Demand is up ... and holding
According to the latest home sales figures from DataQuick, Orange County demand is up 40% compared with the same time last year. In fact, demand is on track for its 6th consecutive month of year-to-year increases. This is good news for the real estate market and a very positive trend in the midst of a trouble-filled economy.
Median Sales Prices ... what's real?
The median selling price is down 30% from a year ago and about 38% down from the peak in June, 2007. This number can be quite deceiving and should be taken in light of the following facts:
Property sales mix. Properties in the higher price ranges are simply not moving and sales are way down. Properties over $750,000 make up less than 15% of demand. Jumbo loans are tougher to get and rates are much higher than conventional. Conversely, demand below $500,000 is way up with the perfect combination of low prices, great choices and historically low interest rates. As such, the lower priced sales pull down the "median" sales price figures and seriously distort actual price declines.
How do you determine actual price declines? House by house. Neighborhood by neighborhood. When one of our buyers takes interest in a neighborhood or specific house, we calculate the actual market decline, historical value and current market value for that specific neighborhood and house. The more we stretch our analysis into zip codes, cities and counties, the less accurate the data becomes.
Projections. The California Association of Realtors is predicting a price drop in 2009 of an additional 6% on the statewide average selling price. Some experts expect the bottom at the end of 2009, some in 2010. We have considered all the reports, trends and analytics and offer our prediction from the trenches.
Our expert opinion from the trenches is that we'll see price declines ranging from 5 - 10% across Orange County in 2009, with prices starting to stabilize at the end of 2009 into 2010. Why are we so optimistic? Because we work in the trenches of real estate with real buyers, real sellers, real banks and real frustration. We typically receive multiple-offers on our bank owned listings, many over listing price and at or above recent low neighborhood comparables. Many of our buyers are shocked to find themselves in a bidding war on the best properties and that the listing price has little to do with final sales price.
So what about all the properties sitting on the market? Look closely and you'll find that many are short sales listed by agents who know little about negotiating with the bank. Some are unmotivated sellers who are simply unwilling to compete with the banks and overprice their homes. Others are bank owned properties that are initially priced incorrectly or need too much work compared with other properties. These prices are typically adjusted within 30 - 90 days to current market value and finally sell.
Nevertheless, with more foreclosures expected to hit the market, prices will continue to decline.
So why buy now?
1. Interest rates are low. Remember my rule of thumb: 10% price decline = 1% interest rate
• $500,000 at 5% for 30 years = $2,684 monthly payment
• $450,000 at 6% for 30 years = $2,698 monthly payment
2. Selection is good. As the market gets closer to bottom, selection will tighten and the "best" properties will be tougher to find, and highly competitive.
3. Your market may increase. That's right, homes where you want to buy, may go up in price. Remember that market statistics are broad, but every neighborhood is unique. If there is only a handful of properties available in the neighborhood you want to live, then don't expect any values. Start looking now and be ready when the opportunity presents itself.
Happy New Year My Friends!
Nancy
Nancy Moeller, CPA, Realtor
Seven Gables Real Estate
714 276-7006
Will prices continue to decline this year? I'm betting on a sure "yes". We can expect more foreclosures, more short sales, more trouble for the economy.
So, should we wait to buy? Heck no. Now is the BEST time to look at the inventory, secure a low interest rate while they are still available and position yourself to take advantage of the best selection and lowest prices we've seen in a long time.
But, if prices are still declining ... Yes, I know you don't want to "overpay". I understand. But here's the thing - let's say prices decline another 10% in the next six months. Let's also assume that interest rates go up 1.5%. VERY possible. Your payment will be HIGHER, then if you bought now. Here's an example:
Now: $500,000 at 5% for 30 years = $2,684
10% Lower: $450,000 at 6.5% for 30 years = $2,844
My personal "rule of thumb" for payments is: 10% price decline = 1% interest rate
And what if the "experts" agree that another 10% is the "bottom" ... now all the buyers that have been sitting on the fence trying to time the market perfectly will start jumping in, buying up inventory and leaving you with less choices. NOW is the time.
Here are our OC Expert Keys to Real Estate Success:
1. Buy in a declining market (that's what we're in)
2. Buy what you can afford (this isn't gambling, it's a long term investment)
3. Repeat (that's how you get rich)
Happy New Year and May Your Real Estate Portfolio Prosper ...
Nancy Moeller, CPA, Realtor
Seven Gables Real Estate
714 276-7006
Not sure what to do today? Today and tomorrow are great days to clean house and figure out what you can give to those who are less fortunate.
Of course, an ancillary benefit is the wonderful tax deduction.And here are my quick tips:
1. Prepare a detailed list of the items your are donating. Ask the charity to sign your list with the receipt they give you.You must also have their organization's name and address.
2. Take a digital picture of each item and back up the pictures on a CD or flash drive with your tax records for that year.
3. For regular household items, estimate the value based on "thrift shop value". If the value exceed $5,000 - get an appraisal.
Give all of this informationi to a qualified CPA or tax advisor to prepare your return.
Have an amazing day!
Nancy Moeller, CPA, Realtor
Nancy Direct: 714 276-7006
Last year, the President approved the "Mortgage Forgiveness Debt Relief Act of 2007". This legislation excludes the discharge of indebtedness from taxable income. Wow, that's great, right? Maybe.
Before you enjoy the wave of relief or bring up this wonderful nugget at the next dinner party, be aware that there are some strict guidelines, complicated rules and strange anomalies that must be weighed. Here is a layman's list of warnings:
What does all this mean? Before signing a loan modification, short sale or allowing the property to be foreclosed upon, call your trusted tax advisor for advice on your situation and goals. There are no cookie-cutter, one-size-fits-all answers. However, there is a BEST answer for YOU. The key is to explore your options before you jump forward.
In Orange and Riverside Counties, CA ... you can call me personally to discuss your options. As a CPA and Realtor, my goal is to protect our client's financial interests, minimize the tax impact of their decisions and help support their goals.
Much success,
Nancy Moeller, CPA, REALTOR
Seven Gables Real Estate
714 276-7006
With all the yard signs and advertisements promising to help homeowners facing foreclosure "save their credit" or "modify their loan" or "avoid bankruptcy", it's tough to know where to turn. Should a homeowner attempt to modify their loan, short sale their home or allow the bank to foreclose?
Here's our advice: Beware of Realtors, loan modification companies or anyone else who provides an immediate answer. The only answer is that it will depend upon on each homeowner's individual situation and personal goals.
When considering a loan modification, the determining question is whether a homeowner will be able to afford the modified payment and live with the new terms. Even though a homeowner must qualify for a loan modification, approximately 80% of successful loan modifications find themselves delinquent again within six months. Ouch.
When considering a loan modification, short sale or foreclosure, the best person to call is not a Realtor or attorney, but rather a CPA and trusted financial advisor. Why? The tax consequences can be severe. Strange, but true ... you may have a HUGE tax bill in the form of both tax forgiveness and gain (yes, gain) on the sale of your residence. Yes, there are exceptions, new legislation and other options, but you must know what they are and make sure you are complying with each and every requirement. I'll talk more about this in future blogs. My point today is simply to encourage homeowners to make the call.
When my partner and I started our real estate practice, I had no idea how much I would be tapping into my experience as a CPA. There is not a single transaction that has not required council regarding tax consequences, financial planning and budgeting.
Before a homeowner buys or sells property, their first call should be to their CPA, tax attorney and/or estate planner. These are HUGE transactions and the tax consequences require a expert to determine the total financial impact of a homeowner's immediate and long term decisions. Realtors sell houses. Tax experts advise on impact. We need both.
Much success,
Nancy Moeller, CPA, REALTOR
Seven Gables Real Estate
714 276-7006
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As a CPA, REALTOR® and financial expert, I focus on protecting our clients financial interests in the sale.
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