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Bob Khalsa: Rising prices lift sinking homeowners

Posted: May 9, 2013 2:00 a.m.
Updated: May 9, 2013 2:00 a.m.

Bob Khalsa

 

Local home resale prices last month hit the highest level in five years, with each leap up in prices rescuing legions of underwater owners, in effect, throwing them a life preserver and pulling them to dry land.

Indeed, a survey of 20 U.S. cities confirmed the pattern that we recently reported for the Santa Clarita and San Fernando Valleys.

Home prices increased 9.3 percent in 20 cities for the 12 months ending in February 2013, according to Standard & Poor’s/Case-Shiller home price index.

It was the ninth consecutive annual increase in the index and the best annual improvement since May 2006.

Yet, despite dramatic gains that have left the Great Recession in the dust, today’s market could never be called “normal.”

Traditional homebuyers are eager to get into the market, with multiple offers common, yet buyers are restrained by a record-low inventory, still-tight loan underwriting rules, and continued competition from investors.

Plus, despite improvements triggered by rising resale prices, an estimated 20 percent of current homeowners still owe more than their property’s current market resale value, which in itself restricts inventory.

With only modest new construction underway locally, it’s easy to understand why the lack of homes for sale is the current hot topic of dinner conversations.

Talk of foreclosures is so yesterday. REOs — Real Estate Owned property typically acquired by lenders via foreclosure — are at low levels not seen since before the recession.

Ironically, lenders are now more open to the idea of short sales — where a home is sold for less than the outstanding loan — just as price increases improve the position of some sellers, thus lessening the need for short sales.

Even investors are wandering a strange new land.

They dominated the market in its early recovery, wielding wads of cash to bludgeon traditional buyers. But higher prices and smaller profits may make housing not quite as attractive to investors.

None of this is “normal” and none of it should be construed as anything but a message to buyers and sellers to get moving. The low interest rates that have been prevailing are not going to be around forever. This Monday the 30 year fixed rate jumped up by about 20 basis points. It may be a temporary spike but it’s a sign of the coming times.

A rational market will return only when consumers make their voices heard. Owners who need to move must not hesitate. If buying a home is a goal, jump in.

It may not be a normal market, but it’s still yielding a lot of new owners.

Bob Khalsa is President of the Santa Clarita Valley Division of the Southland Regional Association of Realtors.
David Walker, of Walker Associates, co-authors articles for SRAR. The column represents SRAR’s views and not necessarily those of The Signal. The column contains general information about the real estate market and is not intended to replace advice from your Realtor or other realty related professionals.

 

 

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