The Equity Report 2017; Your home may be worth WAY more than you think!

There is no doubt that the US real estate sector is still booming, with prices continuously rising in many markets across the nation. In fact, home prices have climbed higher for 53 straight months now, allowing many home sellers to cash in – and many others to escape a negative equity situation.

In fact, in just the first three quarters of 2016, U.S. homeowners saw their equity rise by $837 billion.

The party kept going as homeowner equity increased to $63 billion in the fourth quarter of 2016, according to real estate data analysis firm CoreLogic. With those strong equity gains to finish out 2016, an estimated 62,000 homeowners across the country went from the red to the black in their home’s value in those three months alone.

Rolling into 2017, 48 million U.S. homeowners had positive equity in their homes. Even better, 13,125,367 U.S. homeowners were in an equity-rich position (loan-to-value ratio of 50 percent or lower), representing 23.4 percent of all U.S. homeowners with a mortgage and an increase of more than 2.6 million from a year ago.

In total, U.S. homeowners now have approximately $11.2 trillion in untapped home equity. Interestingly, $6.2 trillion of that total equity belongs to homeowners 62 years and older.

To see how far up the equity ladder we've climbed, consider that in 2012, less than 5 years ago, we experienced the valley of underwater equity with 12.8 million homeowners owing more than their home was worth. In all, nearly 1 in 3 of all U.S. homeowners were underwater on their homes during the dark days of the Great Recession between 2010 and mid-2012.

However, since that low point, the number of seriously underwater homeowners has decreased by more than 6.7 million.

As of Q3 2016, there were 6.1 million seriously underwater properties in the U.S., which represents nearly 10.8% of all properties with a mortgage. While that seems high, it's still a decrease of 854,000 underwater homes from 2015, as the number of equity-rich homeowners has increased by 2.6 million in just that time.

However, the story about our equity gains and losses remains a tale of two groups of cities. In fact, the zip codes with the highest equity gains in the last year include:

78027 in San Antonio, TX
53.1 equity rich
Up 30%

33974 Lehigh Acres, FL
45.0% equity rich
Up 29%

97206 Portland, OR
52.6% equity rich
Up 27%

37208 Nashville, TN
45.4% equity rich
Up 27%

How about the U.S. zip codes that have the most number of properties still seriously underwater? (Seriously underwater homes are defined as have -125% or more negative equity.)

07017 East Orange, JN
62.4% seriously underwater
Number of underwater homes up 38% in the past year.

64130 Kansas City, MO
51.4% seriously underwater
Number of underwater homes up 30% in the past year.

08865 Phillipsburg, NJ
44.2% seriously underwater
Number of underwater homes up 23% in the past year.

43211 Columbus, OH
71.0% seriously underwater
Number of underwater homes up 22% in the past year.

63121 Saint Louis, MO
54.6% seriously underwater
Number of underwater homes up 22% in the past year.

While the number of seriously underwater homes seem to be most prevalent in certain metropolitan pockets, our median home prices have gone up for 18 quarters in a row, allowing a record number of homeowners to accumulate positive equity.

But it’s not just rising prices that are helping our housing market turn a profit. In fact, homeowners are staying in their houses longer before selling these days, a trend that’s allowing them to accrue more equity, as well. As of Q3 2016, the average home seller has lived in his or her home of 7.94 years, a new high based on modern data.

Before our current equity boom and the Great Recession that preceded it, the average home seller had owned their property only 4.26 years – a stark contrast.

By analyzing 88 metropolitan areas with a population of at least 500,000 people or more, data reveals that the areas with the highest share of equity-rich homeowners include:
San Jose (55.7 percent)
San Francisco (49.8 percent)
Honolulu (39.3 percent)
Los Angeles (38.2 percent)
Pittsburgh (34.5 percent)

Other metro areas in the top 10 for the highest percentage of equity-rich homeowners include Portland (33.1 percent), San Diego (33.0 percent); Oxnard-Thousand Oaks-Ventura, California (32.7 percent); Seattle (31.5 percent); and Austin, Texas (31.0 percent).

However, the same research shows which zip codes have the highest share of seriously underwater homes, including Chicago, St. Louis, Detroit, Columbus, Ohio; East Stroudsburg, Pennsylvania; Trenton, New Jersey; Cleveland, and Milwaukee.

Despite the national trend of upticking home prices and equity-rich owners, the share of seriously underwater homeowners increased in 21 of the 88 metro areas analyzed since just last year – a puzzling and concerning statistic.

But for more Americans than ever, their homes keep on rising in value, creating record equity and an opportunity to profit for prudent and opportunistic homeowners.

Hip hip hooray! U.S. home prices rush past pre-recession 2006 peak levels.

Some time in September of 2016, the United States housing market blew past a key measure of home values, proving that the dreaded economic recession that started in 2008 is behind us. It was that month when the average sold home in the United States surpassed the previous peak set in 2016.

According to official reports, the median existing-home price in the U.S. reached $236,400 in September 2016. That mark for all home sales was significantly higher than the previous peak of $230,400 we experienced in July of 2006 – more than a decade ago.

Our current $236,400 median home price was also up 6.5 from just a year earlier for the same month in 2015.

In other key measures, For Sale properties stayed on the market for only 34 days this summer (June), which was the lowest Days-On-Market on record since the National Association of Realtors began tracking that statistic in May 2011. In fact, 47 percent of all homes on the market sold in less than a month during June of 2016, according to NAR.

It’s even more good news for sellers of a non-distressed home, as those were snatched up in a median of only 33 days, while short sales (129 days) and foreclosures (39 days) lagged.

Speaking of distressed sales, short sales, foreclosures and other bank-owned properties constituted just 8 percent of sales this past summer, down from 11 percent the year prior. All-cash sales – another key indicator of a fledgling housing market and distressed sale volume – dropped to just 22 percent of all home purchase transactions, which was down 10 points from 32 percent a year ago.

According to Lawrence Yun, chief economist at the National Association of Realtors, last year’s spring home buying season was the strongest on record since before the financial crash and recession.

"Buyers have come back in force, leading to the strongest past two months in sales since early 2007," said Yun. "This wave of demand is being fueled by a year-plus of steady job growth and an improving economy that's giving more households the financial wherewithal and incentive to buy."

Yun seems spot-on when he points to economic trends – not just a hot seasonal spring market – that are driving home prices. In fact, total sales of single-family homes, townhomes, condo, and co-ops jumped 3.2 percent during June, to a seasonally adjusted rate of 5.49 million – almost 10 percent higher than the previous year.

The growth in the U.S. real estate and housing market has largely come in the last half decade, not incrementally since 2006.

“A lot of that recovery has come in the last four years as the economy has strengthened and created more higher-paying jobs,” stated Taimur Khan, senior research analyst at Knight Frank, the firm that first produced the report on median home values jumping higher than 2006 levels.

But what we’re experiencing with higher home prices may also be attributed to a case of the rising real estate tide lifting all boats. While sales showed the highest pace since February 2007 across the entire U.S, with all major regions moving higher in June, there are still certain markets that are red-hot, bolstering the median price numbers.

In fact, NAR’s president, Chris Polychron, points to “drastic imbalances of supply compared to buyer demand in several metro areas, most notably in the West.”

The biggest home price pushes have been in the most expensive metro areas like San Francisco, San Jose, Los Angeles, and even Sacramento, dragging up the national average with them.

However, the economic recovery and home prices are not quite as rosy in other areas of the country. According to Realtor.com‘s chief economist, Jonathan Smoke, median home prices still haven’t reached pre-2006 levels in 35 of the country’s largest metro areas, including Stockton, Ca, Las Vegas, Phoenix, and some parts of Florida.

Smoke also points to the fact that home prices may be on the steady rise nationally, but haven't "recovered on a real or inflation-adjusted basis." Due to inflation, a home sold for $1 in 2006 is really $1.20 these days, Smoke illustrates, so home prices may be a little less hot than they first appear, not really catching 2006 levels.

Despite this caution, home values continue to be bolstered by a fundamental economic principle of (lack of) supply and demand. In fact, the number of homes for sale across the U.S. sits at near historically low levels, with only 2.30 million existing homes for sale, with housing inventory only 0.4 percent higher than a year ago.

 “When the right type of single-family house in the right area comes to market, people want to buy that home because they might not get that opportunity again,” adds Taimur Khan of Knight Frank. No matter how you look at it, the fact that home prices have jumped above pre-recession levels is an encouraging sign – and presents grand opportunity for home sellers in the Sacramento and Northern California region

10 Reasons to come grow your real estate business with The Alfano Group

With approximately 6,000 active real estate agents in the great Sacramento area, there are scores of brokerages for Realtors to choose. But when it comes to hanging your license in the right firm for you, it's wise to weigh a lot of factors aside from just company size. In fact, we're of the strong opinion that working as a real estate agent with The Alfano Group in Rocklin is a perfect fit for those that are hard working, diligent, ethical, and want to build long-term, highly lucrative careers. We're always looking to bring a couple of high-quality individuals on board that fit that description, so we'd love to chat with you to see if it's a great match. But if you need further evidence that the Alfano Group is the perfect place to see your real estate business grow, here are 10 reasons: 

1. A great professional reputation and strong ties to the community
The Alfano Group Real Estate Agency has helped thousands of people buy and sell homes in Sacramento, Placer, and El Dorado County for years. From the CEO, Anthony Alfano himself, to all of the Realtors and staff, that reputation permeates in the community, giving you a great first impression. When you come to work for the Alfano Group, a lot will be expected of you, but you’ll also have an edge on the competition based on our reputation.

2. Flexibility
If you’re already a real estate agent, you know that the career entails a lot of hard work and hours, but also great flexibility. Do you want to work only mornings so you can spend more time with the kids? Are you looking to build a thriving business only on nights and weekends so you can keep your day job? Are you looking to invest 50 hours a week into your business, but want to be able to pick and choose when to work so you still have life balance? If any of those are true, then a career in real estate with The Alfano Group may be for you.

3. Support
From personal training to professional education, an impressive office where you can work or meet clients to great transaction coordinators and staff, coming to work with The Alfano Group means that you’ll have all of the encouragement, support, and resources necessary to take your real estate sales career to new heights. We also have great established relationships with home inspectors, appraisers, contractors, title companies, mortgage firms, and even an affiliated property management company for you to utilize.

4. Personal touch of a small firm
When you enlist with one of the many large real estate firms, you are little more than a number, as decisions and policies are set on a national level with thousands of competing agents in mind. But if you choose to watch your career blossom with The Alfano Group, you’ll benefit from all of the one-on-one training, support, and personal investment of a boutique real estate firm, where we are all like family and have invested interest in seeing you do well.

5. Company marketing
At other big firms with hundreds of agents, you'll pay a big chunk of your hard-earned money on marketing and advertising costs. While it's important for each Realtor to build his or her individual business, at The Alfano Group you'll be able to use all of our marketing tools already in place, including a state-of-the-art website, custom blogging and visual marketing campaign, social media accounts, and other marketing systems that are proven to work. Pick and choose what works for you, but you can always benefit from our custom company marketing!  

6. Top earning potential
Let's be frank here; people may enjoy recognition, camaraderie, and the perks that come with their job, but we all work for the money. There’s nothing wrong with wanting to earn top dollar, and in real estate, earning a sizable income just means that you helped more families buy or sell their homes successfully. With typical brokerage commissions 2.5-3% of the sale price for a home purchase, it’s possible to earn more money in less time in real estate than perhaps any other non-technical field.

7. Choose your niche market – and your income
Furthermore, when you help buyers and sellers in communities with high-end or luxury homes, the commissions are proportionally higher for each sale. It’s up to you if you want to work with first-time buyers, investors, move-up buyers, only sellers/buyers, or whatever niche in whatever price range you wish, but the bottom line is that Realtors that work with The Alfano Group earn sizably more than the average real estate agent.

8. Be on the cutting edge of technology
Mobile apps for buyers to search for homes; virtual and video tours; drone footage of luxury homes; all of these things – and much more - are possible when you work for The Alfano Group. We focus on arming our agents with the most current technology and tools that help serve our clients, helping you attract more business than ever and thrive.

9. The Alfano Group is built on the total customer experience
We never forget that our #1 priority is helping our clients buy or sell their home better than anyone else. Period. Our obsession to be the best means we always put the client first, doing what is right for them and going the extra mile, with little regard for our own interests. That mission dictates everything we do every day, driving us to offer the best total customer experience anywhere in the real estate industry. As an agent, that's the exact environment you want to be in to build a lucrative long-term career that you love!

10. Leadership and learning from the best
Our CEO, Anthony Alfano, ran several successful businesses, before investing all of that experience and wisdom into forming one company, The Alfano Group. He’s now one of the region’s top real estate brokers, winning numerous awards and accolades every year. Mr. Alfano strives for nothing short of perfection and excellence. His passion is contagious, his knowledge is powerful, and as an agent, you’ll learn, grow, and benefit from his leadership!

Sacramento #4 on list of hottest real estate markets for the coming year - once again.

We don’t have to look far for good news about the real estate market these days, but a recent report shines an even more positive light on forecasted home prices in Sacramento in the coming year.

According to Realtor.com’s annual report on the residential real estate markets they believe will be the hottest in the coming year, Sacramento distinguished itself, once again. In fact, Realtor.com Chief Economist Jonathan Smoke projects Sacramento to be the fourth hottest residential real estate market in the entire country in 2017, with anticipated appreciation rates of 7.2%. Additionally, the report by Realtor.com’s economic analysts predicts that sale volume will also be up 4.9% in 2017.

That follows up on a stellar year for real estate in Sacramento in 2016. Interestingly, a year ago, Sacramento was also ranked #4 in the nation for projected real estate price and sales growth in 2016, making Sacramento the only metropolitan statistical area to rank in the top five both years!

This year’s report also estimates the median home price to be $420,000, so an added 7.18% would bring the median to $450,156,000.

While Sacramento home prices have appreciated rapidly in past years, the region is still primed for growth. Sacramento is the most affordable major city in California, with home prices well less than half of those in San Francisco, San Jose and the Bay Area.

More and more businesses are coming to Sacramento, bringing good-paying jobs, and the new Golden 1 Arena and revitalization in midtown, downtown, the Railyards, East Sacramento, and West Sacramento are well underway. With an extremely tight supply of existing homes and too few new homes under construction, the housing shortage in Sacramento means the price of rent is skyrocketing, further invigorating the residential real estate market.

That’s a notable contrast from Smoke’s predictions for the entire U.S. real estate market, which he expects to slow down slightly, but not falter. According to Smoke and Realtor.com, the U.S. could see an average of 3.9% in home price appreciation and only 1.9% in sales volume growth in 2017.

The report also highlights the fact that many of the fastest-growing real estate markets are in metropolitan areas in the Western United States. In fact, Western cities account for 11 of the top 25 cities on the list for 2017, including 5 cities in California.

On average, the top 10 metropolitan markets on the list will see price gains of 5.8% with an increase in sales volume 6.3%

Here is the data on the top-20 real estate markets expected to grow the fastest according to Realtor.com:

1. Phoenix, AZ

Median Price: $300,000

Projected Price Growth in 2017: 5.94%

Projected Sales Growth in 2017: 7.24%

2. Los Angeles, CA

Median Price: $675,000

Projected Price Growth in 2017: 6.90%

Projected Sales Growth in 2017: 6.03%

3. Boston, MA

Median Price: $480,000

Projected Price Growth in 2017: 6.09%

Projected Sales Growth in 2017: 6.32%

4. Sacramento, CA

Median Price: $420,000

Projected Price Growth in 2017: 7.18%

Projected Sales Growth in 2017: 4.92%

5. Riverside, CA

Median Price: $350,000

Projected Price Growth in 2017: 4.98%

Projected Sales Growth in 2017: 6.88%

6. Jacksonville, FL

Median Price: $284,000

Projected Price Growth in 2017: 4.79%

Projected Sales Growth in 2017: 7.03%

7. Orlando, FL

Median Price: $272,000

Projected Price Growth in 2017: 5.69%

Projected Sales Growth in 2017: 6.10%

8. Raleigh, NC

Median Price: $312,000

Projected Price Growth in 2017: 4.16%

Projected Sales Growth in 2017: 7.55%

9. Tucson, AZ

Median Price: $237,000

Projected Price Growth in 2017: 6.10%

Projected Sales Growth in 2017: 5.47%

10. Portland, OR

Median Price: $420,000

Projected Price Growth in 2017: 6.55%

Projected Sales Growth in 2017: 5.02%

11. Durham, NC

Median Price: $320,000

Projected Price Growth in 2017: 2.55%

Projected Sales Growth in 2017: 8.95%

12. Colorado Springs, CO

Median Price: $335,000

Projected Price Growth in 2017: 4.77%

Projected Sales Growth in 2017: 6.71%

13. Jackson, MS

Median Price: $207,000

Projected Price Growth in 2017: 1.98%

Projected Sales Growth in 2017: 9.44%

14. Detroit, MI

Median Price: $195,000

Projected Price Growth in 2017: 5.17%

Projected Sales Growth in 2017: 6.22%

15. San Diego, CA

Median Price: $620,000

Projected Price Growth in 2017: 6.47%

Projected Sales Growth in 2017: 4.89%

16. Salt Lake City, UT

Median Price: $345,000

Projected Price Growth in 2017: 6.66%

Projected Sales Growth in 2017: 4.67%

17. Deltona, FL

Median Price: $260,000

Projected Price Growth in 2017: 3.10%

Projected Sales Growth in 2017: 8.23%

18. Provo, UT

Median Price: $334,000

Projected Price Growth in 2017: 5.16%

Projected Sales Growth in 2017: 5.84%

19. Austin, TX

Median Price: $385,000

Projected Price Growth in 2017: 3.50%

Projected Sales Growth in 2017: 7.40%

20. Seattle, WA

Median Price: $430,000

Projected Price Growth in 2017: 7.36%

Projected Sales Growth in 2017: 3.41%

The UK's BREXIT is expected to do THIS to your home value:

By now you’ve heard a lot about BREXIT, the United Kingdom’s historic vote to divorce from the European Union that shocked the world. The referendum on June 23 that ended in favor of succession from the EU (by a margin of 53.4% to 46.6%) caused a seismic economic boom in London and ripples that reached every corner of the globe.

In fact, the financial impact of BREXIT has already been nothing short of devastating for England and the UK. June 24 – the day after the vote – the UK’s stock index, FTSE 250, plunged a post-wartime record 7%. The next day, instead of rallying to regain ground as cooler heads had prevailed, it dropped another 7% instead, amounting to a wipe out of about 40 billion Pounds from banking stocks in one felled swoop. The UK Pound soon dropped to a 31-year low and Standard& Poor even downgraded the credit rating for the entire UK economy. Ouch.

But it wasn’t only our plucky friends across the Big Pond that suffered the wrath of the BREXIT exodus. On Wall Street, the U.S. stock market reacted to the news with a 611 one-day loss for the DOW, which amounts to a shocking 3.4% decline, and the S&P 500 lost a similar 3.6%. While our U.S. market has somewhat stabilized and isn’t expected to suffer catastrophically from further news, in today’s interconnected global economy, there is no doubt that BREXIT stunned markets all over the world, from government bonds to the price of gold to stocks.

But as the UK tries to sort out what’s next and pull themselves out from an impending political and economic vortex, there could be a silver lining to BREXIT:

Fortunate for us, one of the segments that stand to directly and immediately benefit from BREXIT are U.S. homeowners. In fact, international investors will start moving money to U.S. real estate.

The UK has long been a safe haven for wealthy foreign investors (and there are a lot of them and they have A LOT of money!) to park their money, particularly in real estate. The stability and safety of the UK’s banking system and economy are considered favorable to that in their home countries, and many investors feel that emerging economic super powers like China, India, Brazil, etc. are way too volatile and lack transparency. Thanks to that influx of wealthy foreign investors, London real estate has soared to the highest prices in the world.

But with BREXIT, London, England, and the UK is no longer a safe bet. In fact, BlackRock predicts an across-the-board 10% decline in London real estate prices over the next year alone, commercial office space is expected to plunge by 18%, and tens of thousands of jobs will likely be lost.

With the value of the British Pound currency falling off the table, their stock market plunging, and even their national credit rating downgraded following the referendum to leave the EU, the U.S. dollar is looking better than ever sitting next to the coin of the Crown.

For those reasons, many analysts expect a critical shift of foreign capital to flow from the UK into the United States real estate markets, both commercial and residential. Point blank, U.S. real estate is cheap, accessible (many chose to invest via REITs and other vehicles instead of individual ownership), and the U.S. economy sits on sound bedrock that few around the world enjoy.

It’s a basic precept, with stability, predictability, and safety the most valuable commodity for investors in the shifting landscape of the post-BREXIT vote financial world.

As Leonard Steinberg, president of real estate brokerage firm Compass, puts it, “Dollars have to flow somewhere. All currencies have to flow somewhere to be invested – why not in the safest economy and environment and that could be the United States?”

That sentiment is echoed by analysts like KC Sanjay, Senior Real Estate Economist with Axiometrics, who feels, “International investors have been [already] increasing their holdings in the U.S. over the past several years, as they have gained a better understanding of the American market and appreciation of the sector’s profitability.”

Sure, investors with the long view can certainly invest heavily in the British Pound and wait a couple years (probably) for its value to recover again, but people always need to place their money in some investment vehicle – whether it be real estate, stocks, funds, gold, etc. NOW, and thanks to BREXIT, U.S. real estate could very well become the flavor of the month…or the year….or the decade, for that matter. 

Experts like Louis Archambault, real estate lawyer and partner at Arnstein & Lehr LLP, don’t predict a sudden return to form for the Pound, which makes the U.S. housing market even more attractive. Says Archambault, “The US is one of the more stable markets right now in the world. I would be looking very seriously to converting that money and investing it in United States.”

The sudden jolt of demand and influx of foreign capital into our housing and commercial real estate market could very well move the needle on housing prices, appreciation rates, and other industry metrics as soon as six months or a year from now, with the biggest impact believed to be felt in large cities like Los Angeles, New York, and the Miami area, all traditionally popular with foreigners. But the handwork of smart investors should spill over to other emerging metropolitan markets – like Sacramento and Northern California – that present unboundless opportunities for growth.

Not only will increased demand and the flow of foreign capital further incentivize the U.S. housing market, but the immediate effect of BREXIT is already being seen on interest rates. After the UK’s referendum passed and the financial markets took a haymaker, already we’ve seen U.S. government debt in a free fall, with yields on the 10-year Treasury dropping from 1.75% to a low of 1.43% in early trading. Movement on the Treasury exerts downward pressure on mortgage interest rates, and already we saw a small 0.02 percentage point correction on mortgage rates, according to NerdWallet.

While a drop of 0.02 isn’t a major shift, it very well temper interest rates from rising, as was to be expected, over the next 18 months, keeping them in favorable territory for those looking to purchase a home with a mortgage or refinance. Mortgage rates usually see a lag time as they adjust to other indices and economic news, so we most certainly haven’t even seen the full (and positive – for us) effect of interest rate drops to come.

A spur in demand; big spenders who need to park their money somewhere safe; an emboldened U.S. dollar versus the Pound, and downward pressure on mortgage interest rates; what does it all add up to?

Over time, London’s misfortune may very well be good news for the U.S real estate market – and our local home prices.