September Real Estate News

September 2008 Newsletter

SALES SLUMP ENDS AFTER 33 MONTHS... It was hard to miss this August 19th headline in the Orange County Register. In fact, it was an end to the longest home buying slump on record. Never mind that the slump ending is directly attributable to still increasing foreclosures, and a still decreasing median home price. After all, the buyers had to live through the first half of the decade, so sellers will have to live through the second half of the decade. The real estate market is usually comprised of 3 types of markets; seller, buyer, and neutral. So what exactly has been happening to generate the positive press? First of all and possibly most important is affordability has made a comeback. At the end of the selling frenzy and sub-prime debacle, affordability was a scant 11%. No housing market will remain healthy when only 11 out of 100 people can afford to buy a home. We have now risen back above 50%. Secondly, there are screaming deals out there and even though there are a lot of them, there are not as many as there were. In other words, according to the Orange County Register (August 26^th 2008), Orange County home demand is up 103% versus a year ago. A report by Steve Thomas shows that, "fresh pending sales from the past month rose 51% in two weeks to 2,991. One year ago, demand was 1,475." But the really interesting part is that supply is at its lowest level in 16 months. (OC Register)

The Associated Press ran a similar headline, "Sales of Existing Homes in U.S. rose in July, Realtors Group Says." In fact, sales increasing are a national phenomenon of the moment. At the end of August, according to Jonathan Lansner' column, who was quoting Steve Thomas' Market Update, supply, or active listing inventory in SoCalMLS, fell 289 homes in two weeks to 14,059, the lowest level since April 5^th, 2007. Even though another wave of foreclosed properties is definitely on the way, for the first time in months the number of distressed properties to hit the market fell in July. Finally, First American CoreLogic reported that prices are not falling as fast as they once were. (Lansner: OC Register) This may suggest that although prices are likely to continue to drop into 2009, it probably won't be nearly as fast, as prices are leveling off.

DON'T WAIT TOO LONG; THE BOTTOM WILL HIT 3 MONTHS BEFORE YOU KNOW IT... So what does all this mean? Well, for one thing it does take 60 days to accumulate most data and another 30 to spread it around to the media and the public. This does make it difficult to ascertain the exact bottom of the market. So what a consumer really needs to do is prioritize your motivation. Meaning? Houses are not stocks, even though we may have confused that for a time. Houses are where you live, raise your family, and get shelter and all that good stuff. Everyone needs to have one. Therefore just make sure it's the right time for you. The market for sure has corrected in a big way. Expect much smaller adjustments from here out.

MORE IMPORTANTLY, understand that there are some very good reasons to get into the market now, if you have been waiting. Here they are: 1) Selection. You saw it said above, inventory is shrinking. 2) Increased competition. Right now, you have a good shot at getting the home you want, even though the average number of offers on bank owned properties is 10 to 20, yes you read correctly, 10 to 20. Most agents who work with bank owned properties will tell you that most of those offers are coming from people who plan to occupy the property, in other words, not investors. That will not last forever. Investors do try to time the market and I would plan on them coming back sometime in 2009. 3) Interest rates. Have you been reading the papers, listening to the news? Do I really need to harp on that fact that interest rates are still in the 6 to 6 ½ range and that this may not be the case for 2009? Also, there is that amazing FHA package with a $7500 tax credit. 4) Home Ownership. Can you say tax savings? Talk to your CPA about the advantages. It's just way cooler to own than rent.

WHAT WERE THE ACTUAL NUMBERS... The total number of sales for Orange County in July, (the last month available) is 2,799, a staggering 45% increase from June and up 17.1% over July a year ago. The overall median price is $461,000 and that is off 6.9% from June and down 28% from a year ago. The most amazing number is the number of sales under $400,000 which came in at 972. That is an increase in that price range of 275% from a year ago. Every price range increased in the number of sales by at least 20% and the $500,000 to $600,000 price ranged increased by 39%. This is important to note because it means that sales have increased in all price ranges not just the lower end. This gives credence to the sales slump being over. The number of properties entering into default increased slightly to 2,320, which is only a 1.7% increase. This would indicate that foreclosures may have peaked or are close to doing so in Orange County. All these factors are positive indicators of the beginning of recovery.

HOUSING RECOVERY LIKELY IN 2010, (BUT WAIT) EXPERT PREDICTS BEGINNINGS COULD START IN 2009... Real estate economist Richard K. Green, director of the USC Lusk Center for Real Estate, was interviewed by Jeff Collins of the OC Register. For a complete transcript of his interview, just give me a call and I will email to you. Essentially Green thinks 2010 is still about right for the recovery, but believes there is some chance for next year because prices have fallen sufficiently.

Green also was enthusiastic about the raising of the conforming loan limits and changes with FHA and the positive impact it would have on Southern California in particular.

IMPORTANT! I ALSO HAVE A GREAT ARTICLE ON HOW NOT TO GET SCAMMED IF YOU ARE FACING FORECLOSURE! THIS IS A MUST READ IF YOU ARE IN A DISTRESS SITUATION. Give my office a call and I will email it over to you. Have a great month and give me a call with any real estate related questions. It's my pleasure to serve you and your referrals.