The Southern California real estate market continues to pick up speed, buoyed by record levels of cash buyers and growing consumer confidence.
But historically low housing inventory in the Inland Empire and stringent lender requirements may even have muted the number of sales. In Riverside and San Bernardino counties, most homes draw multiple offers as the throngs of buyers outnumber the available properties.
In 2012, the number of California houses and condos purchased by cash buyers climbed to a record 145,797, according to DataQuick, a real estate information service. That was a 15.8 percent increase from the previous high of 125,812 in 2011. Cash buyers snapped up 32.4 percent of the 447,573 total homes sold in 2012, compared with a 30.4 percent share in 2011.
“It’s clear that a lot of today’s housing marketing recover is being fueled by people putting their own money into homes,” DataQuick President John Walsh said in a news release. “Some cash buying is part of a normal housing market, but we’re at twice that normal rate. … Today, a lot of buyers are chasing what they view as the deal of a lifetime.”
Meanwhile, the Improving Markets Index grew to 259 cities this month, up from 242 in January, according to the National Association of Home Builders. Sixteen California cities made the list, including Riverside.
“The fact that all 50 states now have at least one metro on the improving list shows that the housing recovery has substantial momentum and continues to expand from one market to the next,” Rick Judson, 2013 NAHB chairman, said in a release.
The improving markets index recognizes metropolitan areas that have made gains from their own low points in housing permits, employment and housing prices for at least six months.
Riverside registered a 10.3 percent increase in housing prices since January 2012, a 3.3 percent increase in jobs since July 2011 and a 5.1 percent increase in housing permits since September 2011.
Cash buyers aren’t the only group clamoring to buy homes. Housing giant Fannie Mae’s latest housing survey shows 41 percent of consumers think home prices will continue to increase in 2013, while only 10 percent expected prices to decline. And 23 percent of those surveyed said now is a good time to sell their home, while 69 percent said now is a good time to buy.
“The housing market continues to firm, with consumer home price expectations for both rental and ownership properties near the strongest levels that we’ve seen in the survey’s two-and-a-half-year history,” Doug Duncan, chief economist at Fannie Mae, said in a release.
California’s median home price increased to $275,000 at the end of 2012, a 10 percent increase from the previous year, DataQuick reported. The median price for all cash sales reached $205,000, up 17.1 percent year over year. Financed homes sold at a median price of $305,000, up 10.5 percent.
According to the January Fannie Mae survey, 65 percent of consumers said they would buy if they were going to move. Only 30 percent said they would rent, while half said they expected rents to increase this year.
At home, consumers were optimistic about their own pocketbooks, with 43 percent expecting an improved situation this year. That was up slightly from 40 percent in December. At the same time, 53 percent of those surveyed were pessimistic about the direction of the U.S. economy, but that was down from 54 percent in December and 61 percent a year earlier.
“Concerns about job loss are waning as payrolls are growing – a trend that may give potential homebuyers more confidence that they can meet the financial obligation of homeownership,” Duncan said in a release.
TOUGH MORTGAGE RULES
DataQuick's Walsh attributed the boom in cash buyers to enthusiastic investors who perceive high returns on their investment, as well as to a difficult mortgage environment.
In fact, if loan requirements for financed purchases weren’t so restrictive, the pool of buyers might be even larger.
“… Since the ‘loans-gone-wild’ days of 2004-2006, the lending pendulum has swung to the opposite end of the spectrum,” Walsh said. “Even a lot of well-qualified buyers can’t get loans.”
Added NAHB’s Judson: “We know that a key factor slowing this progress is today’s overly stringent mortgage standards that are keeping qualified buyers on the sidelines.”
The next 12 to 24 months will be critical for first-time buyers and move-up buyers who are on the edge of qualifying for a home.
“While the overall market is improving, sales levels are still below average, and prices (are) much closer to the bottom than to the peak,” DataQuick’s Walsh said.
Local prices have increased more than 10 percent, and many Inland Empire homeowners are looking to move up, before prices shoot through the roof. Want to know what your home is worth and what you can afford? Call us today at 951-778-7900 to set up a 10-minute interview.
(Brian Bean and Timothy Hardin, DRE Lic #01889132, are Home Listing Specialists and owners of Dream Big Real Estate in Riverside, California. They can be reached directly at Info@DreamBigRealEstate.com or 951-778-9700.)
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