. Even if buying the foreclosed property would be an upgrade for the new buyer, why would the new buyer close out his current loan at a 40 year low rate to open a new loan at a higher rate on a larger principle.
I am currently stock piling resources to benefit if such a scenario happens.

 

[NsXMas]

Re: Re: Re: Do you think the real estate market in Cali has peaked?

What is your opinion of borrowers that will get caught in ARM's in a rising interest rate market. Although this will help to fuel the economy, I foresee a lot of foreclosures and maybe even an over supply of existing housing because of foreclosure rates increasing. If a borrower is trapped in a rising rate loan, loses his house to foreclosure, how many buyers will be lined up to purchase that house at the loan buy out? This, IMO will force existing home prices down. Most people who have wanted to buy or build have at this point. Even if buying the foreclosed property would be an upgrade for the new buyer, why would the new buyer close out his current loan at a 40 year low rate to open a new loan at a higher rate on a larger principle.
I am currently stock piling resources to benefit if such a scenario happens.

Most people don't stay in homes more than 3-5 years, so an ARM will be okay for them. Also, ARM's can only go up or down by a fixed amount per year, so there is a safety margin there.

 

[steveny]

Re: Re: Re: Re: Do you think the real estate market in Cali has peaked?

Most people don't stay in homes more than 3-5 years, so an ARM will be okay for them. Also, ARM's can only go up or down by a fixed amount per year, so there is a safety margin there.

I did not word my first response correctly. What I was trying to imply was maybe lenders, in an effort to jump start the economy, are loaning out funds via ARM's or interest only loans to individuals who would not otherwise qualify for such a large mortgage. When those interest rates go up, and they will, those same individuals will not be able to support a large loan payment with only a small increase in pay. I am assuming interest rates will go up faster than incomes will increase.

I personally am witnessing people who were not able to finance a gumball in the past buying a home now. It appears to me the lenders are becoming lackadaisical about who they are loaning money to.
This point even rings more true with the car market. A friends brother just declared bankruptcy and with in a week went out and financed a brand new car.

 

[NemesisX]

Re: Re: Re: Re: Do you think the real estate market in Cali has peaked?

Most people don't stay in homes more than 3-5 years, so an ARM will be okay for them. Also, ARM's can only go up or down by a fixed amount per year, so there is a safety margin there.

If most people only stay for 3-5 years in a rising interest rate market, for them to move would be WORSE, because they would have to buy in at the current rate, whereas if they stayed there ARM rates would go up only a fixed amount.

Do I think the market has peaked. Yes. Look at how far REITS have fallen in the past couple weeks. Look at how fragmented the housing markets are in other regions, others are already in decline. Look at how slowly commercial real estate is moving. All these provide some clues as to what may come.

This is how peaks are made. Everyone gets all in!

 

[NemesisX]

Re: Re: Re: Do you think the real estate market in Cali has peaked?

I am currently stock piling resources to benefit if such a scenario happens.

Steveny...Im doing the EXACT same thing! I should have figured with you being in options!

 

[steveny]

Re: Re: Re: Re: Re: Do you think the real estate market in Cali has peaked?

If most people only stay for 3-5 years in a rising interest rate market, for them to move would be WORSE, because they would have to buy in at the current rate, whereas if they stayed there ARM rates would go up only a fixed amount.

Do I think the market has peaked. Yes. Look at how far REITS have fallen in the past couple weeks. Look at how fragmented the housing markets are in other regions, others are already in decline. Look at how slowly commercial real estate is moving. All these provide some clues as to what may come.

This is how peaks are made. Everyone gets all in!

I agree, people who are living close to the edge, paycheck to paycheck, are going to be screwed when rates start to climb.

Commercial space is currently over built and more space is still being built. IMO, almost all sectors and regions of the real estate have peaked or are ready to peak.

 

[Tantheman]

I am in the real estate lending business and think I can help you guys get a loan for most scenarios. Please let me know how I can help.

Tan

 

[Gaymond]

If the homes are not selling in < 30 days the sellers are probably asking in excess of the last sales comp. What price range are you talking about? $200-400k listings are really hot and will receive multiple offers 1st day. $750k and under should sell in less than a month if you are in a good area. I've represented buyers and sellers in OC, LA, and IE (RE Broker). Open houses rarely produce the buyer during the showing as it is really for marketing to new clients (buyers and sellers). I am trying to buy another place in the South Bay (Torrance) and 1st day registration had 700 buyers for 100 townhomes ($570-640k). I'm also on the list in Menifee, CA and last month 300+ buyers showed up for 14 homes ($270k-370k). If anyone is looking for a good RE Broker, plz give me a call (I credit buyers 1% towards closing costs from the commission and listings get full service at 3% total commissions).

 

[Arata]

Do you guys think this is a sign that homes have hit their peak for now?

In the already more expensive parts of CA-Nope.

 

[W]

Prices have not peaked where I live. In fact, they are climbing very quickly in my immediate area due to lack of inventory.

The concept of slews of people with ARM's losing their homes due to foreclosures does not apply as much where I live (PB) simply because homeowners have so much equity (more than 50%) and would just sell if they couldn't make the payments. Also, my neighborhood has many rental units where owners are making a killing because monthly income is far greater than the mortgage payments plus other expenses (taxes, depreciation, vacancy, lost rent, management fees,...).