Walnut Creek Real Estate Market Update
The chart below represents a snapshot of inventory in Walnut Creek that compares November 15 through December 15 in both 2012 and 2013.
Actives Bank Owned Short Prop Trend Pending Sold Months of Inventory
2013 55 4 1 -43% 90 78 .7
2012 47 3 0 -31% 158 66 .7
So what does this report say to us? Well it IS December but inventory has “shrunk” yet again, down 43% since November with only a little over a half month supply of inventory. Well guess what? It is more than we had last year at this time! In 2012, we only had 47 Active Listings as compared to 55 this year (note: both are low numbers).
The year 2013 is a year when the housing market transitioned from “investor sales” to “primary home sales.” The share of investor sales is expected to decline as the number of bargain properties continues to decrease, while the share of primary home sales is expected to improve as the economy continues to grow.
As such, the increase in sales bought as primary homes will be undercut by the reduction in investor sales, hence the slight decrease in overall sales in 2013. Next year will be a more “normal” year and the economy will presumably grow at a faster pace. This will provide support to the housing market.
So called “Distressed Sales” (bank owned and short) are also very low these days (in all east bay cities and almost non-existent in WC). As prices rise, homeowners are “whole,” again.
A recent article published by California Association of Realtors (CAR) suggested that NOW is a great time to purchase a home, and here’s why… The increase in home prices with a percentage point increase in mortgage interest rates led to a sharp decrease in affordability. Despite decreased affordability, current market conditions still warrant buying a home sooner rather than later. First, interest rates are still at historical lows but are poised to increase in 2014. Over the past year mortgage interest rates increased by about one percentage point, from about 3.5 percent to 4.5 percent. On average, a half percentage point fluctuation in the mortgage rate changes the payment by $100 per month on a median priced home of $415,770. Most of the predictions for 2014 put the 30-year fixed rate mortgage at 5.3 percent.
While interest rates have moved down since their spike this summer, the uncertainty over the Fed’s policies makes it difficult to hope for any improvement in interest rates. The Fed’s bond buying is the key consideration, not just the tapering, but the general pace of withdrawal. While tapering was considered certain in September, December 2013 is now an increasingly possible date after the most recent employment report showed improvement in hiring.
The second reason to buy a home sooner has to do with new lending rules going into effect on January 1, 2014. The new rules are set to raise the cost of borrowing. The ability-to-repay rule and the associated qualified-mortgage definition will raise the overall cost of originating home loans. Borrowers will be taking the brunt of the financial hit.
There are two other important market conditions to keep in mind. We started the year with a heated market that was at times described as “a bubble.” Since the autumn, the housing market has cooled off. On one hand it is due to decreased affordability and increased mortgage rates. Demand for housing has subsided and bidding wars are not as frequent or aggressive as we saw earlier in the year (although they still exist).
Additionally, inventory of homes for sale has shown improvement with more homes on the market now compared to this time last year. These two conditions suggest a more favorable market for buyers and one that resembles a shift towards a “normal” market.
Wishing all of you a joyous holiday season from the Steve Quanstrom Group! Bring on 2014!
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