Big Bear Luxury Properties

In 2012, all the major price measures indicate that the  Big Bear real estate market continued to see steady declines. But a look back at monthly pricing since July gives us a glimmer of hope!

Take a look at the following charts showing a 6 year look at the market direction based on annual price measures:

From 2010 to 2011, the average sales price of a Big Bear home fell 11% while the median dropped 17%. The average and median price per square foot saw similar declines of 11% and 13% respectively.

Take a look at the next chart which shows the median price per square foot of sold Big Bear homes. (In my opinion the median price per square foot is the most accurate measure of market conditions.) Take a particular look at the stabilization that appears to have occurred over the last 6 months.

Starting this past July, we have had 5 consecuttive months in which the median ppsf did not drop below the July level. Since the market downturn, this has happened only once before in the spring of 2010. Shortly thereafter we experienced our “double dip” dropping prices to where they are today.

Another measure that has stayed relatively constant is the number of homes sold in Big Bear.  After a major drop from the market peak of 1800 sales in 2005 to a low of just under 700 sales in 2008, the last three years have seen sales level off at just short of 900 sales per year.

So what’s the outlook for 2012?

Well, one could make the case that with mortgage interest rates shockingly low (Today’s rate? 3.88% for a 30 year fixed rate conventional loan) and with the economy slowly getting back on its feet, that 2011-12 might just end up being the bottom of the market we’ve been waiting for. Furthermore, the affordability index, which compares the cost of renting a home compared to the cost of owning one, is skewing heavily towards home ownership being the more financially beneficial choice. Lastly we have seen 5 consecutive months of median price per square foot stabilization in a market that has already seen this price measure drop a record 55% since its high of $277/sf  in 2006 to this past December’s $124/sf .

But with foreclosures still occurring consistently and loans still relatively difficult to qualify for, there is still no definitive sign that a market recovery is under way.

But there are some glimmers of hope that we may finally be near the bottom!

But only time will tell…

The sales numbers for big bear homes are in for the month of November. So let’s take a look!

Comparing this November to November 2010

This November, we saw 97 residential home sales compared to 96 in November of last year.

The average sales price was $211,271 this November compared to $240,800 last year, resulting in a 12% decline in average price. The median sale price of Big Bear homes fell from $227,150 in November of 2010 to $168,000 this year. This represents a whopping decline of 26%!

But due to to the nature of fluctuations in sales we see in the very low end and very high end, average and median sales price can be a volatile indicator and not a very accurate market indicator. The average and median price per square foot, in my opinion, gives a more accurate opinion of where the market stands.

In that regard, the average price per square foot was $141 this November compared to $156 last year, resulting in a 10% drop in values. Whereas the median price per square foot  was $130 this November compared to $144 last November. This too represents a 10% decline in values.

Year-to-date numbers

In comparing sales from January 1st through November 30th of this year to that of the same time period last year, we see the following.

The overall number of sale of Big Bear homes is down slightly with 834 sales last year to 825 this year. That’s about a 1% decrease in units sold.

The average sale price has dropped from $252,196 to $219,737 for a decline of 13%, whereas the median price dropped from $193,500 to $160,000 resulting in a 17% decline. The average and median price per square foot showed similar declines of 12% and 13% as well.

Market conditions

Considering these numbers, I would say the market has dropped about 10 – 15% over the past year. This puts the overall value decline since the beginning of the downturn at close to 50%.

Although we’ve learned to take market prognostication with a grain of salt, there have been a few articles surfacing that are predicting that we finally might be hitting bottom and might even be making the turn for the better. This is based on slowly improving economy and unemployment, and most importantly, it appears that foreclosures may finally have peaked and are now starting their long awaited decline.

With mortagage interest rates still hovering around 4% and home values still near their lows, once again I will say that this appears to be the best time to buy a home in over a decade. There haven’t been lower prices and lower rates in over a dozen years!

Will prices and interest rates even get more advantageous in the near future? Nobody knows. But now sure does seem like a chance to take advantage of a really nice bird in the hand instead of hoping there’s two in the bush down the road.

 What an appropriate analogy it is to call this real estate market a roller coaster. Roller coasters use a man-made mechanism to pull one to heights greater than they should be according to the laws of nature. Then as the coaster rolls over the peak, it’s those very laws of nature that take over and a wild ride ensues. Continual ups and downs, with every hill climbed being a little smaller than the one before. Until finally, once all that kinetic energy is used up, you’re right back where you started.

So maybe this market isn’t exactly like a roller coaster, but if you look at the graphs below, you’ll see something that looks more similar to an amusement park ride than not.

On a quarterly basis, looking at all four measures in the above graphs, we’re at the lowest point since the market turned. There’s a lot of speculation of where things will go from here. Some think that with mortgage interest rates as low as they are, and with values approaching 50% lower than they were at the market’s peak, that now is the time to buy. Others feel that it is worth the risk of rates rising, home inventory decreasing, and prices turning to wait a while longer before making their purchase.

Who will be right in the end? Only time will tell. But one thing’s for sure: considering that prices are back to 2001 levels and that interest rates are the lowest they’ve been in over 35 years, today’s market is the best time to buy a Big Bear home  in over a decade!

How does a 3.96% 30 year fixed interest rate sound to today’s home buyers? Unbelievable! IF you can qualify for a loan, there’s never been a better time to do so…. LITERALLY!

Check out this article: http://money.cnn.com/2011/10/06/real_estate/mortgage_rates/index.htm?iid=HP_LN

With rates this low, long term real estate holding are getting more and more attractive. Hopefully these record low rates will cause the increase in home sales we’ve been looking for!

Autumn Has Arrived in Big Bear

September 2011 saw 73 sales of single family residences. This is a decrease from the previous month’s 90 sales and September of last year’s 84 sales.

Values this September were also lower than September of the previous year, with the average price declining 4% while the median price declined 7.5% to $274,003 and $185,000 respectively. Average and median prices per square foot were also down from the previous September’s numbers by 8% and 11% to $159 and $139 respectively.

Year-to-date numbers – comparing sales from January 1st through September 30th of 2010 to that same time period in 2011 – show similar declines. Average and median prices so far this calendar year are $233,491 and $168,000, down 9% and 14% from last year, while average and median price per square foot have fallen 10% and 13% to their current levels of $165 and $156.

Days On Market, the amount of time it is taking a Big Bear home to sell, has stayed steady over the last few years with the average time on market being about 120 days while the median has hovered around 60 days. The disconnect between the average and median number of days a home is listed for sale before selling is due to the polarization of seller’s attitudes and motivation. Some sellers predict continued market declines and price aggressively to sell quickly, while others hold out and hope for a higher sales price, often taking much longer to sell. Keep in mind that although some sellers get their higher asking price, many sellers who list high at first eventually end up selling at a price that is much lower than what they could have sold for had they initially listed at an aggressive price. If we only had a crystal ball!

Interest rates have stayed at record lows. Per CNN’s daily mortgage index, the average 30 year fixed conventional mortgage rate today was an even 4.00%. Once again, with Big Bear real estate prices having fallen about 45% since the market’s peak and while financing is as cheap as it’s been in over 65 years, for those that can buy, it certainly is an advantageous time to do so!

There seems to be a lot of misinformation in the Big Bear real estate marketplace about foreclosures and short sales – particularly in regards to how much of a market share they make up and what the future looks like for distressed homes sales. Again, let’s turn to the data to see what we can find.

Below are two graphs. One showing the average number of short sale listings compared to the actual number of short sales closed for that particular month going back to May of 2009. The second graph is a similar comparison but for foreclosures. Let’s check out the short sale graph first:

If you look at the trend line (red) for short sale listings, you can see the number increasing steadily over the last 2 years. In fact, the number of homes to have listed as a short sale has increased about 36% since May of 2009. At the same time, the number of short sales that actually end up selling has stayed relatively steady at about 10 sales a month. The disconnect between the increasing number of listings and the flat number of short sale closings suggests that more home owners are attempting to short sale their properties, yet we haven’t seen increased success in them being able to do so.

I hear a lot of anecdotal comments from agents, buyers, and sellers alike stating that short sales have become much easier as of late and have a much greater chance of successfully closing. Simply put, the numbers as reported in our Big Bear MLS suggest otherwise. This is not to say that I do not think short sales are a worthwhile pursuit. To the contrary, I think they are in some cases the best avenue for some buyers. Just take note - buyers need to be realistic about their chances of successfully closing a short sale and must manage their expectations accordingly.

Now let’s look at the foreclosure chart:

Again we see foreclosure listings on the rise, but the trend line for sales is actually decreasing slightly. But note that since April, foreclosure sales have been steadily on the rise. If this trend continues, expect more bank owned inventory to be cleared from the market in months to come.

To summarize, a few points come to mind in looking at the information:

 There is an increasing trend in the number of both foreclosure listings and short sale listings in the Big Bear real estate market. The number of successfully closed short sales has not increased significantly while the number of short sale listings has increased steadily. Foreclosure sales as well have not been keeping up with the number of foreclosure listings.

Unfortunately, all these signs point to a weakening market. With more distressed homes hitting the market and sales not increasing proportionally, either banks will have to sit on their inventory over time hoping for the market to come back, or they will have to lower their prices to get their homes sold. 

The good news is that the buyers have an even stronger hand and better buying opportunities in today’s market. Couple that with 4% interest rates, and one might consider that opportunity may be knocking.

In previous posts I have stated that with prices having experienced record declines and interest rates being at their 35 year lows, that now is an advantageous time to invest in real estate in Big Bear. But what about luxury properties or lakefront homes? Have they experienced the same declines as the overall market? Or have homes in these price points had a less severe or more dramatic decrease? And what is the “crystal ball” prediction for higher-end properties moving forward?

Let’s see what the numbers suggest:

 At first look, this graph appears to indicate that lakefront properties and luxury properties both increased and decreased in value greater than the real estate market on a whole. But don’t be fooled. Although this is true in overall dollar amounts, percentagewise, the market declines have been very similar for all properties.

In comparing the highest average price over this time period to the lowest average price, Big Bear lakefronts experienced a 40% decline from the market peak, while luxury homes fell 37% and the overall market saw a 43% decline. Ultimately, each of the three market segments we’re looking at – lakefronts, luxury homes and the overall market – all saw about a 40% drop from the market peak.

So far in 2011, both lakefronts and luxury homes are seeing an upturn in average price. It is too early to state that this is any kind of recovery. But it does does evoke some optimistic speculation that perhaps a market turn has arrived in higher-end home sales.

*Luxury homes are defined as the top 10% of sales by price in the Big Bear market

Calm, Blue, Summer Waters

After a very slow July for Big Bear real estate,  August showed some rebound with sales up 40% and both median and average prices per square foot showing modest gains.

In looking at the number of Big Bear homes sold, this August posted 89 sales as compared to only 64 sales last month and 70 in August of 2010.

Average and median prices of Big Bear homes went different directions, as the average price came in at $188,742, down a slight 4% from July. Conversely, the median price was up 5% to $150,000 from the previous month. Both the average and median price per square foot increased 6% and 1.5% respectively, ending at $135 and $131.

Looking at sales from a year-to-date perspective, comparing January 1st through August 31st of 2011 with that same time period in 2010, the number of sales are still down a slight 5% with 507 closings this year versus 535 closings last year. Price declines continued as well with the average and median prices being off 9% and 15% from last year while the price per square foot of Big Bear homes declined 11% and 13%.

After a few months of declining prices and on the heels of mortgage rates falling to remarkable lows, it is no surprise to see the uptick in sales and stabilization of prices this month. A comment I’ve often heard in the business as of late is, “How good does it have to get before people start buying?”. Hopefully we’ve found that point as price measures are approaching what they were almost 10 years ago while interest rates have hit their 35 year lows.

Our friends over at ITC Title shared with me an historical perspective of where mortgage rates are in comparison to year’s past. Here’s a graph based on their information going back 35 years.

As I’ve mentioned in several posts, with real estate values in Big Bear have fallen almost 50% since their peak in 2006 and with the lowest interest rates in over 35 years, it’s a great time to buy!

In response to my last post, I had a reader ask me to quantify how much prices have dropped in Big Bear since the real estate market downturn began. Here’s a chart showing the  median price per square foot of Big Bear homes since the market decline started.

You can see that although there are ups and downs from month to month and although the steepest rates of decline were in 2007-2008, there are still noticable signs of prices continuing to slide in Big Bear’s market.

An associate of mine brought up an interesting point in this regard: Perhaps values haven’t dropped so much as there are a lot more people buying in the lower price ranges than in previous years.  These sales in the lower price points drag down the overall market numbers and thus don’t necessarily reflect how much one’s property has declined in value.

Being that we are seeing lots of  homes listing and selling in the $50,000 – $100,000 range, I would imagine this explanation has some credibility. Yet one would think that an increase in lower priced home sales would affect the average and median sales prices much more than the average and median  price per square foot which also continues to decline.

It’s tough to justify any one measure giving a precise indication of how much the market has fallen. But regardless of the numbers you look at, it would be tough to make the case that today’s values are the best we’ve seen in almost a decade.