Author Archives: Dominic

An unusual October

Last month, October, something very odd was in the air. We had exceptional weather not typical of ‘Fall weather’, our National Government shutdown and homesales took an odd turn. So we have a couple good things and a big issue sprinkled in there as well but at least the weather was nice. Realistically, SLO has always had great fall weather but it seems that last month high 70’s and 80’s was the way it was going to be. Perhaps the pure joy of great weather is why homebuyers and sellers decided to list and buy substantially more homes than they did a year before.

Last month 130 homes were for sale (68 new listings) and 45 sold homes  in San Luis Obispo alone, county wide there were 1,115 homes on the market and 298 sold homes. In SLO these numbers account for a 25% increase in marketed homes for sale and nearly a 10% increase in sold homes from one year ago. The greatest oddity that we saw last month was a month-to-month 47.8% increase in new listings (September-to-October.) When I took a look at the data this morning I was trying to make sense of this peak in what should have been an otherwise slow month and the only explanation I have is that the market is actually equalizing. Looking at the chart below we can actually see what’s going on with home sales.

A market snapshot

A market snapshot

You will notice that the number of sold homes actually dropped 4.3% in October yet the number of new listings and for sale homes increased substantially. As that blue line increases and the dark green columns decrease we are creating excess inventory on the market unless the pending home sales increases (red line) to match that supply. If we look at the basics of supply and demand, we hit an equilibrium in May of ’13 where our new supply of homes and buyers putting homes into contract was the same but after that we saw a decline in pending sales and sold homes while supply continued to increase. The question then becomes, “Why did demand decrease, there are still a lot of interested buyers on the market looking to buy a home?” I think the next graphic sums it up pretty well.

Average home prices comparison

Average home prices comparison

Notice how the price of new listings continued to increase without any relief? At the same time the price of sold homes stayed considerably lower. The dramatic increase in pending transaction sent sellers into a frenzy of listing for more and it appears to me that the buyers won’t go for it, they simply are not buying overpriced listings. As such, the market is adjusting and for sale prices are coming back down to levels that buyers are willing to agree on. The real estate market dances on!

I call it home

For some, traveling is an endless vacation where the whole world is home and for others of us, traveling is an event and home is more localized. Last week I took the opportunity to head North to Ashland, Oregon with a good friend and two bikes, a tent, hiking boots, a climbing rope and two ice axes for an adventure to a town I had never seen. While I was up there I fell in love with the community and activities that could be experienced there and for a few moments, I thought that I might just be able to move there myself. That thought sparked an interesting exploration into what separates vagabonds from residents and what makes a town a hometown and why SLO will always be my hometown.

In Ashland we encountered numerous vagabonds that were temporary residents of a town that accepted the presence of their vans, campers and wanderlust. Some of them were hippies avoiding the confines of societal norms, others were simply transients looking for their next trip and still others were adventure seekers looking for the next peak to climb or trail to ride. They were all distinguished from residents however, by a freeness. None of them seemed to have a sense of urgency to be any particular place at any particular time. If anything, they were eager to explore whatever caught their fancy in the moment. So let’s say that what defines them is that they live in the moment absent of any boundaries.

The glow of a sunset covering Mt. Shasta

The glow of a sunset covering Mt. Shasta

On the other hand we have the residents, the people that have established addresses in their town with jobs and distinct roles in their community. Residents come to different communities for different reasons; failed attempts at vagabonding, job relocation, family and the list goes on. What set’s them aside from the vagabonds is that they value the sense of a central community and while they may enjoy traveling, it’s not a lifestyle for them. Residents don’t see the county line as a boundary like the vagabonds do, rather, it’s a welcome mat to their hometown and they bustle around their hometown going to and from places, meeting people and accomplishing tasks gladly. It can be said that residents are defined by their responsibilities to their community and may not be bound to a geographic location but certainly identify themselves with their hometown.

So what makes a town a hometown? In my opinion it’s a sense of belonging, for whatever reason. I proudly call myself a San Luis Obispo native resident because I am comfortable here and my lifestyle allows me to thrive here. I love being out on the trail and the smell of the ocean as well as the gentle hum of industry that SLO has. From my office window I get to see the towns personality as tourists and residents wander the shops beside business owners, government officials, doctors and attorneys rush to appointments. All the while, I can get home after work in 4 minutes driving without big city traffic and go for a jog on a beautiful open space trail without pollution induced asthma.

In Ashland I saw a lot of the amazing things that the community offers to people like me including endless trails, gorgeous sunsets, rural and historical beauty and that small town vibe. All of that being said it didn’t feel like home, it felt like a destination. A destination that I can daydream about riding trails in the fall colors and sampling local beer with fellow outdoor enthusiasts while we pretend that we don’t have responsibilities “back home.” Nothing against Ashland but as we drove home last Sunday I got a twitch more excited as we first crossed the California State line then subsequent county lines and by the time we crested the Cuesta Grade… I was anxious and excited to be back home. And as with all of my trips, I felt a little post vacation depression which quickly wore off as I realized, “I’VE GOT HOMES TO SELL!”

So tell me, what makes your town a hometown?

A house in a box

Can you imagine if that was a tag line? What would you believe? Today, I was on our local Realtor® caravan looking at new inventory in San Luis Obispo and one of the homes we saw was a historical home dating back to 1930. Of course, I was in love with it from the first sighting of it because it was an old home with some serious character and curb appeal but what I learned about this home’s past really surprised me. This home was a Sears and Roebuck Modern Home. When the agent holding the home open for us to go through told me that I started thinking about how different things have become and whether it would be a good thing to be able to buy a ‘kit home’ in today’s modern world and what implications that might have.

The Sears Modern Home program was an interesting way for Sears to sell mortgages, lots, building supplies and eventually a ‘move in ready’ home in a box. When I looked at the home this morning it was hard to imagine a 1,500 square foot home and appliances being delivered on a truck to be taken out of a box and assembled like an Erector set project that a family could move into. It had an especially unique look to it yet it was certainly reminiscent to the architecture of its era with high-peaked roofs, double hung windows, a raised foundation and cellar and a nice long driveway back to a detached garage. The interesting thing is that the catalog featured 22 home models in 1911 and about the same in 1930, which when you  think about it; 22 homes could make for a diverse neighborhood if all of the neighbors picked different models. By 1940 the Great Depression and a number of circumstances had taken its toll on the Modern Homes program and the last home was sold that year. In the wake of the program 447 different homes were designed by numerous architects and over 100,000 homes were ordered and built by Sears customers.

My mind has been turning since I walked off of that lot this morning, mostly revolving around what that program could be today. I imagine an advertisement in Sunset Magazine or Better Homes and Gardens with a tagline saying something to the effect of, “Green living is just a click away!” and a link to a website with mail order home packages. In our Sky Mall and Amazon buying environment I can see how this could be a viable program barring local building ordinances and municipal involvement. Think of how we could reduce a carbon footprint for a new home if supplies and appliances were all generated in a local American town, assembled in a box car, and shipped together. Think of the American jobs that could be created simply compiling and packaging a home in a box or shipping it to another local builder that could just ‘slap it all together’ on site. Just think if when you bought a home you literally could buy the materials for a hard cost. Wouldn’t that be awesome?

Sure it would but the reality of it is, that was then and this is now. Back then people were flooding away from the city by the bus load and land was still abundant and undeveloped. People still knew how to build things with their hands and the price of a home then was about the cost of buying a car today. Still, I like to think that there is a case to be made for a drop ship home business that a buyer with land could choose their floor plan and amenities and coordinate with a city staff member and a contractor and build an affordable home, with green ratings and move their family in and that the home would still be standing and saleable over 80 years later.

Last week in SLO and a bigger picture too

Last week in real estate is the weekly notice for what happened in the San Luis Obispo  real estate market as interpreted by Dominic Tartaglia of Tartaglia Realty.

This week I want to address our county-wide market but not without giving you the weekly snapshot of single family homes in San Luis Obispo from this past week. From last Monday 09/09/13 to today the market was fairly slow with just 4 new listings, 3 Pending listings and 7 Sold listings. Median prices for each category in order were $578,000, $649,000 and $575,000 for a total average of $589,857 for last weeks real estate movement. The average Days On Market (DOM) dipped down to 29 from last month’s average of 45 suggesting that there are still plenty of buyers in the game looking for a good price and interest rate yet our inventory is tightening up. If you will remember back to last weeks article I mentioned that we are in a time period of significance in relation to what the effect the Feds will have on mortgage rates; so far nothing significant has happened but we did see a slight relief on the 30 year fixed rate conventional loans with an ever so slight decrease back down to 4.75%, down .125% from last week.

In the coming month or two I expect that we will continue to see a diminished amount of inventory of existing homes and hope to see a few more new construction units introduced to the market by the way of Serra Meadows and Moylan Terrace. In looking at the historical data we see that the real estate supply cycle for the time of September through January has a negative correlation, as we get closer to January inventory decreases each month. That being said, in looking at San Luis Obispo and SLO County we have seen a diminishing supply of “New Inventory” since July but are still seeing increasing numbers of “For Sale” homes. That suggests to me that there is some hesitance from buyers to pay for the higher priced listings and the higher priced listings are still on the market while the more affordable homes are selling quickly (hence the avg. DOM of 29). As the number of New Listings decreases I would expect the number of For Sale homes to follow in that trend. If you are considering selling your home in this market, with a fair price; this is a good market to sell in because buyers are looking for value. I used to see buyers looking for bargains for investment purchases but today my sense is that buyers are buying for personal use now as opposed to investment previously.

Now let’s talk about the county. Q3 of 2013 saw a slight increase of Sold inventory from the previous year and a significant increase in the number of New Listings in the county, up 16.5%. That being said, inventory county-wide was still down nearly 6% from Q3 in ’12 with an increase in median home prices county-wide of 16%. Even more interesting to me was the statistic posted by the California Association of Realtor®s that our county’s sold homes were comprised of 90.9% equity sales in July. That means that 9.1% of the homes sold in July were distress sales. This is a huge swing from years prior where most of the inventory county-wide was distressed in some capacity. If we compare those numbers to Los Angeles County we see that LA County had 83% equity sales and 16.9% of homes sold in January under distress. Statewide, only 82% of home sales in July were equity sales. San Luis Obispo County is making a strong recovery and is ahead of the state in clearing out our distressed inventory and has turned the corner and is stabilizing well ahead of other counties.

Despite posting strong numbers San Luis Obispo County still ranks at 13th in the state according the California Association of Realtors. The CAR bases their ranking system on a variety of metrics which includes median home price which can offset other shortfalls in other counties. For example, Marin County is ranked second in the state yet its DOM is approximately 40 days as opposed to SLO County at 29 but it’s median home price is $1,000,000. For  San Luis Obispo County to be 13th out of 41 counties, it’s safe to say that we are doing well. Putting all of this together, I think of a SCUBA diving concept known as the slack tide. A slack tide is the point at which water in a bay is calm, it’s not rushing in to fill the bay and it isn’t emptying out of the bay back to the open sea. That is the optimal time do dive in a bay because the water is clear, it isn’t moving erratically and you have less of a risk of being taken out to see.

I see our market at that point today. It’s safe to play and get into the market and buy or sell investment property as well as property for a personal residence without getting taken out to sea. Right now the market is pretty transparent and has a trend that is currently suggesting two things without question. First that prices are appreciating and secondly that inventory is at a slight shortage. Granted, each person and each transaction has individual circumstances that may differ from this article but I would be glad to consider your particular instance should you or somebody you know be considering making a move.

Last Week in Real Estate 09/09/13

Last week in real estate is the weekly notice for what happened in the San Luis Obispo  real estate market as interpreted by Dominic Tartaglia of Tartaglia Realty.
Last week in SLO real estate we saw a substantial drop in the activity on the Single Family Residence market. The previous week featured 28 total listings move on the market of which 10 were new inventory (including 5 new construction homes), 11 Pending homes and 7 Sold homes. For the week of 8/26-9/1 the median home price for the new listings was $627,725. Pending and Sold median prices were $659,000 and $718,715 accordingly.This past week, we had a market make up of just 1 Active listing, 8 Pending and 4 Sold listings move on the market. The one new Active listing was at the price of $685,000 whereas the Pending and Sold homes were at a median price of $591,700 and $518,750.  Now here comes the interesting part of this report.The previous week we saw a large influx of new construction homes representing the Serra Meadows project’s introduction of their first phase of sales. 4 of those 5 new homes went into escrow almost immediately and translated over to Pending homes last week. As we see more of the Serra Meadows project hitting the market it will greatly affect what the market will bear for pricing. Considering the fact that San Luis Obispo has not seen a new housing development of this magnitude in over a decade this project has the potential to affect prices of not only new homes but existing home sales as well. When homebuyers are presented the chance to buy a new home in the $550,000-$650,000 range versus an older home that may need some additional cash investment to update we will certainly see what kind of demand there is for new homes and what folks are willing to pay for existing homes.

Another thing to take note of last week was the increase again in interest rates. Since January of this year the 30 year mortgage rate has increased 36% to a still modest 4.57%. This week and the next we should start to see how the Fed will react to the economy and adjust rates accordingly. Stay tuned for more information on that.

Make it a great week!

Dom Tartaglia

About Dom Tartaglia
Dom Tartaglia

Dom Tartaglia represents the next generation in real estate for Tartaglia Realty as a Broker, Cal Poly Graduate and Graduate of REALTOR® Institute (GRI). As a local real estate expert he is well versed in real estate sales and acquisition and is constantly keeping a finger on the pulse of the local market. His weekly analysis of the previous 7 days is a snapshot of what is currently happening and often times reflects back on previous market trends from his career. If you found this information to be insightful pass it on to a friend and tell them why you enjoy working with Dom Tartaglia for all of your real estate needs.

 

Last week in Real Estate 8/26/13

Last week in real estate is the weekly notice for what happened in the San Luis Obispo  real estate market as interpreted by Dominic Tartaglia of Tartaglia Realty. 
Last week in real estate certainly felt slow to me but the numbers are telling me that we are pretty much on par from last month. In fact, if we look back at the Last Week In Real Estate from July 22nd, we see the numbers are nearly identical. Last week 10 homes were listed for sale, 8 homes were put into escrow and 5 homes were sold. What is different, is the median price for homes over the period of that week.

This past week represented an increase in median home prices of “for sale” and “pending” homes and a decrease in “sold” homes. The for sale home prices are 21% higher for the same week last month and pending home prices are at 111% of the median price for pending homes a month ago. The sold home price is 71% of the same week last month. What I am sensing is that sale prices are still really good for sellers as they are up from where they were last year by 12% (43% over 2 years) and the months of inventory index is down 60% from two years ago. Last year, we were at about the same point with our inventory which suggests that there is still a strong demand for homes and not enough supply to suppress rising prices on homes, despite the decreased month to month sale price previously mentioned.

Sale prices may be increasing which is good for sellers but that is not all that increased last week. Interest rates took another tick upward. Last week I saw a 5% interest rate on a 30 year fixed conventional loan that made me flinch. It looks like the days of ridiculously low interest rates are going by the wayside but we are all fortunate that rates are still very good. For a buyer this number does make a difference, buyers that are limited on what they can buy with a 4.5% loan are now even more limited and that jump may be the last chance that they had at buying a home for a reasonable price. With the number of competitors out there trying to buy the same homes, competition is still fierce.

Putting it all together: We are still seeing an influx of homes on the market with a steady stream of the homes selling reasonably quickly and for near asking price with those prices continuing to increase. I would say that we are looking at a sellers market still with what I hope to be a softening appreciation and a more steady market as interest rates rise and we move into the fall season. It will be interesting to see how the increase in mortgage rates affects the volume of home buyers over the remainder of 2013, if at all. If you’re a seller or a buyer, there is an opportunity to make a good deal in today’s market at a good price, with a good loan and with some stiff competition.

About Dom Tartaglia
Dom Tartaglia

Dom Tartaglia represents the next generation in real estate for Tartaglia Realty as a Broker, Cal Poly Graduate and Graduate of REALTOR® Institute (GRI). As a local real estate expert he is well versed in real estate sales and acquisition and is constantly keeping a finger on the pulse of the local market. His weekly analysis of the previous 7 days is a snapshot of what is currently happening and often times reflects back on previous market trends from his career. If you found this information to be insightful pass it on to a friend and tell them why you enjoy working with Dom Tartaglia for all of your real estate needs.

 

Last week in real estate: July 22, 2013

Last week in Real Estate 7/22/13

Last week in real estate is the weekly notice for what happened in the San Luis Obispo  real estate market as interpreted by Dominic Tartaglia of Tartaglia Realty.

Last week in real estate we saw an influx of 9 for sale homes listed on the market in the price range of $520,000-$999,000 with an median value of $599,000. Five of those homes are 3 bedroom homes two were 4 bedroom and two were 2 bedrooms. The average square footage of homes listed last week was 1,736 SF.

We saw 8 homes go into pending contracts with an median asking price of $609,250 and a range of prices from $414,000-$879,000. The average square footage was 1,716 SF and the average cumulative days on market was 21 days.

In the SOLD home market we saw 4 homes go to new San Luis Obispo home owners at an median sale price of $842,500 and a solid 99.8% of the asking price. 3 of the 4 homes had 4 bedrooms, the 4th home was a 3 bedroom home. The average cumulative  days on market was just 15 days which is a testament to how quickly homes are selling as of late.

From last week: Let’s look at these numbers as compared to last week to see which way the trend went. There was a three home deficit in the new listing sector of San Luis Obispo with average home price of $671,389 down 6% from last week. We also saw less average square footage listed which likely corresponds to the reduced average asking price. In terms of pending homes we are holding steady at 8 homes going into escrow across the last two weeks significant reduction in price ranges, down by 20% at the high end of the spectrum from last week. Again, we see that the average square footage is down from the previous week’s pending homes. Sold homes decreased by 3 homes this past week and the median price of sold homes was reduced by 6% from the week prior.

From what I see, the market slowed a bit last week in terms of fresh supply as well as homes sold. Generally, we see July and August as the last two big months of the year in terms of transaction volume and that might be what we are experiencing from last week, the beginning of a slowing market. That being said, 2013 has been consistently posting bigger numbers month over month and the last 7 days could merely be a bump in the road. As of the time of this writing no new listings have been posted on the MLS today but that does not mean that the rest of the week will follow suit. I still think that the market is expanding and that there is a large volume of buyers seeking out a home in a small supply of available homes for sale.

Make it a great week!

Real Estate Scams Continue

How would you feel if you found out that the $2,000 deposit on the house that you were about to rent was taken out of your account and the person renting to you disappeared? Scammed is the word that most people would use to answer that question and being in the real estate industry, I hear that word more than I care to. This morning I read an article published by the National Association of Realtors® that laid out three different scams that are popular right now. The thing of it is, these are the same scams that have been going on for years and people are still falling victim to them. 

As a real estate professional and more importantly as a steward of homeownership and tenancy I feel obliged to write about this issue again, I wrote about this topic a couple of years ago. The more that we can talk about this issue the better we as an industry and as consumers can prevent our friends and families from becoming scam victims so let’s take a look at the three most common scams mentioned in the article. Clearly, these are not the only three scams and they have a multitude of different flavors but there is a solution that is pretty universal across the board for all scams including real estate scams.

The first scam is targeting renters for up front deposits for renting a home. We often see this on Craigslist or some other form of online classified add that allows for the poster to have anonymity. The gig generally goes something like this; a poster will take a real estate ad for a home that is for sale from another website, copy the information and pictures, paste that information into a classified add and state that the home is for rent. Once the stolen and misrepresented property is online a renter will call and ask to get more information whereupon the poster asks for an upfront security deposit to be mailed to them or a wire transfer and guarantees the renter that this is their procedure for renting the unit out and that they will meet the person there to see the house and sign the paperwork. The would be renter complies and when they show up for their appointment, quickly realize that they have been scammed and the home is occupied by the sellers and there is a for sale sign in the yard.

The second scam targets homeowners that have a mortgage on their home by a person calling and stating that they are a representative of a business that claims to help with a variety of loan modification programs ranging from foreclosure counseling, re-financing consulting, loan auditing, leaseback programs or even government assistance program specialists. From the initial phone call the representative will either take personal information and/or charge upfront fees for their services. In reality they take the money and information, waste your time and ultimately, they scam you.

The third scam that is still popular is the all too common scenario where a “real estate investor” offers a workshop, seminar, book, database or some other form of educational material or resource to consumers to teach them how to invest their money to maximize returns on investment etc. etc. they then charge you a sum of money for the privilege of their service and then you wait for the money to roll in. To many people’s disappointment, all that ever happens is they get spammed and or solicited for more money. The only real lesson that these people may get is that old adage, “If it sounds too good to be true, it probably is.” Which brings me to the universal solution of how to avoid being scammed.

Look at the deal and ask yourself, if this deal is too good to be true. Signs that it may be too good to be true and that in fact is a scam are as follows: upfront fees, advanced charges, a third party company is contacting you to talk about your mortgage but they “need some more information”, guarantee or promise unrealistically high ROI on investments or education, you are guaranteed a rental agreement after you provide them funds. Upfront fees or advanced payments are not a part of any real estate deal without some form of agency paperwork in place first. Whether I am leasing property or selling property I am obliged by my professional trade industry to create an agency disclosure contract with a consumer before charging fees so that they understand the implications of what I will be doing for them and what kind of consequence* that means for them, monetarily or legally. Additionally, the California Department of Real Estate must pre-approve advanced fee terms for services rendered by a real estate practitioner. If a third party representative contacts you about your mortgage you should always be wary of what their intention is, sometimes it is okay but generally speaking you should work with your lender for any foreclosure dealings and should not give away your personal information without first verifying the status of the agency contacting you. If you find yourself considering working with a representative I would advise seriously researching the rep and the program that they are promoting before surrendering any information.

When a business promises you a large ROI for some form of information or investment you need to verify the legitimacy of the source. More importantly, nobody gets rich quick in real estate with sound investment strategies. Good real estate investors make money because they have studied the ins and outs of the industry, they understand basic and advanced principles of financing, identifying properties that are sound and construction principles. While you might be asking yourself, “How do I educate myself if I shouldn’t take classes or go to workshops?” I’m here to tell you that it is okay to find legitimate courses in investing principles just be careful and look for courses that are approved by the department of real estate or some accreditation agency. To be entirely honest, I have read a lot of real estate investment books and that is only part of the equation for being able to find good deals. The other part is being immersed in real estate on a regular basis which I can promise is no quick and easy way to make a dollar. Investment takes commitment.

If there is anything that I want you as my friends, family and readers to take away from this article it is this: If you come across a fishy real estate deal, scrutinize it and call me to see what I think about the deal. It won’t cost you anything to contact me and it could save you a lot of time and money. I want you to be happy renters, buyers, sellers and investors and I want you to be safe whether I am your Reator® or not I am a steward of my industry and I take that seriously.

*In this case consequences can be good or bad i.e. I sell your house and you pay me vs. a seller lies about a bad property and they get sued for fraud.

Reasons Dom Loves SLO No. 2

This is the second week of our Reasons to live in SLO series and it’s a food theme this week. Today I was thinking about all of the reasons of why I love to live in SLO and decided to go home and grab lunch on the way there. I figured it made sense because I was taking a couple of pieces of lumber back to my workshop to finish them and paint them before installing them in our office to finish up our recent remodel that was never completely finished but I digress. I decided that I would grab lunch at my favorite sandwich shop in town and that it would be great because I could walk from my house the short two blocks to get that mouth watering piece of artwork and better yet it was 11:45.

Now by this point many locals are calling out the shop of their preference and people less familiar with the traditional American fare; the question rises, why does 11:45 make a difference? Allow me to elaborate. First off locals, my personal preference continues to be Gus’s Grocery and Deli. It’s where we went for sandwiches before football games, it’s where I ate when I was in college (ironically the same house I live in now) and the same place where I have gone to many important business lunches. Needless to say it has nostalgic value but that is just the icing on the cake for me. The real substance of why I obsess over Gus’s is the quality of ingredients and the freshness of the food all paired with the atmosphere. It’s a true sandwich deli and corner grocery complete with beer, wine, chips, salad bar, large patio seating area and the employees are always hustling to crank out delicious creations which leads me to the issue of time.

Gus’s aficionados will have already understood my point about the time but for newbies to the world of Gus’s you are probably dying to know what gives with 11:45? At noon the place becomes packed and I mean paaaacked. Any time I go there at noon I ask myself what I was thinking to come at that time. There is a long line of eager to eat locals, students and tourists all waiting patiently to get their name called to get those pieces of bread and fixings. Now don’t get me wrong, the wait isn’t too bad and if it was twice as long I would still wait because the sandwiches are that good and the patio is the perfect spot to sit out in 75 degree sunshine and enjoy lunch with other lunchgoers but sometimes you forget and have to say to yourself, “Well… I should have guessed it would be packed. If it wasn’t packed the sandwich wouldn’t be so good!”

So there you have it folks, the second reason that I love living in SLO is Gus’s Grocery and Deli on the corner of Santa Barbara Street and Leff Street.

 

TIP: If you are going to Gus’s on the weekend, grab a beer and a sando with some friends and kick back and enjoy the people watching.

This week in real estate July 16, 2013

Market Projections is an article representing the opinions of Dominic Tartaglia, broker associate of Tartaglia Realty. Information and opinions represented within this article should be considered predictions and that actual events and/or results may differ materially. It is highly advisable to meet with your real estate professional to fully discuss the implications of your next real estate transaction. 

This week in real estate’s prediction for San Luis Obispo is indicating further appreciation of home values and an increasing absorption rate paired with a 23% decline in mortgage applications and an increase in ‘for sale’ homes. The average price for a single family residence is following a positive trend with a 27.7% year to year increase in average sold prices, the average sold price in June was $696,000. The absorption rate for san luis obispo dipped 13% to a rate of 68.3% of listed homes being closed for the month. June also posted the highest number of ‘for sale’ homes on the market since November of 2012, representing a 28.4% decrease YTY but up 12.5% from May.

So let’s put it all together. Values are going up on average, there is no questioning that fact. The median home price for San Luis Obispo is up 23% from last April and currently rests at $599,000. If we were to take a look at that number and compare that with the absorption rate and  the 28.4 % decrease in listed homes from last year we would see that there is apparently an argument that scarcity is driving the median home value up. With a 68.3% absorption rate we are looking at a strong market where inventory is moving and suggests that buyers are willing and able to buy at market values. The conditions that may relieve some of the upward pressure on median home prices comes in the form of decreased mortgage applications and increased interest rates as well as the slight increase in listed homes this month.

We are seeing less buyers applying for home loans as a result of their buying power, suggesting a decrease in demand. Basic economic principles dictate that a decrease in demand is a leading indicator that prices may level out or even drop. My prediction is that we will begin to see a leveling off and stabilization of median home prices as more home owners list their homes for sale and less first time mortgage applications are drawn. To sustain the market I would expect that as home owners sell their existing homes they will be relocating thus creating a stabilized market environment as interest rates continue to push upward.

In summation, we are witnessing a rebounding market that may have taken off quickly in the first half of 2013 but is beginning to stabilize as oppose to grow. The one thing that I cannot predict is if/when we will see a peak in the median home price in the near future. I should also mention that there are less optimistic predictions out there that are claiming a real estate bubble is underway. I disagree with the reasons that I have heard stated for a bubble are looming shadow inventory and increasing interest rates. California experienced a 60% decrease in foreclosure filings from last year according to RealtyTrac and while we are still seeing foreclosed homes on the market, the share of traditional equity sales are much greater than they have been in years past. Additionally,  interest rates at less than 5% are still historically low, albeit not as low as 6 months ago. Nonetheless, low interest rates are increasing affordability for many qualified buyers, qualified.

a. “The data relating to real estate for sale on this website comes in part from the IDX program of the Central Coast Regional Multiple Listing Service and its affiliated associations.  Real estate listings held by brokerage firms other than Tartaglia Realty are marked with the IDX icon and detailed information about them include the name of the listing broker and listing agent”.
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