April 2013 – As the market heats up during what appears to be a strong recovery after several years of doldrums, the relationship between inventory, price and sales volume is making itself known.  Shrinking inventory drives up prices while driving down sales volume. 

Inventory – Three years ago, in April 2010, the SFR inventory in Nevada County stood at 1096 units, at that time a 14 month supply of homes at the then current rate of sales.  Today, inventory stands at 336 units, a four month supply at the current absorption rate.  At the same time points, REO inventory stood at 36 and 17 units, respectively.  While current overall inventory has declined to about 30% of the units available 3 years ago, the current REO inventory is at about 50% of 2010 levels.  These are April values, and inventory peaks in June, yet the trends are the same.  A dramatic absorption of available inventory has occurred.

Median Price – In April 2010, the median price was $265,000.  Trending up through summer to a brief high of $279,000 in September, prices then fell to the cycle low of $225,000 throughout 2011.  By the end of March 2013, prices had recovered steadily to $250,000, the highest since year end 2010.  This is an annualized gain of 11%, rather too torrid for those of us who remember.

Unit Volume – From a low of 184/month at April 2010, to 243 in 2011, and 289 in 2012, unit volume (homes sold per quarter) has been up to a recent high of 329 on July 1 2012, and steadily down to 255 on April 1 2013, breaking the 3 year uptrend. 

The rapid decline in inventory, both retail/equity sales, as well as REO, has squeezed up prices and pushed down sales volume.

There are rumors, difficult to verify, that there is a substantial overhang of “shadow inventory” in the REO pipeline. The banks always act in their own interest, in this case to create a shortage then sell into the rising market. 

There are also many retail sellers who have considered selling yet waited for a price rise.  The banks usually depend on having foreknowledge and “front-running” the sell cycle.  This means doing their own selling first and advising their clients later, thus capturing peak profits on their own account.

It’s a trend worth watching, and when the banks begin to dump inventory, we’ll keep you posted.

Paul Sieving is a Realtor® with MacLeod Sierra Realty, a former Director and MLS Chair of NCAOR, was Board Chair of the Grass Valley Chamber of Commerce in 2004, and has served our community as a real estate professional for 14 years. Comments, questions and thoughts are welcome at Paul@PaulSieving.com or (530) 274-0906.

Paul Sieving - Nevada City Real Estate Professional

March, 2013 –For the last two years, the Luxury Market Snapshot was published, examining the performance of this locally important market sector for 2010 and 2011. This month we’ll take a look at the luxury market for 2012 and look for trends.

Our definition of “Luxury Market” properties is single family homes in Western Nevada County that have sold for over $500,000.  We have also limited total acreage to 40 or less.

Our community has become a destination for both second home buyers and retirees over the last couple of decades, due to the many factors that make it stand out among rural markets.

The overall market for 2012 included a total of 1266 sales, compared to 1056 for 2011 and 916 for 2010, while our luxury market was 83 in 2012, 78 in 2011 and 83 in 2010.  This is approximately 6.5% of the overall 2012 market in units, down from 9% in 2010 and 7% in 2011.

In our previous discussions of the general market, we have noted that the portion of distressed sales is the strongest driver of price declines.  Distressed sales are both Short Sales and REO (bank owned property) sales.  The general market in Nevada County during 2009-2010 was running from 30-45% distressed sales in 2009 to a fairly steady 50% in 2010 and 2011, in unit volume. For 2012, the general market level of distressed sales has fallen below 40% and continues to fall in 2013.

By comparison, the luxury market was 21% distressed sales during all of 2010, dropping to 19% in 2011 and only 12% in 2012.

When we look at comparative prices, we need to choose a standard of measurement, and for this purpose, dollars/square foot of living space is appropriate.  We’ll express it as $/sf.

For the overall market in 2010, the approximate average price of a single family home was $159/sf.  In our luxury market segment, it was significantly higher, at around $214/sf.  For 2011, the luxury market was $194/sf, compared to $137/sf for the general market.  In 2012 the overall market was $138/sf, while the luxury segment was $212/sf.

Another key measure of market performance is “days on the market” or DOM.  In the overall market, the average DOM for 2010 was in the low-mid 90s all year.  For 2011, there was a spike to 118 in the first quarter, followed by a quick return to around 90.  By the end of 2012, this had fallen below 80 DOM.  In general, this measure of the market has recovered to “normal” levels.

By comparison, in our luxury market, the average DOM for 2010 was 117, rising to 140 for 2011, and back down to 124 for 2012.  This is approximately 30-50% longer than the overall market, which is also fairly typical for this segment.

Overall, the luxury market in Western Nevada County is holding up better than the overall market, and as in any market, homes in the best condition that are accurately priced are selling quickly!

Paul Sieving is a Realtor® with MacLeod Sierra Realty, a former Director and MLS Chair of NCAOR, was Board Chair of the Grass Valley Chamber of Commerce in 2004, and has served our community as a real estate professional for 13 years. Comments, questions and thoughts are welcome at Paul@PaulSieving.com or (530) 274-0906.

Paul Sieving - Nevada City Real Estate Professional

Foreclosure and default notices in the Bay Area and California have fallen to their lowest levels since before the housing downturn, according to a report released Wednesday.

The report from San Diego's DataQuick highlights how the foreclosure crisis appears to be subsiding after running rampant for five years.

"For more than a year, the general trend has been down" for legal filings that indicate mortgage distress, said DataQuick analyst Andrew LePage.

There are several reasons that foreclosure activity is trending down. As home values have risen over the past year, fewer homeowners are underwater, which means they can more easily refinance or sell their homes if they have trouble keeping up with their mortgage.

Financial hardship is also diminishing. "The other big factors are the pickup in the economy and the improvements in job growth that keep people from getting in trouble in the first place," LePage said.

On top of that, various new laws and legal settlements between banks and the government encourage lenders to pursue alternatives to foreclosure, such as loan modifications and short sales (selling for less than is owed on the mortgage).

While LePage noted that the effects of the law and settlements are hard to measure, the net impact is fewer foreclosures.

Most subprimes gone

Moreover, the bulk of risky subprime loans have already gone through foreclosure. Mortgages issued from 2008 "were safer and saner," LePage said, meaning they are unlikely to have the sharp payment spikes of teaser-rate subprimes.

For the fourth quarter, DataQuick reported that 5,399 households in the Bay Area received default notices, the first step in the foreclosure process. That was down 46.1 percent from the same quarter of 2011. About half of default notices become foreclosures.

Although lenders can file notices of default once borrowers are three months behind, DataQuick said that Californians receiving the notices were a median of eight months in arrears on their primary mortgages.

Statewide, notices of default were down 37.9 percent in the quarter, to 38,212.

Trustee deeds, the final step of foreclosure, were issued for 2,765 Bay Area homes in the fourth quarter. That was down 42.8 percent from the same quarter of 2011.

Statewide, trustee deeds were down 32.4 percent, to 21,127 in the fourth quarter.

Looking at the full year also showed declines. The Bay Area had 30,046 default notices in 2012, down 30.7 percent from 2011. The nine-county region had 1,907 trustee deeds in 2012, a 41.2 percent decline from 2011.

While the numbers are the lowest in six years, many homeowners still struggle to keep their houses.

Oakland's Peggy Hart, 61, for instance, said income from her day care business took a big hit a few years ago. Three years ago, when she first applied for a loan modification, bank representatives told her to stop paying her mortgage and she complied, she said. Wells Fargo gave her a loan modification early on, but the payments were still too high and she was unable to keep up, she said.

Changes are tough

Now her business and her income have rebounded, but her efforts to get a loan modification have been frustrating and unsuccessful, she said.

"I'm able to pay, I want to pay my mortgage," she said. "I told (Wells) on the phone, 'Please let this happen for me.' "

Hart lives with her two sons, granddaughter and a baby great-grandson in the house, where they also run the day care. She owes about $200,000 on the house, which various real estate sites estimate is worth at least $390,000.

"Wells Fargo continues to work with borrowers on mortgage modifications and other options that may help them remain in their homes and avoid foreclosure when possible," the bank said in a statement. "We have been working with Ms. Hart for over three years to identify an option that would allow her to retain this home. We were able to provide her with some temporary assistance in September 2009 while we continued to look at home retention options."

Both foreclosures and notices of default remain more common in lower-cost areas, DataQuick said.

Over the past five years, 1.1 million of California's 8.7 million houses and condos received a foreclosure notice, it said. Of those, 780,000 were actually lost to foreclosure. The others were either sold or the payments were made current.

At the courthouse auction where the final step of foreclosure takes place, about 42 percent of properties in the fourth quarter were purchased by investors, DataQuick said. That was up from 31.2 percent a year earlier.

Carolyn Said is a San Francisco Chronicle staff writer. E-mail: csaid@sfchronicle.com

Paul Sieving is a Realtor® with MacLeod Sierra Realty, a former Director and MLS Chair of NCAOR, was Board Chair of the Grass Valley Chamber of Commerce in 2004, and has served our community as a real estate professional for 14 years. Comments, questions and thoughts are welcome at Paul@PaulSieving.com or (530) 274-0906.

Paul Sieving - Nevada City Real Estate Professional

January 2013 – Looking back at the local real estate market for the past 4 years, the change from a declining market to an improving market is evident. The important values that are used to track market performance are price, volume and distressed sales.

Median Price – The modest uptrend in prices that occurred early in 2010 gave way to further declines in late 2010 and early 2011. This decline followed a seasonal pattern but was larger than normal. Median prices in 2011 were essentially unchanged, beginning and ending at $227,000. 2012 opened a bit lower at $220,000 and since then the uptrend has been very strong, rising to $245,000 in the 4^th quarter, an annualized pace of 15%. Also in 2012, the typical seasonal decrease in 4^th quarter prices was instead an increase of 4%.

The current uptrend in prices is strong enough to overcome the typical winter sag.

Unit Volume – Since the low point in Q1 2009, unit volume (homes sold per quarter) has been on a constant upswing. From 120 units in Q1 2009 to over 300 for the last three quarters of 2012, this trend reflects a general recognition by consumers of excellent pricing, the most favorable interest rates in decades, and significant pent up demand. Homes are flying off the shelves 2.5 times as fast as in early 2009, and typical marketing time has been cut in half, from 150 days to about 75. In the popular areas in and around the villages of Grass Valley and Nevada City, correctly priced properties are on the market for only a handful of days.

Volume is showing seasonality, but less so than normal due to strong demand and weak supply.

Distressed Sales – In a normal or rising market, the percentage of distressed sales (Short Sales and REO) is quite low, usually 5% or less. After peaking at 60% in Q1 2011, the trend has been downward and has been below 40% for the last 6 months.

During the last 2 years the distressed inventory has been around 20%, and recently dropped to 18%. The mix has shifted from 50-75% Short Sales and 25-50% REO, to well over 50% REO the last few quarters. This indicates that the flow of distressed properties is drying up at the source (fewer homeowners in trouble) and moving through the system. Our hungry market is devouring the supply of distressed properties and the inventory is shrinking.

Over the last 3 years, these trends have been very valuable in tracking the market and scouting for a recovery. At the end of 2012, we see that these three trends of price, volume and distressed sales have been aligned and pointing towards a recovery for two solid years.

Due to the low inventory, we are experiencing a sellers’ market in much of Nevada County. As prices increase and more people are able to act on their plans and dreams, inventory is expected to rise and bring the market back into a healthier balance.

Paul Sieving is a Realtor® with MacLeod Sierra Realty, a former Director and MLS Chair of NCAOR, was Board Chair of the Grass Valley Chamber of Commerce in 2004, and has served our community as a real estate professional for 14 years. Comments, questions and thoughts are welcome at Paul@PaulSieving.com or (530) 274-0906.

Paul Sieving - Nevada City Real Estate Professional

Home is where the heart is. A man’s home is his castle. There’s no place like home.

These familiar sayings remind us of the emotional connection Americans have with homes and homeownership. However, home also is where our nation’s economic recovery resides – which is why all Americans should oppose any proposal that would eliminate or attempt to alter the mortgage interest deduction, as it undermines a century-old commitment to the American Dream of homeownership.

Unless Americans are vocal in their opposition during the current tax reform debate, Congress may, in effect, shove generations of current and future homeowners off “the fiscal cliff” by jettisoning their ability to deduct mortgage interest from their federal income taxes.

While current discussions involve reducing the limit to $500,000 for a primary residence and eliminating it entirely for second homes, any attempts to reduce the mortgage interest deduction would not only have deleterious effects on homeownership, but also be tantamount to taking the first step toward a wholesale elimination of this long-standing deduction.

The mortgage interest deduction makes a substantial difference for lower- and middle-income families. If the mortgage interest deduction is taken away, it would cost the average California taxpayer $3,940 annually, and more than 694,000 Californian households would no longer be able to afford to buy a median-priced home.

Eliminating the mortgage interest deduction would have immediate and dire consequences. It would slam the brakes on America’s economic recovery by changing the fundamental economics of homeownership for more than 75 million Americans and slow or even reverse recent home price gains.  Since housing is widely regarded as a key economic driver, our country could be driven back into recession.

In high cost areas such as California, the damage would be even worse.  California homeowners would lose $356.8 billion in potential tax savings, and the recent recovery in home prices would be jeopardized. The state also could realize a loss of more than 40,000 home sales over time, which would cost the California economy $2.4 billion in lost output.

Reducing the allowable amount of the mortgage interest deduction wouldn’t be any less damaging either.  The tax liability for more than 1.19 million primary or secondary homeowners would be negatively impacted if the deductible interest were limited to $500,000.  Furthermore, should the mortgage interest deduction be eliminated for second homes, the potential economic losses to the California economy would total more than $557 million.

How important is the mortgage interest deduction to home buyers? In a recent survey by the CALIFORNIA ASSOCIATION OF REALTORS®, 79 percent of home buyers said that mortgage interest and property tax deductions were “extremely important” in their decision to purchase a home.  A Pew Research Center study last year found that 80 percent of Americans believe buying a home is the best long-term investment they can make – even considering the real estate downturn.

In the final analysis, “There’s no place like home.” By preserving the mortgage interest deduction and finding savings somewhere else (the military budget perhaps) President Obama and Congress can show America that they are not slaves to the Pentagon, and that our vote matters.

Paul Sieving is a Realtor® with MacLeod Sierra Realty, a former Director and MLS Chair of NCAOR, was Board Chair of the Grass Valley Chamber of Commerce in 2004, and has served our community as a real estate professional for 14 years. Comments, questions and thoughts are welcome at Paul@PaulSieving.com or (530) 274-0906.

Paul Sieving - Nevada City Real Estate Professional

If you have any questions, please contact DeAnn Kerr at deannk@car.org.

Paul Sieving is a Realtor® with MacLeod Sierra Realty, a former Director and MLS Chair of NCAOR, was Board Chair of the Grass Valley Chamber of Commerce in 2004, and has served our community as a real estate professional for 14 years. Comments, questions and thoughts are welcome at Paul@PaulSieving.com or (530) 274-0906.

Paul Sieving - Nevada City Real Estate Professional

October, 2012 – From the first quarter of 2011 through the first quarter of this year, local prices have been essentially flat and formed an apparent bottom.  Sales volume during this period has been trending strongly upward.  We’ll look at the continuing trends over the last 2 quarters for some very positive changes.

Median Price – From Q1-Q4 2011, prices were essentially unchanged, beginning and ending at $227,000.  A slight dip to $220K in Q1 2012 reflects typical seasonality.  Since then the trend has been positive, finishing Q3 at $235K, an increase of nearly 7% in 6 months. 

Although this pace of appreciation may not hold over the longer term, it is the strongest two-quarter gain since the top of the current cycle in 2005.

Unit Volume – Peaking at 450/quarter in 2004-2005, the pace of sales fell to a low of 120 in late 2008 and early 2009.  As the recovery in sales took hold through 2009 and 2010, sales remained above 200/quarter.  In 2011 the trend continued, and was pushing at 300/month by Q1 2012.  In the recent 2 quarters, a breakout above 300/month has occurred.  With Q2 sales at 329 and Q3 at 316, an increase of over 30% compared to Q4 2011 is seen.

This powerful trend reflects the rapid absorption of distressed properties by a hungry market.

Days on Market – The average time to sell a single family home had fallen from 150 days in early 2009 to around 90 days by Q1 2010.  With some peaks and valleys since then, the trend broke out lower in Q3 2012 to 77 days.

Distressed Sales – From a pre-boom low of 5% or less, the level of distressed sales (Short Sales and REO) rose to double digits in 2008, and then steadily to around 50% by Q1-2010 and holding steady through Q4 2010.  With a peak of 60% in Q1 2011, the trend has been downward since then and has again averaged approximately 50% through Q2 2012.  In Q3 2012, a breakout lower to 37% occurred.

Inventory – While all domestic markets struggled with excess inventory from 2008-2010, our local market has seen a drop in available homes since then, with the decline in inventory reaching 50% compared to 2010.  At a current level of 366, this inventory is less than a 2-month supply of homes.  During this period the daily inventory of distressed properties has fallen from approximately 120 to 50 or so.

The combination of breakout trends in the recent quarter all points to a single factor that will have the most positive impact on the ongoing recovery: the rapid sell-through of distressed properties in this torrid market.

When we also see that major investment companies are vying for a piece of the action, and buying bulk lots of foreclosed properties in major urban markets, it is yet another sign that the bottom is behind us.  As we head into the winter quarter with some strong momentum, we’re grateful to see some light at the end of the tunnel. 

Paul Sieving is a Realtor® with MacLeod Sierra Realty, a former Director and MLS Chair of NCAOR, was Board Chair of the Grass Valley Chamber of Commerce in 2004, and has served our community as a real estate professional for 14 years. Comments, questions and thoughts are welcome at Paul@PaulSieving.com or (530) 274-0906.

Paul Sieving - Nevada City Real Estate Professional

September 2102 – In California, there are 3 types of real estate agency relationships: Seller’s Agent, Buyer’s Agent, and Agent Representing Both Seller and Buyer.  The latter is known as Dual Agency, and defines the general case where the Seller and Buyer are represented by the same BROKER.

In the general case, the two parties are represented by the same brokerage or office, but not necessarily by the same agent.  Usually, this case involves two AGENTS for the same BROKER, who each represent one of the parties and may or may not know each other, work at the same physical location or even be on speaking terms socially…

In the general case, each agent owes to their own client “a fiduciary duty of utmost care, integrity, honesty and loyalty in all dealings”.  To both buyer and seller are owed a host of other duties including: honest and fair dealing, good faith, full disclosure and strict confidentiality.  When there are two agents, one for each party, it’s pretty straightforward to handle these duties with reasonable skill and care.

The specific case we’re dealing with here occurs when the same AGENT represents a BUYER for the purchase of their own listing, where they also represent the SELLER.  This is known as “double-ending”, or “dual-popping”.  The agent is motivated by the prospect of collecting a double commission, as well as by the added control over the successful close of the transaction by avoiding miscommunication or adversarial positions.

Regardless of the fact that the agent here has a prior business relationship with the SELLER via the listing agreement, it can be seen that the fiduciary duties now owed to BOTH parties can be in direct conflict with each other.  This agent walks a fine line indeed.  In CA, dual agency requires both full disclosure to and full consent from both parties.  It’s important for real estate clients to fully understand and also agree to dual agency, especially when it is a double-pop for the dual agent.

There is a tendency, no matter how aware we are of it, to compromise disclosure, confidentiality, or even fiduciary duty when we “serve two masters”, especially when there is also a financial incentive.  Many dual-pops are closed successfully and without either party feeling under-served, yet problems arising from agency representation are the leading legal issue of concern for real estate professionals of all disciplines.

As a buyer, consider that you want your agent to serve your best interests and yours alone.  You may be able to think of one or more “angles” that by working with the listing agent you might get a better deal.  When you take a closer look and “follow the money”, these angles will usually lead straight to an advantage for the seller and/or for the dual agent, not for you.  Ask not “WHO represents me”, but “who represents ME”.

For advice about dual agency, consult a real estate attorney, I’m just your REALTOR®.

Paul Sieving is a Realtor® with MacLeod Sierra Realty, a former Director and MLS Chair of NCAOR, was Board Chair of the Grass Valley Chamber of Commerce in 2004, and has served our community as a real estate professional for 14 years. Comments, questions and thoughts are welcome at Paul@PaulSieving.com or (530) 274-0906.

Paul Sieving - Nevada City Real Estate Professional

This is a re-post of a letter sent by e-mail to all members of California Association of Realtors® today by our 2012 President LeFrancis Arnold.  Well said, Mr. President!

Please see my previous post for more information:

http://www.paulsieving.com/2012/08/19/fhfa-plans-another-insider-giveaway/

Paul Sieving - Nevada City Real Estate Professional

In the wake of the financial collapse of 2008, one of the first mortgage lenders to go down under the weight of distressed mortgages and toxic MBS instruments was IndyMac Bank.  Along with Countrywide, they had been “pioneers” in creating, packaging and selling the garbage loans that brought our financial system to its knees.

As the debris settled and Federal officials looked for ways to unload some of the junk they had purchased in an attempt to save the banking system, a former Goldman Sachs partner named Steven Mnuchin put together a partnership and bought the assets of IndyMac out of federal receivership.  Renamed OneWest, this outfit is now well known as perhaps the most uncooperative of banks in finding ways to prevent foreclosures on their mortgage clients. 

They are a poster child for dual-tracking, the practice of talking mortgage modification or short sale with clients while quietly moving the property towards foreclosure and conducting Trustee Sales with the element of surprise. 

The assets were purchased at a deep discount to market value, and part of the deal provides additional Federal subsidies to cover any losses incurred in the foreclosure process.  The discount to market and the subsidies were all paid for with our tax dollars.  These sweetheart insider deals are a sign of the terminal illness afflicting our national economy and the financial malfeasance that is so common in the offices of Washington and Wall Street.

And now we hear of yet another giveaway of our national treasure to the players in this game of “shear the sheep”. 

Housing officials of the Obama administration (Fannie, Freddie and FHFA) have quietly proposed to reduce the “overhang” of foreclosed properties by selling bulk lots in pools of $50 million or more to insiders of the Banking Industrial Government Complex (BIG C) at a deep discount to market value.  On the surface, these investors will be required to rent out the houses for a certain period before selling them at market value.  These are taxpayer assets, once again being handed to the crooked cronies that created the crisis in the first place. 

The thing is that the market is already absorbing these distressed properties at a rate that is creating shortages of inventory in many markets, resulting in price increases, multiple offers and an apparent turnaround of the housing crisis.  The current buyer pool is made up of individual homebuyers and small investors who have a commitment to the communities they are buying in. 

The institutional buyers for the proposed program have no such commitment.  By further reducing the available inventory in this way, prices will rise in the selected markets, resulting in a greater “take” for these big players at the eventual point of sale.  Especially here in California, where the supply of homes is below 90 days in many markets, this is a completely unnecessary effort that will result in another transfer of wealth to Wall Street insiders.  When will the madness stop?

Paul Sieving is a Realtor® with MacLeod Sierra Realty, a former Director and MLS Chair of NCAOR, was Board Chair of the Grass Valley Chamber of Commerce in 2004, and has served our community as a real estate professional for 14 years. Comments, questions and thoughts are welcome at Paul@PaulSieving.com or (530) 274-0906.

Paul Sieving - Nevada City Real Estate Professional