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.
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.
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 their 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.
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 26th 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 5th, 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.
We filmed Ruben Rodarte, Prudential California Realty in Anaheim Hills, at Taps on August 26. He outlined a number of key points indicating that this is a prime time for the right buyer to take advantage of lower prices, tighter inventory, tighter lending practices and a lack of investors to compete against.
This is a buyer’s market so obviously the numbers are encouraging to them, not sellers.But, if you think the market is stagnant, if you think people are sitting around waiting, you would be wrong.It is not unusual for any property under $600,000, but especially for a bank owned one to have 6 to 12 offers or more. Orange County had 1,184 bank owned properties in the MLS as of July 11.How many were bought in May? Just about half of them sold with a total of 570.Time needed to sell all foreclosed homes?That was a low number of 44 days.We are nearing the end of loan adjustments for sub-prime loans, which means we are nearing the foreclosure peak and the end all at the same time.Please feel free to call my office at any time and I will let you know current listing counts and the total number of listings that are bank owned.Remember, no one can predict the bottom.People need to decide based on their own circumstance if it is time for them to act.But what is really happening in the market is a far cry from what you read.Affordability increases every day.Congress has passed the “Homeowner Rescue.”Fannie Mae and Freddie Mac are stable and FHA is a phenomenal opportunity, all made permanent with the new $625,500 loan limits.Expect real estate to be what it has always been: a cornerstone of our local economy, for better or worse.But you can bet on this; there is opportunity here right now that may never be here again.There is no question that investors are eyeing the market very carefully.If you need information, look no further as it is my pleasure to serve you.
Again, The Kiplinger Editors have interesting data on Southern California.It is important to mention because again, they are experts on California and their information is regional, not national.What do they say?Tourism is getting a huge boost because of how strong the Euro is right now.“High tech will benefit from consumer demand for cell phones, games, and software.”Kiplinger believes agriculture will benefit from foreign consumers buying more food. Entertainment is counting on strong ad dollars for TV this fall.Some areas will lag such as retail shopping centers and state and local governments.
Real Estate Economics, a homebuilder consulting firm in Irvine has this to say about the Orange County housing market: “Opportunity/Risk Index currently resides slightly below equilibrium, but the trend is toward equilibrium.Any O/R index above equilibrium represents market opportunity, and any index number below equilibrium represents market risk… Within 12 months, (the O/R) index should reach equilibrium… There is a need for an additional 5.6% drop in housing prices before equilibrium is reached in the Orange County Market.
The Kiplinger Report thought the drop would be 10% in 2009 saying, “Home prices have a ways more to drop before leveling off late next year, then staying flat during most of 2010.Difficulties will vary by region.The Inland Empire and Central Valley are sure to have the biggest price drops. Orange County and San Diego prices won’t fall as much.Bargain hunters will spur sales, probably by year end.”We are definitely experiencing that right now.Sales picked up for the first time from May numbers to June. (The latest numbers that are available for a full month.)
Broker and local economist Tom Moon’s predicted price drop for next year, also 10%.Obviously these projections are on top of the already 20% to 25% we’ve seen, depending on the location of the property.So we are looking at a grand total of approximately 35% before we are done.Is there anyone reading this that doesn’t see what impact this will have on the affordability index and how it will spur sales with old fashioned supply and demand.Don’t forget we still have people arriving here that need to buy, we still have a lot of people who were left out of the sub-prime run up and if you read on, you will see that we still have decent economic prospects in Orange County.
This is probably the biggest hurdle the real estate industry has to get over in the minds of consumers.Unfortunately a lot of the news out there is the dismal outlook for national housing.Regions such as the mid-west, specific cities such as Detroit, or sub-prime havens such as Riverside and San Bernardino or even Las Vegas and Phoenix, have many more problems than we do here in Orange County and Los Angeles.
That is not to say that prices are not poised for a further drop, because they are.There is more on that in the next section.But it does mean that when you try to apprise yourself of what the facts are, in order to make a decision as to whether right now, is a good time for you to sell or buy, you should compare apples to apples.For example, if you have a compelling reason to sell your home, i.e. a job transfer, divorce, a health issue, than now is definitely the right time because experts agree, there is more loss on the way before we are done.But if selling is optional, consider your benefits.If you want to sell and capitalize on a move up, then maybe now is good.You need to talk to an expert and gather all the facts.If you are looking to buy, what are your financing needs?Will what you need in a loan program be there in 12 months to make waiting worth while.Is the price drop of 10% worth waiting for over the need for a place to live, especially if you have found the “right house” as a 25% decrease over its high?After all, houses are not meant to be day traded.That was a bad habit that most of the country and certainly Californians partook of for a few years. Read on to see why regional knowledge is good when it comes to real estate.
Every cloud has a silver lining and the real estate market is no different.Sales volume took a jump in May (the latest full month available) over April, although sales were still off approximately 10% from May of ’07.However, most agents who are actively working the foreclosure market will tell you that 8 to 20 offers is not unusual for any house priced under $500,000.The papers will tell you the market is dead, the economists are predicting doom and gloom for another 18 months.I’m here to tell you, don’t believe everything you read.Having said that, yes this is a market to approach with caution.You should know exactly what you want, and what you can afford.But, there are definitely deals out there.You need a real estate professional to help you.There is definite navigation required and you will need negotiating power.I am here to help you.This is a radical market full of possibilities.
ed 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.
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