Bidding wars. All-cash offers. Limited supply. Sound familiar? That’s because these are the words of a song being sung every day in California.
After two years of unprecedented growth will there be a cool-down and possibly a fall in sales and prices in 2022? Will we ever return to “normal”?
Recently, several housing experts reported in USA TODAY that home sales are likely to be slightly lower in 2022 while home prices will continue to rise due to the ongoing housing shortage.
Another real estate brokerage firm had this to say:
“I don’t think we will see a correction, maybe a slowdown.”
A CEO of a realty company stated:
“I don’t see any sort of crash in the near future. No way.”
The National Association of Realtors (NAR) forecast calls for median price gains of between 5% and 7% this year. This increase contrasts to the 2021 increase we saw of a 20% average rise.
If you want to take advantage of the housing boom, but don’t qualify for a conventional mortgage, give Sun Pacific Mortgage a call at 707-523-2099 to discuss a private money loan or visit our website at www.sunpacificmortgage.com. We are a family-owned and operated business serving only California for 34 years. We offer fast mortgages for owner-occupied and non-owner-occupied residences, as well as business purpose loans. Our mortgages are usually completed in 7-30 days making a Buyer’s offer look exceptionally good to a Seller.
When deciding to sell here in California, some homeowners feel they need to get their houses ready to make it more appealing to Home Buyers. Before deciding on this choice, here’s a few things to keep in mind:
There is a shortage of homes right now. In a “normal” market there would be a 6-month supply of homes available for sale. Presently, there is only a 1.9-month supply. As a result, competition is stiff and Sellers are receiving multiple offers. Many Buyers are more willing to take on home improvements themselves to get the home they’re after. In this market, it may be wise to let future Homeowners remodel the bathroom or the kitchen to make design decisions that are best for their specific taste and lifestyle.
Focus on getting a good return on your investment. Make sure that any bigger project you are planning to tackle will give you the return on your investment you are seeking, and that those projects are worth the cost. Consulting a real estate professional before you renovate is a good idea especially in this busy real estate market. You may find that putting you house up for sale as-is, will still sell quickly and result in a good return.
All over the country, but especially in California, we are in a strong seller’s market. So many of the popular California counties, including Sonoma, Marin, Monterey, Santa Clara, San Mateo and even Southern CA counties, are seeing more and more homes slowing coming onto the market – and selling fast!
So, maybe the best course of action is not a reasonable renovation project but instead putting it on the market for the many Home Buyers waiting to buy! But, if you do need fast funding to get a renovation job done quickly in order to cash in on this market, give Sun Pacific Mortgage a call at 707-523-2099. We are a private mortgage funding company who can often get your funding done in as little as a week.
What are the tax benefits of owning a home? Plenty of California homeowners are asking themselves this question right about now as they prepare to file their taxes. Let’s look at some of them:
Mortgage interest: This deduction is itemized, so for this to work in your favor, all your itemized deductions need to be greater than the new standard deduction, which the Tax Cuts and Jobs Act nearly doubled ($12,400 for individuals and $24, 800 for married). There are additional deductions for those aged 65 and older and head of household. If your mortgage went into effect before Dec.15, 2017 you can deduct interest on loans up to $1milliion. If acquired after this date, you can only deduct the interest on the first $750,000.
Property Tax: This deduction is capped at $10,000 for those filing jointly, no matter how high the taxes are. Remember that for some your property taxes may be included in your monthly mortgage payment.
Private mortgage insurance: At the moment, this tax is deductible, but Congress needs to approve an extension for 2021.
Energy efficient upgrades: Credits for solar electric and solar water-heating equipment are available through Dec.31, 2021. The SECURE Act also retroactively reinstated a $500 deduction for certain qualified energy-efficient upgrades such as exterior windows, doors, and insulation. This is a credit, so no worrying about itemizing. However, the percentage of the credit depends on the expenditure.
A home office: Unfortunately, if you are a W-2 employee, you’re not eligible for the home office deduction under the CARES Act even if you spent most of 2020 in your home office.
Home improvements to age in place: These improvements need to exceed 7.5% of your adjusted gross income. You will need a letter from our doctor to prove these changes were medically necessary.
Interest on a home equity line of credit: You can deduct only up to the $750,000 cap, and this is for the amount you pay in interest on your equity line and mortgage combined.
The real benefit of homeownership here in California is in the wealth accrual v, but these tax benefits add up to savings that contribute to your overall wealth total.
If you are looking for some tax benefits and wealth accrual in your future, but do not qualify for a conventional loan, call Sun Pacific Mortgage at 523-2099 to discuss the possibility of private funding. We have a 33-year history of helping thousands of folks just like you achieve their dream of homeownership.
Note: For exact deductions for 2021 you want to consult with your licensed CPA or tax representative.
Looking at all the homes and condos for sale in the northern California counties of Lake, Marin, Mendocino, Napa, Solano, and Sonoma Counties at the end of February, there were just 1,431 on the market. This is the lowest inventory amount since 2005 and 2% below that of January. This region generally enjoys a Spring revival in both listings and sales, but only time will tell.
Let’s take a look at the real estate trends in Sonoma County as of the end of February:
Inventory: 534 (+30% YTY; +2% MTM)
Ratio of homes sold over original price: 45%
New sales: 488 (+38% YTY; +8% MTM)
Supply of inventory: 1.1
Time it takes to sell: 39 (Coastal) – 106 (Oakmont)
Average days on market: 60
Median price: $621,000 (+10% YTY)
Average price: $906,046 (+13% YTY)
Total sales volume: +29% YTY
Sales price to list price: 100% (+5% YTY
It is quite plain to see that Sonoma County real estate has flourished since the beginning of the year with no indication that it will flounder in the near future.
So, if you are thinking of selling your property and are concerned that you might need funding for your new home before it becomes available from the sale of your present home, call Sun Pacific Mortgage at 707-523-2099 to discuss the possibility of a bridge loan.
Or, if you want to get a step up on that house purchase offer, how about trying out a Private Money loan to submit a 10-day close and virtually all-cash offer?! This type of offer just might beat out the other multiple offers and make you the winning Buyer!
Here at Sun Pacific Mortgage, we have been offering these private money loans to many borrowers because we can often obtain their needed funds within a week. We are fast. We are family owned & operated. We have been in business over 3 decades now.
We look forward to helping you or someone you know get a private home loan with our home loan programs.
This is the question that is on many minds in the North Bay after several years of fires, evacuations, power outages, and poor air quality. The answer isn’t easy. With a global pandemic and economic upheaval facing us almost everywhere we turn, the solution might just be to stay put. On considering the alternatives, most North Bay residents conclude that it’s hard to beat the beauty of the area they have come to know and love, as well as the community formed.
The “Great Reshuffle” prompted by the remote workers moving into the North Bay and the fire weary, longtime residents exhausted from the fire threats moving out has created a very active real estate market over the past couple of months. The bottle neck continues to be the lack of inventory.
The only segment of the Sonoma County housing market that seems not to have been impacted by this lack of inventory is the luxury market. Sales in the $2 million and above price range surged in the third quarter to 100. The average was about 30 sales in the second quarter of 2020 as well as in the past four years.
While Napa County’s luxury sales for the third quarter didn’t show as much growth, it still managed to increase from 48 homes exchanging hands compared to an average of 26 over the past four years.
Since 2016, Sonoma County has shown consistent growth in the housing market for the Fall quarter. The median price now stands at around $715,000. Some San Francisco and South Bay buyers are finding this price point attractive when compared to their rents.
At the time of writing this blog, a few weeks of possible fire threats remain, and this continues to fan the “fire fatigue” experienced by many in the North Bay. As one agent who was burned out of her home in the Tubbs Fire of 2017 put it, “There are problems in every other area you can think of, and most I have talked to don’t want to leave friends and families.”
So, what can we expect for the North Bay housing market during the last quarter of 2020? It is anyone’s guess, but Sun Pacific Mortgage has been here for three decades and we are continuing to see a strong need and demand for hard money lending throughout these trying times. If you are looking to refinance, needing a bridge loan, or purchasing property without meeting the stricter guidelines for Covid-19 mortgages, give us a call at 707-523-2099. While we can’t make the fires go away, we can make your mortgage woes less worrisome.
Take a breath! There’s good news ahead. According to many economists we are going to start to see an economic rebound in the second half of this year. Here’s a look at what some of the experts are saying:
Jerome Powell, Federal Reserve Chairman:
“I think there’s a good chance that there’ll be positive growth in the third quarter. And I think it’s a reasonable expectation that there’ll be growth in the second half of the year…”
Nonpartisan Analysis for the U.S. Congress:
“The labor market is projected to materially improve after the third quarter; hiring will rebound, and job losses will drop significantly as the degree of social distancing diminishes.”
These experts and many more believe that while we are certainly not out of the woods yet, there is light at the end of the tunnel. They also agree it will be a bumpy ride for the next few months, but the good news is that they also agree the turnaround will begin sooner rather than later.
Buyers and sellers may have put their real estate and mortgage plans on hold during this planned shutdown. However, as signs have started to pop up, the market is picking back up sooner than later! The past two weeks in Sonoma County alone, there have been over 80 new homes put on the market for sale and both realtor and lender alike are busy with new home buyers.
If you’ve thought about selling or buying anywhere in California, now is the time to get going as it’ll just get busier and busier.
With the stay-at-home order gradually lifting, what was once the boom in real estate during the spring, is just now showing signs of life again as we enter summer.
To quote Joel Kan, Economist at The Mortgage Bankers Association:
“Applications for home purchases continue to recover from April’s sizable drop and have now increased for five consecutive weeks.”
Google Trends reports that online searches for “real estate” have increased from 68 points the week of March 15th to 92 points last week. It appears that more potential buyers are looking for homes virtually. The market is definitely not dead according to these statistics!
Finding a home to buy in Sonoma County or any of the surrounding counties such as Napa and Marin, remains a problem however, since spring sellers removed many listings from the market. Although more people are putting their houses up for sale this month as compared to last month, inventory is still below last year’s level.
The message here is if you are thinking of selling your home anywhere in the North Bay areas of Sonoma, Marin, San Francisco or Sonoma County during the summer, now may be your best opportunity! With so little competition this will allow your home to stand out in the crowd. Home buyers are looking and with all the safety regulations being followed in these North Bay counties, you can confidently begin to show your home to prospective home seekers.
If you need to finance your purchase this summer, but do not qualify for a conventional loan or just are looking for a faster & stronger offer to beat out other home buyers, give Sun Pacific Mortgage a call at 707-523-2099. We specialize in “non-QM” (non-qualified mortgage) type financing, also known as Hard Money loans. Borrowers who have a blemish on their credit report or have difficulty proving their income due to being self employed, etc. can still get financing from our home mortgage programs.
In examining the March real estate market results, it is important to recognize that there is a time-lag of 3-6 weeks between a listing coming on the market and an offer being accepted. With this in mind, almost all the sales data we have as of the first week in April reflects the market before the shelter-in-place went into effect. For all the Bay Area counties March median sales remained quite strong.
According to Realtor.com, March real estate statistics for Sonoma County read like this:
Median List Price: $715,400 (up 7.6% over last year)
Median Listing Price per Sq.Ft.: $406.
Median Sales Price: $636,000
Average Sales Price: $776,202
Median Days on the Market: 46 (trending down since last month)
Number Sold: 251 (up 4.1% from February)
Active Properties: 667 (as of April 5)
Other statistics from various sources:
Median sales price for single-family homes rose 6.6% year-over-year and 3.1% compared to last March.
Sales rose 2.9% year-over-year
Single-family homes pending totaled 348
Median sales price for condos was up 16.2% year-over-year, but condo sales were down 10.9% compared to last March
Condos are selling in 59 days
Days of inventory for homes is now 80
Spring is usually the most active selling season and often sees the highest median sales prices of the calendar year. Give the rapidly changing socio-economic factors in play due to the present pandemic, experts are hesitant to predict how this season will play out.
The good news is that realtors and lenders have found creative avenues around the shelter-in-place restrictions. They are utilizing all the digital and video media available from Zoom to Skype and every platform in-between. Virtual tours are still happening, listings have been going into contract, and escrows continue to be executed. We are a resilient community that has weathered both fires and floods, and we will weather this hardship, too.
Stay calm, breathe, and carry on…this, too, will pass and we will all come out stronger.
With strict regulations in place regarding self-distancing, what is to become of the real estate market? While California real estate sales is now deemed an “essential” industry, it does not mean back to business as usual. All realtors still need to follow health guidelines and each city and county can stipulate what that looks like for their community.
“Necessity is the Mother of inventions”, but with regard to the situation we face today in the midst of Covid-19, it could be rephrased to read: “If necessity is the Mother of Invention, than adversity must surely be the Father of Re-invention.” In keeping with this philosophy, realtors across California have devised old and new ways to stay in touch with their clients and pursue their business, maybe not in the usual way, but still successfully.
Among the ways realtors and clients have been able to communicate is through a virtual tour. Utilizing this tool, a realtor agrees on a specific day to walk through the prospective home with his/her buyer via a video app. (Prior to this exercise, all would need to agree on the app to be used that would be the most comfortable for the buyer.) While “showing” the home, the realtor would comment on the features in each room that are noteworthy and could possibly be overlooked, e.g. high ceilings. Finally, when the realtor has returned to his/her car, there should be a discussion regarding the overall feeling for the property and any specific questions the client might have.
Among the other tools realtors can employ are the old standbys of email, text, phone calls and video calls. With the latter, be sure that your client is using the same platform you use. Maybe when we are on the other end of this pandemic, we will find these tools to be valuable enough to keep
Bottom line: Stay calm and breath! This won’t last forever, and our clients will appreciate whatever efforts you make on their behalf during this time of crisis. Homes will still need to be bought and sold when we see the end of this.
There is no question that investing in real estate can be profitable. However, it is important to be realistic and that you keep your goals achievable.
First of all, you need to keep in mind that you will not make a profit overnight. Secondly, you need to understand that the location of your property will play a critical role in determining how successful you are, and thirdly, the return on your investment also depends on how much money you have to further invest in fixing up the property or keep up with the maintenance.
When it comes to real estate, the primary focus of real estate investor should be on the return on investment. If it is too low, the investment may not be a good idea, but if the return on investment is high, your real estate property could be profitable for a long time, says House Match Real Estate Sales & Property Management.
One of the main reasons why some people fail to make profits in real estate is because they have little or no idea about the return of investment or set unrealistic expectations. But if you have a property that is in a good location and the maintenance costs or upkeep is at a minimum, there are formulas you can use to calculate the return on your investment.
Here are some ways to measure your return on real estate investment:
1. The one percent rule
The easiest way to determine how much money you will make is to use the one percent rule. As per this quick rule, your monthly gross rental income should be at least 1% of your investment.
For example, if you bought an investment property for $500,000, the monthly rental should be at least $5,000. Over 12 months, this equals to $60,000 and even after accounting for all usual expenses, you will still have 6-8% leftover. That can be considered a good return on investment.
2. The capitalization rate
Another formula that is widely used to calculate the profitability of real estate investment is the cap rate. This is basically the ratio of the net income of the investment property to the purchase price.
For example you invest in a home that is worth $250,000 and rent it out for $1,500 a month. After deducting the maintenance fees, you are left with a net monthly income of $1,000 or $12K over 12 months.
The cap rate, in this case, will be $12,000/$250,000 or 4.8%. Whether this a good rate of investment depends on the location of your property, tenant stability, and how much maintenance is required. In general, experts indicate that a cap rate of about 5% is desirable and the higher, the better.
3. Cash on Cash (CoC) return
Another metric that is also used to calculate profitability from real estate investment is the Cash on Cash (CoC) return. Unlike the capitalization rate, CoC calculates the 12 months returns on your investment based on net income and cash investment.
For example, you obtain a loan of $300,000 with $60,000 down payment. The monthly rent is $1500, and your operating costs are $4,000. The CoC is as follows:
12x $1500-$4000/$60,000 – 23.3%
But on the other hand, let us assume you paid cash for the property: a sum of $300,000 instead of a mortgage. The CoC, in this case, would be 12 x 1500-4000/$300,000= 4.6%. The reason for this variation is because CoC depends on how you finance the property. Most real estate investment experts suggest that a CoC between 8-12% is good.
4. Return on investment (ROI)
Measuring the ROI allows you to assess the efficiency of the investment. This is the gold standard of assessing profitability when investing in real estate.
For example, you buy a real estate property for $500,000 and pay an additional $20,000 for things like closing fees, lawyer fees, and the initial home insurance. You rent out the property at $3,000 a month. In this case, the ROI will be as follows:
12 x$3000/$500,000 + $20,000 = 6.9%
Most experts suggest that an ROI between 7-15% is good, but others insist that it should be higher than 20%.
The calculation of the profitability of a real estate investment is just one part of the story. The things that matter include the location of the property, size, type of tenants, and the approximate maintenance and repair costs.
If you own a beach resort, you will never be short of tenants, but if you have a property in a crime-infested area, not only will you have difficulty in finding tenants, but these tenants may not look after your property very well.
It is important to do your groundwork well and choose the property with a great deal of thought. If you do your homework, there should not be any reason why you cannot make a profit.