Q1 2023 Southern California Real Estate Market Update
The following analysis of select counties of the Southern California real estate market is provided by Windermere Real Estate Chief Economist Matthew Gardner. We hope that this information may assist you with making better-informed real estate decisions. For further information about the housing market in your area, please don’t hesitate to contact your Windermere Real Estate agent.
Regional Economic Overview
Following annual revisions to the data, the Southern California market added only 194,000 jobs in 2022, which was far fewer than the over 676,000 added in 2021. The first two months of data for 2023 showed a net loss of 14,800 jobs. Because the data is not adjusted for seasonality, I am not overly concerned by this decline, but I will be watching as we move through the spring to see if declining job growth is becoming pervasive. Total employment in the counties covered by this report is still 266,400 jobs shy of the pre-pandemic peak. Los Angeles County continues to have the largest shortfall of jobs (-260,000), followed by Orange County (-37,100). Job levels in San Diego County match their pre-pandemic peak, while employment levels in the Riverside and San Bernardino markets are each higher by more than 15,000 jobs. The region’s unemployment rate in February was 4.6%, down from 5% at the same time in 2022. The lowest jobless rates were in Orange County (3.4%) and San Diego County (3.7%). The highest was in Los Angeles County, where 5.3% of the workforce was without a job.
Southern California Home Sales
❱ In the first quarter of 2023, 27,577 homes sold, which is down 34.8% from the first quarter of 2022 and is 5.2% lower than in the final quarter of 2022.
❱ Pending home sales, which are an indicator of future closings, were 25.4% higher than in the fourth quarter, suggesting that sales activity in the second quarter of this year may pick up.
❱ On a percentage basis, sales fell the most in San Bernardino County, but all markets pulled back significantly. Compared to the fourth quarter, sales were higher in Riverside County (+7.1%) but fell across the balance of the market.
❱ The drop in sales can mainly be attributed to a lack of inventory: the number of homes for sale was down 27.6% from the final quarter of 2022. Additionally, mortgage rates rose by more than a full percentage point in February, which likely also impacted sales.
Southern California Home Prices
❱ Compared to the same period last year, home prices fell 2.5%. However, prices were 1.9% higher than in the fourth quarter of 2022.
❱ Affordability remains a significant issue, which has been exacerbated by elevated financing costs. That said, median listing prices in the quarter are up in every market other than San Bernardino, which suggests that home sellers may be starting to think that the worst of the price correction is behind them.
❱ Year over year, prices fell across the region but rose in all markets compared to the final quarter of 2022. Of note is that price growth was very solid in San Diego, Riverside, and Orange counties.
❱ While I expect mortgage rates to start stabilizing as we move toward summer, I think there will be some additional downward pressure on home prices. That said, things should start to turn around again in the second half of the year with a return to rising home prices.
Mortgage Rates
Rates in the first quarter of 2023 were far less volatile than last year, even with the brief but significant impact of early March’s banking crisis. It appears that buyers are jumping in when rates dip, which was the case in mid-January and again in early February.
Even with the March Consumer Price Index report showing inflation slowing, I still expect the Federal Reserve to raise short-term rates one more time following their May meeting before pausing rate increases. This should be the catalyst that allows mortgage rates to start trending lower at a more consistent pace than we have seen so far this year. My current forecast is that rates will continue to move lower with occasional spikes, and that they will hold below 6% in the second half of this year.
Southern California Days on Market
❱ In the first quarter of 2023, the average time it took to sell a home in the region was 45 days, which is 24 more than in the first quarter of 2022 and 9 more days than in the fourth quarter of last year.
❱ Market time also rose in all counties covered by this report compared to the fourth quarter of 2022.
❱ Homes in San Diego County continue to sell at a faster rate than other markets in the region, but all counties saw market time increase from a year ago.
❱ Higher mortgage rates and lower affordability still have some buyers sidelined. I expect to see increased activity once buyers become confident that mortgage rates have stabilized and that housing values have found a bottom.
Conclusions
This speedometer reflects the state of the region’s real estate market using housing inventory, price gains, home sales, interest rates, and larger economic factors.
The Southern California housing market is still trying to find its footing. Mortgage rates are not only still at elevated levels, but they are also moving erratically depending on events in the broader economy (e.g. inflation, bank failures, etc.) Although sellers seem to be more confident, buyers are remaining cautious, which suggests that the market recovery will take more time.
Lower inventory levels, higher pending sales, higher listing and sale prices, and an improving absorption rate all favor sellers. However, the market is not completely in their favor. As such, I have left the needle in the “balanced” section of the speedometer. I have tilted it slightly toward home sellers though as there continues to be strong demand for appropriately priced, well-located, and well-appointed homes.
About Matthew Gardner
As Chief Economist for Windermere Real Estate, Matthew Gardner is responsible for analyzing and interpreting economic data and its impact on the real estate market on both a local and national level. Matthew has over 30 years of professional experience both in the U.S. and U.K.
In addition to his day-to-day responsibilities, Matthew sits on the Washington State Governors Council of Economic Advisors; chairs the Board of Trustees at the Washington Center for Real Estate Research at the University of Washington; and is an Advisory Board Member at the Runstad Center for Real Estate Studies at the University of Washington where he also lectures in real estate economics.
Matthew Gardner’s Top 10 Predictions for 2023
This video shows Windermere Chief Economist Matthew Gardner’s Top 10 Predictions for 2023. Each month, he analyzes the most up-to-date U.S. housing data to keep you well-informed about what’s going on in the real estate market.
Matthew Gardner’s Top 10 Predictions for 2023
1. There Is No Housing Bubble
Mortgage rates rose steeply in 2022 which, when coupled with the massive run-up in home prices, has some suggesting that we are recreating the housing bubble of 2007. But that could not be further from the truth.
Over the past couple of years, home prices got ahead of themselves due to a perfect storm of massive pandemic-induced demand and historically low mortgage rates. While I expect year-over-year price declines in 2023, I don’t believe there will be a systemic drop in home values. Furthermore, as financing costs start to pull back in 2023, I expect that will allow prices to resume their long-term average pace of growth.
2. Mortgage Rates Will Drop
Mortgage rates started to skyrocket at the start of 2022 as the Federal Reserve announced their intent to address inflation. While the Fed doesn’t control mortgage rates, they can influence them, which we saw with the 30-year rate rising from 3.2% in early 2022 to over 7% by October.
Their efforts so far have yet to significantly reduce inflation, but they have increased the likelihood of a recession in 2023. Therefore, early in the year I expect the Fed to start pulling back from their aggressive policy stance, and this will allow rates to begin slowly stabilizing. Rates will remain above 6% until the fall of 2023 when they should dip into the high 5% range. While this is higher than we have become used to, it’s still more than 2% lower than the historic average.
3. Don’t Expect Inventory to Grow Significantly
Although inventory levels rose in 2022, they are still well below their long-term average. In 2023 I don’t expect a significant increase in the number of homes for sale, as many homeowners do not want to lose their low mortgage rate. In fact, I estimate that 25-30 million homeowners have mortgage rates around 3% or lower. Of course, homes will be listed for sale for the usual reasons of career changes, death, and divorce, but the 2023 market will not have the normal turnover in housing that we have seen in recent years.
4. No Buyer’s Market But a More Balanced One
With supply levels expected to remain well below normal, it’s unlikely that we will see a buyer’s market in 2023. A buyer’s market is usually defined as having more than six months of available inventory, and the last time we reached that level was in 2012 when we were recovering from the housing bubble. To get to six months of inventory, we would have to reach two million listings, which hasn’t happened since 2015. In addition, monthly sales would have to drop below 325,000, a number we haven’t seen in over a decade. While a buyer’s market in 2023 is unlikely, I do expect a return to a far more balanced one.
5. Sellers Will Have to Become More Realistic
We all know that home sellers have had the upper hand for several years, but those days are behind us. That said, while the market has slowed, there are still buyers out there. The difference now is that higher mortgage rates and lower affordability are limiting how much buyers can pay for a home. Because of this, I expect listing prices to pull back further in the coming year, which will make accurate pricing more important than ever when selling a home.
6. Workers Return to Work (Sort of)
The pandemic’s impact on where many people could work was profound, as it allowed buyers to look further away from their workplaces and into more affordable markets. Many businesses are still determining their long-term work-from-home policies, but in the coming year I expect there will be more clarity for workers. This could be the catalyst for those who have been waiting to buy until they know how often they’re expected to work at the office.
7. New Construction Activity Is Unlikely to Increase
Permits for new home construction are down by over 17% year over year, as are new home starts. I predict that builders will pull back further in 2023, with new starts coming in at a level we haven’t seen since before the pandemic.
Builders will start seeing some easing in the supply chain issues that hit them hard over the past two years, but development costs will still be high. Trying to balance homebuilding costs with what a consumer can pay (given higher mortgage rates) will likely lead builders to slow activity. This will actually support the resale market, as fewer new homes will increase the demand for existing homes.
8. Not All Markets Are Created Equal
Markets where home price growth rose the fastest in recent years are expected to experience a disproportionate swing to the downside. For example, markets in areas that had an influx of remote workers, who flocked to cheaper housing during the pandemic, will likely see prices fall by a greater percentage than other parts of the country. That said, even those markets will start to see prices stabilize by the end of 2023 and resume a more reasonable pace of price growth.
9. Affordability Will Continue to Be a Major Issue
In most markets, home prices will not increase in 2023, but any price drop will not be enough to make housing more affordable. And with mortgage rates remaining higher than they’ve been in over a decade, affordability will continue to be a problem in the coming year, which is a concerning outlook for first-time buyers.
Over the past two years, many renters have had aspirations of buying but the timing wasn’t quite right for them. With both prices and mortgage rates spiraling upward in 2022, it’s likely that many renters are now in a situation where the dream of homeownership has gone. That’s not to say they will never be able to buy a home, just that they may have to wait a lot longer than they had hoped.
10. Government Needs to Take Housing More Seriously
Over the past two years, the market has risen to such an extent that it has priced out millions of potential home buyers. With a wave of demand coming from Millennials and Gen Z, the pace of housing production must increase significantly, but many markets simply don’t have enough land to build on. This is why I expect more cities, counties, and states to start adjusting their land use policies to free up more land for housing.
But it’s not just land supply that can help. Elected officials can assist housing developers by utilizing Tax Increment Financing tools, whereby the government reimburses a private developer as incremental taxes are generated from housing development. There are many tools like this at the government’s disposal to help boost housing supply, and I sincerely hope that they start to take this critical issue more seriously.
About Matthew Gardner
As Chief Economist for Windermere Real Estate, Matthew Gardner is responsible for analyzing and interpreting economic data and its impact on the real estate market on both a local and national level. Matthew has over 30 years of professional experience both in the U.S. and U.K.
In addition to his day-to-day responsibilities, Matthew sits on the Washington State Governors Council of Economic Advisors; chairs the Board of Trustees at the Washington Center for Real Estate Research at the University of Washington; and is an Advisory Board Member at the Runstad Center for Real Estate Studies at the University of Washington where he also lectures in real estate economics.
Q3 2022 Southern California Real Estate Market Update
The following analysis of select counties of the Southern California real estate market is provided by Windermere Real Estate Chief Economist Matthew Gardner. We hope that this information may assist you with making better-informed real estate decisions. For further information about the housing market in your area, please don’t hesitate to contact your Windermere Real Estate agent.
Regional Economic Overview
The employment market grew by 465,000 jobs over the past 12 months. However, the pace of job creation has been slowing and more recently the region has seen total employment levels drop. I am not overly concerned by this, as state data at the county level is not adjusted for seasonality, and I anticipate more jobs will be added as we move through the fall. Total employment in the counties covered by this report is now only 340,000 short of the pre-pandemic peak, having recovered 96.7% of the jobs that were lost. Los Angeles County still has the largest shortfall (-335,700), followed by Orange County (-41,500) and San Diego County (-15,400). Riverside and San Bernardino counties remain well above pre-pandemic employment levels. The region’s unemployment rate in August was 4.2%, down from 7.8% a year ago. The lowest rates were in Orange County (3%) and San Diego County (3.4%).
Southern California Home Sales
❱ In the third quarter, 38,356 homes sold, which is down 31.8% from a year ago and 19.4% less than the second quarter of the year.
❱ Pending home sales, which are an indicator of future closings, were down 16.2% from the second quarter, suggesting that closed sales in the final quarter of this year may disappoint.
❱ Sales fell the most in San Diego County, but all markets saw significant declines. Relative to the second quarter, transactions were lower across the board, with Riverside County experiencing the greatest decline (-24.1%).
❱ Listing activity rose an average of 41.6% compared to the second quarter. With more choice in the market and median list prices down 6.8% from the second quarter, it seems that many would-be buyers are sitting on the fence to see if prices will fall further.
Southern California Home Prices
❱ Home sale prices in the quarter rose 4.6% from a year ago but were 7.1% lower than in the second quarter of this year.
❱ Rising mortgage rates are clearly starting to impact the market. This, combined with higher inventory levels, will lead sale prices to continue pulling back.
❱ The region saw double-digit price growth in Orange County, but the overall trend has shown price growth starting to slow. In fact, prices in Los Angeles County rose by only 1.2% year over year.
❱ A period of reversion was inevitable, especially because artificially low mortgage rates could not continue forever. It’s worth remembering that owners saw home values skyrocket over the past few years. This adjustment to home values will only be temporary, and owners still have ample equity in their homes.
Mortgage Rates
This remains an uncertain period for mortgage rates. When the Federal Reserve slowed bond purchases in 2013, investors were accused of having a “taper tantrum,” and we are seeing a similar reaction today. The Fed appears to be content to watch the housing market go through a period of pain as they throw all their tools at reducing inflation.
As a result, mortgage rates are out of sync with treasury yields, which not only continues to push rates much higher, but also creates violent swings in both directions. My current forecast calls for rates to peak in the fourth quarter of this year before starting to slowly pull back. That said, they will remain in the 6% range until the end of 2023.
Southern California Days on Market
❱ In the third quarter of 2022, the average time it took to sell a home in the region was 25 days, which is 7 more than a year ago and 9 more days than in the second quarter.
❱ Compared to the second quarter of 2022, market time rose in all counties covered by this report.
❱ Homes in San Diego County continue to sell at a faster rate than other markets in the region. All counties saw market time increase year over year.
❱ More homes for sale and higher financing costs have led to increased days on market. That said, it’s important to put the data into perspective; in the third quarter of 2019, the average market time in the region was 42 days.
Conclusions
This speedometer reflects the state of the region’s real estate market using housing inventory, price gains, home sales, interest rates, and larger economic factors.
The housing market has entered a period of transition following the overheated conditions in 2020-2021. Though the headline numbers are far from buoyant, it’s important to understand that the region is only reverting back to where it was before the pandemic. Any belief that the area is going to experience the same meltdown as it went through in the late 2000s is simply inaccurate. There will be an uncomfortable period, but a return to fundamentals is necessary.
As such, I have moved the needle more in favor of buyers as the region continues to trend back toward balance.
About Matthew Gardner
As Chief Economist for Windermere Real Estate, Matthew Gardner is responsible for analyzing and interpreting economic data and its impact on the real estate market on both a local and national level. Matthew has over 30 years of professional experience both in the U.S. and U.K.
In addition to his day-to-day responsibilities, Matthew sits on the Washington State Governors Council of Economic Advisors; chairs the Board of Trustees at the Washington Center for Real Estate Research at the University of Washington; and is an Advisory Board Member at the Runstad Center for Real Estate Studies at the University of Washington where he also lectures in real estate economics.
Best Ways to Meet Your New Neighbors
Moving to a new home can bring with it a mix of emotions, especially if you are moving to a whole new city. Ensuring healthy relationships with your neighbors is a staple to feeling comfortable in your community. Our homes are more than just the physical space where we keep all of our things. They are the buildings and neighborhoods we inhabit, full of people who we share this larger definition of home with.
We have probably all lived in places where you have met all of your neighbors, and places where you have never once said a word to the people who live next door. Chances are you felt more settled in the homes where you also knew the people around you. Having a friend – or at least a friendly face – nearby goes a long way toward establishing feelings of home and community after moving.
Once you buy a new home and get settled in, you can start meeting your neighbors and building a community. The tips below should you give you a good jumping off point.
How to Introduce Yourself to Neighbors
The easiest way to meet new neighbors is simply to walk up to them and introduce yourself. Hopefully, your new neighbor will be happy to strike up a conversation with you.
1. Spend Time Outside
You might be surprised just how many neighbors you can meet by simply spending time outside in your new neighborhood. After all, you are not likely to meet your new neighbors if you spend all of your time in your house, so make sure that you spend time outside too. Walking the dog or taking your child on a walk is a great way to meet other dog owners or parents in the community. Talking about each other’s dogs or children is an instant conversation starter.
Make a point to do something outdoors every day. Hanging out on your front porch or taking a walk around the neighborhood can make it easy to strike up a conversation with another neighbor who is spending time in their yard. Gardening or beautifying the outside of your home will give you the chance for your new neighbors to come and introduce themselves. Over time, those neighbors you chat with when you are outside can become your friends.
2. Smile and Say Hello
This is sometimes all that it takes; it is as simple as that.
Meeting your neighbors does not have to include your introduction or a full conversation. Instead of thinking about throwing a housewarming party as soon as you unpack and create order in your home, just smile and wave to your neighbors when you see them. It will break the ice for future introductions and the neighbors will pick up your intention. Sometimes, that is all it takes for a good first impression.
If you want to talk, and you think the feeling is mutual, start the conversation. Let them know that you have moved in and let the conversation flow naturally. Remember, you will be able to pick up where you left off the next time you see them.
3. Offer Help
There is no better way to make a good impression on your new neighbors than to offer a helping hand. If you see that your neighbor needs help, offer some. They might need a tool that you can provide, or an extra pair of hands to carry something. This way, you will establish yourself as a person who is willing to help.
Those acts of kindness can help you make friends and show your new neighbors that you want to build a community. And of course, this is a great opportunity to talk to your neighbor and get to know them.
4. Ask For Help or Advice
You might think that it's not the best thing to ask for help from people you do not know. But remember that people love to help other people. It is built into our nature. You don't have to ask them to help you carry your sofa to your apartment, but you can ask to borrow a tool you need to assemble your furniture. When you stop by your new neighbor’s home to introduce yourself, ask them for advice on local activities or community events that you can be involved in. Asking for advice from a new neighbor is a great way to start a conversation.
As you explore the new community, consider asking a neighbor about their favorite local restaurants or coffee shops. You can also ask for recommendations for local service providers for everything from plumbing to the best place gym in town. Showing eagerness to learn about your new neighborhood will help your neighbors to feel at ease talking. This conversation will also give your neighbors the opportunity to tell you about events that happen in the local community.
5. Visit Nearby Public Areas
If you do not see many of your neighbors out in their yard or driveway, try meeting them in other areas of the community. Perhaps they relax at the community dog park or pool or exercise at the local gym. Visit typical meeting spots and you will likely make new friends there. You could also join a local club, group, sports team, or service organization.
6. Turn to Your Pets Or Kids
Kids and pets can be a great way to connect with others. If there are neighborhood kids the same age as yours, you can meet other parents while giving your kids the opportunity to make friends. Children can often make neighborhood friends faster than adults can. Inviting your children’s friends over to your house gives you the opportunity to meet their parents. If you have young children, you could even start a weekly play group where parents and children meet together to socialize and play.
And if you have a dog, you may quickly connect with other dog owners while you are out on your daily walks or at the dog park. Finding these things in common can help create a connection and even help your pets acclimate to the new neighborhood.
7. Host a Housewarming Party Or A Block Party
Nothing brings neighbors together like a party. If you are determined to get to know your new neighbors, consider throwing a housewarming party and inviting them to stop by for coffee or a meal.
You could even work with community members to organize a block party. It doesn’t just benefit you — it gives all your neighbors the chance to meet and get to know one another. A housewarming party does not need to be complicated. Typically, you will give a tour of your new home to your guests. If your house is not put together yet, you could also hold a party on your porch or deck. Barbecue food, play music, and let the kids play in the yard.
8. Attend Neighborhood Events
Perhaps your neighborhood already has an established community with regular block parties and events. Attending these events is a good way to show your neighbors you want to be part of the community. You could even join your neighborhood association group.
9. Attend Community Events
Community events are one of the most fun ways to meet your new neighbors and find out what your local community is passionate about. Look up events in your area, stop by local businesses and take note of events listed on their bulletin boards.
Communities often hold regular local events such as farmers’ markets and festivals. Becoming involved in the community by attending local events is one of the easiest ways to get to know your new neighbors.
Find the Right Agent
The day will come when your new neighborhood no longer seems so novel and you have settled in to life in the community. Take the time in the beginning to go the extra step and immerse yourself in where you live, and you will feel a deeper connection and appreciation as the days, months, and years add up. A move to a new neighborhood is an opportunity to explore the world with a fresh set of eyes, so make the most of it and get out there. You will always be glad that you did.
Windermere’s community of real estate professionals is our greatest asset. We have experts in all areas of real estate, from your typical starter home to condos, luxury properties, and new construction. While residential real estate is the mainstay of our business, Windermere also has offices and associates who specialize in property management, commercial real estate, and relocation services. To further facilitate the home buying process, Windermere has affiliated partners in certain regions to provide mortgage, title, and escrow services.
Call us today with any questions or concerns. Our professional Real Estate Agents will help you through this exciting process. (951) 369-8002
How to Buy a House If You Have Bad Credit
Buying a house is possible with bad credit, but it is harder and more expensive than it is for those with excellent credit. Bad credit can be a result of circumstance or not knowing better. A home is one of the biggest purchases most people will make in their lifetime, and it can be a stressful process, even if you have great finances.
There are private and government-backed loan options that make it possible to become a homeowner even if you have bad credit. Other options include raising your credit score before you begin looking for mortgages. Having a higher credit score makes it easier to get a loan and helps you receive the best rates.
While it may take some work to improve your finances and get your credit rating up, it is certainly within reach. Let’s look at the options.
What Do Mortgage Lenders Consider A Bad Credit Score?
Most borrowers do not know this, but many lenders do not require a specific minimum credit score to buy a house. A conventional mortgage lender is free to set their own requirements when it comes to your credit score. Government-backed loans give mortgage lenders some peace of mind but they do have credit score requirements.
If you have a credit score lower than 500, you might find getting a mortgage a bit hard and will probably need to focus on increasing your score first. The minimum credit score you will need depends on the loan type. Another option that prospective homeowners with bad credit can take is purchasing a home with a co-borrower.
First, let’s take a look at the credit score ranges from FICO:
Exceptional credit = 800 and above
Very good credit = 740 to 800
Good credit =670 to 740
Fair credit = 580 to 670
Poor credit = under 580
How Your Credit Impacts Your Purchasing Power
If you have poor credit rating, it typically means that you will have a difficult time getting approved for loans. The good news is, it is relatively easy to raise your credit score—it just takes some time and due diligence.
One of the biggest things lenders will look at is your payment history. If you have a history of irregular or missed payments, lenders will be more hesitant to approve a loan. It is important to pay credit card bills and other loans on time, and if possible, at higher amounts than the minimum payment due. This will show a lender that you have the capability to pay off debt and manage credit.
Another key area of concern for lenders is your debt-to-income ratio. Debt-to-income ratio, or simply DTI, refers to the percentage of your monthly income that goes toward debt payments. When applying for a mortgage, you will authorize a credit check where lenders examine your credit history, including your current debts and the minimum monthly payments for these debts. They will calculate your total monthly debt payments, and then divide this by your gross income to determine your DTI ratio. So, if you have a gross monthly income of $5,000, and $500 in monthly debt payments, you have a DTI ratio of 10%—which is excellent. But mortgage lenders do not only look at your current debts when calculating DTI ratio. They also factor in “future” mortgage payments to gauge affordability.
Lenders will use this information to determine your ability to manage your monthly payments and repay what you’ve borrowed. If possible, aim to reduce your overall debt—this will help improve your debt-to-income ratio and make it easier for you to get approved for a mortgage.
One thing to keep in mind is that it is wise to keep your credit card balances below 50 percent of your limit. This will show you can manage debt and thus, keep your credit in good standing.
Can You Buy A House With Bad Credit?
Government-backed loans typically have lower credit score requirements, but homebuyers with less-than-ideal credit can still get a private mortgage if they make up for it in some other way. You may be able to put more toward your down payment, which reduces the size of the mortgage you need — and the lender’s risk. This costs more upfront, but you start with more equity in your home. This can be a better financial move than putting down less upfront and paying more in interest.
While it is possible to qualify for a conventional mortgage with a low credit score, government-backed mortgages may be a better option. Ideally, if you are able to reduce your total debt now and increase your income, this will improve your debt-to-income ratio. Having a healthy level of income and few debts shows lenders you are likely to have enough cash to make your monthly mortgage payments.
No two situations are the same, and outside of your actual score, lenders will also be looking at things like:
- How much the borrower has available for a down payment
- The borrower’s overall amount of debt
- How much income the borrower earns
- If the borrower has any debts in collections
How To Buy A House With Bad Credit
If you purchase a home with bad credit, you can always repair your credit and refinance your mortgage for much better loan terms later on.
Let’s check out some of the loan options available and the average credit score requirements for each of them.
Conventional Loans: 620 minimum credit score
Conventional loans are the generic name for mortgages backed by the government’s largest mortgage agency, the Federal Housing Finance Agency (FHFA). The FHFA backs 81 percent of all U.S. mortgages, so your mortgage will probably be backed by the FHFA, too.
There is not a set minimum requirement for income, credit score or down payment to qualify for a conventional loan. However, the minimum credit score required to qualify for a conventional mortgage loan is usually a 620 or better.
USDA Loans: 620 minimum credit score
The USDA loan is a no-down-payment mortgage for buyers in rural parts of the country and lower-density suburbs. The U.S. Department of Agriculture subsidizes the program. It requires home buyers to have a minimum credit score of 620 at the time of purchase, along with other income requirements specific to a USDA loan.
VA Loans: 580 minimum credit score
The U.S. Department of Veterans Affairs guarantees VA loans for service members, veterans and some surviving spouses. VA loans are available to:
- Veterans who meet service length requirements
- Service members on active duty who have served a minimum period
- Certain reservists and National Guard members
- Certain surviving spouses of deceased veterans
If you believe you qualify, you should contact the VA to receive a Certificate of Eligibility. Some lenders may be able to get the certificate on your behalf.
Homebuyer Assistance Programs: 580 minimum credit score
Homebuyer assistance programs rarely enforce credit score minimums. Instead, they adopt the standards of their accompanying mortgage.
For example, if you are a home buyer who uses a conventional mortgage with a 620 credit score requirement, the homebuyer assistance program you use for a down payment will also use the 620 minimum.
FHA Loans: 500 minimum credit score
FHA loans let you put down as little as 3.5% if you have a credit score of 580 or higher. However, you may still be able to get a loan with a credit score of at least 500 — but you will likely need to make a 10% down payment. FHA loans also require you to pay a mortgage insurance premium.
Additionally, you must meet the following requirements:
- DTI ratio of 43% or less
- Steady employment and income (proved with documentation)
- Home must be your primary residence
- The minimum credit score needed to get an FHA loan is 500.
Rent To Own Home Ownership Programs
Another option that is gaining in popularity is the rise of rent to own home ownership programs. There are companies and investors that will purchase a property for you and lease it to you with an option to purchase it from them at a later date. This is a great alternative to traditional mortgage programs if you are having trouble getting approved. This program allows you to purchase a home if you are facing credit and down payment hurdles.
You will not own the home in the beginning. Rather, you will start off as a tenant but you will work your way towards being able to secure the deed of that home with your own financing. The terms are usually set by the owner or investor of the property and do not require perfect credit or a down payment upfront to enter this agreement.
Owner-Financed Programs
Much like rent to own homes, owner financed homes are a direct agreement between you and the owner of a property that allows you to make payments that go towards the purchase of your home. The eligibility requirements, credit standards, and down payment of these types of home-ownership programs will vary from owner to owner.
Improve Your Credit Score
Taking a few steps to improve your credit score before home shopping will improve your homebuying experience exponentially. Getting a mortgage with bad credit is possible, but raising your credit score helps you access larger mortgage loans with lower rates. You will have more overall options if you raise your credit score before you buy a home.
If you have a mortgage already and do not plan on moving, boosting your credit score can help you save money on interest payments and refinance if rates drop.
Here are some tactics for raising your score and positioning yourself for better homebuying opportunities.
- Check your report and score every year
- Dispute errors
- Make your payments on time
- Only use credit cards for essentials
- Do not close unused accounts
- Temporarily avoid new credit
- Get a co-signer
Why You Should Improve Your Credit Score Before Buying
Even improving your credit score by just a few points before buying can still save you thousands of dollars. If boosting your score allows you to be approved for a conventional mortgage instead of an FHA loan, you will save the up-front mortgage insurance premium of 1.75% of the loan amount. Additionally, conventional loans tend to have lower closing costs and interest rates than FHA loans.
While both FHA loans and conventional loans will require monthly mortgage insurance if you put down less than 20%, an FHA loan includes monthly mortgage insurance for the life of the loan that you can only get rid of by refinancing—and paying closing costs on a new loan. For a conventional mortgage, the private mortgage insurance drops off once your loan balance is equal to 80% of the property value.
Find the Right Agent
Buying your house should be a fun and fulfilling experience. If you have done your research and evaluated what you can afford and what you truly need, finding a new home can be exciting. Learning more about the purchase process eliminates the fear of the unknown and lets you search for a home with peace of mind.
Windermere’s community of real estate professionals is our greatest asset. We have experts in all areas of real estate, from your typical starter home to condos, luxury properties, and new construction. While residential real estate is the mainstay of our business, Windermere also has offices and associates who specialize in property management, commercial real estate, and relocation services. To further facilitate the home buying process, Windermere has affiliated partners in certain regions to provide mortgage, title, and escrow services.
Call us today with any questions or concerns. Our professional Real Estate Agents will help you through this exciting process. (951) 369-8002
How to Know If a House Has “Good Bones”
We have all heard a house referred to as having “good bones” but how many of us actually know what that means? On the surface, it sounds great! Good bones… yes, I want that!
As realtors, we have dedicated our careers to helping people find a home that is perfect for their family. Some people assume that the perfect home means they will need to build from the ground up with each detail of their own choosing. Luckily, this is not necessarily the case. If you find a home with “good bones” you can transform it to your dream home.
A home with good bones typically describes a fixer-upper or possibly a home that has great potential. Fresh paint, new carpeting and other cosmetic touch-ups can hide a wealth of defects in a house. When evaluating an older home, buyers need to look beyond the carefully curated facade to discover the house’s underlying qualities—its “bones.”
Of course, whether or not a home has “good bones” is dependent on a number of factors. For instance, construction materials often vary from location to location due to weather concerns (think: hurricanes, earthquakes, flooding, etc). So the type of house that has good bones in one state may not have good bones in another.
In the real estate and construction industries, a house is described as having “good bones” if it doesn’t have any major defects that could lead to expensive repairs. Overall, though, there are a number of features that the majority of homes considered to have “good bones” share.
Keep reading to find out the big indicators that a home has good bones.
What Does “Good Bones” Include?
There are many factors that determine whether a home has good bones. Depending on the location of the property the home may be affected by environmental factors such as hurricanes, flooding, or tornados. Another factor you might want to think about is the age of the home. In reality what determines a home with “good bones” is the opinion of the realtor and buyer.
Here are some possible determining factors:
1) Construction and Foundation
Without a doubt, the first thing people mean when they say “a house has good bones” is that its foundation is solid and its structure is sound. Throughout the years, the materials we use to build houses have changed. Oftentimes, older wood frame homes built in the first half of the 20th century were actually made of higher quality wood construction than the wood frame homes built today. These higher quality materials can decrease the defects present in the home. Other house building materials that are generally considered to be “good bones” also include brick and concrete.
2) Sturdy Roof
One of the most important (and expensive) parts of a house is the roof. In your research, find out what materials were used to construct the roof on your prospective new home (slate, cement tile, and metal will last significantly longer than wood or asphalt shingles) and when it was last replaced.
A proper inspection of the house should be able to tell you whether a roof is in disrepair. Look for visible signs of wear and tear such as sags, rust, leaks, mold, fungi, and any lifting, missing, cracked, or curling shingles. Over time, untended roof problems will trickle down to inside-the-home damage, so it pays to be vigilant, or at the very least to make sure you will not be surprised by the need for repairs. If the roof is relatively new and shows little (if not, zero) wear and tear, you can assume the house has good bones.
3) Natural light
Having plenty of natural light and well-constructed windows is a major plus when buying a home. A bright, airy ambience can also come from a home being optimally situated on the property. Windows that face south typically get lots of light throughout the day, while north-facing windows receive less. Windows on the east and west generally get strong morning or afternoon light, respectively. To get a sense of the home’s natural light and to properly assess these “bones”, you will need to walk through the home in-person during different parts of the day. If the home is light and bright, you can say that the home has good bones.
4) Plumbing
How old is the plumbing and is it in good condition? These are questions that must be asked before purchasing a home. Typically the older the home the more likely you are to have concerns arise. If the pipes are in good shape and the toilets, showers and other plumbing features are up to code and in good working condition, then you can be sure this home has good bones.
5) Coherent Floor Plan
Once you have filtered out all the bad decor, consider the flow of rooms, their size and proportion, and any inefficiencies or wasted space. This is often easiest to do by looking at a floor plan, because you can quickly see adjacencies, odd-shaped rooms, and potential ways to recapture unused square footage.
Consider the number of floors, bathrooms, and bedroom size and location. Do you want the main bedroom to be on a separate floor, or do you need it to be close to a small child’s room? Make sure the location of the laundry room is convenient—and assess the placement of appliances and toilets in the kitchen and bathroom, as changes in plumbing and electrical work are costly.
6) Good Location and Lot Size
There are some things you just cannot change about a property, and where it is located—and how it is oriented on its site—is one of those things. You have heard it from every real estate agent, and they’re right: Location is (often) paramount. A beautifully laid out townhouse is suddenly not as perfect if it is located far away from where you were looking, and a home in the ideal neighborhood that was placed on its lot so that it almost abuts its neighbor can be similarly unappealing.
Here are a couple “bonuses” if you find them in a home!
1) Flooring
Finding a home with good floor or original wood flooring can be a huge bonus to the value of your home. While damaged or low-quality floors are not necessarily a deal-breaker, they are considered to be part of the “bones” of the home. Given that real wood floors are quite expensive to replace, it is always a huge bonus when the house has good flooring, especially if all you need to do is sand them down and add a stain. If a home’s floors are capable of being restored to their former glory, you can consider the house to have good bones.
2) Unique Features
Oftentimes, home buyers adore old, fixer-upper homes for their unique charms and historic features, such as wooden beams, wainscoting, vintage wallpaper, or antique lighting can be a factor of considering the home to have good bones. If you consider these features to be important in a home, then you can say the house has good bones.
3) Bonus Rooms
Whether it is a mother-in-law apartment with the potential for rental income or an oversized basement with extra storage space, a home with a bonus room is always a big advantage. Not only is it good for resale value, but it is also an added convenience and expansion potential. If the home has a bonus room, you can claim it has good bones.
Remember to Overlook Cosmetic Concerns
Even though charming features can be an indication of good bones, do not get too wrapped up in decorative details. While midcentury modern has been back for some time and the shabby-chic style is all the rage, there are definitely trends from the past that just do not speak to us today. Things like shag carpeting, dingy paint, and peeling wallpaper can all be replaced without spending too much money. Do not be deterred by a kitchen full of avocado-colored appliances. Instead, squint and imagine the space with gleaming hardwood floors and bright white walls.
A Professional Inspection is Crucial
While a home may appear to have “good bones,” the only way to truly know for sure is to conduct a professional home inspection. An inspection typically includes a thorough look at the condition of a home’s heating system, central air conditioning system, interior plumbing and electrical systems; the roof, attic, and visible insulation; walls, ceilings, floors, windows and doors; the foundation basement, and visible structure.
In addition to the standard inspection, you might also consider adding on tests for radon, mold, and lead-based paint, as well as a pest inspection and a well and septic inspection, if needed.
Most inspectors will provide estimates on the ‘life expectancy’ of certain items like the roof, furnace, and appliances. That is why it is a good idea for buyers to attend their inspection. Not only can you learn a lot about the home you are buying, but it is also a great opportunity to ask questions and discuss any concerns.
Find the Right Agent
Buying your house should be a fun and fulfilling experience. If you have done your research and evaluated what you can afford and what you truly need, finding a new home can be exciting. Learning more about the purchase process eliminates the fear of the unknown and lets you search for a home with peace of mind.
Windermere’s community of real estate professionals is our greatest asset. We have experts in all areas of real estate, from your typical starter home to condos, luxury properties, and new construction. While residential real estate is the mainstay of our business, Windermere also has offices and associates who specialize in property management, commercial real estate, and relocation services. To further facilitate the home buying process, Windermere has affiliated partners in certain regions to provide mortgage, title, and escrow services.
Call us today with any questions or concerns. Our professional Real Estate Agents will help you through this exciting process. (951) 369-8002
How to Improve Curb Appeal Before Selling
Your house might be immaculate on the inside, but if the outside does not match, your potential buyers may not even make it inside. First impressions make a huge difference when selling your home. In certain markets, you only have one shot to convince a potential buyer to even consider your house.
Curb Appeal is a popular word used in the real estate business to describe the feeling that someone gets when they drive up to a home. We will get into the concept more later, but the term curb appeal refers to how your home, lawn and garden appear from the outside. You want your property to have a “wow” factor to entice them to inquire further. This is why it is important to know how to add curb appeal to your house.
It is not unheard of for buyers to see a home’s exterior and decide to cancel their showing if they do not like what they see. At the very least, poor curb appeal can give a bad first impression that can lead buyers to view the inside of the home with an overly critical eye. After all, a well-maintained exterior implies to the buyers that a home has been taken care of.
Homes with beautiful curb appeal tend to have a higher property value and a higher asking price when they sell. Next time you are driving up to and parking in front of your house ask yourself, "does the curb appeal make the home feel warm, stylish and inviting”... or perhaps the opposite.
When selling a home, most people busy themselves repairing and staging the inside of the house to prepare for showings with prospective buyers. Read on to get ideas on how to make your home stand out in the hot Inland Empire market.
What Is Curb Appeal?
Curb appeal is that undefinable something that draws you to a home at a glance. It is a combination of visual charm, good upkeep and attention to detail. It is the general attractiveness of your home and its surrounding property visible from the front sidewalk, street and/or lawn.
In a nutshell, curb appeal is your home’s first impression on visitors or prospective buyers. It is literally how the property looks when seen from the street. Good curb appeal can serve several purposes, depending on whether the house is for sale or you just want to showcase your home to its best advantage.
When enhancing curb appeal, consider what purpose you want to achieve to make the best choices. Curb appeal is definitely subjective to different tastes, but you want to use different tactics if you are planning to sell your property as opposed to welcoming guests to a holiday party.
Curb appeal can…
- Provide a friendly welcome to visitors and guests
- Entice and impress potential buyers or renters
- Showcase the property’s key features and style
Set a Plan of Action for Improved Curb Appeal
Before you start work on pruning, planting or painting, analyze what needs to be done so you can decide how much you want to spend. This crucial first step will help you determine where you should focus your attention.
A good way to see your property from an outside perspective is to take a photo of the home’s exterior as if this were the photo you will post on your online listing. Evaluate the whole scene and be honest in your assessment. Does anything stand out as a negative? Maybe ask a friend or neighbor to evaluate your home’s exterior and point out the biggest defects. Whether you have peeling paint, a cracked sidewalk or mismatched foliage, you are probably more blinded to the issues than an outsider would be.
How to Give Your Property More Curb Appeal
As you contemplate improvements, stay true to your home’s style and avoid being tempted by trends. Adding or improving curb appeal can be expensive, depending on the scope of the project and the size of your front yard, so some things might just have to be repurposed or cleaned up. Luckily, exterior home improvements usually offer a strong return on investment depending on the preferences of buyers in your market. At the very least, an investment in curb appeal will help you attract buyers and possibly sell sooner.
1. Do a Thorough Cleaning
A marathon cleaning session can also do wonders for your curb appeal. Consider power washing all the surfaces to get the years of dirt and cobwebs down. Clean the decks, carport, siding and pavement. Keep in mind that power washers can damage wood and siding if used incorrectly, so get instructions from your rental company. When cleaning, do not forget to wash down the trinkets and décor you have around your porch and garden. Make sure figurines are clean and standing upright. Spray down and straighten any signs you have on the porch.
2. Create a Welcoming Entrance
Elevate your entryway by adding some decorative elements outside your front door, like a charming welcome mat, potted plants or a decorative wreath. Simple changes can help to make the front entrance of your home appear cozy and inviting. If you have a front porch, add a new outdoor area rug and some charming wooden rocking chairs.
3. Spruce Up Your House Number
Sometimes all it takes is a new set of house numbers in a different style and font to make your home instantly more appealing. A new set of house numbers can modernize an older home or give your home that designer touch. This is great if you want to make your house stand out from the rest on the market.
If you are buying new house numbers, remember that the siding or eave underneath is likely to be less weathered. So your replacements need to be the same size or slightly larger so the old outlines do not show.
4. Replace Your Mailbox
Curb appeal is all about the details, so if your mailbox looks like it has seen better days, it might be time to bring a new one in. Mailboxes serve a dual purpose: they collect your mail, but they also send a message about the homeowner’s attentiveness to their dwelling. An upscale mailbox, architectural house numbers, or address plaques can make your house stand out. If you do not buy a new mailbox, at least give the old one a facelift with paint and new house numbers.
5. Paint Your Front Door
Adding pizzazz to your home's front entrance is an easy, low-cost way to up your home's curb appeal. With the right front door colors, you can use the front door as a unique way to greet any potential buyers. Options for front door colors are as endless as your imagination. However, choose one that complements the color scheme of your home’s exterior. For a monochromatic color scheme, choose darker and lighter shades within the same color. To add eye-catching contrast, pick a door color that’s on the opposite end of the color wheel as your home’s main color.
6. Refresh Your Outdoor Furniture
Any outdoor furniture that is old and in need of repair should be tossed out or updated. Front porch furniture — like gliding, lounging or rocking chairs — welcomes guests and invites them to sit, take a load off and enjoy some conversation. You can find nice, inexpensive furniture at a thrift store to add character. Shop for something that looks good but does not require refinishing.
7. Install Exterior Lighting
Outdoor lighting can make a world of difference when it comes to your home’s curb appeal. Add some solar lights along the front walkway or some low-voltage lights near your front flower bed. Landscape lights are easy to install, and solar varieties are self-sufficient, so they will not put a strain on your energy bill. Interested house buyers might be driving past your home later in the day or evening to see what it looks like. Sellers should give them the best view possible with welcoming exterior lighting. Warm porch lighting is a must, and if you have any lighting fixtures on your garage, they should match any other exterior fixtures on your house.
8. Add New Hardware
Upgrading your front door’s hardware is a simple, cost-effective way to increase the curb appeal. Choose from a variety of colors and metal types, like silver, gold, satin nickel, copper and oiled bronze to add pizzazz to an otherwise boring door. Hardware also comes in many shapes and sizes, so before heading to the home center, consider the look and function you want.
9. Hide Exterior Cables
Outdoor cables and wires can be an unsightly mess, and they can negatively impact your curb appeal. Keep exterior cables hidden using exterior-rated channel raceways that you can run the wire underneath. Weatherproof boxes to hide wayward wires are another good option to keep these items neatly hidden from view.
10. Plant Fragrant Flowers
Flowers do more than just provide visual interest. Aromatic, sweet-scented flowers set the tone as soon as the buyer walks up and leave a lasting impression. Just do not overwhelm people with fragrant flowers too close to the entryway. Jasmine, roses, lavender and thyme are all good options. Pay attention to seasonality so you can get something that is blooming during your listing time.
11. Update the Sidewalks and Walkways
Make your sidewalk look new again by resurfacing it with new concrete. If you cannot resurface the whole thing, at least get rid of weeds and overgrowth in the seams and along the sides so that the sidewalk is clean and free of obstructions. Enhance walkways around your home and garden by installing stylish pavers. A paved walkway makes maneuvering around the outside of your home easier, and you can find them in a wide variety of colors, shapes and styles to coordinate with the rest of the home.
12. Install Concrete Borders
Lawn borders contain your mulch and define flowerbeds and pathways, giving your landscaping a finished look and actually does not cost much to install. Out of all these curb appeal ideas, this is the most hands on, do-it-yourself project, so keep in mind the time and labor it will take.
Expect to dig a trench, build and install wood forms, pour in some gravel and then top that with concrete mix. Add just a few extra steps if you want to color the concrete mix, and give this project about three days to cure. In a week, your flower beds will look better than ever and your front yard will have a sense of order to it.
13. Manicure the Lawn
Tending to your lawn is a do-it-yourself task that can add free and instant curb appeal to your home. Cut the grass regularly and conquer those weeds. A manicured lawn with a picturesque garden and ornaments tells passersby that your home is clean, well-maintained and highly valued. Alternatively, unmown grass and a driveway filled with potholes tells others your home's value is depreciating.
14. Refresh Your Driveway
Once the driveway is clear of debris, moss, weeds, grasses and oil stains you are going to want to fill in any cracks in the driveway. Installing a border along the driveway gives it a crisp, elegant look. You can use bricks, pavers, and stone to get your driveway to really pop. You should also hose down your driveway and walkaway before you even take photos for your listing to give it a fresh look.
15. Update Your Garage Door
If your garage door is dented, peeling, rusting, chipping, or just out of date, considering installing something new. Or consider painting the garage door the same color as the trim on your house, as this will give your property a more uniformed look. Wash any windows in your garage to make it more appealing. Then, consider the lighting inside your garage as well, as this part of the home can often feel dark and unwelcoming – the opposite of how you want a prospective buyer to feel.
Find the Right Agent
First impressions still matter. Curb appeal can make or break a buyer’s interest in your home before they even step through the front door, so it’s important to put your best foot forward. Be sure to add unique touches to make your home feel cozy and welcoming. These steps will go a long way toward helping your home stand out from the crowd.
Windermere’s community of real estate professionals is our greatest asset. We have experts in all areas of real estate, from your typical starter home to condos, luxury properties, and new construction. While residential real estate is the mainstay of our business, Windermere also has offices and associates who specialize in property management, commercial real estate, and relocation services. To further facilitate the home buying process, Windermere has affiliated partners in certain regions to provide mortgage, title, and escrow services.
Call us today with any questions or concerns. Our professional Real Estate Agents will help you through this exciting process. (951) 369-8002
Q2 2022 Southern California Real Estate Market Update
The following analysis of select counties of the Southern California real estate market is provided by Windermere Real Estate Chief Economist Matthew Gardner. We hope that this information may assist you with making better-informed real estate decisions. For further information about the housing market in your area, please don’t hesitate to contact your Windermere Real Estate agent.
Regional Economic Overview
Total employment in the counties covered by this report has risen more than 600,000 jobs over the past year, recovering 97.3% of the jobs lost due to the pandemic. Unsurprisingly, Los Angeles County still has the largest shortfall (-254,000 jobs), followed by Orange County (-44,100) and San Diego County (-15,000). Riverside and San Bernardino counties are now well above pre-pandemic employment levels. The region’s unemployment rate in May was 3.6%, down from 8.2% a year ago. The lowest rates were in Orange County (2.4%) and San Diego County (2.7%). The highest unemployment rate was in Los Angeles County, where 4.5% of the labor force was without a job. The Inland Empire continues to outperform, and I am hopeful that the rest of the region will return to pre-pandemic employment levels by the end of the year. However, it’s likely that Los Angeles County may take somewhat longer to fully recover due to its size.
Southern California Home Sales
❱ In the second quarter, 47,596 homes sold, down 19% from a year ago but up 13.1% compared to the first quarter of the year.
❱ Pending home sales, which are an indicator of future closings, were down modestly from the first quarter. However, I still expect that the summer will see a decent number of sales.
❱ The largest drop in sales was in Orange County, but all markets saw significant declines. That said, the spring market was in place in San Diego, Los Angeles, and Orange counties, which experienced double-digit percentage increases in sales compared to the prior quarter.
❱ Listing activity has risen across the region, which has given buyers more in the way of choice. That may explain, to a certain degree, why pending sales have pulled back; buyers are not feeling as pressured as they were when inventory was very low.
Southern California Home Prices
❱ Home prices in the second quarter rose 10.9% compared to a year ago and were 5.4% higher than in first quarter of 2022.
❱ Rising mortgage rates have not had as much of an impact as some expected, but increased financing costs appear to have taken at least some of the heat off the market, as demonstrated by the slowing pace of price growth compared to 2021.
❱ There was double-digit price growth in every county other than Los Angeles. Riverside County led the way with prices rising by 16.7%. The rest of the region also saw very impressive sale price growth.
❱ With relatively high mortgage rates and more homes coming to market, I have started to watch list prices closely. Compared to the first quarter, median list prices are still up an average of 8.7%, suggesting that sellers remain rather bullish.
Mortgage Rates
Although mortgage rates did drop in June, the quarterly trend was still moving higher. Inflation—the bane of bonds and, therefore, mortgage rates—has yet to slow, which is putting upward pressure on financing costs.
That said, there are some signs that inflation is starting to soften and if this starts to show in upcoming Consumer Price Index numbers then rates will likely find a ceiling. I am hopeful this will be the case at some point in the third quarter, which is reflected in my forecast.
Southern California Days on Market
❱ In the second quarter of 2022, the average time it took to sell a home in the region was 16 days, which was 2 fewer days than a year ago and 5 fewer days than in the first quarter of the year.
❱ Compared to the first quarter of 2022, days on market dropped in all counties covered by this report, which was impressive given the higher number of homes for sale.
❱ Homes in San Diego County continue to sell at a faster rate than other markets in the region. All counties other than San Bernardino (where it took one more day for homes to sell than a year ago) saw market time drop.
❱ With inventory levels rising, some may think that the market is set for a correction, but I disagree. Sales are still higher than in 2019 and it took half the time to sell a home in the second quarter of this year than it did during the same period in 2019.
Conclusions
This speedometer reflects the state of the region’s real estate market using housing inventory, price gains, home sales, interest rates, and larger economic factors.
The trend in the job recovery remains positive, and the prospect of a return of all the jobs lost due to the pandemic is becoming more palpable. The housing market is still performing well, even in the face of higher inventory levels and rising financing costs. That said, the frenetic pace of activity of the past 18 months or so will slow, but not to a degree that is concerning.
More listings led to more sales, which is a little counterintuitive especially given far higher mortgage rates than we’ve seen in years. The market remains favorable to home sellers, and they are still in the driver’s seat.
About Matthew Gardner
As Chief Economist for Windermere Real Estate, Matthew Gardner is responsible for analyzing and interpreting economic data and its impact on the real estate market on both a local and national level. Matthew has over 30 years of professional experience both in the U.S. and U.K.
In addition to his day-to-day responsibilities, Matthew sits on the Washington State Governors Council of Economic Advisors; chairs the Board of Trustees at the Washington Center for Real Estate Research at the University of Washington; and is an Advisory Board Member at the Runstad Center for Real Estate Studies at the University of Washington where he also lectures in real estate economics.
5 Major Mistakes Seller’s Make In A Buyer’s Market
The real estate market is cyclical. Even a long-lasting buyer or seller’s market will eventually come to an end as demand, price and supply change in any particular area.
As the name indicates, a buyer’s market is one in which the real estate market conditions favor buyers. Perhaps the inventory of listed properties is exceeding current demand, and sellers are forced to lower their listing prices. This provides the opportunity for buyers to purchase property at a better price than typical market value.
In all our years in the real estate space in the Inland Empire, we at Windermere have seen sellers make common mistakes that have resulted in them missing out on a profitable sale! If you are thinking about buying or selling a home, it is important to understand the market dynamics that could affect your bottom line.
To help you avoid, our expert team has listed some of the common mistakes that sellers make in a Buyer’s Market.
What Is a Buyer’s Market?
As you might have guessed, a buyer’s market favors buyers, not sellers. But what, exactly, does that mean?
A buyer’s market happens when the number of homes available is greater than the number of potential buyers. Simply put, the supply exceeds the demand in the real estate market. One indicator of a buyer’s market is lower home prices.
During a buyer’s market, homes often sell right around the listing price and sometimes even less. There is little opportunity to demand anything higher without causing buyers to turn to other comparable homes in your area. Sellers are at a disadvantage because of the volume of competition. Instead of waiting for the right buyer to come along, sellers often agree to a sale for less than they hoped when the home was listed.
Another sign of a buyer’s market is seeing homes on the market for longer than average. If you drive through any given neighborhood and notice the same “For Sale” signs staying for weeks or even months, it is likely a buyer’s market. During this type of market, you are unlikely to see a bidding war for a home like you would in a seller’s market. Buyers in this type of market know they have the upper hand and are typically unwilling to spend above the asking price since they have so many homes to choose from.
Signs of a Buyer’s Market
- More properties on the market than in past periods
- 6 months or more of inventory on the market
- Listed properties spending more time on the market
- Current listing prices below previous sales prices
- Lower overall closing percentage
- Falling average house prices
- An increase in real estate ads trying to attract buyers
- Numerous Foreclosures
- Low Interest Rates
5 Seller Mistakes in a Buyer’s Market
Overpricing
When selling your house, it is natural to want the most you can get from the sale but in a buyer’s market, you want to be a bit more conservative when it comes to pricing your property. When you overprice your house, an informed buyer will be able to spot the inflated cost right away.
If the asking price is too high, there is a high probability that your house will remain on the market longer. The problem with this is that buyers see the extended time on the market as the property being less than desirable. To avoid this, make sure the asking price is just right so that you have room to negotiate. This way you will end up attracting more buyers.
Inaccessibility
A serious seller must make the property easy to show for potential buyers. Most of the people looking to enter the real estate market are searching online. As a result, this means that within hours of posting your home online, you may start getting requests from people who want to physically see the property in person. Making your property hard to access will play a major role in reducing the price and the image associated with it.
Not Taking the First Offer
Oftentimes, sellers do not take their first offer seriously. They keep holding out in hopes of a better offer. However, numerous studies have shown that more than 70% of the time, it is the first buyer that ends up buying the property. The first offer may be far lower than what you had expected. There still may be some room for negotiations in a buyer’s market, but keep your expectations lower that you would in a different market.
Offering Credit
If you have a leaky faucet, an unhinged door or the house needs a slight paint job, then it is in your best interest to invest the time and money to resolve these issues before you step foot on the market with this piece of property.
Most people do not want to buy a property in poor shape, especially in a buyer’s market. Competition is too high. Buyers that are investing in real estate property during a buyer’s market tend to be more selective. They want to look for the best simply because they can find the best. Thus, it is essential to get your property in its best shape. Locate the problems and fix them based on your discretion. It is wise to prioritize these issues based on their profitability.
A lot of sellers offer credit against such flaws. This just lowers the selling price. Instead of offering credits or a price cut, take out a day or two and get such issues resolved. This will result in your property selling faster and at a higher price.
Highly Personalized Changes
Often, sellers make the mistake of over personalizing the house they are selling. As a result, the probability of something being unuseful or unwanted to the other person increases significantly. If you end up making very specific and highly personalized changes, there is a high possibility that it might not work out for the buyer.
Therefore the highly recommended and fool proof plan here is to think like a buyer and put yourself in someone else’s shoes for a while. This will help streamline a lot of things when it comes to selling a property.
Selling a Home in a Buyer’s Market
Selling a home in a buyer’s market can be an uphill battle, so it’s important to mentally prepare yourself for what can be a stressful process. Make sure you will be able to emotionally separate what you love about your home from the feedback you get from buyers, and remind yourself that it is normal to receive lowball offers in a buyer’s market. Try not to be offended.
If and when an offer does come in, do whatever you can to keep the negotiations going, staying open and flexible. Remember to consider the full package. There is more to selling a home than just the sale price, and entertaining low offers does not make you a desperate seller — it makes you a smart one, as you are making the most of a cool market. If you do not have wiggle room on price, consider other concessions you could make to your buyer, including appliances, offering a convenient close date, or waiving contingencies.
If you are selling and buying at the same time — selling your current home in order to buy a new property—you may want to wait to buy your house until after your current house has sold. Buying is easy in a buyer’s market, so you should be able to find and purchase a new home quickly.
Find the Right Agent
If a buyer has a lot of homes to choose from in the area that he wants to be in, then it's a buyers' market. If there are few homes in that area, then it's a sellers' market. You can figure it out by asking your agent or you can go online and look at the number of homes that are for sale in your area.
Windermere’s community of real estate professionals is our greatest asset. We have experts in all areas of real estate, from your typical starter home to condos, luxury properties, and new construction. While residential real estate is the mainstay of our business, Windermere also has offices and associates who specialize in property management, commercial real estate, and relocation services. To further facilitate the home buying process, Windermere has affiliated partners in certain regions to provide mortgage, title, and escrow services.
Call us today with any questions or concerns. Our professional Real Estate Agents will help you through this exciting process. (951) 369-8002
7 Major Mistakes Buyers Make In a Seller’s Market
The housing market is constantly in flux, and thanks to the market dynamics of supply and demand, it often tilts between favoring buyers or sellers. If you are thinking about buying or selling a home, it is important to understand the market dynamics that could affect your bottom line.
Buying a home always has its challenges. But when you're trying to do it in a seller's market, the difficulty can reach a new level. But do not dismay! Buyers in a seller’s market can get what they want, but they need to have a solid plan in place.
In all our years in the real estate space in the Inland Empire, we at Windermere have seen buyers make common mistakes that have resulted in them missing out on the home of their dreams! To help avoid this happening to you, our expert team has listed some of the common mistakes that buyer’s make in a Seller’s Market.
What Is a Seller’s Market?
In a seller's market, demand for housing is high, but the supply of homes for sale is low. This imbalance in supply and demand can lead to bidding wars and rising home prices. The cause of a seller's market can vary based on economic factors both national and local. For example, certain cities can experience a high demand for homes and low inventory if new businesses open or there is an influx of new residents. On a national scale, low mortgage interest rates can inspire more people to buy, and that increase in demand can trigger a seller's market.
As the name indicates, sellers have a slight advantage when their home is listed during a Seller’s Market, since there are often more buyers than homes available on the market. This is not to say that you should avoid buying in a seller’s market. But if you are planning on buying or selling, it is important to learn how to recognize a seller's market and how to navigate one.
Signs of a Seller's Market
These are housing trends that signal a seller's market:
- Low Inventory. Few homes are listed for sale, leaving limited options for homebuyers.
- Houses Sell Fast. Homes on the market sell quickly since there's a high demand.
- Houses Sell Over Asking Price. Bidding wars with competing offers occur frequently, pushing sale prices above the original asking price.
- Sellers Have More Leverage. Sellers have the upper hand when negotiating home prices and deal terms since there is elevated competition among buyers.
7 Buyer Mistakes in a Seller’s Market
· Not Being Ready and “On-Call”
When we say homes go fast in a seller’s market, we mean it. When a market is hot, properties are moving quickly from “just listed” to “under contract” within a matter of days or even hours. You have to be ready to seize on a good opportunity as soon as it hits the market. It is not unheard of for people to make offers on a home before they even see it in person. You must have an “on call” mindset or you could miss out!
· Not Getting Pre-Approved
You might be confident that you will be approved for a mortgage loan based on your steady income, your low debt-to-income ratio, and your high credit score — but the seller cannot rely on that. The only way to prove to the seller that you are a qualified buyer is to be prequalified from a lender. A pre-approval letter determines how much you can borrow after submitting your financial information like income and credit. Getting approved ahead of time is the best way to show the seller that you are serious and ready to buy now.
NOTE: Pre-Approved is different than Pre-Qualified! Pre-qualification means that you simply told your lender your financial story. Pre-approval involves submitting a mortgage application, complete with providing verifying documents. Pre-approval from a reputable lender is key. Presenting this shows the seller that the buyer has already set the wheels in motion and is serious about making a deal.
- Not Making Your Best Offer First
Most people want to buy as much as possible for as little money as possible. So when most people see the listing price of a home, they naturally wonder what they can really get the house for. Offering lower than asking price is a reasonable strategy, especially if the house is overpriced compared with other similar homes in the area, or if it is a buyer’s market with lots of available inventory.
But trying to get a deal when you are the buyer in a seller’s market might not be the best tactic. Not only is it important to make an offer quickly, but even more important to make a good, strong offer. In a Seller’s Market, there’s no time for what I call “low-ball” offers. In a seller’s market, you need to go all in with your best offer up front since this market indicates a shortage of inventory and fierce competition. Most sellers in this market have the luxury of waiting to get the price they want, not to mention they could receive multiple offers at one time. Therefore, you should present your best initial offer, giving the seller a reason to work with your offer over another.
- Not Being Prepared for a Bidding War
If there is ever a time when a bidding war could be imminent, it is during a seller’s market. Odds are your offer will be rejected at least once during the home buying process. You may even enter a bidding war, which can cause you to pay over your max budget if you are unprepared. The best way to stay within your budget is to search for homes below your price range. This creates some leeway in case negotiations take place after your initial offer. During negotiations with the seller, your real estate agent will be your best asset.
- Over-Analyzing the Purchase Price
Over-analyzing a home purchase in a seller’s market is ill-advised. When you wait too long, you risk losing the home you have fallen in love with. Once you have finally found a home that meets all your qualifications, make the offer! To give yourself more leverage, be prepared to move quickly by having your finances in order — get a preapproval.
· Expecting a “Great Deal”
It is a hard pill to swallow, but “great deals” do not often exist in a Seller’s Market, unless the homeowner is highly motivated to sell quickly. The words GREAT DEAL in themselves are very subjective. In a market on the rise, most purchases look like a “great deal” a year or two after the transaction.
- Working With an Inexperienced Agent
Choosing the right real estate agent is imperative when buying a home in a seller’s market. If you have a seasoned agent on your side, you will probably have a better chance of getting the home you want. Experienced agents know the ins and outs of the local market and help you save time and money. Plus, in most cases, buyers do not pay real estate agents; sellers do.
Find the Right Agent
If a buyer has a lot of homes to choose from in the area that he wants to be in, then it's a buyers' market. If there are few homes in that area, then it's a sellers' market. You can figure it out by asking your agent or you can go online and look at the number of homes that are for sale in your area.
Windermere’s community of real estate professionals is our greatest asset. We have experts in all areas of real estate, from your typical starter home to condos, luxury properties, and new construction. While residential real estate is the mainstay of our business, Windermere also has offices and associates who specialize in property management, commercial real estate, and relocation services. To further facilitate the home buying process, Windermere has affiliated partners in certain regions to provide mortgage, title, and escrow services.
Call us today with any questions or concerns. Our professional Real Estate Agents will help you through this exciting process. (951) 369-8002