I THINK IT HAS BEEN SO LONG since we had a “normal” real estate market that most of us in the industry don’t even know what normal is anymore.
At the beginning of the millennium, the housing industry was in hyper growth mode fueled by crazy underwriting standards that pumped millions of buyers into the marketplace that in any normal sense would not be able to qualify for a home loan. This artificial supply of buyers overheated the market and caused values to soar.
That all ended when the supply of easy money loans dried up. Then came a credit freeze that made it almost impossible for anybody to qualify for a home loan, and the pool of home buyers dropped to unprecedented lows.
For a period of several years, foreclosures and short sales became the new normal. When a Realtor listed a property that was not in distress, that was considered unusual.
Things began to change in 2012 when the government began slashing interest rates through a unprecedented bond purchase program that drove mortgage interest rates to historically low levels. This finally brought buyers back into the market.
We had lots of folks wanting to take advantage of low home values and low interest rates, but we did not have enough available homes. So for a few years now, we have had a shortage of homes available for sale.
The shortage of homes was due to a couple of factors.
First, existing homeowners had suffered through years of declining values and did not have sufficient equity to be able to sell their homes. Second, the new home-building industry had suffered major losses through the great recession and was slow to start new developments.
We have been “recovering” for three years or more and are finally getting close to home values not seen since the beginning of the housing crisis. Depending on where you live, some neighborhoods have recovered entirely while others still have a long ways to go.
Yet the shortage of housing persists. To be sure, it is better than it was a few years ago. But there is still a dearth of available homes, and the best of properties are snapped up quickly and frequently with multiple offers.
In Benicia, there are around 40 single family homes available for sale at any time, with another 15 or so condominiums and town houses. The number ebbs and flows. At the moment, there are only 36 single family homes listed as available in Benicia.
Historically, this is about 50 percent of what is normally listed for sale at any given time but inventory levels have improved substantially in the last few years, when available homes often numbered in the teens.
On a national level, most housing analysts believe the housing market will stabilize as values rise, more and more homeowners return to positive equity and add to the available housing stock and builder inventory increases.
According to the latest reporting from CoreLogic, home values are up 6.3 percent when compared to a year ago. It is interesting that California is tracking at exactly the same rate of 6.3 percent.
California is a big state, and some areas are appreciating faster than others. When we had a normal housing market, you could take a graph of California’s best and worst years and arrive at the easy conclusion that property in California would appreciate on average 8 percent annually. We are close to that number now. Does this mean we are in a normal market?
Guy Benjamin (CAL BRE License #01014834, NMLS 887909) writes a weekly column for The Herald, offering general information on real estate matters. As it is impossible to address all possibilities and variations, he will try to answer individual questions by readers who contact him at 707-246-0949 or guyb@fairwaymc.com.
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