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Real Estate News & Commentary

The How and Why Behind the Calming of California’s Housing Market

As market observers have long noted, California’s housing market has been persistently volatile. The only consistent fact about the West Coast’s housing market has been its capacity for sharp price gains and painful crashes. Since the housing market began recovering, the California housing market has seen an exceptionally sharp rise in property values, much of which has been bolstered by the strength of the San Francisco and Los Angeles job markets. The Housing Recovery As the housing recovery has progressed, it seemed only those with outstandingly high income were likely to have much available home choices in the Golden State. That being said, there’s some evidence things are evening out. A recent report in the Los Angeles Times notes that the rise in home prices seems to be slowing somewhat. This is currently running hand-in-hand with an overall slowing of home sales, which occurred at a flurry pace throughout 2013. Related: California Housing Market Losing Momentum According to figures provided by the Los Angeles Times, the typical house in the six-county Los Angeles region sold for  $410,000 in May. This is up only 1.5% from April, a comparatively slight increase against the climbs we’ve seen in the prior twelve months. Additionally, the annual year-over-year gain only recorded at 11.4%. While this is still a strong climb, it’s far from the spikes we’ve seen in past months. This looks like an indicator of relative price stability, and broader market trends seem to be validating this. We’re seeing a simultaneous decrease in investor purchases and a climb in available inventory. The breadth of available has likely gone a long way toward easing price gains, since inventory constriction has typically been one of the strongest guarantees of value inflation. So Does this Mean Housing Will Become Affordable? Well, considering this is the southern California housing market, that’s a very relative term. As a large positive, it seems that we won’t see a continuous spiking in home values that could prove destabilizing. Sales recorded this May tallied at 15.1% less than in May of last year. Related: The What, Where, When and How of Investing in Southern California’s Volatile Real Estate Markets That being said, housing in the region wasn’t particularly buyer-friendly to begin with, and those who subsist on salaries that would be more than suitable for supporter a mortgage in much of the country won’t have much luck around San Francisco and Los Angeles. In Conclusion It’s likely that California’s housing market will enter a period of comparative stagnancy. Neither demand nor prices will likely rise within the following months, leading to a calm and relatively unremarkable time for the local housing market. On the other hand, it looks like the number of distressed sales and foreclosures are declining. If patterns continue, there’s a chance that the long-term fate of the California housing market is that it will become comfortably predictable. Do you agree? Be sure to leave your comments below! Free eBook from BiggerPockets! Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks, and techniques delivered straight to your inbox twice weekly! Actionable Advice for Getting Started, Discover the 10 Most Lucrative Real Estate Niches, Learn how to get started with or without money, Explore Real-Life Strategies for Building Wealth, And a LOT more Sign up below to download the eBook for FREE today! Click Here to Download the eBook Now! We hate spam just as much as you

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Real Estate News & Commentary

Is Economic Pessimism Holding Back the Housing Market?

While we’ve seen a rapid rebound in the market, and some steady gains in recent months, home buying and overall growth in the property sector has remained tepid. Since the start of 2014, we’ve seen either flat growth or monthly year-over-year sales figures that undershoot what was recorded in 2013. This is worrisome on a handful of counts, one of them being that stagnancy could cause fluctuations in property sales down the line. The other concern is that slow home sales could cause a restriction in available property that spikes home sales further, causing even slower property sales in the coming months. That being said, it seems that much of the unease in the housing market can be traced back to a root cause. Chilling Effect of Widespread Pessimism As a recent Los Angeles Times report points out, widespread pessimism about the state of the American economy overall has produced a chilling effect across the housing market. A recent survey from Fannie Mae disclosed that a full 57% of those polled felt that the U.S. economy is heading in “the wrong direction”. Related: U.S. Housing Market Hits a Rut Overall, pessimism around home affordability seems to be mounting. The same report that the Los Angeles Times cited points out a growing belief that homes will become less valuable in the coming months. Only 48% of those polled (down from 50% in April) believe home prices will increase within the coming year, and a full 7% expressed certainty that home prices would drop. W hile the 7% figure might seem meager compared to the 48% who estimate that home prices will rise, that also measures as the highest proportion of polled responders within the past year who expected home prices to drop. So What to Make of This? Granted, this is far from a doom-and-gloom scenario. Sluggish sales and purchase slowdown are a far cry from an outright housing crash, and it’s not a completely damning set of data. The amount of those polled who believe it’s a responsible time to sell their house is sitting at 43%. Despite gut-level responses around whether or not it’s a good time to sell or buy, or whether home prices will rise, much homebuyer hesitancy remains tied to the greater economy. The report quoted in the Los Angeles Times projected that net home sales in 2014 will hit well below what was recorded at the close of 2013. Throughout the housing purchase boom of 2013, there were persistent questions of whether or not the strength in the buying market would continue for the foreseeable future. More prescient analysts suggested that the purchase boom would run out of steam if the economy didn’t pace a quick rebound as well. The first wave of major purchases seemed motivated by consumer confidence and a belief that we wouldn’t be experiencing a second bubble, but a lukewarm economy overall hasn’t helped sustain it. Related: Housing Recovery Is Helping Consumer Economy It’s likely that one of the most reliable ways for home sales to pick up would be a corresponding rebound in employment figures and median family income. Do you think this will happen? Be sure to leave your comments below! Free eBook from BiggerPockets! Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks, and techniques delivered straight to your inbox twice weekly! Actionable Advice for Getting Started, Discover the 10 Most Lucrative Real Estate Niches, Learn how to get started with or without money, Explore Real-Life Strategies for Building Wealth, And a LOT more Sign up below to download the eBook for FREE today! Click Here to Download the eBook Now! We hate spam just as much as you

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Real Estate News & Commentary

April 2014 Looks Like It Was A Great Month For Overall House Sales, But Was It?

With the notable slowdown in home sales at the start of this year, there was general apprehension that the housing market was hitting a rut. Much of the concern seemed to center on whether or not the release in pent-up demand that was unleashed after the recession had finally run its course. This, coupled with the still hazy financial futures of younger buyers, looked set to produce a mediocre 2014. But They Were Wrong… That being said, it looks like things are picking up with the start of the home buying season. According to a new report from the Los Angeles Times, existing home sales climbed in April, the first month-over-month climb recorded this year. This occurred concurrently against a monthly rise in sales inventory, which could account for much of the rise in sales. Certain regions within the greater American housing market have seem home values rise so sharply that entire demographics of potential buyers have been pushed from the table. Granted, sales are still down some against the figures tallied in April 2013. Overall, signs point to nationwide home sales being lower than that recorded in 2013. Lawrence Yun, the chief economist of the National Association of Realtors, was quoted as remarking that sales in Q2 of this year would likely be markedly less than that recorded in Q2 2013. Overall, we seem to be observing typical seasonal trends at a suppressed rate. Sales are indeed picking up with the coming of the pre-summer phase, but the lapse in home sales throughout Q1 may portent a softer year overall. Related: Housing Starts Dipped in January… and Is That Bad? What Will This Mean for Home Values? Overall, we’re looking at a year thus far where home sales are climbing and slowing in small cycles. The decreases in January, February, and March were relatively small, and the comparative rise in home sales recorded last month was relatively incremental as well. This might portend a year where the change in home prices remains more stable against the sharper gains that were witnessed throughout 2012 and 2013. The issue here is that the surge in prices last year has forced buyers from the table, and may continue to do so throughout the rest of the year. There seem some questions on whether or not this will result in long-term stagnancy. This wouldn’t likely cause a rupture in the housing market dramatic enough to cause sever price fluctuations, but it is a troubling equation going forward. Related: Learning from Bubbles: A Look at Housing Bubbles Worldwide Price uncertainty and sales momentum seem the biggest quandaries facing the housing market through the remainder of the year, and the seesaw between receding home prices and the number of buyers who can afford listed prices could only complicate matters through Q3 and Q4. How do you predict the outcome of overall house sales for this year?  Be sure to leave your thoughts and comments below! Free eBook from BiggerPockets! Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks, and techniques delivered straight to your inbox twice weekly! Actionable Advice for Getting Started, Discover the 10 Most Lucrative Real Estate Niches, Learn how to get started with or without money, Explore Real-Life Strategies for Building Wealth, And a LOT more Sign up below to download the eBook for FREE today! Click Here to Download the eBook Now! We hate spam just as much as you

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Real Estate News & Commentary

What Will Happen to the Mortgage Finance System?

There has long been a general feeling that the American residential property sector is broken overall. While there was a sharp rebound in home sales once consumer confidence recuperated in 2013, we’ve seemed to have nevertheless hit a rut where the housing market is stalling. However, with recent attempts from Capitol Hill to reform the home lending process, there are some concrete areas that probably need reform. According to a new report from Reuters, the Senate Banking Committee could approve a bill to disassemble Fannie Mae and Freddie Mac. The ultimate endpoint of this bill would be to replace the two loan bodies with a transitory agency that provides a government mortgage guarantee that will only be offered once losses are handled by private finance entities. It’s a convoluted process, even by the admission of those who’ve been watching its passage most closely.  The Reuters story quotes the standing president of the Mortgage Bankers Association admitting, “This is complicated legislation”. The ultimate goal rests on doing away entirely with wing of the government that was propped upped during the bleakest period of the recession. There seems some contention that both agencies are doing more harm than good at this point, and that transitioning to private sector management would foster a culture of deeper accountability. So What Would Happen if They’re Shuttered? The Reuters article points out that during the depths of the recession Fannie and Freddie lost the government a net  $187.5 billion in taxpayer funds. We’ve reached a point where the agencies have rebounded to profitability, and have returned more profits in dividends than they once took away as bailout aid. That being said, their flailing during the recession and danger to the U.S. Treasury if things go south has many within both the government and private interest looking for a better solution. But the other side of the coin isn’t completely safe either. There seems concern that pushing assets held under Fannie and Freddie into private ownership could compromise the paths to affordable housing for lower-income families. Alternately, it could lead to certain players gaining too strong a foothold across various services in the loan management process. In the case this slows home sales too drastically, it could undercut the housing recovery or destabilize home values. Ultimately, the impact on the housing market for better or for worse will spring from the details of the bill itself. Current plans lay out that both agencies will be disassembled within five years of the bill’s passage, so we’re not slated to see a rapid transition. Ideally this will allow for financial adjustment and for potential errors in judgment to be curbed. Free eBook from BiggerPockets! Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks, and techniques delivered straight to your inbox twice weekly! Actionable Advice for Getting Started, Discover the 10 Most Lucrative Real Estate Niches, Learn how to get started with or without money, Explore Real-Life Strategies for Building Wealth, And a LOT more Sign up below to download the eBook for FREE today! Click Here to Download the eBook Now! We hate spam just as much as you

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Real Estate News & Commentary

U.S. Housing Market Hits a Rut

As I noted in a prior post, certain regional housing markets are experiencing a temporary slowdown. There were some hints that particularly high-demand regions would undergo some decline in sales – prices rose too dramatically for this to not be a consideration. However, recent analysis suggests this trend may be deeper and more widespread than previously expected. According to a new report from Forbes, the downturn in home sales last month was especially sharp. Monthly home sales dropped 14.5% in March from February, and dropped a full 13.3% year-over-year. Citing a report from the National Association of Realtors, the Forbes piece also points out that sales of new single-family homes hit the lowest point since July 2013 last month as well. New home sales might be the most disappointing aspect of the current housing market. Purchases of new construction last month severely underperformed analysis consensus according to figures compiled by Bloomberg. That being said, the general sluggishness of home sales overall was coupled with an exceptionally high price tag. According to the Forbes article, the median sales price for a purchased home last month rested at $290,000, the highest monthly tally yet recorded. So What to Make of This? The data suggests that the market remains most difficult for first-time buyers. This is an unfortunate development, since the overall sustainability of the housing recovery rests largely with those seeking their first home. The overall housing market risks stagnation in the case that only older or move-up buyers are drawn to the market. Generally speaking, low-priced homes seem to be moving quickest. Citing a report from Trulia, the Forbes article notes that only 49% of the homes listed at the low end of the pricing scale were one sale two months prior, compared to 53% for mid-range homes and 62% for those in the highest price tier. Additionally, data suggests that activity in the housing market remains regionally segmented. This is typical whether the market is healthy or not, but it seems especially pronounced. Sales of new single-family homes appear to be strongest in the northeast, while sales in the Midwest, west coast, and the south all appear to be lagging. Hopefully this downturn will be temporary, or at least not too detrimental to the long-term health of the housing market. Some commentators have suggested that the slowdown in the housing market might be due to the heavy and prolonged winter, which would be more comforting if the northeastern housing market hasn’t remained the healthiest. Overall, it seems we can hope that the housing market evens off and more young Americans, by whatever means, reach a place of financial security necessary to safely buy new homes. Free eBook from BiggerPockets! Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks, and techniques delivered straight to your inbox twice weekly! Actionable Advice for Getting Started, Discover the 10 Most Lucrative Real Estate Niches, Learn how to get started with or without money, Explore Real-Life Strategies for Building Wealth, And a LOT more Sign up below to download the eBook for FREE today! Click Here to Download the eBook Now! We hate spam just as much as you

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Real Estate News & Commentary

Washington, DC Home Sales Continue to Dwindle

While certain high price areas show no sign of slowing down, the DC metropolitan housing market is singing a different tune. We’ve seen many economically healthy cities experience resurgence in home prices, a phenomenon largely motivated by the gradual climb in home sales. This produced a self-motivating effect where homebuyer confidence let to more purchases, and the subsequent rise in values encourage further homebuyer confidence. That being said, we’ve seen certain metros hit a distinct tipping point. The price /purchase rate escalation can only rise so far until too many potential homebuyers get locked out of the market. As a recent Washington Post story notes, we’ve seen purchase rates decline for the third straight month as of the close of March. We’ve seen a disappointing overall first quarter for home sales in DC this year, which is a disappointing trend considering how strong they were during the same time last year. As the Washington Post story notes, this could have to do with other factors than pure economic trends. The constant snowing throughout the mid-Atlantic has chilled home sales overall, but it’s still significant enough that it can’t be attributed solely to the weather. The report also points out that tougher mortgage rates and tightened loan standards might also be contributing to the decline in home sales. As a point of comparison, figures cited from RealEstate Business Intelligence note that sales in the DC metro region were down 11.3% in March against the same timeframe from last year. The same report notes that DC homes sold in March of this year recorded at the lowest tally since March 2009, in the depths of the recession. This might portend a long-standing trend, or could merely represent a temporarily slowdown in local sales. What are the Possibilities? Some of the data points to Q1 2013 standing as a temporary cooldown period for the DC housing market. There’s a likelihood that homebuyers have been (in a sense, literally) weathering out the winter period in anticipation of the friendlier spring home prospecting season. The Washington Post strongly hints at this possibility, especially in light of the recent increases in local housing inventory. Releasing new homes onto the open market should help ease the elevated price of local real estate, which should coincide nicely with the homebuying-friendly summer season. To offer a more direct figure, the Post story notes that more homes came on the market in March than in the entire eight months before that. In terms of price, there’s a chance that demand is so high that new homes on the market might not diminish prices too strongly. That being said, even if home values do continue to escalate, it could have the broad impact of helping homeowners who are still struggling with negative equity. This too could, in time, allow for more homes to go up for sale. Free eBook from BiggerPockets! Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks, and techniques delivered straight to your inbox twice weekly! Actionable Advice for Getting Started, Discover the 10 Most Lucrative Real Estate Niches, Learn how to get started with or without money, Explore Real-Life Strategies for Building Wealth, And a LOT more Sign up below to download the eBook for FREE today! Click Here to Download the eBook Now! We hate spam just as much as you

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Real Estate News & Commentary

Los Angeles Housing Market Seems to be Slowing

Of all the regional markets in the United States, none have seen the flurry of activity that California has since 2013 began. While still carrying the troublesome status as the ground zero of the pre-recession housing crash, both Silicon Valley and greater Los Angeles have seen rapid home sales and price escalation throughout the past few months. As I noted in a prior post, the San Francisco housing market is still pacing a straight upward trajectory. However, the housing market down south might soon witness different patterns. A Notably Slower Growth According to a new report form the Los Angeles Times, population growth throughout Southern California slowed notably last year. As the article details, there’s much less motion to form new households and less influx of new residents overall. This has led to a slight decrease in demand for new homes, which for a span of months had been gaining value due to elevated demand. It’s a sign, overall, that the decrease in demand could lead to a slight evening in what have for a long while been escalating home values. The combination of limited relocation to Los Angeles and its adjacent counties and a general migration away from the area has already started to impact the housing market outlook.  As the Los Angeles Times report notes, more than 11,000 residents moved out of San Bernardino County than moved in by the close of 2013. It seems that the migration away from these high-population, high-demand areas is tied directly to the exorbitant price of real estate. As has been observed throughout the northern part of the state, housing prices have become so high that some buyers have avoided the area altogether. So What’s the Impact? This might have the unintentional impact of leveling housing prices, or at least slowing the rise in values. One of the small ironies of LA buyers getting priced out is that it helps maintain prices for a larger range of potential homeowners. It seems as if Los Angeles, as is the case with the rest of the country, has reached a point where home prices are seesawing gently between affordability and minor climbs in price. It’s a somewhat complex position for the market, but it’s also a buffer against a sharp bubbling in real estate values. At this point in time, it’s far preferable to the boom-crash many observers were concerned about once the housing market began turning the corner. Ultimately, this might forecast a greater interest in more “peripheral” property – homes and condos located away from high-demand neighborhoods and the coastline. More conservative buyers might look for out-of-the-way homes in lower-priced neighborhoods, which leave opportunities for developers to reap the rewards of investing in lower-demand areas. What are your thoughts on the Southern California market? Photo Credit: Ron Reiring Free eBook from BiggerPockets! Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks, and techniques delivered straight to your inbox twice weekly! Actionable Advice for Getting Started, Discover the 10 Most Lucrative Real Estate Niches, Learn how to get started with or without money, Explore Real-Life Strategies for Building Wealth, And a LOT more Sign up below to download the eBook for FREE today! Click Here to Download the eBook Now! We hate spam just as much as you

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Real Estate News & Commentary

San Francisco Housing Prices Continue to Inflate

As I’ve noted in prior posts, housing market prices are marked by strong regional disparities. Most of these differences in price are directly tied to the strength of local economies and job markets – high-earning, fiscally stable regions attract a professional class that gradually elevates the price of real state. Or, in some cases, not so gradually. California Real Estate.. California real estate in general tends to carry a hefty price tag but San Francisco, in particular, seems to be experiencing and unimpeded spike in value. According to a new report from the New York Times’ “Bits” blog, the area is experiencing its own odd sort of housing crisis. Citing a recent transaction in the city’s Glen Park neighborhood, a house that was put to market at $895,000 was finally purchased at $1.425, a solid $530,000 above asking price. As the New York Times story notes, this is far from an eccentric example – the combination of young, highly compensated tech employees and intense demand for limited property has caused local real estate prices to skyrocket. Granted, this is not a recent phenomenon. San Francisco juts out on a geographic peninsula and, unlike Seattle to the north and Los Angeles to the south, the nearest suburbs are either to the city’s south or far across its bay and accessible only by bridge travel. The New York Times story notes pointedly that more wealth is concentrated in the San Francisco Bay area than most anywhere else in the country. The combination of geography and a phenomenally wealthy tech sector has led to an unceasing climb in real estate prices. In terms of demographic specifics, the New York Times report details that while 75,000 residents have moved to San Francisco, only 17,000 new housing units were built over the same timeframe. The consequences? Anywhere from 60 to 80 percent of San Francisco homes are selling above the asking price. Related: California Housing Market Losing Momentum So, What’s the Outlook? Ultimately, it’s great for realtors and sellers, and potentially miserable for long-term residents and anyone seeking to buy. The duality of limited space and heavy demand from high-earning buyers will likely jack up the prices further, and there’s little sign in the immediate that this bubble will pop. The supply-demand fundamentals and regional complexities seem too ingrained for there to be much in the way of price easing. One of the other complexities is that in terms of buyer demographics, it’s turning San Francisco into a one-industry city. As far as residents go, only those involved in the high-paying tech sector can actively compete in the purchasing market. Many other residents whose profession and pay grade might make them feasible buyers in other cities – we’re talking teachers, government employees, even research scientists – are being forced to look elsewhere or relocate entirely. The long-term consequence of this is that if and when the tech bubble bursts, the housing market may ride along with its crash. To read the full New York Times article to which this post refers, click here. Photo Credit: jondoeforty1 Free eBook from BiggerPockets! Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks, and techniques delivered straight to your inbox twice weekly! Actionable Advice for Getting Started, Discover the 10 Most Lucrative Real Estate Niches, Learn how to get started with or without money, Explore Real-Life Strategies for Building Wealth, And a LOT more Sign up below to download the eBook for FREE today! Click Here to Download the eBook Now! We hate spam just as much as you

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Real Estate News & Commentary

Truck Sales Suggest Strong Outlook for Housing Market

As I noted in a prior post, activity in the consumer goods sector is often an indicator of health in the housing market. Major home supply retailers often see a jump in sales during or even before a rise in buyer activity. Scenarios like this can have spillover effects as well, with the increase in retail purchases and overall consumer confidence leading to profit surpluses and even job growth. That being said, recent analysis suggests that activity in another area of the consumer economy might bode well for the housing market. According to a new story from the Washington Post’s Wonkblog, the recent increase in pickup truck sales might have some positive aftereffects for the property sector as well. Citing a recent report from TD Economics, sales of pickup trucks jumped a full 12% in 2013. All things considered, this seems the largest annual gain in light truck sales in years. So What Does This Say About the Economy? The purchase of pickup trucks has a deep correlation to planned increases in new home construction. Construction workers have a special reliance on certain makes and models to transport construction supplies and tools of industry, and often purchase additional (or up-to-date) vehicles in the case new building projects are on the horizon. The Washington Post analysis points out that since 1980, climbs and decreases in pickup trucks have correlated with subsequent rise in new home construction. Extrapolating from this, TD Economics predicts that housing starts will rise to just under 1.5 million by 2015, a notable climb from the 927,000 recorded last year. The Washington Post analysis continues to suggest the recent downturn in new construction is temporary, and will recuperate in time for the major spring-summer homebuying season. In fact, Ford’s sales of their F-Series just had the strongest February in eight years, much of which was propelled by a sharp uptick in sales during the latter half of the month. What’s the Takeaway? Granted, truck sales are not a flawless indicator of housing market performance. There are abundant other reasons why pickup truck sales could be, well, picking up. The Washington Post story points out that the Detroit Big Three all just unveiled new models of their signature trucks, which is a good sign considering the companies’ previous lean years. But, on the other hand, it might create consumer interest far and beyond their typical workingman’s demographic. That being said, there’s a good chance that weaker home sales in January/February of this year were due to purchase exhaustion following the flurry of buyer activity in late 2013. With the cold weather and generally miserable climate conditions having kept buyers away, we could see gains in the housing market spring back as soon as May. Photo Credit: al7n6awi Free eBook from BiggerPockets! Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks, and techniques delivered straight to your inbox twice weekly! Actionable Advice for Getting Started, Discover the 10 Most Lucrative Real Estate Niches, Learn how to get started with or without money, Explore Real-Life Strategies for Building Wealth, And a LOT more Sign up below to download the eBook for FREE today! Click Here to Download the eBook Now! We hate spam just as much as you

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Flipping Houses

Housing Recovery: Still Marred by Regional Differences

With the housing market appearing to enter a period of slower growth, market observers have started to conclude that we’re slated for a longer-term recovery. There is still some regional unevenness, but for the most part analyst consensus seems to be pointing toward hope for sow but steady growth in the immediate. However; there are some differing opinions on the matter. Housing Recovery: Still Marred by Regional Differences A recent Washington Post story paints a somewhat more complex picture of the housing market. Citing a newly published study from the Demand Institute, the report notes that regional differences in price stability and growth persist throughout the U.S. One of the most galling takeaways was the disproportionate value difference between major metro regions. Disclosing analysis from the Demand Institute report, the Washington Post pointed out that the top 10% of cities encompassed within the report held 52% of total housing wealth. In terms of financial specifics, the top 10% of city regions held $4.4 trillion in property wealth, while the bottom 40% held only $700 billion (or 8% of the total housing wealth overall). Granted, some cities will inevitably contain inordinate amounts of valuable property. Economic powerhouses like Los Angeles, Chicago, San Francisco, and New York City would naturally hold a sizable portion of American urban property wealth. What was most surprising about the report was how comparatively lacking the remaining cities were. As an adjunct to this, the Demand Institute report also analyzed the likelihood of future value gain and the potential increases. States with depressed housing prices were predicted to gain the most value through 2018, with New Mexico and Illinois among those singled out. As a comparison, regions with relatively stable housing prices leading into 2012 were predicted to have the lowest future prices gains. Both Washington DC and New York were ranked among the lowest states in terms of future value gains. Related: Housing Recovery Is Helping Consumer Economy What’s the Takeaway? Much of this makes straightforward economic sense. Metros whose property suffered the least during the recession had the least room to climb. Places whose property values crashed or gradually dwindled clearly had much more value to recover, and had a longer recovery timeframe as a result. Clearly some of these cities are looking toward well past 2014 until their homes regain their value (if they ever do so fully). Illinois and greater Chicago may well see a new emergence as popular home locations, whereas all signs point toward much of Detroit maintaining its stagnation. Ultimately, property investors would do well to balance the current property values (or lack thereof) against other hard economic factors – job growth, real estate demand, as well as projections around population growth. As always, the health of local property markets is tied to job figures, and the same can be said for the U.S. housing sector as a whole. What are your thoughts on the housing recovery? Let’s discuss… Free eBook from BiggerPockets! Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks, and techniques delivered straight to your inbox twice weekly! Actionable Advice for Getting Started, Discover the 10 Most Lucrative Real Estate Niches, Learn how to get started with or without money, Explore Real-Life Strategies for Building Wealth, And a LOT more Sign up below to download the eBook for FREE today! Click Here to Download the eBook Now! We hate spam just as much as you

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Real Estate News & Commentary

California Housing Market Losing Momentum

As the focal point of the 2007 bubble burst, it was uncomfortable to see California reemerge as the market with the quickest rise in home prices. While the gains in property values were impressive nationwide, markets throughout the northern part of the state and the LA metro region in particular were monumental. Both Los Angeles and Orange Counties say a rise in prices that were so sharp they left the impression that a second bubble wasn’t entirely out of the question. However, according to a recent story from the Los Angeles Times, it appears that the momentum in home sales may at least be temporarily slowing. As the report outlines, local buyers are significantly less enthused than during peak buying periods throughout 2013. Broadly speaking, January sales in the six-county Southland region were the lowest recorded since January of the year prior. Home prices dropped a full 3.8% against those in December, a trend that seems largely attributable to the newfound disinterest in home purchases. Much of this seems tied to the deadening effect of inflated home prices. Genuine buyer interest in and of itself seems persistent, but as the Los Angeles Times report indicates, some buyers are being outright choked from the market. Affordability has been a major consideration for local buyers, with the median home price resting around $380,000 despite the slight decrease in local property values. This sort of “teetering” phenomenon across the southern California housing market is compounded by the fact that many of the recent purchases seem to originate from investors and not prospective residents. The ultimate effect seems to be a broad exclusion of potential buyers from the California housing market. The ultimate impact of this remains to be seen – it’s feasible that the market could experience potential stability down the line if buyers shy away for too long. Fears of a second bubble was one primary reasons for broad hesitancy in the buyer’s market, and consumer confidence still remains fragile. Anything that only encourages buyer skepticism clouds the future of the local housing market. Is There a Silver Lining? Ultimately, yes. One of the positive consequences of a decrease in purchase momentum is that housing prices may dip enough for certain buyers to return to the table. There’s the potential for a sort of uneven drop-rise pattern in the California housing market where home prices decrease due to purchase slowdown, and increase again once they become affordable to enough interested buyers. While this risks unevenness, it does stave off the likelihood of a bubble in the immediate future. All this being said, it seems the forecast for the housing market throughout Los Angeles and Orange County hinges on whether or not purchases arrive from prospective residents or from hedge funds and financial orchestrators. It’s easy for economic trends to sustain if they come from more organic motivators (consumer confidence, resident property demand), but if they’re orchestrated by outside forces, then stability could be more likely. Photo Credit: Thomas Hawk Free eBook from BiggerPockets! Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks, and techniques delivered straight to your inbox twice weekly! Actionable Advice for Getting Started, Discover the 10 Most Lucrative Real Estate Niches, Learn how to get started with or without money, Explore Real-Life Strategies for Building Wealth, And a LOT more Sign up below to download the eBook for FREE today! Click Here to Download the eBook Now! We hate spam just as much as you

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Real Estate News & Commentary

Is The Housing Market Still Lagging?

While the housing market paced a sharp recovery in 2013, and there are signs the sector is stabilizing, persistent doubt remains as to its impact on the American economy as a whole. The general consensus among public economists is that the housing market has lagged behind the greater U.S. economy in terms of recovery and overall growth. Growth in the housing market, while notable, seems to be leveling off in some areas and dangerously sharp in others. As of late, certain commentators are attempting to parse exactly why activity in the housing market has been comparatively slow. New analysis from Los Angeles Times contributor Michael Hiltzik tackles this head-on, while outlining some hypothetical prescriptions. Noting analyst consensus, Hiltzik points out the importance of increasing mortgage credit availability, considering that the fixed 30-year mortgage remains cornerstone of the American home loan market. However, the opening of mortgages for home purchases seems to have bottomed out by the close of 2011. Taking all this into consideration, there needs to be a stable “engine” of some variety to insure the housing market continue to grow. Without directly endorsing this myself, Michael Hiltzik suggests at least partially retaining public-sector mortgage management. His rationale hinges on the possibility that this will shift loan responsibility from private borrowers back onto greater institutions, and into the ownership of entities better adept at handling them. While a counter-argument might suggest this encourages economic paternalism, there is a feasible case to be made that it also removes an element of fiscal risk. To address possible qualms around propping up both the 30-year fixed mortgage and keeping loan management in public hands, Michael Hiltzik points out that the greatest threat to the housing market remains regional upsets. To follow the train of logic that supporters of the 30-year fixed mortgage endorse, it’s a mortgage paradigm that only bolsters price stability against confounding factors. In order for the housing market to sustain its recovery, there will need to be certain economic stabilizers. It’s easy to argue the inverse is true as well. So What’s the Solution? While I can’t explicitly endorse every claim in Michael Hiltzik’s Los Angeles Times column, he does fixate on some crucial points. Within reason, fixed-rate mortgages will need to remain accessible to the mainstream of America buyers. As an adjunct to this, mortgages will need to rest at least partially within the hands of institutions against which culpability can be enforced. The factors leading up to the 2008 recession were multifaceted, but the bottoming-out of the mortgage market was no small contributor. Ultimately, we’ll need to insure by some means or the other that most Americans are able to safely purchase homes. Too strong a slowdown in the housing market could discourage recovery in certain metros, further compromising the ability of young professionals and middle-earning families to put down for a mortgage of their own. Photo Credit: Justin Gaurav Murgai Free eBook from BiggerPockets! Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks, and techniques delivered straight to your inbox twice weekly! Actionable Advice for Getting Started, Discover the 10 Most Lucrative Real Estate Niches, Learn how to get started with or without money, Explore Real-Life Strategies for Building Wealth, And a LOT more Sign up below to download the eBook for FREE today! Click Here to Download the eBook Now! We hate spam just as much as you

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