There are three factors that should make prospective homebuyers wary:
- There's a shortage of housing supply in Southern California, creating a bubble, with demand outstripping existing inventory and pushing up prices. Few new houses have been built in the region the past four years.
- Money is cheap. Mortgage interest rates are at historic lows. Combined with prices that were depressed by the bursting of the big housing bubble four years ago, this is drawing buyers into the market and convincing sellers that now is the right time to put homes on the market.
- Investors are major players in the market.
That last point should concern plain Joe and Jane buyers the most. This is from DataQuick's release:
Investors continue to account for an unusually large share of all sales.mortgage. It doesn't matter how creditworthy you are if the competition has pickup truck full of cash. And remember, investors are...investors. They can afford to lose money and make money, as long as they make more money in the long term. Everyday buyers have different motives for buying a home, a losing money usually isn't one of them — even if the losses are only temporary in a market that will inevitably adjust.
Absentee buyers – mostly investors and some second-home purchasers – bought a near-record 28 percent of the Southland homes sold last month. That was up from 27.7 percent the prior month and up from 25.4 percent a year earlier. The record was 29.9 percent in February this year, while the monthly average since 2000 is 17.6 percent. Last month’s absentee buyers paid a median $245,000, up 22.5 percent from a year earlier.
Buyers paying with cash accounted for a near-record 32.1 percent of October home sales, down insignificantly from 32.2 percent the month before and up from 30.0 percent a year earlier. Cash purchases peaked at 33.7 percent of all sales this February, and since 2000 the monthly average is 16.8 percent. Cash buyers paid a median $250,000 last month, up 21.1 percent from a year ago.
The views, opinions, positions or strategies expressed by the authors and those providing comments or external internet links are theirs alone, and do not necessarily reflect the views, opinions, positions or strategies of First Capital, we make no representations as to accuracy, completeness, current, suitability, or validity of this information and will not be liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its display or use. Any information provided does not constitute an offer or a solicitation to lend. Providing information to purchase does not guarantee a loan approval. All registered trademarks, copyright, images, or other items used are property of their respective owner and are used for editorial purposes only.
First Capital Mortgage is a subsidiary of PHH Home Loans LLC, a direct lender, Dept. of Corporations file #413-0713 NMLS#4256
Visit FirstCapital Online or call: 310-458-0010