The San Elijo Hills and Old Creek Ranch local real estate market has been steadily rising since its lowest point of early 2012 – a market recovery of approximately 45%. Today’s detached home average price is $771,000 compared with $560,000 in Feb 2012, while attached units are averaging $442,000 compared to $274,000 at their lowest point (12 month rolling average). Detached homes have now hit historical highs since the recession (or almost, depending of the neighborhood) and attached units are nearly reaching their peak. It is important to note that new construction homes selling over the last 12-24 months have been pulling the average values up due to their “new” status appeal and often lower mello roos.
What does this mean for our future market, and is it sustainable?
We are currently experiencing a low supply – March 2016 is showing 1.3 months of supply, compared to 2.5 months of inventory during the peak of last year, June 2015. Note that a market is considered a seller’s market when the inventory is less than 6 months, so we are deep in seller’s market territory. The low supply of homes for sale, combined with a sustained demand due to our community’s desirability, along with low interest rates, is fueling our real estate prices. When marketed aggressively and priced appropriately, properties are often selling for top dollar with a short market time. There are nuances in performance which we will discuss later in this article.
Is there a housing bubble? Home prices are continuing to rise across most of the nation. This has created a level of concern with some pundits claiming a housing bubble, like we saw in 2006. While we do not have a crystal ball, we want to explain why we feel these concerns might be unfounded.
As previously mentioned, the number of families looking to purchase a home is greater than the supply of homes on the market. As long as the supply remains low and the demand is strong with low interest rates, we can expect a strong market. This year’s interest rates are forecasted to remain in the low 4% territory which should be supporting the demand. The wild card remains to be the supply. May-July often brings a surge of homes for sale, which may result in a more balanced market.
The major difference with 2006…
A decade ago, the demand for housing was artificially boosted by lending standards that were far too lenient. Today, the strength of the demand for housing is legitimate, as lending standards are nowhere near what they were a decade ago. For proof of this, let’s look at a graph of the Mortgage Bankers’ Association’s Mortgage Credit Availability Index. A decline in the MCAI indicates that lending standards are tightening, while increases in the index are indicative of a loosening of credit. Since June 2008, the lending standards have been tight and homeowners have been required to show proof of assets/income, proving mortgage payment affordability. Therefore, the foundation of homeownership has been much stronger than it was between 2003-2008.
Today’s price increases, unlike those a decade ago, are the result of qualified buyer demands exceeding the current inventory of homes available for sale. Once the supply increases, or the demand decreases, prices will level out.
According to the BMO Harris Bank Home Buying Report, 52% of Americans say they are likely to buy a home in the next five years. This is a very positive sign, however, we must remain cautious with such reports because what people want to do, and what they can do, may be different.
SELLING YOUR HOME FOR ALL IT’S WORTH
Even in a hot market, we can see major disparities in sales prices and performance between properties that appear similar in size, location and amenities. It can often be explained by differences in agent performance, marketing, home preparation, pricing and negotiation.
Pricing your home
Proper pricing is a priority for a successful sale. Price it too low and you may be leaving money on the table. Price it too high and buyers might ignore the property, and the length of time on the market is a clock ticking at the buyer’s advantage. The longer a home sits on the market, the more potential the buyer has for negotiation. A thorough pricing strategy, along with understanding the trends and property specifics, is essential for a seller to maximize their sales price. Multiple offers allow sellers to negotiate the best terms and price. We can often negotiate rent-backs, allowing sellers some time to secure their replacement property.
Preparing your home
Interior, exterior, from basic cleaning to major repairs, it is essential to get sound advice to maximize your property value and the return on your improvements.
Surrounding yourself with the right professionals
Marketing is key to selling your home for all it’s worth! To reach the maximum results, it takes a lot more to sell a home than taking photos and placing the home on the MLS. A complete marketing plan should be implemented, including the latest technologies, professional photos, campaigns with premium online exposure, print materials, marketing towards international and relocation buyers, among others.
An experienced, well-connected, professional agent with a strong track record is essential to build a plan for success.
- Is the agent you are considering a full time agent with experience, or selling real estate as a part time activity?
- Do they take the time to understand your needs and goals to build the best strategy for you and your family? If you are selling and need to buy another home, is the agent well versed on strategies and contract terms to protect you, negotiate a rent back and make it a smooth transition?
- How much real estate did they sell last year? And how many properties in the area? What are their statistics of market time and sales price vs. the market?
- Are they well aware of current trends and local market specifics?
- Are they well connected in the real estate market?
- Do they have a support team, staff and relationships to help you prepare your property and address staging, preparation and repairs for your home?
- Are they strong communicators, do they provide frequent feedback and activity reports as part of their service? And how strong of a marketing program do they offer to get your home exposed to buyers and other agents?
Agent ethics, relationships, negotiation, communication skills & contract expertise are essential factors as well.
As area experts since San Elijo Hills and Old Creek Ranch started, our team of professionals welcome the opportunity to answer your questions and help build a strategy and plan together for your real estate needs! Our local presence, knowledge of the market and strong marketing program have been key in helping our clients achieve successful real estate planning. Located in the heart of San Elijo Hills, we are always available to provide advice and services.
Nicolas Jonville, Owner/Broker Associate of The Jonville Team with Keller Williams Realty at 1215 San Elijo Rd in San Elijo Hills, T: 760-471-5098, E: Mail@JonvilleTeam.com, W: www.SEHproperties.com, (BRE Lic# 01410224/01417209)