Saturday, May 4, 2013

SoCal Heats Up And So Does Real Estate

Small swings of a pendulum can make big changes.  In Real Estate you can see that happening right now in my little micro market of the Huntington Harbor at the far north end of Huntington Beach.  Three years ago if a home hit the market it was a short sale, auction type deal.  The house would be held open for a day, and the best offer was taken to the bank.  It could take 30 days or 18 months to close escrow.

I bought one of these homes at bargain basement prices.  It wasn't nearly as easy as you would think though.  There was at least one if not two or three houses on each street either for sale, in escrow or waiting for bank approval.  Several owners gave up and walked away.

Almost 24 months to the day after I closed escrow on my home, Huntington Harbor is an entirely different story.  Instead of for sale signs, there are contractors signs on every block.  Homes that sat for $1.8 Million on the market for a year, are now bulldozed and a new home is being built in it's place.

There is a minor renaissance occurring, so the question is what really changed in 24 months?  Unemployment is still high, interest rates are low and yet credit is still tight, so what is happening here?

The answer is the pendulum swung across the middle.  Interest rates dropped making real estate more appealing to investors.  I just refinanced my house at 3.25% on a 30 yr fixed rate.  That is cheap money when Coca-Cola stock was recently yielding 3.62%  If you have the cash, buy Coca-Cola, get a loan on the house and make a little on the spread.  Small changes make big shifts.

Additionally, once the foreclosure rush was over and prices stabilized, fewer people were allowed to short sell their homes so they just took them off the market.  Fewer homes on the market led to slightly upward price pressure.  Gently increasing prices last fall caused more people who where thinking of selling to hold out as the last few foreclosures sold.

By late winter the prices of off water properties started to rise, followed quickly by the waterfronts.  All that was needed was a "breakout property".  The breakout property is the property that sells at a price high enough everyone notices.  Two of them happened at once.  A large very nice custom broke the $3 Million mark, and a tear down broke the $1.6 Million mark.

Those two breakouts added enough confidence that fences started going up and remodeling was up and running in a big way.

I could see all of this happening just walking my dogs and paying attention to the neighborhood.

As some of the remodel project near completion, the moving trucks tell us they aren't selling.  This gave just enough confidence to the market that several homes were listed at near 2006/2007 peak prices.  Two already have gone into escrow.

We won't know for 30 to 60 days if those houses sold near, at or even above the peak value, and if one of them breaks out, you can bet the wave will spread inland.

I have been saying for two years, that if you are thinking of upgrading, now is the time.  Prices are rising, interest rates are at record lows.  If you are thinking about moving and aren't sure about it, give me a call.  If you are living in or looking in Huntington Harbor, Huntington Beach, Sunset Beach or Surfside, give me a call.

If you live outside that area, I can find you someone that can help if you don't already have an agent.  Take advantage while you can.

If you are planning to downsize, then waiting might not be so bad.  That answer depends more on your long term tax situation.  The more you make selling, the more you will pay in property taxes on your new place for as long as you live there.  Make a little less now, or pay a lot more forever?  You decide, and then call me if you have any questions
Huntington Harbor Sunset
Huntington Harbor Sunset from my iPhone, no tricks...