One of the more interesting sidebars of the jump in home prices in 2013 is that many real estate agents are not necessarily thrilled. You would think that with prices in some areas reaching near peak levels that real estate agents would be jumping for joy. Alas, money is made on sales volume. You make more money on five home sales at $400,000 than on one home sale at $600,000. Investors continue to dominate the market so even for loan processors, the volume for mortgage applications has been low. We have seen a continuing decline of licensed California agents and brokers. The peak was reached back in 2008 and since then, many have simply allowed their licenses to expire and new blood is not entering the game in any significant way. The trend is unmistakable and you would think the recent run-up in prices would be a call to action for many future agents and brokers. Yet with so many investors going straight to auction, working off the books, and the proliferation of real estate data the demand is simply is not there. Sales volume continues to be incredibly anemic and we have seen a recent increase in inventory this year but nothing dramatic. The reality is, for those looking to buy inventory remains thin and we still have a good number of house horny buyers.
Young people are having a very difficult go at enjoying the spoils of the recent housing market. In places like California, 2.3 million adults are living at home with their parents, many unable to scrounge up enough for a rental let alone the ability to go out on their own to purchase a property. I’ve seen the argument chastising student debt as the main reason why young people are unable to purchase a property. That is likely to be one part of a larger symptom. The bigger issue is you have a younger population that is less affluent. It was already difficult enough for young buyers to purchase a home prior to the investor led boom of 2013. You would think that a housing boom would coincide with a steady growth in household formation but it has not. Sales volume is still relatively low given the increase in prices. What you have is a market being driven up by a sheer belief that prices are going to go up even higher (i.e., flippers, investors, etc). Yet we now see inventory starting to increase because of ludicrous prices being asked in certain areas. Some big name investors are now openly talking about housing being a poor investment at these prices. Frankly, current prices in many cities across the country are simply too much for the incomes of young Americans. Is student debt the main reason why young people are opting not to buy or is there something bigger going on?
We have an astute audience that reaches beyond the confines of the 405 and 10 freeways. I know it is hard for some readers to see beyond PCH but it is true, the U.S. is an expansive and far reaching country. It is hard for some readers to grasp the endless boom and bust cycles of Southern California real estate. So today, we’ll take a trip to three fairly popular cities and see what we can get with a $600,000 to $650,000 budget. I’d be interested to see what those outside of the area and those within it have to say about these properties and their current prices. What you will find is that inventory is growing and house horny buyers are itching to dive into housing even if it means taking on ARMs once again. Those that bought a few years ago will now find it difficult if not impossible to purchase today. Has the economy so radically changed to justify 20 to 30 percent price increases within one year? This market is still being driven by hot money although it is starting to cool off. Visually seeing what we can get for $600,000 to $650,000 in Pasadena, Arcadia, and Torrance might give you a good idea of what the current market is like. For those outside of the area, welcome to SoCal housing!
The old adage that cash is king seems to be the new mantra for real estate in a post housing crash world. Investors continue to dominate the housing market out maneuvering house horny buyers that simply want a place to call home. Beer budgets, champagne tastes, love of debt. Of course, as some of you astute readers know, the typical holding time for a first home buyer is in the range of 7 to 10 years. Not that this matters much for many since first time home buying is near record lows especially in expensive states like California that are undergoing a renting renaissance. Actually, this is more like a new middle ages in housing were big money from all over the world is crowding out regular home buyers. Yet big money is fickle. It moves around quickly. We are already seeing inventory creep up because prices are becoming less attractive to investors. Of course the crowd is always late to the party. Those that time the market get a large amount of attention while the 7,000,000 that underwent foreclosure since 2005 seem to be relegated to the appendix of “real estate never goes down†history. Some new interesting data on all that cash buying. 58 percent of all recent REO sales went to cash buyers (compared to 40 percent of all sales going to cash buyers). REOs are better deals and usually are priced more attractively which ironically, is what income strapped households actually need. Then again, this isn’t your typical housing market.
Subscribe to feed
