What is the ideal time to sell a home and move up to a larger one or a more desirable neighborhood? Experienced Realtors® would answer that question with, “When there are more people buying in your home’s price range than there are homes available for sale. When interest rates are low. And when there is a large supply of homes in the price range in which you want to buy.” BINGO, that perfectly describes today’s market in the Central Valley.
Over the past 5 years the Central Valley has had its share of struggles in the housing market. Foreclosure and short sale properties have been a majority of the sales. Many homeowners with a desire or need to move up have put their plans on hold, sometimes because they didn’t want to be in a pricing war against a bank-owned property. The media’s repeated headlines about “distressed sale properties,” seems to ignore the fact that 45% of the homes sold in Fresno County in the last 3 months have been what real estate agents have labeled “traditional sellers,” people who have equity in their home. We’ve been looking at the glass as half empty instead of half full.
Another reason move-up buyers should consider this a good time to move is the under supply of homes in lower price ranges. A Month’s Supply of Inventory” (MSI) is a gauge for determining price appreciation. If there is less than 3 month’s supply of inventory, it should be easier to sell properties. With a limited supply, buyers may also be willing to offer more for a property to increase the chance their offer will be accepted. An inventory of 3 to 6 months is considered an acceptable supply that should keep values stable and selling times reasonable. An inventory of more than 6 months is considered an oversupply and home sellers may need to reduce their asking price in order to get their home sold.
The Month’s Supply of Inventory Graph shows that there is a limited supply of homes priced under $250,000, and a stable supply of homes priced between $250,000 and $400,000. And more good news for move-up buyers, there is an abundance of homes to choose from in upper price ranges over $400,000.
by Paul Gibson, Owner/Broker Guarantee Real Estate
We all know that residential real estate markets are local. Don’t we? While at our Fig Garden Village Office yesterday, one of our Sales Associates told me that she was working with buyers in the $250,000 to $300,000 range and every time they made an offer on a property, they found themselves in a multiple offer situation. “More buyers than sellers” flatly contradicts yesterday’s news that home prices are declining. Mr. Case and Mr. Schiller are brilliant economists and arguably their Case Schiller Index for U.S. Home Prices is THE index . . . . except Fresno, our local market, is not part of the Case Schiller Index as recently reported in the national news, and (much worse) reported in the Fresno Bee, and on our local Fresno TV stations. Many major markets are still undergoing price adjustments, but not Fresno.
What does a buyer in Fresno need to know? Well, first of all, there are many other factors for a buyer to consider before they dive into the market statistics. Picking the precise “bottom” of the market is impossible, but understanding basic trends is not. Here’s a trend that I think every Fresno buyer should know. The median price for a single family home in Fresno & Clovis in April 2009 was $143,000, in April 2010 it was $155,000, and in 2011 it was $145,000. Did it go up, and then down? Yes, BUT likely because during the spring of 2010 it was artificially propped up by the $10,000 State and $8,000 Federal Home Buyer’s Tax Credits. These tax credits stimulated activity. As the deadline drew near, people were willing to pay a higher price for a limited inventory and thereby not miss out on a once in a life time tax refund opportunity.
So is the Fresno market really down 7% (from $155,000 in 2010 to $145,000 in 2011)? Or is it up 1% (from $143,000 in 2009 to $145,000 in 2011)? Both statistics are mathematically correct! I don’t think the Fresno market has declined or is taking a double dip, I do think it is still recovering and values should remain relatively neutral. The outlook is positive over the next several years.
I believe that it is a great time to buy for the homeowner with a long term perspective. Home values are at, or in some cases below, replacement costs. Interest rates are at historic lows. Don’t get caught trying to pick the “bottom of the market”. Pick a home that you would love to live in; one that you will appreciate.
The California Association of Realtors® (C.A.R.) recently released their First Time Home Buyer’s Affordability Index, the results showing that the Central Valley remains the most affordable region in the State. The analysis for the first quarter of 2011 shows that based on annual median household incomes, the percentage of population that can afford to purchase an entry-level home is:
In this C.A.R. analysis, buyers in Fresno County would need an income of $18,040 and a 10% down payment in order to purchase an entry level home valued at $117,500.
Fresno has once again been named to the top 10 list of cities in the United States where it is financially best to buy a home instead of rent. Here’s the original article: REALTOR® Magazine-Daily News-Cities Where It’s Cheaper to Buy Than Rent
Prices have stabilized over the past 2 years in the Fresno area after hitting bottom in February 2009.
This news surprises most buyers as National news channels tout that home prices continue to fall. However, real estate prices are a local economy. Fresno was one of the first markets to go into the real estate recession beginning back in 2007 and Fresno is one of the first markets to come out of that recession.
Buying a home in Fresno instead of renting does not have to be perceived as too expensive. Jeff Merrill of Guarantee Home Loans stated that a purchase on an $150,000 home with an FHA loan will have a total payment of approximately $1075.00 per month. Of that, approximately $200 is going towards the principal balance each month and another $200 could potentially be saved in the homeowner’s taxes (*) under mortgage interest deduction. That would bring the real cost of the $150,000 home to as little as $675 per month. Compare that to renting – where the entire payment is not going towards any principal balance, or income tax reduction.
It may be time to consider how much you can afford. Check out Guarantee Home Loans’ 60 Second application and their Loan Officers can give you a good estimate of your buying power.
(*)Guarantee Real Estate & Guarantee Home Loans are not tax accountants and recommend that individuals contact their tax consultants to determine the homeownership tax benefits for their specific financial situation.