The government has lent a hand to the residential real estate market, assisting a recovery that should cause real estate values to stabilize after a two-year downward trend.
The housing bill signed last month will permanently raise the conforming loan rate from $417,000 to $625,000. The economic stimulus package that temporarily raised the limit in San Diego County to $695,000 will continue until year's end and then drop to $625,000 in 2009.
Fannie Mae and Freddie Mac will not be able to buy these larger, conforming loans, reducing the risk levels for lenders and keeping the interest rate low. Loans above the limit are not guaranteed and carry a higher interest rate.
A loan more than the $695,000 limit is considered a jumbo loan and carries a full percentage point higher, 7.5 percent, than a conforming loan. This is a part of the reason for the price declines in Carlsbad's luxury market.
The million dollar market
Million dollar property in Carlsbad has become the tough sell in today's real estate market. There are 184 homes currently for sale in Carlsbad priced at $999,000 and up, with an average of 13 selling per month.
This leaves a 15-month supply of million dollar homes. With a healthy supply of homes on the market for more than six months, the oversupply of million dollar homes is expected to reset Carlsbad values from the $800,000 price range and up.
The million dollar market was the darling of the 2003 local real estate scene. Builders raced to construct massive estates to satiate consumer demand for the bigger, more elegant home and buyers raced to outbid each other.
But the market began to change at the end of 2005, as did the feeling of guaranteed real estate appreciation. The excitement for Carlsbad luxury lessened in 2006 as many buyers became more conservative in their purchasing decisions and settled for smaller, less expensive homes.
Lenders also became more conservative and raised their rates on jumbo loans. Consequently, it became much more expensive to purchase a million dollar home just as fewer buyers were willing to stretch to purchase. The result is today's oversupply.
The silver lining in the strained luxury market is the incredible discounts available to able homebuyers. A recent sale of a desirable five bedroom home for $1.475 million in The Ranch, one of southeast Carlsbad's exclusive luxury neighborhoods, illustrates the opportunity. In 2005, this same home sold for $1.6 million without any additional improvements.
Bright spot in local real estate
The bright spot for local real estate has been in neighboring Oceanside, San Marcos and Vista with homes priced at $300,000 to $450,000. Short-sale and foreclosure property have pushed down the average sale prices, and buyers are taking advantage of this opportunity.
For example, a 2,500-square-foot, four bedroom home in Oceanside that sold for $675,000 in 2006, recently sold for $445,000. The property was a bank-owned foreclosure.
Demand is high for these low-priced properties. These homes are selling in the first week of listing with multiple offers, which is reminiscent of the fast-paced market in 2004.
Part of this activity can be attributed to the generous financing options to those in the entry-level real estate market. Federal Housing Administration, or FHA, and Veterans Affairs loans remain a popular choice for buyers.
Designed to benefit first-time homebuyers, FHA loans need only a low 3 percent down payment and that money can come as a gift from a family member, employer or charitable organization. Loans less than $417,000 are easily completed by local lenders, and buyers are taking advantage of the opportunity.
Government gift
Another part of the stimulus package benefits first-time homebuyers who purchase their primary residence on or after April 9, 2008 and before July 1, 2009. Provided that they haven't owned a home in the last three years and fit certain income parameters, buyers are eligible for up to $7,500 in tax credit for buying a home.
The credit is generous, but is actually an interest-free loan paid back when taxes are filed at $500 per year over 15 years.
The housing bill signed last month will permanently raise the conforming loan rate from $417,000 to $625,000. The economic stimulus package that temporarily raised the limit in San Diego County to $695,000 will continue until year's end and then drop to $625,000 in 2009.
Fannie Mae and Freddie Mac will not be able to buy these larger, conforming loans, reducing the risk levels for lenders and keeping the interest rate low. Loans above the limit are not guaranteed and carry a higher interest rate.
A loan more than the $695,000 limit is considered a jumbo loan and carries a full percentage point higher, 7.5 percent, than a conforming loan. This is a part of the reason for the price declines in Carlsbad's luxury market.
The million dollar market
Million dollar property in Carlsbad has become the tough sell in today's real estate market. There are 184 homes currently for sale in Carlsbad priced at $999,000 and up, with an average of 13 selling per month.
This leaves a 15-month supply of million dollar homes. With a healthy supply of homes on the market for more than six months, the oversupply of million dollar homes is expected to reset Carlsbad values from the $800,000 price range and up.
The million dollar market was the darling of the 2003 local real estate scene. Builders raced to construct massive estates to satiate consumer demand for the bigger, more elegant home and buyers raced to outbid each other.
But the market began to change at the end of 2005, as did the feeling of guaranteed real estate appreciation. The excitement for Carlsbad luxury lessened in 2006 as many buyers became more conservative in their purchasing decisions and settled for smaller, less expensive homes.
Lenders also became more conservative and raised their rates on jumbo loans. Consequently, it became much more expensive to purchase a million dollar home just as fewer buyers were willing to stretch to purchase. The result is today's oversupply.
The silver lining in the strained luxury market is the incredible discounts available to able homebuyers. A recent sale of a desirable five bedroom home for $1.475 million in The Ranch, one of southeast Carlsbad's exclusive luxury neighborhoods, illustrates the opportunity. In 2005, this same home sold for $1.6 million without any additional improvements.
Bright spot in local real estate
The bright spot for local real estate has been in neighboring Oceanside, San Marcos and Vista with homes priced at $300,000 to $450,000. Short-sale and foreclosure property have pushed down the average sale prices, and buyers are taking advantage of this opportunity.
For example, a 2,500-square-foot, four bedroom home in Oceanside that sold for $675,000 in 2006, recently sold for $445,000. The property was a bank-owned foreclosure.
Demand is high for these low-priced properties. These homes are selling in the first week of listing with multiple offers, which is reminiscent of the fast-paced market in 2004.
Part of this activity can be attributed to the generous financing options to those in the entry-level real estate market. Federal Housing Administration, or FHA, and Veterans Affairs loans remain a popular choice for buyers.
Designed to benefit first-time homebuyers, FHA loans need only a low 3 percent down payment and that money can come as a gift from a family member, employer or charitable organization. Loans less than $417,000 are easily completed by local lenders, and buyers are taking advantage of the opportunity.
Government gift
Another part of the stimulus package benefits first-time homebuyers who purchase their primary residence on or after April 9, 2008 and before July 1, 2009. Provided that they haven't owned a home in the last three years and fit certain income parameters, buyers are eligible for up to $7,500 in tax credit for buying a home.
The credit is generous, but is actually an interest-free loan paid back when taxes are filed at $500 per year over 15 years.