Carlsbad's real estate market continues its push through positive territory in 2010. Both single-family homes and condominiums have seen higher selling prices and lower market time. Skeptics question the true strength of the market, attributing the 12-month turnaround in real estate to government and lender manipulation.
The result of the manipulation is the current low 5-percent mortgage rate and restricted inventory levels. Carlsbad's for-sale inventory dropped from an average of 12 months in 2008 down to 3 months in 2009, where it remains unchanged. And while fewer homes are being sold when compared to the boom years of '03 -'05, the buyers are bidding against each other on the fewer available homes. The result is higher prices and quicker sales.
The most notable segments of the Carlsbad housing market have been the condo and townhome markets. It takes an average of 48 days to sell an attached home in Carlsbad. About 46 attached homes per month are selling, with the average selling price settling at around 98 percent of the asking price.
The average attached home is a two-bed, two-bath, 1,420-sq.-ft home that sells for $354,913. Condos have a general appeal for their lower price and shared maintenance cost via homeowners' association fees. And although the second-home market had all but vanished from 2006 to 2009, the now-lower prices are encouraging investors and vacationers to take a second look at their options along the coast.
Condos in the $299,900 range are one of the strongest selling segments of the current condo market. The units sell in around 30 days and for an average of 99.6 percent of their asking price.
About 66 percent of currently available condos in this price range are short-sale homes. The bulk of these condos are located within Tanglewood and Hosp Way in North Carlsbad, and also around the La Costa golf course in the 92009 ZIP code area.
A Hosp Way, one-bedroom, 690-sq.-ft unit can sell for as little as $110,000. Investors can see 11-percent (or greater) return on their $25,000 down payment and 5.5-percent mortgage rate. Leverage is a great advantage in investment property. Without a levered return, the $110,000 cash investment in the condo will realize 6.5 percent. This is the immediate return based on a monthly rent of $1,110, and does not factor in future appreciation or rent increases.
The challenge with an inexpensive investment condo is that it often stays inexpensive. Appreciation is limited to the average price rising on the general market. A new kitchen or updated bathroom in a one-bedroom condo will see little return on investment.
When purchasing a condo, the prospective buyer (and buyer's agent) should look hard at the financial stability of the homeowners' association. Review the association's financial reserves and the operating costs, and look through the tax records at the recorded mortgage amounts of the other owners.
Since 2008, lenders have not consistently recorded the notice of default (NOD) that precedes a lender foreclosure. Counting the NODs was an easy way to estimate how many units might stop paying their HOA fees in the near future. But today's metric is how much an owner owes versus how much their condo is worth. If an owner owes more than the condo is worth, he is a higher risk for default.
An experienced agent should help his client research and review the entire complex's financial status and estimate the future stability of the community. If owners stop paying their fees, the monthly dues may be increased to cover the non-contributing units. The association may also implement an assessment. Higher dues or a $3,000 assessment will damper the expected returns.
First-time homebuyer tax rebate update:
With the end of the homebuyer tax credit on April 30, 2010, the State of California has created a new, $10,000 home-buying tax credit to help stimulate the state's economy. To qualify for the full $10,000 credit, a homeowner will need to owe $3,333 in state income tax each year for three years. Although the program will officially end January 1, 2011, the $100 million cap on the tax credit is expected to cause the program to end prematurely.