What’s Ahead For Fresno Housing Market in 2014?

Well, 2013 was an amazing year for property value comeback. We had an approx. 13% increase in property values overall. This really helped because we lost so much in the downturn for a few years. The market activity really peaked in mid summer, and there has been a very slow but steady decline of sales activity ever since. 2014 is starting out, with relatively low inventory of available homes, which is keeping the values strong, but I do believe that this will change as people realize that they can sell now because they have gained some equity. I know that there is “pent up” demand for people that want to sell their homes, that have been waiting on the sidelines for their values to increase. Well now is the time if ever, to put that home on the market in 2014. Most analysts are predicting single digit appreciation in 2014, so it wont really pay to wait and see. There have also been some changes in the mortgage industry, that will affect the market. For one, FHA has lowered their maximum mortgage amount from $381,250 to $281,250. and FHA had earlier in 2013 raised their mortgage insurance premium costs. This is unfortunate, because Fresno is a huge FHA market with approx. 70% or transactions getting FHA loans. On the other side, conventional financing is many time more attractive with slightly higher 5% minimum down payments. Interest rates are definitely on the rise in 2014 and their have been other important changes in qualifying for a loan. Starting tomorrow Jan. 10. 2014, new lending guidelines, referred to as QM, which stands for “qualified mortgage lending and borrowers ability to repay”. Borrowers must have a maximum 43% debt to income ratio, and they are not considering “compensating factors”, such as a higher cash down payment, assets or money reserves in the bank. It’s all about your income and debts and credit scores period! So if your in the market to buy a home and have been pre-qualified, you really need to meet with your lender again to get a conditional loan approval. Policies have changed now and we need to make certain buyers can qualify under the new guidelines. I look forward to working with more sellers and buyers this year, particularly the “move up” type buyers. I believe that the investors flipping homes is slowing down, because their are fewer opportunities in foreclosures, so 2014 could be the year for “move up” buyers to sell their homes and buy up or downsize. Cash is still king!

Fresno Home Market Trend For Fall 2013

TGChartImage

The Fresno Market is showing is showing signs of a slowdown now. As you can see from the graph above, the “Pended” sales, which is the red line indicating accepted offers is on a downslide, as well as the dark green, which is the closed sales. You can see that the MLS active inventory is increasing, by the light green bar showing approx. 1283 active listings at this date thru October 2013. From other analysis, our prices of homes in the Fresno/Clovis area have increased 13.7% since the beginning of the year 2013.

The graph below, shows the “months inventory” at this time. We currently have a 2.8 months of inventory based on closed sales VS current inventory numbers.

Months inventory

A Tale of Two Home Sale Markets

A Tale of Two Markets

With the Federal Reserve signaling an impending scale back of its quantitative easing program,interest rates soared in recent months. The average 30 year fixed rate jumped more than 100 basis points from 3.35 percent in early May to 4.46 percent in late June, and reached its highest level since July 2011. The increase in mortgage rates had an impact on the housing market as home sales in California pulled back slightly in June.Sales dropped on a month-to-month basis for the first time in the last four months, and were down 3.7percent when compared to June 2012.Despite the decline in overall sales, higher-end markets continued to show strong growth on a year-over-year basis. Sales above $500,000 increased 33.6 percent when compared to June 2012, and sales of million dollar plus homes jumped 31.7 percent from last year. This was evident in coastal markets such as San Francisco County,Marin County, and Santa Cruz as all of them experienced double-digit sales increase in June.Lower price segments of the housing market,however, continued to decline with sales under $200,000 dropping 43.6 percent from last June and sales between $200,000 – 300,000 decreasing25.7 percent year-over-year.

The vast difference in sales trends between the lower and the upper price ranges was due in part to the constraint in the housing supply. Overall housing supply in June improved slightly from the previous month but remained tight by historical standards. Inventory levels, however, vary across the board with a significant shortage in lower-price segments but are less constrained in higher-priced markets. The supply of homes priced under $300,000, for example, dropped 47.1 percent from last June, while inventory for million dollar plus properties increased 7.5 percent when compared to last year.The steep decline in inventory for the lower price segment is partly attributed to the lack of supply in distressed properties, as REO and short sales tend to concentrate in the lower-priced markets. The supply shortage in distressed properties is due primarily to government intervention in recent years, which slowed the flow of foreclosed properties to the market place. Bank-owned/REO inventory, in fact, has been declining by an average of over 50 percent year-over year for the past twelve months. The recent surge in home prices has also turned some of the previously underwater properties into homes with positive equity, and led to fewer short sale listings on the market. Equity sales, on the other hand, improved 7.8 percent in June from last year as home prices continued to climb and more homeowners started putting their house on the market.