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Million-dollar home sales hit seven-year high in California
The number of homes that sold for $1 million or more in California hit a seven-year high in the second quarter, and sales north of $2 million reached a new record.
That’s according to new figures from San Diego-based DataQuick, which tracks local housing markets in the state. They found million-dollar-plus sales grew at a 9.1% clip statewide compared with last year, while sales overall fell 7.4%.
One is the hot technology sector in the Bay Area and some affluent parts of Southern California, which is minting new millionaires who can afford seven-figure homes. Another is the 11.6% price growth in California over the last year, which means a house worth $925,000 last summer may be worth $1,032,300 today. And there’s the influx of international buyers, which is pushing up prices at the high end.
Then there’s that old saw that the rich are just different than you and me, especially in a time when credit is tight and the job market remains soft for many middle-income home buyers.
It’s always fascinating to watch this part of the real estate market. It behaves differently, responds to its own set of criteria. These buyers, especially those in the multi-million-dollar market, are less likely to agonize over credit scores, income and job security, down payments and mortgage interest rates.
Of course, in the most desirable parts of coastal California, a million-dollar home is rather routine. Half of all homes sold in San Francisco County in June exceeded $1 million and parts of Los Angeles and Orange counties regularly cross into seven figures.
The market for even higher-priced homes is even hotter. While there were more million-dollar homes being sold here in the mid-2000s than today, California in the second quarter set all-time records for the number of homes sold for more than $2 million, more than $3 million, more than $4 million and more than $5 million.
Sales of homes for at least $1 million heat up in California
While the overall housing market may have been stuck in neutral this spring, there was no stopping sales of high-end homes.
Sales of homes for $1 million or more hit a seven-year high in California in the second quarter, while sales of $2-million-plus houses hit an all-time record.
The 9.1% growth in sales of homes with seven-figure price tags, compared with the same period last year, came as overall sales fell, reflecting a housing market split between those who have cash and access to credit and those who do not.
Although tight lending standards and a still-soft jobs picture are keeping first-time home buyers out of the market, higher-end buyers are seeing low interest rates and are more likely to have profited from the strong stock market.
The San Francisco Bay Area saw a 19% jump in sales of seven-figure homes as the surging tech industry kept minting more people who can afford them. An influx of international buyers is propping up the high-end market in parts of Southern California. And an 11.6% year-over-year gain in home prices across the state has pushed many $900,000 houses up north of the million-dollar mark.
In all, 12,826 homes in the state sold for more than $1 million in the second quarter.
Whatever the reason, developers aiming at higher-end buyers say they’re seeing strong demand.
Luxury home builder City Ventures has sold 20 of 31 units at its new Ambassador Gardens development in Pasadena, said Chief Executive Mark Buckland, half of those since May. Many of the condos, which start at around $1.5 million, are being scooped up by people from Pasadena and neighboring towns who are selling a larger house and looking to downsize.
There are a lot of baby boomers looking around thinking, “I don’t need all this property anymore.” There aren’t a lot of opportunities out there, and that buyer has the assets to afford this.
Although many of City Ventures’ customers in Pasadena are move-down buyers paying cash, nearly 70% of the million-dollar homes sold in California in the second quarter were purchased with a mortgage.
For high-end, high-credit borrowers, things have rarely been better.
Interest rates are near historic lows, at 4.12% for a 30-year fixed-rate mortgage, Freddie Mac said Thursday. And rates for so-called jumbo loans — those worth more than $625,000 in pricier parts of California — have been lower than standard conforming loans in recent months, a situation that mortgage watchers say they’ve rarely if ever seen before.
10 Ways to Prepare for Homeownership
- Decide what you can afford. Generally, you can afford a home equal in value to between two and three times your gross income.
- Develop your home wish list. Then, prioritize the features on your list.
- Select where you want to live. Compile a list of three or four neighborhoods you’d like to live in, taking into account items such as schools, recreational facilities, area expansion plans, and safety.
- Start saving. Do you have enough money saved to qualify for a mortgage and cover your down payment? Ideally, you should have 20 percent of the purchase price saved as a down payment. Also, don’t forget to factor in closing costs. Closing costs — including taxes, attorney’s fee, and transfer fees — average between 2 and 7 percent of the home price.
- Get your credit in order. Obtain a copy of your credit report to make sure it is accurate and to correct any errors immediately. A credit report provides a history of your credit, bad debts, and any late payments.
- Determine your mortgage qualifications. How large of mortgage do you qualify for? Also, explore different loan options — such as 30-year or 15-year fixed mortgages or ARMs — and decide what’s best for you.
- Get preapproved. Organize all the documentation a lender will need to preapprove you for a loan. You might need W-2 forms, copies of at least one pay stub, account numbers, and copies of two to four months of bank or credit union statements.
- Weigh other sources of help with a down payment. Do you qualify for any special mortgage or down payment assistance programs? Check with your state and local government on down payment assistance programs for first-time buyers. Or, if you have an IRA account, you can use the money you’ve saved to buy your fist home without paying a penalty for early withdrawal.
- Calculate the costs of homeownership. This should include property taxes, insurance, maintenance and utilities, and association fees, if applicable.
- Contact a REALTOR. Find an experienced REALTOR who can help guide you through the process.
Mistakes That Will Hurt Your Home Sale
Skimping on Listing Photos
It is critical to have professional photos of your home because these days the vast majority of home buyers scrutinize the internet as their preferred method of narrowing the scope of homes of their liking. You’ll be doing yourself a disservice if you do not insist that your agent provide quality photos of your home prior to placing it on the market. Keep in mind that the market is saturated poor quality photos of homes for sale; consequently, if your agent does a good job, it will set your listing apart from the competition and give you the edge that will generate extra interest.
A lot of folks think their home is just right and without flaws. However, any problem with the property will be uncovered during the buyer’s inspection, so there’s no use trying to hide it. Either fix the problem, price the property below market value to account for the problem, or offer the buyer a credit to fix the problem. Know that if you don’t fix the problem prior to the showings, you will turn away the majority of buyers who are looking for a turnkey home. Having your home inspected before listing it is a good idea if you want to avoid costly surprises once the home is in escrow.
Not Preparing Your Home for Sale
Sellers who do not take time to prepare or stage their homes are asking for trouble. Failing to pay attention to home preparation will not only lower your home’s value, but may even foil the sale of your home. For instance, if you neglect to fix minor issues such as a malfunctioning or dilapidated entry doorknob, a potential buyer may conclude that the house has many other costlier issues that likewise haven’t been fixed. Have a friend or your agent with an impartial mental state point out areas of your home that need repair. Due to your emotional involvement with your home, you may have become blind to its trouble spots. Likewise,make sure you’re your home is not filled with clutter. It should be clean and tidy, with a neutral fresh coat of paint. Also, you should avoid having any unpleasant odors or aromas, which may impede creating a good impression on potential buyers.
Keeping Old Appliances
Old or dilapidated appliances make any home look like it is worth less than its actual market value. If there are appliances in your home that look weathered and not in full working order, they need to be replaced prior to the showing. Failure to take care of this matter will likely turn away lots of potential buyers who are looking for a turnkey home. Put yourself in the buyer’s shoes: You would not want to move in to your new home and have to replace all or most of the appliances.
Too Much ‘You’ In Your Home
It’s fine to add a personal touch, but remember that you won’t be living in your home once you sell it. Anyhome décor, art, or staging themes need to speak to a future homeowner. Themes in the home need to be neutral because you want to avoid turning-off any potential buyer with your own personal predilections.
Not Accommodating Potential Buyers
If someone wants to view your house, you need to accommodate this person, even if it is inconvenient for you. And yes, you have to clean and declutter the house before every single visit. A buyer won’t know and won’t care if your house was clean last week if it isn’t clean when he or she views it. It’s a lot of work, but absolutely essential if you are serious about selling your home and getting the right price.
Overpricing Your Home
Whether you’re working with an agent or going it alone, setting the right asking price is critical to selling your home. Overpriced homes do not sell, they languish. Don’t worry too much about setting a price that’s on the low side. Actually, underpricing your home a bit can be a strategy to generate a higher interest in your home. Besides, first impressions are crucial when selling your home. If your home enters the market overpriced, many buyers will overlook it from the start because today’s buyers are highly sophisticated and do lots of research on comparable market values prior to searching for homes.
Overpricing Your Home Because You Have “Time”
Sellers who aren’t in a hurry often decide to test the market by listing their homes at an unrealistic high price and waiting to see if they get any bites. In reality, this strategy almost always counterproductive and will actually cause you to lose money.If you list your home too high to begin with, you will likely find yourself making incremental price drops but never quite catching up with the market. Additionally, when a home has had multiple price reductions, it gives the appearance that there’s something wrong with it.
Following Buyers Around During Showings
Finally, the common practice of following buyers around during showing is a mistake made by home owners. This practicemakes the potential buyer nervous and uncomfortable. Given the owner’s personal involvement a potential buyer is much less likely to take the time to visualize him or herself in your home; they may even abort doing a full tour, given the uncomfortable feeling of being constantly observed. It is important that create distance and give the potential buyer a chance to critique and discuss your home on their own.
10 Ways to Create Your Own Paradise in the Backyard
Any outdoor living space, be it a compact apartment terrace or an expansive poolside patio, becomes so much more inviting once it’s been outfitted with a few creature comforts. In search of ideas to make your garden areas as comfortable as possible.
Consider function first.If it doesn’t ultimately serve your objectives, it doesn’t matter how great your outdoor space looks. One person may want to sit quietly and read outside; another may want to garden. For those who like to entertain and cook, an outdoor kitchen can make life hospitable for both chef and guests and with so many new options in appliances and cabinets, outdoor cook zones can be as beautiful as they are functional.
Keep traffic flowing.Inviting, well-laid paved paths or stepping stones lead you on a journey or allow you to gracefully get to an outdoor destination. It is also recommended that you carefully plan your outdoor space with seating or dining areas that permit the free flow of foot traffic.
Go vertical.A tiny backyard or limited light on a city terrace needn’t prevent you from having a beautiful garden. Wall gardens with multicolor plants that need no direct sunlight are available from garden centers or home stores. Succulents, for example, are easy to grow on vertical surfaces even in arid climates. You can also create a living fence by planting a row of tall, narrow thujaoccidentalis trees or create ‘walls’ with arbors, trellises, room dividers or fences.
Cultivate a theme. Come up with a style concept and stick to it. Ask yourself how you want to feel when in your outdoor space, then create that feeling with texture, pattern, color, shape and scale, using everything from furniture to planters to accessories.
Stimulate the senses. Lavender, geraniums, lemongrass, eucalyptus, catnip, basil, mint and many other plants will not only add a nice touch of color close to paths and circulation areas, but they’ll also freshen the air with appealing fragrance as you and your guests brush past them. You can also use plants to create artful swaths of color and texture. Play with just a few colors or textures for more effective impact and easy maintenance. A multicolor Victorian or country-style garden may require you to hire an expert to care for it, unless of course you’re willing to be hands on.
Bug off.Most of us work, so we often spend time on our terrace or patio in the evening. Lighting is a good way to add interest and beauty to the outdoors, but it also attracts bugs! To keep the bugs away, we suggest soft yellow illumination concealed within planters or turned towards a wall. Also, citronella candles and torches add light while chasing bugs away. Other bug-busting options include dabbing on oil of lemon or donning light-colored clothing, which bugs have a hard time seeing. Plants like chrysanthemums, basil, and mint also repel bugs.
Related: 4 Easy Budget-Friendly Backyard Makeovers
Accessorize!Just as with an outfit, an outdoor living space is not complete until you finish it off with a few accessories. But don’t overdo it here. Editing is key. Always start with a rug and don’t forget a shade overhead, especially if your patio is in a sunny spot.
Lighten up.Remember to go for ambiance at night with light. Use a variety of types of lighting—at least three sources of light is ideal—and keep it soft and out of your eyes. You want to see the glow of light but not the light source. Consider string lights, uplights, table lamps, floor lamps, hanging fixtures, even candles. For a green solution, great solar and LED lights are available.
Let it flow. To enhance the comfort of outdoor living, add a water feature, the bubbling sounds of water calm and sooth. You can even add goldfish.
Extend the inside out.Decorate outside in similar ways as you would insideand at any budget, have some fun and be creative with materials, more so than you might be in the house. To create your own outdoor private paradise, don’t be afraid to step out of your decorating comfort zone.
4 Mistakes First-Time Homebuyers Make
First-time homebuyers almost always make a few mistakes when buying their home. Perhaps they pay too much, choose the wrong type of mortgage or neglect to budget for needed home improvements.Working with a trustworthy, experienced lender can help prevent such mistakes. But consumers also need to take responsibility for their budgets and choices.Before buying a home, consumers need to develop a short- and long-term perspective on their purchase.
Learn the four biggest financial mistakes of first-time buyers:
- Spending the maximum on housing
One mistake comes when lenders qualify buyers based on their incomes and debt-to-income ratios without considering how much the borrowers spend on items such as transportation, savings, food and other necessities.
A lot of first-time buyers are optimistic about the future and excited about buying a home, so they borrow the absolute maximum they can afford instead of allowing themselves wiggle room for a partial loss of income or for future expenses such as children.
Financial experts recommend that consumers decide how much they want to spend each month on housing before meeting with a lender.
Every buyer should create their own budget and know their limits. Many first-time homebuyers experience a sizable change in their housing payments. Some new owners may go from $500 per month in rent to a monthly mortgage payment of $2,000.
- Not getting prequalified early enough
Meeting with a lender for a buyer consultation and prequalification for a mortgage should be the first step toward homeownership. Yet many first-time homebuyers wait until they are ready to start house hunting before contacting a lender.
It’s never too early to set up a free buyer consultation with a lender. Every buyer needs to get prequalified early enough in the process so that they can make some changes if they need to or correct errors on their credit report.
Some buyers may need to spend up to a year saving more money, increasing their incomes or cleaning up their credit before making an offer on a home.
A buyer consultation should include creating long-term financial goals and strategies for buying property.
- Misunderstanding the importance of a high credit score
While most consumers know it’s important to have a high credit score, not everyone understands how costly a low score can be.
All mortgage lending is done with a tier of interest rates and terms based on consumer credit scores. A credit score of 720 or above will earn you the best rates and can potentially save you thousands of dollars.
A score of 680 to 720 can get you good mortgage rates, while a FICO score of 620 is usually about the lowest score to qualify for most loans.
Consumers should learn about credit scores the minute they start working. Many Websites provide information about how to improve your credit score.
Even after a mortgage approval, consumers must avoid applying for new credit or taking on new debt, because a second credit check is now often required before settlement.
- Choosing the wrong mortgage product
First-time homebuyers today typically opt for a 30-year fixed-rate mortgage. Their conservatism is a reaction to stories about the dangers of interest-only mortgages and adjustable-rate mortgages.
But home loan alternatives to a 30-year-fixed sometimes make more sense. For example, buyers certain they will be relocated by their companies within five years may find a 5/1 ARM could be a much better mortgage.There’s no reason to pay a premium for a product you don’t need like a 30-year loan. Homebuyers eager to build equity in their homes or who are older and want to live mortgage-free in retirement should consider a 15-year fixed-rate loan or, if they can afford it, even a 10-year mortgage to reach their goals.