Have sellers missed their opportunity to get top dollar for their homes?

Have housing prices peaked? I hear this question often when I speak to sellers about whether they should list their homes now or wait for the market to shift.

Over the last couple of months, we’ve seen interest rates climbing to the mid-5% range. At the same time, inventory levels have started to rise, buyer demand has dropped off, and inflation has become more of a problem. Despite all this, **I don’t think sellers have missed the boat. **

Interest rates have been a key driver in our market over the last couple of years. They made the cost of owning a home cheaper than renting. Our market has also been fueled by COVID and the migration of people who can work from home.

In recent months, the Federal Reserve has announced they’ve increased the Fed Funds Rate by 50 basis points to combat inflation and that they’ll continue to do this throughout the year.

“If you have a plan, it’s still a great time to sell.”

Affordability is the primary concern among buyers in our market, but it’s not all bad news. Though many homes in desirable neighborhoods are selling for top dollar with multiple offers, overpriced houses are left sitting on the market and might have to go through price adjustments before they’ll sell. If you’re a buyer, this could be an opportunity for you to buy a home without waiving all your contingencies. You might even get a property for market value instead of having to offer tens of thousands of dollars over asking price.

If you’re a seller, pricing your home correctly from the start is crucial. I recently took a listing that I thought was fair market value, but it ended up sitting on the market for longer than expected. Why? The market has begun to shift, and some higher price points are being impacted by issues of affordability. Rising rates have increased buyers’ monthly payments by a significant amount, causing many buyers to retreat to the sidelines and wait for things to get better.

For sellers asking if they should sell now or wait, my answer is that we know what the market is doing right now, but we don’t know what it will look like in six months to a year from now. Selling now is certainly a great option, but at the same time, don’t just sell to maximize your profits without a plan. You’ll need to figure out where you’ll be staying afterward, and as we’ve already discussed, buyers are not favored by this market.

Whether you’re looking to buy or sell a home, we would love to have a conversation with you to guide you through this volatile market. Give us a call or send us an email. We hope to hear from you soon!

Your spring Palm Springs 2022 real estate market update.

Today I’m bringing you our Palm Springs spring market update. Prices continue to surge as record-high sales and record-low inventory keep pushing prices higher in every city in Palm Springs. At the end of March, the median price of a detached home was $660,000, which represents a year-over-year gain of 20.2%; last year at this time, it was $616,000. We expect prices to continue to rise over the next two months, and then seasonal factors should take over.

As of April 1, the Valley had 678 units of inventory, and it’s a bit worrisome that there was no seasonal escalation in inventory, which almost always occurs between October and April. We currently only have 0.7 months’ worth of inventory, which is 0.1 less than last year. The only hope for higher inventory is a surge of new listings, but with only 1,244 new listings in March (which is average), we don’t see that happening yet. This historically-low inventory indicates exceedingly low supply and moderate to strong buyer demand, which both contribute to higher prices.

“Prices continue to surge as record-high sales and record-low inventory keep pushing prices higher.”

With inflation ticking up, mortgage interest rates have also increased and are hovering at about 5% right now. There are indications this is beginning to affect buyer demand as more and more people are priced out of the market. However, interest rates are still historically favorable, and getting into the market now may be more affordable than waiting since prices are predicted to appreciate at least through the end of the year.

We expect to continue seeing a strong seller’s market throughout 2022, but there might be more competition for sellers and moderation in demand as rates go up. So if you’re considering selling, you’ll have less competition and the best chance of getting your highest price if you list now versus later.

If you have any questions about the value of your home or are interested in buying in the Greater Palm Springs area, we’d love to speak with you about your unique situation. Please feel free to reach out to us via phone, text, or email. We’d be glad to help you. Also, if you have any real estate-related topics or questions we can answer in a future blog, please let us know.

Here’s how the war in Ukraine and inflation are affecting our market.

If you’ve watched the news recently, you know that everyone is talking about the war in Ukraine and inflation. How are these factors affecting our real estate market?

First, I want to mention that I am praying regularly for the people of Ukraine, and I hope this war ends as soon as possible. However, the effect this conflict has on our real estate market isn’t entirely negative. When times are difficult, investors tend to move their money from the stock market into hard assets, such as real estate. **The security of housing becomes more attractive when the future becomes uncertain. **

Rising inflation is having a similar effect on our market. Traditionally, real estate appreciates at the same rate as inflation; sometimes, home values even outpace it. This makes real estate a great hedge against inflation.

“As long as supply remains low, home prices won’t decrease.”

On top of this, interest rates are rising. As of this blog post, rates are just under 5%. While that isn’t a terrible rate from a historical perspective, it does mean that homes have become less affordable, and demand will start to decrease. That being said, about 40% of homes in our area are purchased using cash. Rising rates may curb demand, but as long as supply remains low, there is no reason to expect a price decrease. In fact, our real estate market may experience double-digit appreciation this year.

As always, it comes down to supply and demand. Our inventory remains incredibly low, and global conflicts are driving investors towards hard assets like real estate. As long as these factors remain, we’ll be in a strong seller’s market. If the war in Ukraine turns into something bigger, it could have a different impact on our area. For now, it’s still a great time to buy or sell.

If you have questions about today’s topic or anything else related to real estate, please call or email me. I would love to help in any way I can!

Here’s why I tend to discourage sellers from listing homes as pocket listings.

In our competitive market, buyers and investors are looking for pocket listings because they think they’ll get a better deal on those properties. I get at least two or three calls a week from investors both in and out of the area looking for pocket listings. However, today I want to talk about why pocket listings are a bad idea.

First, what is a pocket listing? It’s a listing that an agent takes but doesn’t expose to the broader market. Instead, they keep it in their pocket and retain exclusive access to it.

So why do I think that selling a home as a pocket listing may not be in the best interest of sellers? It’s because turning a house into a pocket listing vastly limits the exposure of the property. If you properly market your home, you’ll generate enough interest to create a bidding war. That, in turn, will help you realize your home’s highest potential price. In California, the listing agreement that you sign with an agent outlines all the benefits of putting your home on the MLS, and it frowns on the idea of holding homes as pocket listings for the aforementioned reasons.

“Holding a home as a pocket listing limits how many buyers see it, which reduces the price you’re likely to get when you sell.”

There are some situations when a pocket listing makes sense, however, such as when you’re in the public eye or going through financial hardship or divorce. You might not want the entire neighborhood to know that you’re selling your home.

In this strong seller’s market, it might be a better idea to give your property a little time before you decide on an offer to allow as many buyers as possible to see it. I’ve seen a lot of properties enter and leave the market within just 24 hours. It seems like those sellers might just be accepting the first offer they received without generating a bidding war. That probably happened because the home didn’t spend enough time on the market to generate the appropriate level of interest.

If you have any questions about pocket listings or you’re thinking about selling your home, don’t hesitate to reach out to me by phone or email. I’d love to have a conversation with you.

Here are three things that are giving our buyers a competitive advantage.

Even though we’re in a strong seller’s market here in Palm Springs, there are still ways that you can win as a buyer. Buyers are having to compete for homes like never before these days, but here are three tips that we’re sharing with our clients to help them get their offers accepted over the others:

1. Move quickly. You should already have a process in place to evaluate homes before looking at them in person. First, determine your “must-haves” in a home. I suggest that buyers take a blank piece of paper, draw a line down the middle, and sort what they want into two columns: must have and nice to have. Identify your top three must-haves and agree on them.

Once you start looking at homes, you’ll be much quicker to evaluate them. We have our buyers rate each home they see on a scale from one to 10 as they consider the home’s price, condition, and location. In general, a home that scores a seven or above could be a good contender to consider purchasing.

“A pre-approval letter and proof-of-funds letter serve the same purpose.”

2. Demonstrate your ability to purchase to the seller. To show you have the desire and the ability to own a home, have a strong pre-approval letter from your lender. If you’re paying cash, a proof-of-funds letter serves the same purpose. These are items that we strongly encourage you to submit with your initial offer.

3. Come in strong with your offer. If you find a house that fits your needs and has your must-haves, we advise you to come in strong on price. You may not get a chance to increase your offer down the line, so you want to put your best foot forward from the beginning. If a home is priced well, you should expect to at least pay the asking price if you’re in a multiple-offer situation. Make your highest and best offer first because there is no guarantee you’ll get to make another one.

We’ve had a lot of success in securing properties for our buyers even in a competitive seller’s market. We’d love to help you as well.

If you have any questions about buying a home or anything else related to real estate, don’t hesitate to reach out via phone or email. We look forward to hearing from you soon.

I’m going deep into whether or not our market is slowing down somewhat.

Is our real estate market slowing down somewhat? I’ll be doing a deep dive into answering that question today. Many factors go into assessing how the market’s doing, and I’ll be discussing the main ones. The question of whether our market is slowing is a difficult one to answer due to a few considerations.

Feel free to watch the full message above or use these timestamps that will direct you to various points in the video:

0:00— Introduction to today’s topic

0:25— Year-over-year change in housing inventory for June 2021

0:50— Year-over-year change in housing inventory for July 2021

1:50— If inventory continues increasing, we could see a wave of activity later in the year

3:30— Home builders are now limiting their sales to try to catch up

4:40— The fears of a COVID-19 variant wave could change things again

5:50— Advice if you’re looking to buy or sell

6:15 Wrapping up today’s topic

Please feel free to reach out to us via phone, text, or email if you’re thinking about buying or selling. We’d love to help you. Also, if you have any questions or topics you’d like us to talk about in a future video, please let us know. I’d be happy to make a video about it.

We may be sensing signs of a shift in our current real estate market.

As a housing analyst, Ivy Zellman is a trusted source of information regarding the housing market. She recently stated in her June broker report, “This month’s overall homebuyer demand rating equaled 86 on a 0-100 scale, down from 88 last month and marking the first sequential decline since November.” This is our first indicator that buyer demand may be beginning to wane ever so slightly.

At 0:55 in the video above, you’ll see the results of a survey from the home purchase sentiment index that tracks the percentage of respondents who say that it’s a good time to buy. In May of this year, 35% thought it was a good time to buy, a sharp contrast from last year when that number was 61%. Perception is reality, and if people are feeling like it’s not a good time to buy, that becomes their reality.

“We may see a slight cooldown on this frenzied market that we’ve experienced over the last year and a half.”

Next, at 1:55 in the video above, you’ll see the monthly showing time index. The chart shows that in May, the number of showings went down compared to March and April, though they’re still above where we were this time last year. There are still plenty of buyers in this hyper-seller’s market, but we seem to be seeing signs of buyer fatigue. But what’s causing this buyer fatigue? There are actually a few factors to note:

Record price appreciation

Extremely low inventory

Record-high percentage of sales over list price

Record-low days on market

Historically low mortgage rates

The final graph at 2:59 above shows the months supply of homes for sale going back to 1999. With supplies hovering between one and two months of supply, we’re nowhere near being in a buyer’s market, but there has been a small uptick in that direction. Don’t count on the market normalizing anytime soon, but we may see a slight cooldown on this frenzied market that we’ve experienced over the last year and a half.

If you’re a buyer, we would love to help you navigate this market. You need a trusted advisor at your side to get you through your next home purchase. If you’re a seller, note that while the market still favors sellers, things are beginning to trend slightly towards buyers. That means there’s no better time to sell your home for top dollar.

Whether you’re buying or selling, or if you have questions about real estate in general, don’t hesitate to reach out to me. I’d love to hear from you.

Is the current market affordable, and is it a good time to buy?

Is it a good time to buy a home in today’s housing market? The power lies in the hands of the sellers; rapid appreciation is driving declines in affordability despite rising incomes, and we’re seeing very low mortgage rates. Housing affordability declined in April by 7%, which was the most since December of 2018. Days on the market are at record lows, and multiple-offer bidding wars are common across all price points. 

Does this mean it’s a bad time to buy a home? Should a buyer wait for the housing market to cool off or jump in now before affordability declines even further?

Buying a home is both a financial and lifestyle decision. If an individual or a family has made the lifestyle decision to buy, then it becomes a financial question. Will affordability decline in the months to come? If so, it may be a good time to buy before things get worse. However, if buyers start to back off, thereby lowering the likelihood of bidding wars, causing house prices to moderate, and affordability to bounce back, you may want to consider waiting.

Shifts in housing supply or buyer demand can affect affordability. If supply increases and meets demand in the middle, then house prices will moderate. Unfortunately, while inventory has increased slightly in recent weeks, it remains at near historic lows and is not enough to compensate for the decade of underbuilding. It will take years for the supply to catch up to the demand. In the meantime, any new housing inventory will be quickly bought due to existing demand, so significant housing relief is unlikely in the near future.

Another thing that could moderate demand is a substantial increase in mortgage rates. However, without an increase in income or decrease in the house price growth, a rise in mortgage rates is going to accelerate the decline in affordability and squeeze out the buyers that are on the margin out of the market. With these buyers out of the market, there might be less intense and frequent bidding wars, and house pricing may moderate. However, even without the rising mortgage rates, if house price appreciation continues to grow, then that’s going to reduce affordability even further. In the short run, it’s going to squeeze more buyers out of the market.

“Affordability is likely to worsen before it improves.”

Household income growth and price appreciation can provide some insight into the likely direction of affordability in April. The nominal house price growth increased by 16.2%. That’s nearly double the 8.6% seen last year. For affordability to improve, house-buying power must outpace nominal house price growth. That’s not happening right now.

Looking ahead, economists forecast mortgage rates to hit 3.4% by the end of 2021. The household income would need to increase by about 5% to offset any affordability loss due to increased mortgage rates. While incomes are expected to increase in the months to come as the economy continues to improve, it’s unclear if it’s going to reach the pace necessary to offset the potential rising mortgage rates.

The bottom line is that while nominal house price growth may moderate due to the affordability squeeze on buyers who are on the margin, the severe supply and demand imbalance means the housing market is unlikely to cool enough to result in a material improvement in affordability. Even if demand moderates due to an affordability squeeze, it will take time for the supply to catch up with demand, which is increasing house price growth.

So should you buy now or wait? Affordability is likely to worsen before it improves, so try to buy now. If you’re a buyer looking for a home in the greater Palm Springs area, we have a lot of experience placing buyers in homes and shepherding them through multiple-offer situations. 

We’d be happy to help you as well. Please feel free to just give us a call, text, or email.

The numbers indicate we’re not in a housing bubble.

Are we in a housing bubble? Is the market going to crash?

This seems to be something I’m getting asked about a lot these days. While I don’t have a crystal ball and can’t definitively answer these questions, I can share some information that would indicate we’re not in a housing bubble. 

The first key to remember is that the last market crash from 2005 to 2008 was built on predatory lending. Lending standards were very loose back then. However, with the passing of the Dodd-Frank Act and the new regulations formed by the Department of Housing and Urban Development, it’s much more difficult to get a loan. Lenders nowadays check your down payment, debt-to-income ratio, and have very strict standards for giving loans. 

Second, due to our high job loss caused by the pandemic, the government created forbearance programs that allowed homeowners to defer or delay their mortgage payments for a certain amount of time. As they begin to make those payments again, many lenders are allowing modifications to their mortgages, which allows them to put their payments on the back end of them. This has prevented outright foreclosures from happening; the number of foreclosures in our area is very low.

“If you’re interested in purchasing a house, now might be the time to act so that you don’t have to pay that additional 6% to 7% in the next year.”

Third, home prices have appreciated by 21% in the past year in the Palm Springs area, which gives a lot of homeowners additional equity in their homes. If they find themselves in a difficult place, they’d be able to get out of their homes and cover their closing costs quite easily. 

Lastly, new housing starts are at a 10-year low. Builders haven’t been building at the same pace that they did during the runup to the last crash. We have a housing shortage issue that’s creating more appreciation for sellers. As long as interest rates stay low and wage growth continues, it’ll create affordability even though homes are appreciating. Over the next year, we’re projecting homes to keep appreciating at a rate of 6% to 7%. 

If you’re interested in purchasing a house, now might be the time to act so that you don’t have to pay that additional 6% to 7% in the next year. If you have any questions about selling a home or purchasing in this market, don’t hesitate to call or email me. If you have any other real estate-related questions, feel free to reach out to me as well. I’d be happy to help you. I’ll see you next time!

Here’s what to consider if you’re thinking of doing a pre-listing inspection.

Is a pre-listing home inspection—which is an inspection done prior to listing a home on the market—beneficial to sellers or not? My answer is maybe. There are several advantages and disadvantages to consider.

Advantages:

1. You determine the condition of the home. This means there will be no surprises. If there are any major defects you need to address before listing the home, you’d be aware of them up front. If anything comes up in the inspection that you won’t be willing to address, you can reflect that in your marketing price and communicate it to any potential buyers who look at it once it’s listed.

2. You improve buyer confidence. You’ll attract more buyers, fewer contingencies, and create a solid foundation for negotiation. Buyers will know exactly what they’re getting into when starting negotiations because they’ll have already had the necessary information on the home’s condition.

3. You can have a smoother transaction. The buyer already knows the condition of the home, so you may not be faced with renegotiating price, credits, or repairs. This gives you peace of mind when entering into a transaction with a buyer.

Disadvantages:

1. You have to cover the cost instead of the buyer. A home inspection is typically a cost paid by the buyer during the transaction. If you as the seller order the inspection prior to listing the home on the market, you’ll have to take on the cost.

2. You may find previously unknown issues in the home that you didn’t anticipate having to address or disclose.

3. There are disclosure requirements regarding the findings in the inspection report. In California, we have very strict disclosure laws, and sometimes an inspection report will identify problems that read much worse than they actually are. Regardless, you’ll be obligated to disclose all of those issues, and the easiest way to do that is to share the inspection report with any potential buyers.

If you’re trying to decide whether to do a pre-listing inspection or not, give me a call and I’d be happy to discuss your situation. If you have any other real estate questions, feel free to reach out to me as well. I’d love to hear from you!