What’s New With San Diego Real Estate – Good morning everyone. I wanted to provide a brief update as to the re-sale(s) figures that were released today. Many of you may have seen these figures already and are wondering why there has been such a pullback – simple answer to that; it’s a complex answer. I’ll do my best to touch on this matter to help clarify what I’m seeing as a day-to-day.
The index of pending home sales fell 8.7% last month to a seasonally adjusted annual rate of 92.4, the lowest reading since October 2011 – ouch. All four U.S. regions saw monthly pending homes sales drop in December, with the gauge down 10.3% in the Northeast, 9.8% in the West, 8.8% in the South and 6.8% in the Midwest. For those of us here in San Diego we are seeing similar activity, e.g., greater list time(s), price reductions, seller incentives, etc.
Here in North San Diego County I’m still seeing very strong sales activity even with the limited inventory. Coastal communities like Carlsbad, Encinitas and Cardiff are all doing very well. These market area(s) seem to be maintaining their year-over-year increases in sales prices, averaging 9-11%. Some of the North County Inland market areas like Scripps Ranch, Poway and 4S are also doing quite well. The year-over-year rate sales figures show an average of 7-9% increase. The near record low inventory levels have helped bolster re-sale figures in these areas.
With the changes that have taken hold this year due to the new QM guidelines and mortgage regulations (conforming loan cap of $546,250), I’ll be curious to see how these mandates affect sales figures. I personally think it will affect San Diegan’s greater than what has been forecasted.
With a heavy reduction in the maximum conforming loan amount, perspective homebuyers as well as families looking to refinance are going to be facing a new set of challenges. Sourcing larger down-payments and or having to seek ‘Jumbo Loans’ now is a reality that many of us cannot afford to do. Losing $150,000.00 in borrowing capacity and tightening qualification ratios (DTI), these changes are going to affect things – let’s just hope that it doesn’t have a greater impact than what is expected.
As well all know, when lending standards are created that allow a borrower access to mortgage monies, sales figures will increase and the market will start to operate again. The same is to be said for the opposite of that. If guidelines continue to tighten unnecessarily, then we will continue to see figures like we are today. The key is going to be when lenders and mortgage REIT’s create a mechanism to the secondary market (non-Fannie Mae/Freddie Mac) that provides a way to collateralize these funds – then it’s going to change things greatly. That will create opportunities for qualified borrowers and allow the self-employed a way back into the market.
Here in San Diego we have a strong economic environment that will support these long overdue programs. Let’s hope that 2014 is the year we see it happen.