To offer a better understanding of what's going on in Carlsbad's real estate market right now, I'm presenting the five defining trends below.
1. Long-Term Investors
Question Their Hold
Long-term real estate investors are attracted the steady stream of income provided by real estate. The low home prices of 2009-2011 in combination with record low mortgage rates provided the opportunity to purchase rental property that would generate 10 percent and greater yearly returns. But with real estate prices up nearly 30 percent from 2012, the overall return on investor equity is shrinking and forcing many investors to take a second look on their buy-and-hold thesis.
Take a recently listed home in La Costa 'for-rent' on Craigslist at $3,000 a month. The home would sell for around $700,000. Deducting the costs of sale and loan on the property, the owner has a potential $247,000 equity position in the property. Not factoring for vacancies, repairs, vandalism or other peculiar costs, the home is generating an estimated 3.6 percent yearly return on the $247,000. The owner can make a case for keeping the property if he expects current rents or the property's value to rise substantially in the near future. Otherwise, he is holding onto an investment that is not generating sufficient returns to justify a long term hold.
2. Single Level Homes Sizzle
No stairs, no problem. A single-level Carlsbad home is a hot commodity in today's real estate market. The Carlsbad single level home is selling in a blistering 20 days average versus 38 days for its two-story counterpart. The single-level home will also carry a price-per-square-foo premium, especially in newer communities where there are fewer single level options.
Single level homes make up only a quarter of the single family homes currently available in Carlsbad. Most of those homes were built before 1990. The recently-built south Carlsbad community of Viridian of La Costa Greens had only three modeled floorplans when constructed in 2007. All three were two stories. Davidson Homes set aside only 10 percent of its buildable lots for its un-modeled, single level floorplan.
This trend, followed by many of the newer communities, has helped create a single level shortage and encourage a premium for the product. A recent single level sale in Viridian for the three-bedroom 2,800-square-foot plan secured $975,000, nearly the same price as the 4,000 square-foot plan 3 that closed escrow only a few months prior at $995,000.
3. Luxury Property
Resurgence
Carlsbad's luxury homes of $1 million and above have enjoyed a resurgence of activity in the past year. Low mortgage rates and improved outlook on the market has encouraged homebuyers to make their move up. Carlsbad's planned communities of Aviara, Bressi Ranch, La Costa Greens and The Oaks have seen their most coveted properties secure record high sales prices.
Real estate brokers are finding buyers willing to pay a premium for unique lots, appointments and/or upgrades. Depending on the combination of amenities, it could be as much as 30 percent higher than their non-appointed, model match cousins.
4. Mortgage Rates
Recent Improvements in average mortgage rates have been a benefit to Carlsbad home buyers. Rates moved down from highs in late August early September of an average 4.6 percent to current levels of 4.28 percent for a 30-year fixed loan. This is helping homebuyers save money in monthly mortgage payments and better afford the higher prices Carlsbad has seen in recent months. It appears banks have become more confident in the near term real estate market, as creative mortgage programs are making a comeback. The most creditworthy borrowers are finding conventional programs requiring only 5 percent, some as low as 0 percent down, financing. Buyers are encouraged to explore their financing options.
5. Fewer Appraisal Challenges
North County brokers are running into fewer challenges with appraisals in the current marketplace.
One of the major hurdles in 2012, the low appraisal constrained financing for many would-be homeowners. Appraisers have become wiser to the improved market conditions and have ample supply of higher recent comparable sales to draw their value estimates.
Those wanting to refinance or secure an equity line on their current home take note.
Lund can be reached at [email protected]
1. Long-Term Investors
Question Their Hold
Long-term real estate investors are attracted the steady stream of income provided by real estate. The low home prices of 2009-2011 in combination with record low mortgage rates provided the opportunity to purchase rental property that would generate 10 percent and greater yearly returns. But with real estate prices up nearly 30 percent from 2012, the overall return on investor equity is shrinking and forcing many investors to take a second look on their buy-and-hold thesis.
Take a recently listed home in La Costa 'for-rent' on Craigslist at $3,000 a month. The home would sell for around $700,000. Deducting the costs of sale and loan on the property, the owner has a potential $247,000 equity position in the property. Not factoring for vacancies, repairs, vandalism or other peculiar costs, the home is generating an estimated 3.6 percent yearly return on the $247,000. The owner can make a case for keeping the property if he expects current rents or the property's value to rise substantially in the near future. Otherwise, he is holding onto an investment that is not generating sufficient returns to justify a long term hold.
2. Single Level Homes Sizzle
No stairs, no problem. A single-level Carlsbad home is a hot commodity in today's real estate market. The Carlsbad single level home is selling in a blistering 20 days average versus 38 days for its two-story counterpart. The single-level home will also carry a price-per-square-foo premium, especially in newer communities where there are fewer single level options.
Single level homes make up only a quarter of the single family homes currently available in Carlsbad. Most of those homes were built before 1990. The recently-built south Carlsbad community of Viridian of La Costa Greens had only three modeled floorplans when constructed in 2007. All three were two stories. Davidson Homes set aside only 10 percent of its buildable lots for its un-modeled, single level floorplan.
This trend, followed by many of the newer communities, has helped create a single level shortage and encourage a premium for the product. A recent single level sale in Viridian for the three-bedroom 2,800-square-foot plan secured $975,000, nearly the same price as the 4,000 square-foot plan 3 that closed escrow only a few months prior at $995,000.
3. Luxury Property
Resurgence
Carlsbad's luxury homes of $1 million and above have enjoyed a resurgence of activity in the past year. Low mortgage rates and improved outlook on the market has encouraged homebuyers to make their move up. Carlsbad's planned communities of Aviara, Bressi Ranch, La Costa Greens and The Oaks have seen their most coveted properties secure record high sales prices.
Real estate brokers are finding buyers willing to pay a premium for unique lots, appointments and/or upgrades. Depending on the combination of amenities, it could be as much as 30 percent higher than their non-appointed, model match cousins.
4. Mortgage Rates
Recent Improvements in average mortgage rates have been a benefit to Carlsbad home buyers. Rates moved down from highs in late August early September of an average 4.6 percent to current levels of 4.28 percent for a 30-year fixed loan. This is helping homebuyers save money in monthly mortgage payments and better afford the higher prices Carlsbad has seen in recent months. It appears banks have become more confident in the near term real estate market, as creative mortgage programs are making a comeback. The most creditworthy borrowers are finding conventional programs requiring only 5 percent, some as low as 0 percent down, financing. Buyers are encouraged to explore their financing options.
5. Fewer Appraisal Challenges
North County brokers are running into fewer challenges with appraisals in the current marketplace.
One of the major hurdles in 2012, the low appraisal constrained financing for many would-be homeowners. Appraisers have become wiser to the improved market conditions and have ample supply of higher recent comparable sales to draw their value estimates.
Those wanting to refinance or secure an equity line on their current home take note.
Lund can be reached at [email protected]