December 13, 2007
As shopping centers overflow with cars, it is obvious that many of us are last minute shoppers; but, as in real estate, you can find the best deals when there is a lot in stock and you shop early. It’s too bad that so many potential buyers are frozen in fear that they will purchase and it won’t be the bottom, leading them to sit idly for some sort of sign. Unfortunately, nobody is going to ring a bell when we hit bottom. Experts who have spent their lives studying the swings in markets differ on precisely when that will be. However, take heed, most experts are calling for the bottom in mid-2008. They may be correct, but current demand has been at a low since the financial crunch hit the worldwide financial markets in August, and it is only going to improve from here. With the Federal Reserve, Central Banks, and international banks working together to improve liquidity to the financial markets, the current sluggish demand due to the crunch is going to dissipate, restoring banks’ willingness to do loans. Throw in historically low interest rates, and buyers would be foolish to pass up the opportunity. So, if you are a buyer with splinters from sitting on the proverbial fence, waiting for a bell… DING, DING, DING. Do not waste the opportunity to purchase when all of the conditions are perfect for buying, just as they were from 1994 through 1996. Take a look at this history of median prices:
1990 $242,358
1991 $239,680
1992 $230,860
1993 $217,210
1994 $214,540
1995 $209,400
1996 $213,370
1997 $229,840
1998 $261,700
1999 $280,900
2000 $316,240
I remember article after article, news report after news report highlighting every blow of the downturn during the 1990’s. It was enough to scare anyone into not purchasing. We experienced foreclosures and short sales on almost every block. Buyers wanted to buy at the bottom. There is not a person in Orange County who would not jump at the opportunity to buy at those prices again; yet, very few really wanted to take the plunge. If I would have purchased every listing that I had in my own personal inventory during those years, I would be in the Bahamas typing this report. Many skeptics would point to the grossly high prices and affordability issues. Well, the same was said back in the 1990’s. Shoot in 1980, the median price was at $114,000; I am sure that many buyers were hoping that prices would come back to those levels. So, let’s learn from history. Historically, Southern California is not only a great place to live, but a wonderful long term investment. It is important to reiterate that interest rates are at historical lows once again. In 1990 they were above 10%. In 2000, they were above 8%. As a buyer, don’t think that these low rates below 6% are here to stay. As a matter of fact, as soon as Bernanke and the Federal Reserve see a restoration of the financial markets and the economy heating up again, they are going to return to their methodic raising of rates to curb inflation and restore strength in the dollar. Most economists agree that the current rates, hovering around 6%, are about as low as they will go. If you bought a condo for the current detached median price, $650,000, with 20% down, at the current jumbo rate of approximately 6.5% (5.75% for conventional loans which are loan amounts less than $417,000), the mortgage payment would be $3,280. Even if values were to decline by 10%, bringing the $650,000 home to $585,000, if rates were to increase to 7.5% (7% for conventional loans or about 1 point higher than they are today), the payment would be $3,272, a savings of $8 per month. If rates were to increase to 8.5% (8% for conventional like they were at the beginning of this decade), that payment would rise to $3,599, or an extra $319 per month. If inflation was out of control and rates popped up to 10.5% (10% for conventional like they were at the beginning of 1990), the payment would be $4,281, $1,001 more every single month. So, buyers should do their homework and not just rely on the constant reporting on the pressures in pricing. There’s a lot more to making this decision, not to mention, as a buyer, it is much easier to shop when only a few are shopping. Remember the Cabbage Patch Kids craze of the 1980’s? It will happen to real estate again too.
More homeowners are pulling their homes off the market, which is evident in the current active inventory reading. The active inventory has fallen by 464 homes in the past two weeks and 1,105 homes in the past month, bringing the current inventory to 16,128 homes. Demand, the number of homes placed into escrow within the prior month, decreased by 95 homes to 1,148 new escrows. With the drop in demand, the market time increased to 14.05 months from 13.49 months two weeks ago. Last year at this time there were an additional 691 escrows within the prior month, the active inventory was at 12,661, or 3,467 fewer homes, and market time was at 6.88 months. Two years ago, there were 8,329 fewer homes on the market, 1,027 more escrows within the prior month, and the market time was at 3.59 months.
Currently, short sales and foreclosures in Orange County account for 23% of the active inventory, up from 21% two weeks ago and 19.3% a month ago. We can attribute a lot of the rise to homeowners pulling their homes off of the market; foreclosure and short sales, for the most part, don’t. Short sales and foreclosures now account for 30% of all escrows opened within the prior month, up from 26% two weeks ago. Of all the short sales and foreclosures currently on the market, 65% are below $500,000, up from 63% two weeks ago and 62% four weeks ago. 93% of all short sales and foreclosures currently on the market are below $750,000, unchanged over the past six weeks. 38.3% of the all homes under $500,000 are either a short sale or a foreclosure. For the 1,872 detached homes in Orange County priced below $500,000, 54% are either a short sale or a foreclosure.
The disparity between the detached home market and condominiums continues its normal pattern where the detached market is outperforming condominiums. Market time for detached homes is at 13.57 months versus 14.85 months for condominiums.
What can we expect for the remainder of the year and the beginning of 2008? For the remainder of the year we can expect sluggish demand due to the holiday market and more homes pulled off the market. The active inventory will start the year with a bit more than 15,000 homes. More and more homes will be placed on the market after we bring in the New Year in anticipation of more demand and a decent Spring market. The worldwide financial market will right itself within the first quarter, boosting demand and leaving us with incredible rates. Unfortunately, demand will just not meet the heavy expectations of homeowners and the active inventory will continue to rise until it eclipses the 20,000 home mark. Demand during the Spring will march along at about 15% to 20% less than last year, a healthy increase from its current stagnant levels.
What if you are a seller, how should you respond to the market? The market is a buyers market. To be successful in 2008, it is all about having the right attitude and doing what it takes to get a home sold. But, if you are a homeowner and do NOT really have to sell, don’t. If you choose to play the game, go into the venture with the knowledge that it will take patience and perseverance to be successful. Know the market. Price homes according to the comparable sales and escrows with the knowledge that many short sales are artificially priced too low in order to attract potential buyers, yet the lender will never ultimately agree to those low figures. Remember, “short sales” are not a deal even if a seller has a signed contract in hand until a lender is willing to sign off on their loss. Many are priced so low that a lender simply will not sign off on a full price offer from a willing and able buyer. Sellers need to prepare there home for showings on day 120 just as they did in the first week: all the lights are on, there’s a hint of vanilla in the air, soft music is playing in the background. You never know when THE buyer of your home is going to step through your doorway and it needs to be ready when they do. Now more than ever, sellers must rely on the expertise of a professional, experienced and knowledgeable real estate agent. The real estate agents that are still in the game are the ones that have survived the change in the market and can represent buyers and sellers in any market.
If you are considering buying or selling a home in South Orange County, call on the experts! Dianna and Brian McGarvin 949-370-2652 or visit our website at http://www.pierbowl.com/.
Monday, December 17, 2007
Monday, December 10, 2007
The Comfort Zone
May we all learn to step outside our comfort zone and make our lives better.
If you are considering buying or selling a home in South Orange County, call on the experts! Dianna and Brian McGarvin 949-370-2652 or visit our website at http://www.pierbowl.com/.
The Comfort Zone
Unknown
About 10 years ago, I started a job as a trainer for a Telemarketing agency. In one of my first classes the head trainer told a very motivating story that I would like to share with you.
He began by drawing a diagram of a stick man standing in the middle of a circle. To make it more interesting, he drew things like a house, a car, and a few friends inside the circle.
He asked the question "Can anyone tell me what this is?" In a long silence, one guy decided to throw out "the world?" The trainer said "That's close, this is your Comfort Zone. Inside your circle you have all the things that are important to you. Your home, your family, your friends, and your job. People feel that inside this circle they are safe from any danger or conflict.
"Can anyone tell me what happens when you step out of this circle?" A strong silence came over the room. The same eager guy abruptly announced "You are afraid". Another guy said "You make mistakes". The silence continued and the trainer smiled and said "When you make mistakes what can the result be?" The first guy shouts "You learn something."
"Exactly, you are learning." The trainer turned to the board and drew an arrow pointing from the stick man directly to the outside of the circle. He proceeded to say "When you leave your Comfort Zone you put yourself out there, in front of the world to be in a situations that you are not comfortable with. The end result is that you have learned something that you did not already know, you expand your knowledge to become a better person." He turned again to the board and drew a bigger circle around the original circle, and added a few new things like more friends, a bigger house etc.
"The moral of the story is that if you stay inside your Comfort Zone you will never be able to expand your horizons and learn. When you step out of your Comfort Zone you will eventually make your circle bigger, to challenge your mind and grow to be stronger, and all in all a better person."
If you are considering buying or selling a home in South Orange County, call on the experts! Dianna and Brian McGarvin 949-370-2652 or visit our website at http://www.pierbowl.com/.
The Comfort Zone
Unknown
About 10 years ago, I started a job as a trainer for a Telemarketing agency. In one of my first classes the head trainer told a very motivating story that I would like to share with you.
He began by drawing a diagram of a stick man standing in the middle of a circle. To make it more interesting, he drew things like a house, a car, and a few friends inside the circle.
He asked the question "Can anyone tell me what this is?" In a long silence, one guy decided to throw out "the world?" The trainer said "That's close, this is your Comfort Zone. Inside your circle you have all the things that are important to you. Your home, your family, your friends, and your job. People feel that inside this circle they are safe from any danger or conflict.
"Can anyone tell me what happens when you step out of this circle?" A strong silence came over the room. The same eager guy abruptly announced "You are afraid". Another guy said "You make mistakes". The silence continued and the trainer smiled and said "When you make mistakes what can the result be?" The first guy shouts "You learn something."
"Exactly, you are learning." The trainer turned to the board and drew an arrow pointing from the stick man directly to the outside of the circle. He proceeded to say "When you leave your Comfort Zone you put yourself out there, in front of the world to be in a situations that you are not comfortable with. The end result is that you have learned something that you did not already know, you expand your knowledge to become a better person." He turned again to the board and drew a bigger circle around the original circle, and added a few new things like more friends, a bigger house etc.
"The moral of the story is that if you stay inside your Comfort Zone you will never be able to expand your horizons and learn. When you step out of your Comfort Zone you will eventually make your circle bigger, to challenge your mind and grow to be stronger, and all in all a better person."
Monday, December 3, 2007
Market Time Report: ‘Tis the Season to BUY
November 29, 2007
Now that the Thanksgiving leftovers have been depleted, we move on to the next holiday season, the absolute “best” time of the year to be a buyer. Unfortunately, consumers seem to look at only one factor in purchasing: price. If prices are trending down, they simply don’t want to purchase. The logic used is the same used in shopping. For example, if you were looking for a high definition flat panel television set, yet every day the news reports and newspapers detailed that the market for flat panel televisions was down and that prices would fall, you would be inclined to wait. HOWEVER, there are a lot of factors in buying a home which most consumers simply do not consider. Purchasing a home is far more complex than going down to the local electronic store and purchasing a television. In purchasing a home, a buyer should consider the following factors in addition to pricing trends: current interest rates, the number of choices in searching for a home, a gift from Uncle Sam in the form of a tax break and historical long term investment data for housing in Orange County. I have been accused of being biased because I am in the industry. I am sure the skeptic naturally questions buying right now, but that’s because they are looking at purchasing based solely upon the trend in pricing. There is also a segment of the market that is very vocal about the impending doom of real estate. Many have expectations of prices dropping by 20%, 30% or more. First, a large portion of the segment is fence sitting buyers rooting for the market to drop to a point where they can afford a larger home. The problem with that theory is that even with all of the pressure on price because of supply and demand, homeowners are simply reluctant to drop prices swiftly. There is stickiness to pricing that has been a character of the present market since it first slowed back at the beginning of 2006. Many think that bank foreclosures will drop the value in neighborhoods because bank owned homes are “deals.” As somebody who sold hundreds of bank owned foreclosures throughout the 1990’s, I must dispel this myth. Most banks will do whatever they can to achieve market value and they will hold firm on price. They are very aware of any the value of any home in their portfolio through a real estate broker and an appraisal (sometimes multiple appraisals). They will opt to rehabilitate a home by addressing all cosmetic repairs and necessary repairs with new carpet, new paint inside and out, replacing the roof, new fixtures, new faucets, new windows, etc. They will do whatever it takes so that the property shines inside and out. They are only willing to work with serious buyers. There are some ridiculously low prices on homes currently on the market, and they are ALL short sales. The price may be attractive, but the sale is “subject to lender approval.” Unfortunately, the price is not set by the lender; instead, the seller and buyer set the price in hopes to entice a borrower to write an offer in a slow market. Remember, lenders are not slouches and they are not willing to give away thousands of dollars so that a homeowner can get out from underneath a home. Instead, they will do their homework and obtain a broker’s, or multiple brokers’, opinion of value, and a certified appraisal, or even multiple appraisals. Remember, they want to recoup as much of their asset as possible. Many short sales are submitted and rejected. Buyers should look for listings with preapproved short sales where a reasonable sales price has already been established. Unfortunately, this is the exception and not the rule.
The talk around the coffee pot these days centers around the numbers of buyers who are comfortably perched on the fence waiting for the “best” time to buy. An economist at a conference last week aptly stated that “nobody is going to ring a bell at the bottom of the market.” Plus, these fence sitters are just factoring the pressure on pricing. So, let’s take a closer look at what most buyers are not considering in their decision to purchase:
RATES: Bernanke and the Federal Reserve may be looking to cut the discount rate again in December, and they may even cut it a couple more times in 2008. However, when you hear that the Federal Reserve has cut the discount rate, it does not affect the long term, 30-year fixed rates used to purchase a home, directly. The cut only has an immediate effect on short term rates like equity lines, credit card debt, etc. Interest rates can only go so low. Most economists agree that the current rates, now below 6%, are about as low as they will go. The new Federal Reserve, under the guidance of Bernanke, is not interested in keeping the discount rates at the current low level, either. The recent credit crisis has forced them to reverse course in their methodical increases since the beginning of 2006. Many are now pointing a finger at the old Federal Reserve, under the guidance of Alan Greenspan, for artificially stimulating demand in real estate by keeping rates at very low levels for several years. With rates at the current low levels, the general public is now accustomed to low rates. Many do not recall that rates were at 8% at the beginning of the 2000’s and they were at 10% at the beginning of the 1990’s. They have been much higher than that too. But, just as we became accustomed to low rates, when rates do rise, and they will rise, the general public will get used to an environment of increasing rates, just as we have with the price of gasoline. We may not like it, but there is very little we can do about it. If you bought a condo for the current detached median price, $650,000, with 20% down, at the current jumbo rate of approximately 6.5% (5.75% for conventional loans which are loan amounts less than $417,000), the mortgage payment would be $3,280. Even if values were to decline by 10%, bringing the $650,000 home to $585,000, if rates were to increase to 7.5% (7% for conventional loans or about 1 point higher than they are today), the payment would be $3,272, a savings of $8 per month. If rates were to increase to 8.5% (8% for conventional like they were at the beginning of this decade), that payment would rise to $3,599, or an extra $319 per month. If inflation was out of control and rates popped up to 10.5% (10% for conventional like they were at the beginning of 1990), the payment would be $4,281, $1,001 more every single month. As you can imagine, the higher the purchase price, the higher the loan amount, the greater the effect on the payment as interest rates rise.
CHOICES: The beauty of a buyers market is the vast number of choices in the marketplace. Gone are the days where buyers had to overbid on homes only to settle on their fourth choice. Instead, buyers have a plethora of homes to choose from in order to isolate the best fit for their family. That’s a luxury that buyers were begging for just two years ago. Buyers should not fall into the trap of waiting for the market bottom. Bottom watchers end up entering the market when demand is on the rise and run the risk of settling on their second or third choice.
TAX BREAK: Many forget to consider the huge gift from Uncle Sam, a wonderful yearly tax write off of interest and taxes, a huge savings for homeowners.
LONG TERM INVESTMENT: Markets move in cycles. We are currently experiencing a buyers market. Historically, we have had many sellers markets and many buyers markets. But, the fact remains that homes in Orange County have ALWAYS beat the prior record height after EVERY cyclical downturn. Another fact is that Orange County is running out of land in which to build additional homes. People aspire to live here because of the weather, the beaches, the recreation, and the great lifestyle. Movies and television shows feature Orange County as their backdrop. Why? It is simple, Orange County sells.
Many homeowners are opting to pull their homes off the market, which is evident in the current active inventory reading. The active inventory has continued its descent, falling by 464 homes in the past two weeks to 16,769 homes. Over the past four weeks, the active inventory has dropped 685 homes. Demand, the number of homes placed into escrow within the prior month, decreased by 52 homes to 1,243 new escrows. The market time increased slightly to 13.49 months from 13.31 months two weeks ago. The small drop in demand and small increase in Market Time can most likely be attributed to the long Thanksgiving weekend. Last year at this time there were an additional 672 escrows within the prior month, the active inventory was at 13,572, or 3,197 fewer homes, and market time was at 7.09 months. Two years ago, there were 8,671 fewer homes on the market, 1,166 more escrows within the prior month, and the market time was at 3.36 months.
Currently, short sales and foreclosures in Orange County account for 21% of the active inventory and 26% of all escrows opened within the prior month. Of all the short sales and foreclosures currently on the market, 63% are below $500,000, up from 62% two weeks ago and 59% four weeks ago. 93% of all short sales and foreclosures currently on the market are below $750,000, unchanged over the past four weeks. 35.3% of the all homes under $500,000 are either a short sale or a foreclosure. For the 1,758 detached homes in Orange County priced below $500,000, 50% are either a short sale or a foreclosure.
The disparity between the detached home market and condominiums has returned to normal for this time of year (it took a brief hiatus because of the financial crunch). Market time for detached homes is now at 12.92 homes versus 14.46 months for condominiums.
What can we expect for the remainder of the year and the beginning of 2008? The year is almost complete, but we can expect much of the same demand while the active inventory continues its decline to the 15,000 home mark. With demand around the same level and the inventory dropping, market time will improve slightly. We can expect demand to pick up after the first few weeks of the New Year and continuing to pick up through the Spring market. Demand will be between 15 to 20% less compared to 2007, but will be much higher than its current level. With many homeowners anticipating the Spring market, many will mistakenly place their home on the market with the expectation of the ability to sell fast. However, with the inventory starting at 15,000 homes, it will quickly blossom to the 20,000 home mark. More short sales and foreclosures will be placed on the market to compete with traditional sellers.
What if you are a seller, how should you respond to the market? First, if a seller has a home valued below $2 million, a majority of the market, do not wait for the Spring to sell. In a buyers market, if you have to sell, sell early and price your home according to the market value right out of the gate. Do not risk chasing the market down in value. It is also extremely important to heed the following warning: do NOT place your home on the market unless you absolutely, unmistakably MUST sell NOW. The only exception to this rule is the high end, homes above the $2 million mark. Now more than ever, sellers must rely on an experienced, tuned-in real estate expert to guide them. Price is important, but it is not always the answer. Sometimes, there just is no demand for a given period of time. Patience is very crucial for success. Price is becoming increasingly difficult to determine because of so many short sales with artificially low prices that may entice a buyer but will never be accepted by a lender. Thus, there is a lot of homework and preparation necessary to establish price. It is still imperative to price a home at or slightly below the last comparable sale or escrow, but a drastic drop is not necessary. Stay in close contact with all changes in the marketplace. Keep in mind, with so many choices, the better the condition, the higher the probability in procuring an offer. So, address all cosmetic repairs, just as lenders are apt to do in today’s market. Don’t be afraid to replace worn carpet and paint scuffed walls, If a roof is leaking, fix it or replace it. It can take months to sell a home; BUT, the home should ALWAYS be in showing condition. You will never know when the buyer of your home is going to come through and you want your home to show its absolute best.
Steven ThomasRE/MAX Real Estate Services
President"Outstanding Agents! Outstanding Results!"
If you are considering buying or selling a home in South Orange County, call on the experts! Dianna and Brian McGarvin 949-370-2652 or visit our website at http://www.pierbowl.com/.
Now that the Thanksgiving leftovers have been depleted, we move on to the next holiday season, the absolute “best” time of the year to be a buyer. Unfortunately, consumers seem to look at only one factor in purchasing: price. If prices are trending down, they simply don’t want to purchase. The logic used is the same used in shopping. For example, if you were looking for a high definition flat panel television set, yet every day the news reports and newspapers detailed that the market for flat panel televisions was down and that prices would fall, you would be inclined to wait. HOWEVER, there are a lot of factors in buying a home which most consumers simply do not consider. Purchasing a home is far more complex than going down to the local electronic store and purchasing a television. In purchasing a home, a buyer should consider the following factors in addition to pricing trends: current interest rates, the number of choices in searching for a home, a gift from Uncle Sam in the form of a tax break and historical long term investment data for housing in Orange County. I have been accused of being biased because I am in the industry. I am sure the skeptic naturally questions buying right now, but that’s because they are looking at purchasing based solely upon the trend in pricing. There is also a segment of the market that is very vocal about the impending doom of real estate. Many have expectations of prices dropping by 20%, 30% or more. First, a large portion of the segment is fence sitting buyers rooting for the market to drop to a point where they can afford a larger home. The problem with that theory is that even with all of the pressure on price because of supply and demand, homeowners are simply reluctant to drop prices swiftly. There is stickiness to pricing that has been a character of the present market since it first slowed back at the beginning of 2006. Many think that bank foreclosures will drop the value in neighborhoods because bank owned homes are “deals.” As somebody who sold hundreds of bank owned foreclosures throughout the 1990’s, I must dispel this myth. Most banks will do whatever they can to achieve market value and they will hold firm on price. They are very aware of any the value of any home in their portfolio through a real estate broker and an appraisal (sometimes multiple appraisals). They will opt to rehabilitate a home by addressing all cosmetic repairs and necessary repairs with new carpet, new paint inside and out, replacing the roof, new fixtures, new faucets, new windows, etc. They will do whatever it takes so that the property shines inside and out. They are only willing to work with serious buyers. There are some ridiculously low prices on homes currently on the market, and they are ALL short sales. The price may be attractive, but the sale is “subject to lender approval.” Unfortunately, the price is not set by the lender; instead, the seller and buyer set the price in hopes to entice a borrower to write an offer in a slow market. Remember, lenders are not slouches and they are not willing to give away thousands of dollars so that a homeowner can get out from underneath a home. Instead, they will do their homework and obtain a broker’s, or multiple brokers’, opinion of value, and a certified appraisal, or even multiple appraisals. Remember, they want to recoup as much of their asset as possible. Many short sales are submitted and rejected. Buyers should look for listings with preapproved short sales where a reasonable sales price has already been established. Unfortunately, this is the exception and not the rule.
The talk around the coffee pot these days centers around the numbers of buyers who are comfortably perched on the fence waiting for the “best” time to buy. An economist at a conference last week aptly stated that “nobody is going to ring a bell at the bottom of the market.” Plus, these fence sitters are just factoring the pressure on pricing. So, let’s take a closer look at what most buyers are not considering in their decision to purchase:
RATES: Bernanke and the Federal Reserve may be looking to cut the discount rate again in December, and they may even cut it a couple more times in 2008. However, when you hear that the Federal Reserve has cut the discount rate, it does not affect the long term, 30-year fixed rates used to purchase a home, directly. The cut only has an immediate effect on short term rates like equity lines, credit card debt, etc. Interest rates can only go so low. Most economists agree that the current rates, now below 6%, are about as low as they will go. The new Federal Reserve, under the guidance of Bernanke, is not interested in keeping the discount rates at the current low level, either. The recent credit crisis has forced them to reverse course in their methodical increases since the beginning of 2006. Many are now pointing a finger at the old Federal Reserve, under the guidance of Alan Greenspan, for artificially stimulating demand in real estate by keeping rates at very low levels for several years. With rates at the current low levels, the general public is now accustomed to low rates. Many do not recall that rates were at 8% at the beginning of the 2000’s and they were at 10% at the beginning of the 1990’s. They have been much higher than that too. But, just as we became accustomed to low rates, when rates do rise, and they will rise, the general public will get used to an environment of increasing rates, just as we have with the price of gasoline. We may not like it, but there is very little we can do about it. If you bought a condo for the current detached median price, $650,000, with 20% down, at the current jumbo rate of approximately 6.5% (5.75% for conventional loans which are loan amounts less than $417,000), the mortgage payment would be $3,280. Even if values were to decline by 10%, bringing the $650,000 home to $585,000, if rates were to increase to 7.5% (7% for conventional loans or about 1 point higher than they are today), the payment would be $3,272, a savings of $8 per month. If rates were to increase to 8.5% (8% for conventional like they were at the beginning of this decade), that payment would rise to $3,599, or an extra $319 per month. If inflation was out of control and rates popped up to 10.5% (10% for conventional like they were at the beginning of 1990), the payment would be $4,281, $1,001 more every single month. As you can imagine, the higher the purchase price, the higher the loan amount, the greater the effect on the payment as interest rates rise.
CHOICES: The beauty of a buyers market is the vast number of choices in the marketplace. Gone are the days where buyers had to overbid on homes only to settle on their fourth choice. Instead, buyers have a plethora of homes to choose from in order to isolate the best fit for their family. That’s a luxury that buyers were begging for just two years ago. Buyers should not fall into the trap of waiting for the market bottom. Bottom watchers end up entering the market when demand is on the rise and run the risk of settling on their second or third choice.
TAX BREAK: Many forget to consider the huge gift from Uncle Sam, a wonderful yearly tax write off of interest and taxes, a huge savings for homeowners.
LONG TERM INVESTMENT: Markets move in cycles. We are currently experiencing a buyers market. Historically, we have had many sellers markets and many buyers markets. But, the fact remains that homes in Orange County have ALWAYS beat the prior record height after EVERY cyclical downturn. Another fact is that Orange County is running out of land in which to build additional homes. People aspire to live here because of the weather, the beaches, the recreation, and the great lifestyle. Movies and television shows feature Orange County as their backdrop. Why? It is simple, Orange County sells.
Many homeowners are opting to pull their homes off the market, which is evident in the current active inventory reading. The active inventory has continued its descent, falling by 464 homes in the past two weeks to 16,769 homes. Over the past four weeks, the active inventory has dropped 685 homes. Demand, the number of homes placed into escrow within the prior month, decreased by 52 homes to 1,243 new escrows. The market time increased slightly to 13.49 months from 13.31 months two weeks ago. The small drop in demand and small increase in Market Time can most likely be attributed to the long Thanksgiving weekend. Last year at this time there were an additional 672 escrows within the prior month, the active inventory was at 13,572, or 3,197 fewer homes, and market time was at 7.09 months. Two years ago, there were 8,671 fewer homes on the market, 1,166 more escrows within the prior month, and the market time was at 3.36 months.
Currently, short sales and foreclosures in Orange County account for 21% of the active inventory and 26% of all escrows opened within the prior month. Of all the short sales and foreclosures currently on the market, 63% are below $500,000, up from 62% two weeks ago and 59% four weeks ago. 93% of all short sales and foreclosures currently on the market are below $750,000, unchanged over the past four weeks. 35.3% of the all homes under $500,000 are either a short sale or a foreclosure. For the 1,758 detached homes in Orange County priced below $500,000, 50% are either a short sale or a foreclosure.
The disparity between the detached home market and condominiums has returned to normal for this time of year (it took a brief hiatus because of the financial crunch). Market time for detached homes is now at 12.92 homes versus 14.46 months for condominiums.
What can we expect for the remainder of the year and the beginning of 2008? The year is almost complete, but we can expect much of the same demand while the active inventory continues its decline to the 15,000 home mark. With demand around the same level and the inventory dropping, market time will improve slightly. We can expect demand to pick up after the first few weeks of the New Year and continuing to pick up through the Spring market. Demand will be between 15 to 20% less compared to 2007, but will be much higher than its current level. With many homeowners anticipating the Spring market, many will mistakenly place their home on the market with the expectation of the ability to sell fast. However, with the inventory starting at 15,000 homes, it will quickly blossom to the 20,000 home mark. More short sales and foreclosures will be placed on the market to compete with traditional sellers.
What if you are a seller, how should you respond to the market? First, if a seller has a home valued below $2 million, a majority of the market, do not wait for the Spring to sell. In a buyers market, if you have to sell, sell early and price your home according to the market value right out of the gate. Do not risk chasing the market down in value. It is also extremely important to heed the following warning: do NOT place your home on the market unless you absolutely, unmistakably MUST sell NOW. The only exception to this rule is the high end, homes above the $2 million mark. Now more than ever, sellers must rely on an experienced, tuned-in real estate expert to guide them. Price is important, but it is not always the answer. Sometimes, there just is no demand for a given period of time. Patience is very crucial for success. Price is becoming increasingly difficult to determine because of so many short sales with artificially low prices that may entice a buyer but will never be accepted by a lender. Thus, there is a lot of homework and preparation necessary to establish price. It is still imperative to price a home at or slightly below the last comparable sale or escrow, but a drastic drop is not necessary. Stay in close contact with all changes in the marketplace. Keep in mind, with so many choices, the better the condition, the higher the probability in procuring an offer. So, address all cosmetic repairs, just as lenders are apt to do in today’s market. Don’t be afraid to replace worn carpet and paint scuffed walls, If a roof is leaking, fix it or replace it. It can take months to sell a home; BUT, the home should ALWAYS be in showing condition. You will never know when the buyer of your home is going to come through and you want your home to show its absolute best.
Steven ThomasRE/MAX Real Estate Services
President"Outstanding Agents! Outstanding Results!"
If you are considering buying or selling a home in South Orange County, call on the experts! Dianna and Brian McGarvin 949-370-2652 or visit our website at http://www.pierbowl.com/.
Sunday, November 18, 2007
Market Time Report: Attention Buyers! It’s Time to Gobble Up a Home
November 15, 2007
Horn of plenty, cornucopia, feast, buffet… if you are a buyer sitting on the fence, the conditions are ideal; it is TIME to gobble up a home. There are many buyers out there who are thinking that the inventory is high, demand is low and there is still a lot of pressure on pricing; so, why buy now? Thus, many buyers are sitting on the proverbial fence waiting for some sort of sign that “today” is the perfect time to buy, the “bottom of the market.” Just as nobody predicted the financial credit crunch that hit the world in August, nobody will be able to isolate THE bottom of the market without quite a bit of luck. Instead let’s take a closer look at the current market condition. Yes, the fence sitting buyers are correct: the inventory is high, demand is low and there is pressure on pricing. But, many are missing the often overlooked OTHER conditions of the current market: historically low interest rates that will not remain at these low levels forever, a cornucopia of choices not seen in over a decade, the wonderful tax advantages of owning a home, and, historically, real estate as a super long term investment.
RATES: You can put good money on the fact that Bernanke and the Federal Reserve will not leave rates at artificially low levels for as long as they did throughout the 2000’s. We will have to wait and see how the history books are written, but Alan Greenspan (the prior Federal Reserve Chairman) and the Federal Reserve, under his guidance, may share quite a bit of the blame for artificially fueling the excesses in the past housing boom. Just as everybody grew accustomed to housing appreciation for years, everybody has also grown accustomed to these historically low interest rates. At the beginning of 2000, rates were at about 8%. At the beginning of 1990, rates were at 10%. Buyer’s are just looking at pricing but are overlooking the fact that an increase in rates affects affordability substantially. If you bought a home for the current detached median price, $650,000, with 20% down, at the current jumbo rate of approximately 6.5% (6% for conventional loans which are loan amounts less than $417,000), the mortgage payment would be $3,280. Even if values were to decline by 10%, bringing the $650,000 home to $585,000, if rates were to increase to 7.5%, the payment would be $3,272 per month, a savings of $8. If rates were to increase to 8%, that payment would rise to $3,434, or $154 more. If inflation was out of control and rates popped up to 10% (they were much higher than that in the late 1970’s and early 1980’s), the payment would be $4,107 per month, $827 more every single month. As you can imagine, the higher the purchase price, the higher the loan amount, the greater the affect on the payment as interest rates rise.
CHOICES: With a large inventory and low demand, buyers have a lot of choices in their search to find their home. Just a few years ago buyers were writing offer after offer on one home after another, only to settle for their third or fourth choice and pay above the asking price, competing with several other buyers every step of the way. Many agents were reluctant to work with a buyer unless they were realistic in their expectations of the market. Sellers ruled the real estate kingdom and called the shots (within reason of course). The current market is polar opposite, this time with sellers competing for the attention of a much smaller buyer pool. Today, agents are reluctant to work with sellers unless they are realistic in their expectations of the current market and are motivated to do what it takes to procure an offer. Now, buyers rule the real estate kingdom and call the shots (within reason). A buyer has the luxury of patiently isolating their home of choice, knowing that all the cards are stacked in their favor. Why wait for the market to change before making a strike? Often times, buyers that wait too long end up competing with other buyers and have to settle for a second or third choice.
TAX BREAK: I would be remiss if I did not remind everybody of the wonderful tax write offs that Uncle Sam has so generously provided to all home owners; the larger the loan, the bigger the tax break. Homeowners are able to write off their interest and tax payments, a gift from our uncle.
LONG TERM INVESTMENT: It’s quite simple, over time, real estate along the golden coast of California has and always will do well. There aren’t that many areas in the United States that match the weather, plenty of sun and low humidity, the close proximity to some of the best beaches in the world, and year round outdoor activities where one can ski one day or work on a tan reclined in a favorite beach chair the very next day. In 1972, 35 years ago, the median price was at $28,400 in Orange County. In 1977, 30 years ago, the median price was at $70,100. In 1982, 25 years ago, the median sales price was at $129,641 in Orange County. In 1997, the median price was at $229,840 in Orange County. People from around the world aspire to live in Orange County. That will not change. Throw in the fact that builders are running out of raw, buildable land, and there is considerable upward pressure on price for the long term. Buy for the long term, it’s not only “home,” it’s an excellent investment.
Currently, as more and more homeowners who really don’t have to sell are pulling their homes off of the market, the active inventory continues its descent, falling by 221 homes to 17,233 homes. Over the past four weeks, the active inventory has dropped 526 homes. Demand, the number of homes placed into escrow within the prior month, has increased by 182 homes to 1,295 new escrows since bottoming out at its lowest level of the year on October 4th. It looks as if the Orange County real estate market is starting to shake off the affects of the financial crunch. With another increase in demand and another drop in the inventory, market time continues its decrease from the 2007 height, 15.96 months, reached on October 4th, to 13.31 months today. Last year at this time there were an additional 692 escrows within the prior month, the active inventory was at 14,165, or 3,068 fewer homes, and market time was at 7.13 months. Two years ago, there were 8,850 fewer homes on the market, 1,352 more escrows within the prior month, and the market time was at 3.17 months.
Currently, short sales and foreclosures in Orange County account for 19% of the active inventory and 21% of all escrows opened within the prior month. Of all the short sales and foreclosures currently on the market, 62% are below $500,000, up from 59% two weeks ago and 57% four weeks ago. 93% of all short sales and foreclosures currently on the market are below $750,000, unchanged over the past two weeks and up slightly from 92% posted four weeks ago. 32.9% of the all homes under $500,000 are either a short sale or a foreclosure. For the 1,662 detached homes in Orange County priced below $500,000, 48.3% are either a short sale or a foreclosure, a staggering statistic.
There is almost no difference between the detached home market, a market time of 13.37 months, and the condominium market, a 13.20 month market. Until the financial crunch is completely in the rear view mirror, these numbers should remain close.
What can we expect for the remainder of the year and the beginning of 2008? We can probably expect demand to continue to rise slightly, after of course taking a brief hiatus for Thanksgiving, as there is nowhere but up from the lows stemming from the financial crunch. September and October promise to be lows for closed sales for 2007. The active inventory will continue its march downward as more and more sellers pull their homes off of the market. Yes, there are homeowners who don’t really have to sell and who no longer have the stomach to do what it will take to successfully sell in this market. We should start the New Year with a current inventory of about 15,000 homes, almost 4,000 more homes than the beginning of this year. Market Time will continue to drop through the end of the year. We will most likely start the New Year with an expected market time of 12.5 months. Towards the end of January, demand will rise and market time should drop to about 10 months. But, as many homeowners with flawed expectations of a good Spring place their homes on the market, the inventory will once again rise. If too many overzealous homeowners opt to enter the market, the inventory will easily reach the 20,000 home mark. Demand in the Spring could be off by about 10% compared to this year.
What if you are a seller, how should you respond to the market? WARNING: do NOT place your home on the market unless you absolutely, unequivocally MUST sell NOW. The only exception to this rule is the high end, homes above the $2 million mark. Contrary to what many think, if all of a sudden every seller on the market priced their home below the last comparable sale or escrow, the fence-sitting buyers would not jump off of their perches in droves and there would be very little affect on demand. So, be careful in navigating the tough waters of the current real estate market. Now more than ever, sellers really need an experienced, tuned-in real estate agent to guide them. “For Sale By Owner” and discount brokerages are a thing of the past. With so many short sales in the marketplace, it is tough to determine price. Many buyers are learning quickly, if a price is too good to be true and “subject to lender approval” (a short sale) it is too good to be true. After waiting a very long time for an answer, sometimes weeks, buyers are realizing that the artificially low prices may be priced to entice a buyer, but they are too low for a lender to accept. The price affixed to a short sale is NOT a value provided by the lender; rather, it is a value determined by the agent and seller. A few short sales are priced appropriately and are already approved by the bank. However, this requires everybody, the seller and their agent, to do all of their homework up front. Just as in school, very few like to do their homework early; but, that is what it takes to successfully represent a short sale. So, as a seller, most short sales that surround their home are artificially priced. An experienced agent can help ascertain the real values from the artificial. The bottom line, be careful in pricing. It is still imperative to price a home at or slightly below the last comparable sale or escrow, but a drastic drop is not necessary. Stay in close contact with all changes in the marketplace. Sellers should address all cosmetic repairs inside and out. With so many choices, the better the condition, the better the odds of success. If a roof is leaking, fix it or replace it. Chances are there are plenty of homes with a roof that does not leak. The home should be in showing condition ALWAYS. If a seller needs a break from selling their home for months on end, then they can place their home on “hold do not show” for a week or two of rest. A seller never knows the precise date when the buyer that is going to fall in love with their home walks in. A seller wants the impression to be the absolute best impression; so, the home must be staged day in and day out.
Steven Thomas
President RE/MAX Real Estate Services
If you are considering buying or selling a home in South Orange County, call on the experts! Dianna and Brian McGarvin 949-370-2652 or visit our website at http://www.pierbowl.com/.
Horn of plenty, cornucopia, feast, buffet… if you are a buyer sitting on the fence, the conditions are ideal; it is TIME to gobble up a home. There are many buyers out there who are thinking that the inventory is high, demand is low and there is still a lot of pressure on pricing; so, why buy now? Thus, many buyers are sitting on the proverbial fence waiting for some sort of sign that “today” is the perfect time to buy, the “bottom of the market.” Just as nobody predicted the financial credit crunch that hit the world in August, nobody will be able to isolate THE bottom of the market without quite a bit of luck. Instead let’s take a closer look at the current market condition. Yes, the fence sitting buyers are correct: the inventory is high, demand is low and there is pressure on pricing. But, many are missing the often overlooked OTHER conditions of the current market: historically low interest rates that will not remain at these low levels forever, a cornucopia of choices not seen in over a decade, the wonderful tax advantages of owning a home, and, historically, real estate as a super long term investment.
RATES: You can put good money on the fact that Bernanke and the Federal Reserve will not leave rates at artificially low levels for as long as they did throughout the 2000’s. We will have to wait and see how the history books are written, but Alan Greenspan (the prior Federal Reserve Chairman) and the Federal Reserve, under his guidance, may share quite a bit of the blame for artificially fueling the excesses in the past housing boom. Just as everybody grew accustomed to housing appreciation for years, everybody has also grown accustomed to these historically low interest rates. At the beginning of 2000, rates were at about 8%. At the beginning of 1990, rates were at 10%. Buyer’s are just looking at pricing but are overlooking the fact that an increase in rates affects affordability substantially. If you bought a home for the current detached median price, $650,000, with 20% down, at the current jumbo rate of approximately 6.5% (6% for conventional loans which are loan amounts less than $417,000), the mortgage payment would be $3,280. Even if values were to decline by 10%, bringing the $650,000 home to $585,000, if rates were to increase to 7.5%, the payment would be $3,272 per month, a savings of $8. If rates were to increase to 8%, that payment would rise to $3,434, or $154 more. If inflation was out of control and rates popped up to 10% (they were much higher than that in the late 1970’s and early 1980’s), the payment would be $4,107 per month, $827 more every single month. As you can imagine, the higher the purchase price, the higher the loan amount, the greater the affect on the payment as interest rates rise.
CHOICES: With a large inventory and low demand, buyers have a lot of choices in their search to find their home. Just a few years ago buyers were writing offer after offer on one home after another, only to settle for their third or fourth choice and pay above the asking price, competing with several other buyers every step of the way. Many agents were reluctant to work with a buyer unless they were realistic in their expectations of the market. Sellers ruled the real estate kingdom and called the shots (within reason of course). The current market is polar opposite, this time with sellers competing for the attention of a much smaller buyer pool. Today, agents are reluctant to work with sellers unless they are realistic in their expectations of the current market and are motivated to do what it takes to procure an offer. Now, buyers rule the real estate kingdom and call the shots (within reason). A buyer has the luxury of patiently isolating their home of choice, knowing that all the cards are stacked in their favor. Why wait for the market to change before making a strike? Often times, buyers that wait too long end up competing with other buyers and have to settle for a second or third choice.
TAX BREAK: I would be remiss if I did not remind everybody of the wonderful tax write offs that Uncle Sam has so generously provided to all home owners; the larger the loan, the bigger the tax break. Homeowners are able to write off their interest and tax payments, a gift from our uncle.
LONG TERM INVESTMENT: It’s quite simple, over time, real estate along the golden coast of California has and always will do well. There aren’t that many areas in the United States that match the weather, plenty of sun and low humidity, the close proximity to some of the best beaches in the world, and year round outdoor activities where one can ski one day or work on a tan reclined in a favorite beach chair the very next day. In 1972, 35 years ago, the median price was at $28,400 in Orange County. In 1977, 30 years ago, the median price was at $70,100. In 1982, 25 years ago, the median sales price was at $129,641 in Orange County. In 1997, the median price was at $229,840 in Orange County. People from around the world aspire to live in Orange County. That will not change. Throw in the fact that builders are running out of raw, buildable land, and there is considerable upward pressure on price for the long term. Buy for the long term, it’s not only “home,” it’s an excellent investment.
Currently, as more and more homeowners who really don’t have to sell are pulling their homes off of the market, the active inventory continues its descent, falling by 221 homes to 17,233 homes. Over the past four weeks, the active inventory has dropped 526 homes. Demand, the number of homes placed into escrow within the prior month, has increased by 182 homes to 1,295 new escrows since bottoming out at its lowest level of the year on October 4th. It looks as if the Orange County real estate market is starting to shake off the affects of the financial crunch. With another increase in demand and another drop in the inventory, market time continues its decrease from the 2007 height, 15.96 months, reached on October 4th, to 13.31 months today. Last year at this time there were an additional 692 escrows within the prior month, the active inventory was at 14,165, or 3,068 fewer homes, and market time was at 7.13 months. Two years ago, there were 8,850 fewer homes on the market, 1,352 more escrows within the prior month, and the market time was at 3.17 months.
Currently, short sales and foreclosures in Orange County account for 19% of the active inventory and 21% of all escrows opened within the prior month. Of all the short sales and foreclosures currently on the market, 62% are below $500,000, up from 59% two weeks ago and 57% four weeks ago. 93% of all short sales and foreclosures currently on the market are below $750,000, unchanged over the past two weeks and up slightly from 92% posted four weeks ago. 32.9% of the all homes under $500,000 are either a short sale or a foreclosure. For the 1,662 detached homes in Orange County priced below $500,000, 48.3% are either a short sale or a foreclosure, a staggering statistic.
There is almost no difference between the detached home market, a market time of 13.37 months, and the condominium market, a 13.20 month market. Until the financial crunch is completely in the rear view mirror, these numbers should remain close.
What can we expect for the remainder of the year and the beginning of 2008? We can probably expect demand to continue to rise slightly, after of course taking a brief hiatus for Thanksgiving, as there is nowhere but up from the lows stemming from the financial crunch. September and October promise to be lows for closed sales for 2007. The active inventory will continue its march downward as more and more sellers pull their homes off of the market. Yes, there are homeowners who don’t really have to sell and who no longer have the stomach to do what it will take to successfully sell in this market. We should start the New Year with a current inventory of about 15,000 homes, almost 4,000 more homes than the beginning of this year. Market Time will continue to drop through the end of the year. We will most likely start the New Year with an expected market time of 12.5 months. Towards the end of January, demand will rise and market time should drop to about 10 months. But, as many homeowners with flawed expectations of a good Spring place their homes on the market, the inventory will once again rise. If too many overzealous homeowners opt to enter the market, the inventory will easily reach the 20,000 home mark. Demand in the Spring could be off by about 10% compared to this year.
What if you are a seller, how should you respond to the market? WARNING: do NOT place your home on the market unless you absolutely, unequivocally MUST sell NOW. The only exception to this rule is the high end, homes above the $2 million mark. Contrary to what many think, if all of a sudden every seller on the market priced their home below the last comparable sale or escrow, the fence-sitting buyers would not jump off of their perches in droves and there would be very little affect on demand. So, be careful in navigating the tough waters of the current real estate market. Now more than ever, sellers really need an experienced, tuned-in real estate agent to guide them. “For Sale By Owner” and discount brokerages are a thing of the past. With so many short sales in the marketplace, it is tough to determine price. Many buyers are learning quickly, if a price is too good to be true and “subject to lender approval” (a short sale) it is too good to be true. After waiting a very long time for an answer, sometimes weeks, buyers are realizing that the artificially low prices may be priced to entice a buyer, but they are too low for a lender to accept. The price affixed to a short sale is NOT a value provided by the lender; rather, it is a value determined by the agent and seller. A few short sales are priced appropriately and are already approved by the bank. However, this requires everybody, the seller and their agent, to do all of their homework up front. Just as in school, very few like to do their homework early; but, that is what it takes to successfully represent a short sale. So, as a seller, most short sales that surround their home are artificially priced. An experienced agent can help ascertain the real values from the artificial. The bottom line, be careful in pricing. It is still imperative to price a home at or slightly below the last comparable sale or escrow, but a drastic drop is not necessary. Stay in close contact with all changes in the marketplace. Sellers should address all cosmetic repairs inside and out. With so many choices, the better the condition, the better the odds of success. If a roof is leaking, fix it or replace it. Chances are there are plenty of homes with a roof that does not leak. The home should be in showing condition ALWAYS. If a seller needs a break from selling their home for months on end, then they can place their home on “hold do not show” for a week or two of rest. A seller never knows the precise date when the buyer that is going to fall in love with their home walks in. A seller wants the impression to be the absolute best impression; so, the home must be staged day in and day out.
Steven Thomas
President RE/MAX Real Estate Services
If you are considering buying or selling a home in South Orange County, call on the experts! Dianna and Brian McGarvin 949-370-2652 or visit our website at http://www.pierbowl.com/.
Thursday, November 15, 2007
Welcome home to San Rafael in Talega
118 Via Monte Picayo, San ClementeFall in love with this gracious home as you step through the gates and turret entry. Upstairs includes 3 bedrooms, built-in computer niche and laundry room. Downstairs offers an additional (or 4th) bedroom and full bath. Complete with a three car tandem garage. Spacious kitchen opens to an eating area and family room. Richard Marshall Olde Boards wood flooring, marble and newer carpet throughout. Master suite with recently remodeled bath. Built-in computer niche, speaker system, wood shutters, crown molding, high baseboards and window and door casings. Located on a cul de sac in the heart of Talega. Stroll to the Village, schools and golf club. Low mello roos and association dues.
For a private showing call Brian @ 949-370-2652.
If you are considering buying or selling a home in South Orange County, call on the experts! Dianna and Brian McGarvin 949-370-2652 or visit our website at http://www.pierbowl.com/.
Monday, November 5, 2007
Market Time Report: The Holiday Market is Here, Time to Buy
November 1, 2007
Good Afternoon!
Now that the kids are coming off of their sugar rushes and Halloween 2007 is in the past, it is time for us to move into the Holiday Market, cyclically the slowest time of the year… but, not this year. We already experienced the slowest demand of the year due to the financial market crunch, September and October. November is already showing signs of improvement and December promises to be even better. Bernanke and the Federal Reserve lowered the short term rate by another quarter percent, but are beginning to warn that their cuts may be coming to an end. Yet, the financial crisis is not over, so we can expect at least one more cut. Rates have been dropping and so have jumbo loans (loans above $417,000). The discrepancy between conforming loans (loans at $417,000 or less) and jumbo loans is beginning to finally narrow. It really is a great time to be a buyer with tons of choices, low interest rates, plenty of motivated sellers and not a lot of competitions among buyers. It looks as if Congress has not properly heeded Bernanke’s feedback at Congressional hearings back in September where he stated that the conforming loan limit should be temporarily increased to increase liquidity in the financial market and NOT wait until March when the market will right itself. Sometime in 2008, we can expect the government to step in and correct the giant discrepancy between the current conforming loan limit, $417,000 and the median price for a detached home in the state of California, $531,000.
The bottom of the financial crunch, in terms of demand (escrow activity), was about a month ago. Demand, the number of homes placed into escrow within the prior month, increased from 1,113 homes four weeks ago to 1,241 homes today, that’s an increase of 128 homes, or a 12% increase. With the start to the Holiday market, it looks as if many homeowners are opting to pull their homes off of the market. The active inventory dropped by 305 homes in two weeks to 17,454 homes. With an increase in demand and a drop in the inventory, market time decreased from 15.11 months two weeks ago to 14.06 months today. Last year at this time there were an additional 746 escrows within the prior month, the active inventory was at 14,729, or 2,725 fewer homes, and market time was at 7.41 months. Two years ago, there were 9,195 fewer homes on the market, 1,509 more escrows within the prior month, and the market time was at 3.00 months.
I have created a new chart, the Orange County Foreclosure Report, to help isolate the cities and price ranges that are more or less affected by short sales and foreclosures. Currently, short sales and foreclosures in Orange County account for 17.5% of the active inventory and 18% of all escrows opened within the prior month. Of all the short sales and foreclosures currently on the market, 59% are below $500,000, up from 57% two weeks ago, and 93% are below $750,000, up from 92% two weeks ago. 35% of the active inventory is comprised of homes below $500,000. That range has been impacted the most by the subprime shakeup; 30.1% are either bank owned or short sales. For homes between $500,000 and $750,000, another 35% of the active inventory, 17.1%, are either bank owned or short sales. They account for only 6.7% of the range of homes between $750,000 and $1 million. The higher the range, the lower the percentage.
The financial crunch had a tremendous impact on the market and an even more profound impact on detached homes. Even though the market is still feeling the effects of the financial crunch, it actually bottomed out about four weeks ago. The market time for detached homes dropped from 16.56 four weeks ago to 13.97 months today. Ever since the subprime meltdown in March, the detached home market has been better than the condominium market. But, that all changed in September as the financial crunch took a real bite out of the demand for detached homes. As rates for jumbo loans have dropped in recent weeks, demand is beginning to rise again. The detached market is once again better than the condominium market, slightly, but better. The market time for condominiums dropped from 15.08 months four weeks ago to 14.18 months today.
What can we expect for the remainder of the year and the beginning of 2008? Demand has continued its slow, but methodical rise over the past month as jumbo loan rates have dropped and confidence in our financial markets slowly returns. We can look for demand to continue to slowly ascend. Thus, the slowest time of the year is actually already in our rear view mirror, September and October. We can also expect the active inventory to drop as more homes are pulled off the market for the holidays. With demand on the rise and an inventory on the decline, the market time will actually continue to improve through the remainder of the year. With rates dropping, it will become more enticing for buyers to finally make the plunge. With the recent downturn in demand because of the financial crunch, there simply were not enough homes coming off of the market due to successfully placing a home into escrow. Thus, there has been a delay in the reduction of the active inventory. It appears as if we are going to start the New Year off at a very high level, around the 15,000 home level. That’s a lot of homes to start off the year. We started 2007 with a little over 11,000 homes and built up to nearly the 18,000 home mark. Starting the year at 15,000 makes the 20,000 inventory mark almost certain. Spring of this year was extremely slow due to the subprime shakeup. The Spring in 2008 will be even slower, about a 10% decrease in demand as some buyers sit on the fence a little longer and wait.
How should a seller approach the market? There are a lot of people who now have to sell because of economic circumstances where they simply can no longer afford their home because of recent adjustable mortgage rate resets. These sellers, short sale sellers and the banks that are foreclosing on homes really MUST sell. For sellers within areas or ranges with a higher percentage of troubled properties who are contemplating selling, they need to ask themselves if they have the stomach and ability to compete. There is a tremendous amount of competition in almost every city and every price range; thus, do NOT place your home on the market unless you absolutely HAVE to. Live in your home and do not panic, the market will return and surpass the recent highs. To be successful in this market, isolate the most recent comparable sale or escrow and price your home $10,000 below that mark. That still does not guarantee an immediate sale, but it is an attractive lure that will help your property stand out. Condition is also very important. First, address all cosmetic fixes from carpet to paint to repairing a leaking roof. Then, have the property in showing condition day in and day out. That is asking a lot given that homes are on the market for months, but you never know when the buyer that is going to buy your home is going to schedule an appointment and you want your home to be in its best showing condition prior to an offer being written. In a buyers market, keep in mind that the floorplan and location are also important factors in securing a sale. Odd floorplans, backing to power lines or a busy street are just a few examples that do well during a sellers market, but their value is heavily impacted during a slower market when there are so many alternatives. For perspective, there are 17,454 homes on the market and 1,241 new escrows within the prior month. Given current demand, 16,213 homeowners will NOT be successful over the course of the next month. The bottom line: if you are a seller, pack your patience, it will most likely take months to sell your home. Price your home to sell today and do not wait to drop the price or for a better market. This will result in chasing the market down in price.
How should a buyer approach the market? If you plan on owning your home for more than just a few years, rest assured that Southern California is not just a popular worldwide destination, it’s an excellent long term investment. It is important to note that you cannot believe everything you hear or read in the media:
"The prices of houses seem to have reached a plateau, and there is reasonable expectancy that prices will decline." - Time Magazine 1947
"Houses cost too much for the mass market. Today's average price is out of reach for two-thirds of all buyers." - Science Digest 1948 (average price at the time: $8,000)
"The goal of owning a home seems to be getting beyond the reach of more and more Americans." - Business Week 1969 (average price at the time: $28,000)
"Most economists agree... a home will become little more than a roof and a tax deduction, certainly not the lucrative investment it was..." - Money Magazine 1981
"We're starting to go back to the time when you bought a home not for its potential money-making abilities, but rather as a nesting spot." - Los Angeles Times 1993
"Financial planners agree that houses will continue to be a poor investment." - Kiplinger's Personal Finance Magazine 1993
"A home is where the bad investment is." - San Francisco Examiner 1996
Rates are great. Sellers are motivated. There are a lot of choices. It is great to be a buyer. So, look for the home that best fits your family’s needs and write an offer. Keep in mind that the sales to list price ratio is 95%, erasing the necessity to bring in a lowball offer. If you are a buyer, you may be concerned about falling prices, which is understandable. But, if you are going to live in the home for several years, the market will surpass its record levels again. Also, rates are not going to always be this low. As soon as the market is on the mend, Bernanke and the Federal Reserve are going to increase the rates to ease their fears of inflation and monthly mortgage payments for new loans will rise. If you bought a home for the current detached median price, $655,000, with 20% down, at the current jumbo rate of approximately 6.5%, the mortgage payment would be $3,312. Even if values were to decline by 10%, bringing the $655,000 home to $590,000, if rates were to increase to 7.5%, they payment would be $3,298 per month, a savings of $14. If rates were to increase to 8%, that payment would rise to $3,460, or $148 more. Plus, if you bought today, the first year interest tax write off for taxes would be $34,000. So, buy now and have a place to call home knowing that you made a wise decision.
Written by Steven Thomas President RE/MAX Real Estate Services
If you are considering buying or selling a home in South Orange County, call on the experts! Dianna and Brian McGarvin 949-370-2652 or visit our website at http://www.pierbowl.com/.
Good Afternoon!
Now that the kids are coming off of their sugar rushes and Halloween 2007 is in the past, it is time for us to move into the Holiday Market, cyclically the slowest time of the year… but, not this year. We already experienced the slowest demand of the year due to the financial market crunch, September and October. November is already showing signs of improvement and December promises to be even better. Bernanke and the Federal Reserve lowered the short term rate by another quarter percent, but are beginning to warn that their cuts may be coming to an end. Yet, the financial crisis is not over, so we can expect at least one more cut. Rates have been dropping and so have jumbo loans (loans above $417,000). The discrepancy between conforming loans (loans at $417,000 or less) and jumbo loans is beginning to finally narrow. It really is a great time to be a buyer with tons of choices, low interest rates, plenty of motivated sellers and not a lot of competitions among buyers. It looks as if Congress has not properly heeded Bernanke’s feedback at Congressional hearings back in September where he stated that the conforming loan limit should be temporarily increased to increase liquidity in the financial market and NOT wait until March when the market will right itself. Sometime in 2008, we can expect the government to step in and correct the giant discrepancy between the current conforming loan limit, $417,000 and the median price for a detached home in the state of California, $531,000.
The bottom of the financial crunch, in terms of demand (escrow activity), was about a month ago. Demand, the number of homes placed into escrow within the prior month, increased from 1,113 homes four weeks ago to 1,241 homes today, that’s an increase of 128 homes, or a 12% increase. With the start to the Holiday market, it looks as if many homeowners are opting to pull their homes off of the market. The active inventory dropped by 305 homes in two weeks to 17,454 homes. With an increase in demand and a drop in the inventory, market time decreased from 15.11 months two weeks ago to 14.06 months today. Last year at this time there were an additional 746 escrows within the prior month, the active inventory was at 14,729, or 2,725 fewer homes, and market time was at 7.41 months. Two years ago, there were 9,195 fewer homes on the market, 1,509 more escrows within the prior month, and the market time was at 3.00 months.
I have created a new chart, the Orange County Foreclosure Report, to help isolate the cities and price ranges that are more or less affected by short sales and foreclosures. Currently, short sales and foreclosures in Orange County account for 17.5% of the active inventory and 18% of all escrows opened within the prior month. Of all the short sales and foreclosures currently on the market, 59% are below $500,000, up from 57% two weeks ago, and 93% are below $750,000, up from 92% two weeks ago. 35% of the active inventory is comprised of homes below $500,000. That range has been impacted the most by the subprime shakeup; 30.1% are either bank owned or short sales. For homes between $500,000 and $750,000, another 35% of the active inventory, 17.1%, are either bank owned or short sales. They account for only 6.7% of the range of homes between $750,000 and $1 million. The higher the range, the lower the percentage.
The financial crunch had a tremendous impact on the market and an even more profound impact on detached homes. Even though the market is still feeling the effects of the financial crunch, it actually bottomed out about four weeks ago. The market time for detached homes dropped from 16.56 four weeks ago to 13.97 months today. Ever since the subprime meltdown in March, the detached home market has been better than the condominium market. But, that all changed in September as the financial crunch took a real bite out of the demand for detached homes. As rates for jumbo loans have dropped in recent weeks, demand is beginning to rise again. The detached market is once again better than the condominium market, slightly, but better. The market time for condominiums dropped from 15.08 months four weeks ago to 14.18 months today.
What can we expect for the remainder of the year and the beginning of 2008? Demand has continued its slow, but methodical rise over the past month as jumbo loan rates have dropped and confidence in our financial markets slowly returns. We can look for demand to continue to slowly ascend. Thus, the slowest time of the year is actually already in our rear view mirror, September and October. We can also expect the active inventory to drop as more homes are pulled off the market for the holidays. With demand on the rise and an inventory on the decline, the market time will actually continue to improve through the remainder of the year. With rates dropping, it will become more enticing for buyers to finally make the plunge. With the recent downturn in demand because of the financial crunch, there simply were not enough homes coming off of the market due to successfully placing a home into escrow. Thus, there has been a delay in the reduction of the active inventory. It appears as if we are going to start the New Year off at a very high level, around the 15,000 home level. That’s a lot of homes to start off the year. We started 2007 with a little over 11,000 homes and built up to nearly the 18,000 home mark. Starting the year at 15,000 makes the 20,000 inventory mark almost certain. Spring of this year was extremely slow due to the subprime shakeup. The Spring in 2008 will be even slower, about a 10% decrease in demand as some buyers sit on the fence a little longer and wait.
How should a seller approach the market? There are a lot of people who now have to sell because of economic circumstances where they simply can no longer afford their home because of recent adjustable mortgage rate resets. These sellers, short sale sellers and the banks that are foreclosing on homes really MUST sell. For sellers within areas or ranges with a higher percentage of troubled properties who are contemplating selling, they need to ask themselves if they have the stomach and ability to compete. There is a tremendous amount of competition in almost every city and every price range; thus, do NOT place your home on the market unless you absolutely HAVE to. Live in your home and do not panic, the market will return and surpass the recent highs. To be successful in this market, isolate the most recent comparable sale or escrow and price your home $10,000 below that mark. That still does not guarantee an immediate sale, but it is an attractive lure that will help your property stand out. Condition is also very important. First, address all cosmetic fixes from carpet to paint to repairing a leaking roof. Then, have the property in showing condition day in and day out. That is asking a lot given that homes are on the market for months, but you never know when the buyer that is going to buy your home is going to schedule an appointment and you want your home to be in its best showing condition prior to an offer being written. In a buyers market, keep in mind that the floorplan and location are also important factors in securing a sale. Odd floorplans, backing to power lines or a busy street are just a few examples that do well during a sellers market, but their value is heavily impacted during a slower market when there are so many alternatives. For perspective, there are 17,454 homes on the market and 1,241 new escrows within the prior month. Given current demand, 16,213 homeowners will NOT be successful over the course of the next month. The bottom line: if you are a seller, pack your patience, it will most likely take months to sell your home. Price your home to sell today and do not wait to drop the price or for a better market. This will result in chasing the market down in price.
How should a buyer approach the market? If you plan on owning your home for more than just a few years, rest assured that Southern California is not just a popular worldwide destination, it’s an excellent long term investment. It is important to note that you cannot believe everything you hear or read in the media:
"The prices of houses seem to have reached a plateau, and there is reasonable expectancy that prices will decline." - Time Magazine 1947
"Houses cost too much for the mass market. Today's average price is out of reach for two-thirds of all buyers." - Science Digest 1948 (average price at the time: $8,000)
"The goal of owning a home seems to be getting beyond the reach of more and more Americans." - Business Week 1969 (average price at the time: $28,000)
"Most economists agree... a home will become little more than a roof and a tax deduction, certainly not the lucrative investment it was..." - Money Magazine 1981
"We're starting to go back to the time when you bought a home not for its potential money-making abilities, but rather as a nesting spot." - Los Angeles Times 1993
"Financial planners agree that houses will continue to be a poor investment." - Kiplinger's Personal Finance Magazine 1993
"A home is where the bad investment is." - San Francisco Examiner 1996
Rates are great. Sellers are motivated. There are a lot of choices. It is great to be a buyer. So, look for the home that best fits your family’s needs and write an offer. Keep in mind that the sales to list price ratio is 95%, erasing the necessity to bring in a lowball offer. If you are a buyer, you may be concerned about falling prices, which is understandable. But, if you are going to live in the home for several years, the market will surpass its record levels again. Also, rates are not going to always be this low. As soon as the market is on the mend, Bernanke and the Federal Reserve are going to increase the rates to ease their fears of inflation and monthly mortgage payments for new loans will rise. If you bought a home for the current detached median price, $655,000, with 20% down, at the current jumbo rate of approximately 6.5%, the mortgage payment would be $3,312. Even if values were to decline by 10%, bringing the $655,000 home to $590,000, if rates were to increase to 7.5%, they payment would be $3,298 per month, a savings of $14. If rates were to increase to 8%, that payment would rise to $3,460, or $148 more. Plus, if you bought today, the first year interest tax write off for taxes would be $34,000. So, buy now and have a place to call home knowing that you made a wise decision.
Written by Steven Thomas President RE/MAX Real Estate Services
If you are considering buying or selling a home in South Orange County, call on the experts! Dianna and Brian McGarvin 949-370-2652 or visit our website at http://www.pierbowl.com/.
Saturday, October 20, 2007
Market Time Report: It’s a SPOOK-Tacular Time to Be a Buyer
October 18, 2007
Good Afternoon!
With Halloween fast approaching, the absolute prime buying season is at our doorstep, the Holiday market, from Halloween through the first few weeks of the New Year. Throw into that mix a drop in rates, choices not seen for buyers in years and a ton of pressure on pricing. The end result is it’s a good time to be a buyer. It looks as if the economic indicators are pointing towards another rate cut at the end of this month when Bernanke, the Federal Reserve chairman, and the rest of the Federal Reserve meet again. The remaining fixes needed to stabilize the financial market are extremely slow to evolve. Congress and the United States Treasury are providing more debate than actual firm solutions. So, it looks as if the credit crunch will take the better part of the rest of this year to right itself. In the meantime, at the prompting of the Treasury, Citigroup, Bank of America and JPMorgan Chase and Co. are working together to develop a $100 billion fund to buy up bad debt and restore confidence in the credit market so that investors will enter the game once again. Investors have been on the sidelines since August waiting to be sure that when they reenter the commercial paper market their investments will be safe and sound with almost guaranteed short term profits. They have long memories and it was just in August that everybody realized that commercial paper was laced with bad subprime debt. With strict qualifications now in place and virtually no subprime loans to speak of, the commercial paper market will slowly become more enticing. As the government continues to debate the merits of increasing the conventional loan limit (where rates are cheaper and are backed by government formed agencies) beyond its current $417,000 limit, it appears that by the time they react, the market will have righted itself. Bernanke warned everybody to act now and not wait until March of 2008. It appears as if nobody was listening. Stay tuned!!
It appears as if the bottom of the financial crunch hit a couple of weeks ago. Demand, the number of escrows placed into escrow within the prior month, increased from 1,113 homes two weeks ago to 1,175 homes today, that’s an increase of 62 homes, or a 5.6% increase. The current active inventory did not change at all over the past two weeks and remains at 17,759 homes. With an increase in demand and the inventory not changing, market time decreased from 15.96 months two weeks ago to 15.11 months today. Last year at this time there were an additional 836 escrows within the prior month, the active inventory was at 15,263, or 2,496 fewer homes, and market time was at 7.59 months. Two years ago, there were 9,493 fewer homes on the market, 1,606 more escrows within the prior month, and the market time was at 2.97 months.
Currently, short sales and foreclosures in Orange County account for 13% of the active inventory, up from 12% two weeks ago, and 15% of all escrows opened within the prior month, unchanged in two weeks. Of all the short sales and foreclosures currently on the market, 59% are below $500,000, up from 57% two weeks ago, and 93% are below $750,000, up from 92% two weeks ago.
The increased demand must have come from the detached home market, because the condominium market was virtually unchanged over the past two weeks, dropping from 15.08 months to 15.04 months. On the other hand, detached homes dropped from 16.56 months two weeks ago to 15.15 months today, a significant change that can most likely be attributed to buyers slowly reentering the jumbo loan market (loans above $417,000). 28.7% of the overall active inventory is vacant; 32.7% of the condominium market and 26.2% of the detached market.
What can we expect for the remainder of the year and the beginning of 2008? We are realizing a bit of an increase in demand as more and more jumbo loan buyers reemerge in the market. As rates for jumbo loans start dropping, we can expect this trend to continue. Demand really cannot drop much from its current levels; it is what can be referred to as inherent demand, those buyers who simply will buy regardless of the market because they want to own a home and just don’t want to rent: newlyweds, relocation buyers, empty nesters, etc. Rates are starting to fall as Wall Street has been nervously and negatively reacting to recent economic and earning reports. It appears as if Bernanke and the Federal Reserve are poised to drop rates again. As rates drop, it will become more enticing for buyers to make the plunge. The Autumn market is nearly behind us, but it did not really amount to much since all of the typical cycles were not able to play out, with the financial crunch dominating the market instead. Typically, we would have seen a bit more demand, a ton of sellers pulling their homes off of the market and the active inventory dropping. Instead, we experienced minimal demand, but since few homes were coming off of the market due to being placed into escrow and instead just sat on the market, the inventory did not really drop. For the remainder of the year, the Holiday market, Halloween through the first few weeks of the New Year, we can expect demand to rise a little, a number of sellers to pull their homes off of the market for the holidays and a decrease in the active inventory. With a delay in the reduction of the active inventory, it appears as if we are going to start the New Year off at a very high level, around the 14,000 home level. That’s a lot of homes to start the 2008 market. We started 2007 with a little over 11,000 homes and built up to nearly the 18,000 home mark. Starting the year at 14,000 increases the likelihood of eclipsing the 20,000 inventory mark as many homeowners will opt to place their homes on the market in what is cyclically the best time to sell, the Spring market.
How should a seller approach the market? It is worth repeating every time I have the opportunity, as a homeowner in beautiful Orange County, if you do NOT have to sell, DON’T. If you would like to sell, DON’T. Sell IF AND ONLY IF you absolutely HAVE to sell. There is simply way too much competition on the market and a lot of people that really MUST sell because they are in a financial pinch. Homeowners that can’t afford their monthly obligations, bank owned homes, “divorce forced sales,” etc., are the true motivated sellers. If you want to compete you must take into consideration that you will be competing with extremely motivated sellers who eventually must sell. They will do what it takes to sell, which is often times an aggressive price to procure a rapid sale. So, if you don’t HAVE to be a part of the market, simply LIVE in your home and enjoy one of the privileges of the American Dream: home ownership. Yes, it can feel uneasy sitting on the sidelines as prices are coming down off of their historic highs; but, be assured that the market will eventually bounce back, it always does. Long term, home ownership in Southern California has ALWAYS been an excellent investment. For perspective, there are 17,759 homes on the market and 1,175 new escrows within the prior month. Given current demand, 16,584 homeowners will NOT be successful over the course of the next month. So, if you are a seller that MUST sell, pack your patience, make your home shine by addressing ALL cosmetic fixes and have your home in showing condition every day that it is on the market. Keep in mind that in a buyers market, price is determined by condition and location. If a home has a poor location or condition, be prepared to discount heavily to entice buyers to purchase. Do NOT fall into the trap of chasing the market down in price by not pricing a home properly NOW. This occurs when a seller starts high, then reduces the asking price, only to find that the fair market value has dropped from the original fair market value.
How should a buyer approach the market? To many, it sounds like I am speaking out of both side of my mouth when I inform the general public that we are going into one of THE best times to buy in years. Shoot, I am in the real estate industry, why wouldn’t I say buy now, it is in my own best interest, right? Not so fast. Rates are dropping because the Federal Reserve Board wants to prop up the real estate market so that it does not have a negative impact on the overall general economy. The housing market is on the brink of doing just that. Once the general economy is on solid footing, they will increase rates again, cutting into a buyers buying power. Prices have dropped and they will very likely drop a bit more. But forecasting the exact bottom of the market is about as hard as pitching a no-hitter in baseball. If the professionals can’t do it, the general public certainly will have a difficult time isolating the precise point as well. My own best guess is towards the end of the first quarter of 2008. However, there will be more buyers in the marketplace then. Currently there is very little competition. As a buyer, if you plan on actually living in your home beyond the unrealistic expectations of flipping in a couple of years, then buy now. Be assured that owning a home in sunny Southern California and Orange County is not only an excellent tax write off, it is an exceptional, historical long term investment that will eventually erase the current downturn in the market. I would prefer purchasing in a climate where I can take my time, have a lot of choices, find a great interest rate and isolate the perfect home for my family. That is a sharp contrast to just a couple of years ago where many buyers were forced to purchase their third, fourth or fifth choice in a lopsided seller’s market. The shoe is on the other foot now. So, isolate the right home, find a motivated seller who really must sell in the current market, which means they will be motivated with a realistic price in today’s market. Then, write an offer with the knowledge that successful sellers in today’s market are still obtaining 97% sales price to list price. That virtually eliminates the low ball buyer. If you are a buyer, don’t waste everybody’s time and throw out the 80% or 90% offers.
The following areas have inventories of less than thirteen months: Aliso Viejo, Brea, Buena Park, Costa Mesa, Fountain Valley, Huntington Beach, Laguna Niguel, Laguna Woods, Mission Viejo, Portola Hills, Rancho Santa Margarita, San Clemente, Seal Beach, Talega and the range of homes priced below $500,000.
The following areas have inventories at eighteen months or greater: Anaheim, Coto de Caza, Cypress, Dove Canyon, Ladera Ranch, Laguna Beach, La Habra, Lake Forest, Newport Beach, Newport Coast, Santa Ana, Villa Park, and all ranges above $2 million.
Written by Steve Thomas, President RE/MAX Real Estate Services
If you are considering buying or selling a home in South Orange County, call on the experts! Dianna and Brian McGarvin 949-370-2652 or visit our website at http://www.pierbowl.com/.
Good Afternoon!
With Halloween fast approaching, the absolute prime buying season is at our doorstep, the Holiday market, from Halloween through the first few weeks of the New Year. Throw into that mix a drop in rates, choices not seen for buyers in years and a ton of pressure on pricing. The end result is it’s a good time to be a buyer. It looks as if the economic indicators are pointing towards another rate cut at the end of this month when Bernanke, the Federal Reserve chairman, and the rest of the Federal Reserve meet again. The remaining fixes needed to stabilize the financial market are extremely slow to evolve. Congress and the United States Treasury are providing more debate than actual firm solutions. So, it looks as if the credit crunch will take the better part of the rest of this year to right itself. In the meantime, at the prompting of the Treasury, Citigroup, Bank of America and JPMorgan Chase and Co. are working together to develop a $100 billion fund to buy up bad debt and restore confidence in the credit market so that investors will enter the game once again. Investors have been on the sidelines since August waiting to be sure that when they reenter the commercial paper market their investments will be safe and sound with almost guaranteed short term profits. They have long memories and it was just in August that everybody realized that commercial paper was laced with bad subprime debt. With strict qualifications now in place and virtually no subprime loans to speak of, the commercial paper market will slowly become more enticing. As the government continues to debate the merits of increasing the conventional loan limit (where rates are cheaper and are backed by government formed agencies) beyond its current $417,000 limit, it appears that by the time they react, the market will have righted itself. Bernanke warned everybody to act now and not wait until March of 2008. It appears as if nobody was listening. Stay tuned!!
It appears as if the bottom of the financial crunch hit a couple of weeks ago. Demand, the number of escrows placed into escrow within the prior month, increased from 1,113 homes two weeks ago to 1,175 homes today, that’s an increase of 62 homes, or a 5.6% increase. The current active inventory did not change at all over the past two weeks and remains at 17,759 homes. With an increase in demand and the inventory not changing, market time decreased from 15.96 months two weeks ago to 15.11 months today. Last year at this time there were an additional 836 escrows within the prior month, the active inventory was at 15,263, or 2,496 fewer homes, and market time was at 7.59 months. Two years ago, there were 9,493 fewer homes on the market, 1,606 more escrows within the prior month, and the market time was at 2.97 months.
Currently, short sales and foreclosures in Orange County account for 13% of the active inventory, up from 12% two weeks ago, and 15% of all escrows opened within the prior month, unchanged in two weeks. Of all the short sales and foreclosures currently on the market, 59% are below $500,000, up from 57% two weeks ago, and 93% are below $750,000, up from 92% two weeks ago.
The increased demand must have come from the detached home market, because the condominium market was virtually unchanged over the past two weeks, dropping from 15.08 months to 15.04 months. On the other hand, detached homes dropped from 16.56 months two weeks ago to 15.15 months today, a significant change that can most likely be attributed to buyers slowly reentering the jumbo loan market (loans above $417,000). 28.7% of the overall active inventory is vacant; 32.7% of the condominium market and 26.2% of the detached market.
What can we expect for the remainder of the year and the beginning of 2008? We are realizing a bit of an increase in demand as more and more jumbo loan buyers reemerge in the market. As rates for jumbo loans start dropping, we can expect this trend to continue. Demand really cannot drop much from its current levels; it is what can be referred to as inherent demand, those buyers who simply will buy regardless of the market because they want to own a home and just don’t want to rent: newlyweds, relocation buyers, empty nesters, etc. Rates are starting to fall as Wall Street has been nervously and negatively reacting to recent economic and earning reports. It appears as if Bernanke and the Federal Reserve are poised to drop rates again. As rates drop, it will become more enticing for buyers to make the plunge. The Autumn market is nearly behind us, but it did not really amount to much since all of the typical cycles were not able to play out, with the financial crunch dominating the market instead. Typically, we would have seen a bit more demand, a ton of sellers pulling their homes off of the market and the active inventory dropping. Instead, we experienced minimal demand, but since few homes were coming off of the market due to being placed into escrow and instead just sat on the market, the inventory did not really drop. For the remainder of the year, the Holiday market, Halloween through the first few weeks of the New Year, we can expect demand to rise a little, a number of sellers to pull their homes off of the market for the holidays and a decrease in the active inventory. With a delay in the reduction of the active inventory, it appears as if we are going to start the New Year off at a very high level, around the 14,000 home level. That’s a lot of homes to start the 2008 market. We started 2007 with a little over 11,000 homes and built up to nearly the 18,000 home mark. Starting the year at 14,000 increases the likelihood of eclipsing the 20,000 inventory mark as many homeowners will opt to place their homes on the market in what is cyclically the best time to sell, the Spring market.
How should a seller approach the market? It is worth repeating every time I have the opportunity, as a homeowner in beautiful Orange County, if you do NOT have to sell, DON’T. If you would like to sell, DON’T. Sell IF AND ONLY IF you absolutely HAVE to sell. There is simply way too much competition on the market and a lot of people that really MUST sell because they are in a financial pinch. Homeowners that can’t afford their monthly obligations, bank owned homes, “divorce forced sales,” etc., are the true motivated sellers. If you want to compete you must take into consideration that you will be competing with extremely motivated sellers who eventually must sell. They will do what it takes to sell, which is often times an aggressive price to procure a rapid sale. So, if you don’t HAVE to be a part of the market, simply LIVE in your home and enjoy one of the privileges of the American Dream: home ownership. Yes, it can feel uneasy sitting on the sidelines as prices are coming down off of their historic highs; but, be assured that the market will eventually bounce back, it always does. Long term, home ownership in Southern California has ALWAYS been an excellent investment. For perspective, there are 17,759 homes on the market and 1,175 new escrows within the prior month. Given current demand, 16,584 homeowners will NOT be successful over the course of the next month. So, if you are a seller that MUST sell, pack your patience, make your home shine by addressing ALL cosmetic fixes and have your home in showing condition every day that it is on the market. Keep in mind that in a buyers market, price is determined by condition and location. If a home has a poor location or condition, be prepared to discount heavily to entice buyers to purchase. Do NOT fall into the trap of chasing the market down in price by not pricing a home properly NOW. This occurs when a seller starts high, then reduces the asking price, only to find that the fair market value has dropped from the original fair market value.
How should a buyer approach the market? To many, it sounds like I am speaking out of both side of my mouth when I inform the general public that we are going into one of THE best times to buy in years. Shoot, I am in the real estate industry, why wouldn’t I say buy now, it is in my own best interest, right? Not so fast. Rates are dropping because the Federal Reserve Board wants to prop up the real estate market so that it does not have a negative impact on the overall general economy. The housing market is on the brink of doing just that. Once the general economy is on solid footing, they will increase rates again, cutting into a buyers buying power. Prices have dropped and they will very likely drop a bit more. But forecasting the exact bottom of the market is about as hard as pitching a no-hitter in baseball. If the professionals can’t do it, the general public certainly will have a difficult time isolating the precise point as well. My own best guess is towards the end of the first quarter of 2008. However, there will be more buyers in the marketplace then. Currently there is very little competition. As a buyer, if you plan on actually living in your home beyond the unrealistic expectations of flipping in a couple of years, then buy now. Be assured that owning a home in sunny Southern California and Orange County is not only an excellent tax write off, it is an exceptional, historical long term investment that will eventually erase the current downturn in the market. I would prefer purchasing in a climate where I can take my time, have a lot of choices, find a great interest rate and isolate the perfect home for my family. That is a sharp contrast to just a couple of years ago where many buyers were forced to purchase their third, fourth or fifth choice in a lopsided seller’s market. The shoe is on the other foot now. So, isolate the right home, find a motivated seller who really must sell in the current market, which means they will be motivated with a realistic price in today’s market. Then, write an offer with the knowledge that successful sellers in today’s market are still obtaining 97% sales price to list price. That virtually eliminates the low ball buyer. If you are a buyer, don’t waste everybody’s time and throw out the 80% or 90% offers.
The following areas have inventories of less than thirteen months: Aliso Viejo, Brea, Buena Park, Costa Mesa, Fountain Valley, Huntington Beach, Laguna Niguel, Laguna Woods, Mission Viejo, Portola Hills, Rancho Santa Margarita, San Clemente, Seal Beach, Talega and the range of homes priced below $500,000.
The following areas have inventories at eighteen months or greater: Anaheim, Coto de Caza, Cypress, Dove Canyon, Ladera Ranch, Laguna Beach, La Habra, Lake Forest, Newport Beach, Newport Coast, Santa Ana, Villa Park, and all ranges above $2 million.
Written by Steve Thomas, President RE/MAX Real Estate Services
If you are considering buying or selling a home in South Orange County, call on the experts! Dianna and Brian McGarvin 949-370-2652 or visit our website at http://www.pierbowl.com/.
Monday, October 15, 2007
Beware of Garbage Trucks
By David J. Pollay
How often do you let other people's nonsense change your mood? Do you let a bad driver, rude waiter, curt boss, or an insensitive employee ruin your day? Unless you're the Terminator, for an instant you're probably set back on your heels. However, the mark of a successful person is how quickly he/she can get back her focus on what''s important. Sixteen years ago I learned this lesson. I learned it in the back of a New York City taxi cab. Here's what happened. I hopped in a taxi, and we took off for Grand Central Station. We were driving in the right lane when, all of a sudden, a black car jumped out of a parking space right in front of us. My taxi driver slammed on his breaks, skidded, and missed the other car's back end by just inches! The driver of the other car, the guy who almost caused a big accident, whipped his head around and he started yelling bad words at us. My taxi driver just smiled and waved at the guy. And I mean, he was friendly. So, I said, ''Why did you just do that? This guy almost ruined your car and sent us to the hospital!''And this is when my taxi driver told me what I now call, ''The Law of the Garbage Truck.'' Many people are like garbage trucks. They run around full of garbage, full of frustration, full of anger,and full of disappointment. As their garbage piles up,they need a place to dump it. And if you let them,they''ll dump it on you. When someone wants to dump on you, don''t take it personally. You just smile, wave, wish them well, and move on.You''ll be happy you did. So this was it: The ''Law of the Garbage Truck.'' I started thinking, how often do I let Garbage Trucks run right over me? And how often do I take their garbage and spread it to other people: at work, at home, on the streets? It was that day I said, ''I''m not going to do it anymore.'' I began to see garbage trucks. I see the load they're carrying. I see them coming to drop it off. And like my Taxi Driver, I don't make it a personal thing; I just smile, wave,wish them well, and I move on. One of my favorite football players of all time,Walter Payton, did this every day on the footballfield. He would jump up as quickly as he hit the ground after being tackled. He never dwelled on a hit.Payton was ready to make the next play his best. Good leaders know they have to be ready for their next meeting. Good parents know that they have to welcome their children home from school with hugs and kisses.Teachers and parents know that they have to be fully present, and at their best for the people they care about. The bottom line is that successful people do not let Garbage Trucks take over their day. What about you? What would happen in your life, starting today, if you let more garbage trucks pass you by? Here's my bet.You'll be happier. So...Love the people who treat you right. Forget about the ones who don't. Believe that everything happens for a reason. If you get a chance , TAKE IT! If it changes your life , LET IT! Nobody said it would be easy...They just promised it would be worth it!
How often do you let other people's nonsense change your mood? Do you let a bad driver, rude waiter, curt boss, or an insensitive employee ruin your day? Unless you're the Terminator, for an instant you're probably set back on your heels. However, the mark of a successful person is how quickly he/she can get back her focus on what''s important. Sixteen years ago I learned this lesson. I learned it in the back of a New York City taxi cab. Here's what happened. I hopped in a taxi, and we took off for Grand Central Station. We were driving in the right lane when, all of a sudden, a black car jumped out of a parking space right in front of us. My taxi driver slammed on his breaks, skidded, and missed the other car's back end by just inches! The driver of the other car, the guy who almost caused a big accident, whipped his head around and he started yelling bad words at us. My taxi driver just smiled and waved at the guy. And I mean, he was friendly. So, I said, ''Why did you just do that? This guy almost ruined your car and sent us to the hospital!''And this is when my taxi driver told me what I now call, ''The Law of the Garbage Truck.'' Many people are like garbage trucks. They run around full of garbage, full of frustration, full of anger,and full of disappointment. As their garbage piles up,they need a place to dump it. And if you let them,they''ll dump it on you. When someone wants to dump on you, don''t take it personally. You just smile, wave, wish them well, and move on.You''ll be happy you did. So this was it: The ''Law of the Garbage Truck.'' I started thinking, how often do I let Garbage Trucks run right over me? And how often do I take their garbage and spread it to other people: at work, at home, on the streets? It was that day I said, ''I''m not going to do it anymore.'' I began to see garbage trucks. I see the load they're carrying. I see them coming to drop it off. And like my Taxi Driver, I don't make it a personal thing; I just smile, wave,wish them well, and I move on. One of my favorite football players of all time,Walter Payton, did this every day on the footballfield. He would jump up as quickly as he hit the ground after being tackled. He never dwelled on a hit.Payton was ready to make the next play his best. Good leaders know they have to be ready for their next meeting. Good parents know that they have to welcome their children home from school with hugs and kisses.Teachers and parents know that they have to be fully present, and at their best for the people they care about. The bottom line is that successful people do not let Garbage Trucks take over their day. What about you? What would happen in your life, starting today, if you let more garbage trucks pass you by? Here's my bet.You'll be happier. So...Love the people who treat you right. Forget about the ones who don't. Believe that everything happens for a reason. If you get a chance , TAKE IT! If it changes your life , LET IT! Nobody said it would be easy...They just promised it would be worth it!
Tuesday, October 2, 2007
19th Annual San Clemente Seafest Oct. 7
10/7/2007, 10:00am
19th Annual San Clemente Seafest Oct. 7 SAN CLEMENTE - San Clemente will hold its 19th Annual San Clemente Seafest on Sunday, October 7, 2007, 10 a.m. and features a Chowder Cook-off, Fisherman’s Lobster, Killer Dana Surf Contest, Business Exposition, Arts & Craft Show, Entertainment provided by the Gemtones and a U.S. Coast Guard Search & Rescue Demo Operation all taking place at the historic San Clemente Pier area.Chowder Cook-offThe Seafest is famous for its Chowder Cook-Off Competition held on the historic San Clemente Pier. Area citizens, restaurants, and businesses contend for the best tasting chowder this side of New England. Visitors arrive from all over the county to sample the many unique variations of Chowder.Surf Contest - Sponsored by Killer DanaThe 11th annual Surf Contest, sponsored by Killer Dana, is back and bigger than ever. This exciting event features local amateur surfers competing for a variety of prizes and trophies.Arts & Craft ExhibitThe Seafest will feature an arts & craft show. This exhibit showcases only handcrafted merchandise from talented individual from Southern California.EntertainmentThe Gemtones, a local power trio, will be rocking and rolling audiences in true 70’s fashion. With fire strength and conviction, the band performs classic rock, blues and surf covers, as well as a growing catalog of original songs. Don’t miss this fantastic group.The event will also include the United States Coast Guard Search and Rescue performing a Demo Operation, face painting, Balloon Art and much more.Free shuttle parking is available at the San Clemente High School, 700 Ave. Pico.For information regarding the event, tickets, surfing, vending and sponsorship opportunities call the Chamber office at (949) 492-1131 or visit our website at www.scchamber.com
19th Annual San Clemente Seafest Oct. 7 SAN CLEMENTE - San Clemente will hold its 19th Annual San Clemente Seafest on Sunday, October 7, 2007, 10 a.m. and features a Chowder Cook-off, Fisherman’s Lobster, Killer Dana Surf Contest, Business Exposition, Arts & Craft Show, Entertainment provided by the Gemtones and a U.S. Coast Guard Search & Rescue Demo Operation all taking place at the historic San Clemente Pier area.Chowder Cook-offThe Seafest is famous for its Chowder Cook-Off Competition held on the historic San Clemente Pier. Area citizens, restaurants, and businesses contend for the best tasting chowder this side of New England. Visitors arrive from all over the county to sample the many unique variations of Chowder.Surf Contest - Sponsored by Killer DanaThe 11th annual Surf Contest, sponsored by Killer Dana, is back and bigger than ever. This exciting event features local amateur surfers competing for a variety of prizes and trophies.Arts & Craft ExhibitThe Seafest will feature an arts & craft show. This exhibit showcases only handcrafted merchandise from talented individual from Southern California.EntertainmentThe Gemtones, a local power trio, will be rocking and rolling audiences in true 70’s fashion. With fire strength and conviction, the band performs classic rock, blues and surf covers, as well as a growing catalog of original songs. Don’t miss this fantastic group.The event will also include the United States Coast Guard Search and Rescue performing a Demo Operation, face painting, Balloon Art and much more.Free shuttle parking is available at the San Clemente High School, 700 Ave. Pico.For information regarding the event, tickets, surfing, vending and sponsorship opportunities call the Chamber office at (949) 492-1131 or visit our website at www.scchamber.com
Monday, October 1, 2007
409 Arenoso Lane #2
Enjoy sit down ocean views in this single level condo. Just steps to the beach,pier & charming Del Mar street. Large square footage with two large bedrooms plus office(could be used as a 3rd bedroom).Remodeled throughout offers gorgeous kitchen with new cabinets, granite & appliances. Beautiful master bath features jacuzzi tub, glass block shower & marble counters. Closets with custom builtins. New baseboards,door & window casing and crown molding. Two parking spaces with elevator to front door. $1,100,000For a private showing call Brian @ 949-370-2652.
If you are considering buying or selling a home in South Orange County, call on the experts! Dianna and Brian McGarvin 949-370-2652 or visit our website at http://www.pierbowl.com/.
Sunday, September 23, 2007
Market Time Report: Revitalizing the Financial and Housing Market
September 20, 2007
As the national economy began to feel the affects of both the financial and housing market crunch, the Fed surprised everybody with a half point cut and congress, in conjunction with the Treasury and the White House, is embarking on other solutions. The end result is that rather than sit on the sideline and watch the housing market unravel, to avoid the potential of a recession, all hands are on deck doing everything in their means to stimulate lending and housing. Of course, this does not mean that demand will change overnight. Instead, as the economy absorbs the rate cuts and future congressional legislation, demand will begin to rise. A couple of months ago, rate cuts were not forecasted to change until the beginning of 2008, if at all. Now, we not only received a rare half point cut, there will most likely be additional cuts through the end of the year. Congress is exploring an increase in FHA limits, a temporary increase in conforming limits from $417,000 to the mid-$600k level, not to mention legislation to help insure the financial market does not repeat the subprime mess and liquidity crunch. The bottom line is that everybody is involved and no longer watching from the sidelines. This should definitely have an impact on the housing market. Yes, there will still be foreclosures and defaults, but the peak may be coming in the beginning of 2008 as more and more buyers enter the marketplace with favorable interest rates and broader available financing. Stay tuned!!
It is still too soon to start seeing the effects of the rate cut. Remember, this is just the beginning of the housing and financial market stimulus. Demand, the number of new escrows within the prior 30 days, dropped from 1,206 homes two weeks ago to 1,180, a 26 home drop. The current active inventory increased by 138 homes in two weeks to 17,898 homes, the highest mark of the year, 1,892 additional homes compared to last year’s peak, reached in August of 2006. Orange County’s market time increased from 14.73 months two weeks ago to 15.17 months. Last year at this time, there was an additional 1,028 escrows within the prior month (almost double), the active inventory was at 15,672, or 2,226 fewer homes, and market time was at 7.1 months. Two years ago, there were 10,150 fewer homes on the market, 1,878 more escrows within the prior month, and the market time was at 2.53 months.
Currently, short sales and foreclosures in Orange County account for 8% of the active inventory and 10% of all escrows opened within the prior 30 days. Two weeks ago they accounted for 7% of the active inventory and 8% of the escrow activity. Of all the short sales and foreclosures currently on the market, 57% are below $500,000 and 92% are below $750,000, virtually unchanged from two weeks ago.
The financial crunch over the past several weeks has translated to a much slower detached home market, since a majority of that market requires a jumbo loan to purchase. For condominiums, market time has increased from 14.39 months two weeks ago to 14.79 months today. The market time for detached homes has increased from 14.94 months to 15.4 months today. Four weeks ago, the market time for detached homes was at 11.79 months. 32.8% of the current active condominium inventory is vacant, versus 25.4% of the current active detached home inventory. Overall 27.5% of the active inventory is vacant. Because of the long market times, many homeowners will opt to lease out their homes for the time being, in anticipation of a stronger future market.
What can we expect for the remainder of the year? Currently we are experiencing inherent demand. Regardless of the market, there always is somebody willing to purchase. But, with Bernanke and the Federal Reserve cutting rates, congress and the white house poised to pass quick-fix legislation, demand should begin to build in the coming months. For the rest of the Autumn market, now through Halloween, we can expect the inventory to begin to drop as more and more sellers pull their homes off the market. With a dropping inventory and increased demand, the market time should stabilize and then begin to drop. The Holiday market, Halloween through the first couple weeks of the New Year should be marked by more homeowners pulling their homes off the market. But, with the Federal Reserve, congress and the White House tinkering with the financial market, demand for housing could steadily rise. This could ultimately translate into a decent start to 2008, reminiscent of the decent start that the housing market achieved at the beginning of this year. Earlier this year, the Orange County real estate market was heating up until the subprime mess derailed demand in March and then the liquidity crisis in the financial sector further derailed demand to its current anemic levels.
How should a seller approach the market? If you don’t have to sell, don’t. If you would like to sell, don’t. Homeowners should only look to sell their homes IF AND ONLY IF they absolutely MUST sell. There are 17,898 homes on the market and 1,180 new escrows within the prior month. Given current demand, 16,718 homeowners will NOT be successful over the course of the next month. That translates to a 6.6% chance of success. Sellers should sit on the sidelines and wait for the overall market to improve and demand to increase from its current weak levels. There is so much competition that sellers must be the best priced, best condition, best location to be successful. Poor condition or a poor location necessitates a further reduction in the asking price. Sellers willing to address cosmetic fixes and have their homes in tip top shape from top to bottom, inside and out, will fare better in this market. Box up clutter and stage the home similar to a builder model, with all lights on and music playing in the background. This needs to be done every single time the home is shown without exception. Every buyer that walks through could be the one that brings in an offer. With so much pressure on pricing, it is best to price a home aggressively immediately, rather than play the wait and see what happens game. This will ultimately result in chasing the market down in price, where a seller starts high, then reduces the asking price, only to find that the fair market value has dropped from the original fair market value. Also, buyers don’t care about a seller’s desire to net a certain dollar amount from their home.
How should a buyer approach the market? The perfect storm is brewing: rates are falling, prices are coming down, there is little to no competition and we are fast approaching the Holiday or Winter market. This IS the buying season. Many will tell you to wait. Others will accuse me of bias because I am in the real estate industry. Nobody knew that 1995 was the bottom of the last downturn either until years later. In hindsight, every living adult should have bought that year, but most everybody was fearful that the market would continue to decline. Sound familiar? Prices have already come off of their highs and for the rest of the year and the start of 2008 promises to be a very similar situation. Throw into the equation that rates will extremely favorable and it is an excellent scenario. It is important to note that Bernanke and the Federal Reserve will only drop rates for as long as they have to. As soon as the market shows any signs of life, they are going to hedge inflation and increase rates immediately. Even if prices drop slightly, you can still expect payments to increase as rates increase. Having the luxury to isolate an ideal home in a soft market with low rates is not a luxury to pass up. It is extremely important to keep in mind that Southern California, and more specifically, Orange County, is historically a super long term investment and an excellent place to live with a real lack of buildable land. Last, in arriving at a fair offering price, the average current closed sales to list price ratio for Orange County is 97% and NOT 80% or even 90%. Lowball offers rarely result in a sale. Seeking motivated seller and offering a fair price will.
Steven Thomas
President RE/MAX Real Estate Services
If you are considering buying or selling a home in South Orange County, call on the experts! Dianna and Brian McGarvin 949-370-2652 or visit our website at http://www.pierbowl.com/.
As the national economy began to feel the affects of both the financial and housing market crunch, the Fed surprised everybody with a half point cut and congress, in conjunction with the Treasury and the White House, is embarking on other solutions. The end result is that rather than sit on the sideline and watch the housing market unravel, to avoid the potential of a recession, all hands are on deck doing everything in their means to stimulate lending and housing. Of course, this does not mean that demand will change overnight. Instead, as the economy absorbs the rate cuts and future congressional legislation, demand will begin to rise. A couple of months ago, rate cuts were not forecasted to change until the beginning of 2008, if at all. Now, we not only received a rare half point cut, there will most likely be additional cuts through the end of the year. Congress is exploring an increase in FHA limits, a temporary increase in conforming limits from $417,000 to the mid-$600k level, not to mention legislation to help insure the financial market does not repeat the subprime mess and liquidity crunch. The bottom line is that everybody is involved and no longer watching from the sidelines. This should definitely have an impact on the housing market. Yes, there will still be foreclosures and defaults, but the peak may be coming in the beginning of 2008 as more and more buyers enter the marketplace with favorable interest rates and broader available financing. Stay tuned!!
It is still too soon to start seeing the effects of the rate cut. Remember, this is just the beginning of the housing and financial market stimulus. Demand, the number of new escrows within the prior 30 days, dropped from 1,206 homes two weeks ago to 1,180, a 26 home drop. The current active inventory increased by 138 homes in two weeks to 17,898 homes, the highest mark of the year, 1,892 additional homes compared to last year’s peak, reached in August of 2006. Orange County’s market time increased from 14.73 months two weeks ago to 15.17 months. Last year at this time, there was an additional 1,028 escrows within the prior month (almost double), the active inventory was at 15,672, or 2,226 fewer homes, and market time was at 7.1 months. Two years ago, there were 10,150 fewer homes on the market, 1,878 more escrows within the prior month, and the market time was at 2.53 months.
Currently, short sales and foreclosures in Orange County account for 8% of the active inventory and 10% of all escrows opened within the prior 30 days. Two weeks ago they accounted for 7% of the active inventory and 8% of the escrow activity. Of all the short sales and foreclosures currently on the market, 57% are below $500,000 and 92% are below $750,000, virtually unchanged from two weeks ago.
The financial crunch over the past several weeks has translated to a much slower detached home market, since a majority of that market requires a jumbo loan to purchase. For condominiums, market time has increased from 14.39 months two weeks ago to 14.79 months today. The market time for detached homes has increased from 14.94 months to 15.4 months today. Four weeks ago, the market time for detached homes was at 11.79 months. 32.8% of the current active condominium inventory is vacant, versus 25.4% of the current active detached home inventory. Overall 27.5% of the active inventory is vacant. Because of the long market times, many homeowners will opt to lease out their homes for the time being, in anticipation of a stronger future market.
What can we expect for the remainder of the year? Currently we are experiencing inherent demand. Regardless of the market, there always is somebody willing to purchase. But, with Bernanke and the Federal Reserve cutting rates, congress and the white house poised to pass quick-fix legislation, demand should begin to build in the coming months. For the rest of the Autumn market, now through Halloween, we can expect the inventory to begin to drop as more and more sellers pull their homes off the market. With a dropping inventory and increased demand, the market time should stabilize and then begin to drop. The Holiday market, Halloween through the first couple weeks of the New Year should be marked by more homeowners pulling their homes off the market. But, with the Federal Reserve, congress and the White House tinkering with the financial market, demand for housing could steadily rise. This could ultimately translate into a decent start to 2008, reminiscent of the decent start that the housing market achieved at the beginning of this year. Earlier this year, the Orange County real estate market was heating up until the subprime mess derailed demand in March and then the liquidity crisis in the financial sector further derailed demand to its current anemic levels.
How should a seller approach the market? If you don’t have to sell, don’t. If you would like to sell, don’t. Homeowners should only look to sell their homes IF AND ONLY IF they absolutely MUST sell. There are 17,898 homes on the market and 1,180 new escrows within the prior month. Given current demand, 16,718 homeowners will NOT be successful over the course of the next month. That translates to a 6.6% chance of success. Sellers should sit on the sidelines and wait for the overall market to improve and demand to increase from its current weak levels. There is so much competition that sellers must be the best priced, best condition, best location to be successful. Poor condition or a poor location necessitates a further reduction in the asking price. Sellers willing to address cosmetic fixes and have their homes in tip top shape from top to bottom, inside and out, will fare better in this market. Box up clutter and stage the home similar to a builder model, with all lights on and music playing in the background. This needs to be done every single time the home is shown without exception. Every buyer that walks through could be the one that brings in an offer. With so much pressure on pricing, it is best to price a home aggressively immediately, rather than play the wait and see what happens game. This will ultimately result in chasing the market down in price, where a seller starts high, then reduces the asking price, only to find that the fair market value has dropped from the original fair market value. Also, buyers don’t care about a seller’s desire to net a certain dollar amount from their home.
How should a buyer approach the market? The perfect storm is brewing: rates are falling, prices are coming down, there is little to no competition and we are fast approaching the Holiday or Winter market. This IS the buying season. Many will tell you to wait. Others will accuse me of bias because I am in the real estate industry. Nobody knew that 1995 was the bottom of the last downturn either until years later. In hindsight, every living adult should have bought that year, but most everybody was fearful that the market would continue to decline. Sound familiar? Prices have already come off of their highs and for the rest of the year and the start of 2008 promises to be a very similar situation. Throw into the equation that rates will extremely favorable and it is an excellent scenario. It is important to note that Bernanke and the Federal Reserve will only drop rates for as long as they have to. As soon as the market shows any signs of life, they are going to hedge inflation and increase rates immediately. Even if prices drop slightly, you can still expect payments to increase as rates increase. Having the luxury to isolate an ideal home in a soft market with low rates is not a luxury to pass up. It is extremely important to keep in mind that Southern California, and more specifically, Orange County, is historically a super long term investment and an excellent place to live with a real lack of buildable land. Last, in arriving at a fair offering price, the average current closed sales to list price ratio for Orange County is 97% and NOT 80% or even 90%. Lowball offers rarely result in a sale. Seeking motivated seller and offering a fair price will.
Steven Thomas
President RE/MAX Real Estate Services
If you are considering buying or selling a home in South Orange County, call on the experts! Dianna and Brian McGarvin 949-370-2652 or visit our website at http://www.pierbowl.com/.
Tuesday, September 18, 2007
Fed slashes rates to boost economy
The Federal Reserve lowers the target on a key short-term interest rate for the first time in four years to 4.75% from 5.25%
By Paul R. La Monica, CNNMoney.com editor at large
September 18 2007: 3:01 PM EDT
NEW YORK (CNNMoney.com) -- The Federal Reserve cut the target on a key short-term interest rate by a half of a percentage point Tuesday to 4.75%, further acknowledgment from the central bank that the mortgage meltdown plaguing Wall Street and Main Street could have a negative impact on the economy.
Stocks surged following the announcement, with the Dow gaining nearly 250 points, or 1.8 percent. The S&P 500 and Nasdaq both shot up more than 2 percent. Bonds fell, sending the yield on the benchmark 10-year U.S. Treasury up to 4.5 percent. (Bond prices and yields move in opposite directions.)
The cut to the federal funds rate, the first since June 2003, was widely anticipated by investors and followed a surprise cut to the Fed's discount rate on Aug. 17. The only question was whether the Fed would lower the federal funds rate by 25 basis points or 50 basis points. (There are 100 basis points in a full percentage point.)
Some investors had thought that Fed chair Ben Bernanke would take a more cautious approach and not cut rates by such a large margin, because a half-point cut could signal the Fed was acting out of desperation to save the economy.
But Alan Skrainka, chief market strategist with Edward Jones in St. Louis, disagreed with that interpretation. He said Wall Street was cheering the rate cut because it proves the Fed is willing to take any moves necessary to ensure the economy is not derailed by problems in the subprime mortgage market, loans made to consumers with less-than-perfect credit.
"We're having champagne and cookies," Skrainka said. "This is not a magical elixir that solves our subprime problems overnight, but it is a big step in the right direction to keep the economy growing. The Fed is sending a strong message that it won't get behind the curve," he added.
The federal funds rate, an overnight lending rate that banks charge each other, is important since it influences the amount of interest consumers must pay for various types of debt, such as credit cards, home equity lines of credit and auto loans. The rate cut should help some beleaguered home borrowers who are set to see monthly payments on adjustable rate mortgages rise later this year.
In its statement, the Fed said that "the tightening of credit conditions has the potential to intensify the housing correction and to restrain economic growth more generally" and that the rate cut "is intended to help forestall some of the adverse effects on the broader economy that might otherwise arise from the disruptions in financial markets and to promote moderate growth over time."
The Fed also cut its largely symbolic discount rate by a half of a percentage point to 5.25 percent. The central bank lowered the discount rate, which is what banks pay to borrow directly from the Federal Reserve, by 50 basis points on Aug. 17.
Although investors applauded the rate cut, one market expert cautioned that this does not mean an end to the credit crunch.
"People should not assume that the economy's problems are over. That would be a mistake. They are significant and they are widespread," said Larry Smith, chief investment officer with Third Wave Global Investors, a Greenwich, Conn.-based investment advisor with about $400 million in assets. "Today's action, while important, do not put to rest the fears that emanate from the credit concerns."
But Smith said the rate cut was a "bold step" and that he expected the Fed to cut interest rates at least one more time, probably by just a quarter of a percentage point though, before the end of the year.
The Fed's next monetary policy decision is scheduled to take place at the end of a two-day meeting on Oct. 31 and its last meeting of the year is set for Dec. 11.
To that end, according to federal funds futures on the Chicago Board of Trade, investors are now pricing in a 100 percent chance that the Fed will cut rates at least one more time before year's end.
And Skrainka of Edward Jones said he expects the Fed to cut rates several more times during the next few months.
"This is the beginning of an easing cycle. This is not one-and-done move by the Fed."
If you are considering buying or selling a home in South Orange County, call on the experts! Dianna and Brian McGarvin 949-370-2652 or visit our website at http://www.pierbowl.com/.
By Paul R. La Monica, CNNMoney.com editor at large
September 18 2007: 3:01 PM EDT
NEW YORK (CNNMoney.com) -- The Federal Reserve cut the target on a key short-term interest rate by a half of a percentage point Tuesday to 4.75%, further acknowledgment from the central bank that the mortgage meltdown plaguing Wall Street and Main Street could have a negative impact on the economy.
Stocks surged following the announcement, with the Dow gaining nearly 250 points, or 1.8 percent. The S&P 500 and Nasdaq both shot up more than 2 percent. Bonds fell, sending the yield on the benchmark 10-year U.S. Treasury up to 4.5 percent. (Bond prices and yields move in opposite directions.)
The cut to the federal funds rate, the first since June 2003, was widely anticipated by investors and followed a surprise cut to the Fed's discount rate on Aug. 17. The only question was whether the Fed would lower the federal funds rate by 25 basis points or 50 basis points. (There are 100 basis points in a full percentage point.)
Some investors had thought that Fed chair Ben Bernanke would take a more cautious approach and not cut rates by such a large margin, because a half-point cut could signal the Fed was acting out of desperation to save the economy.
But Alan Skrainka, chief market strategist with Edward Jones in St. Louis, disagreed with that interpretation. He said Wall Street was cheering the rate cut because it proves the Fed is willing to take any moves necessary to ensure the economy is not derailed by problems in the subprime mortgage market, loans made to consumers with less-than-perfect credit.
"We're having champagne and cookies," Skrainka said. "This is not a magical elixir that solves our subprime problems overnight, but it is a big step in the right direction to keep the economy growing. The Fed is sending a strong message that it won't get behind the curve," he added.
The federal funds rate, an overnight lending rate that banks charge each other, is important since it influences the amount of interest consumers must pay for various types of debt, such as credit cards, home equity lines of credit and auto loans. The rate cut should help some beleaguered home borrowers who are set to see monthly payments on adjustable rate mortgages rise later this year.
In its statement, the Fed said that "the tightening of credit conditions has the potential to intensify the housing correction and to restrain economic growth more generally" and that the rate cut "is intended to help forestall some of the adverse effects on the broader economy that might otherwise arise from the disruptions in financial markets and to promote moderate growth over time."
The Fed also cut its largely symbolic discount rate by a half of a percentage point to 5.25 percent. The central bank lowered the discount rate, which is what banks pay to borrow directly from the Federal Reserve, by 50 basis points on Aug. 17.
Although investors applauded the rate cut, one market expert cautioned that this does not mean an end to the credit crunch.
"People should not assume that the economy's problems are over. That would be a mistake. They are significant and they are widespread," said Larry Smith, chief investment officer with Third Wave Global Investors, a Greenwich, Conn.-based investment advisor with about $400 million in assets. "Today's action, while important, do not put to rest the fears that emanate from the credit concerns."
But Smith said the rate cut was a "bold step" and that he expected the Fed to cut interest rates at least one more time, probably by just a quarter of a percentage point though, before the end of the year.
The Fed's next monetary policy decision is scheduled to take place at the end of a two-day meeting on Oct. 31 and its last meeting of the year is set for Dec. 11.
To that end, according to federal funds futures on the Chicago Board of Trade, investors are now pricing in a 100 percent chance that the Fed will cut rates at least one more time before year's end.
And Skrainka of Edward Jones said he expects the Fed to cut rates several more times during the next few months.
"This is the beginning of an easing cycle. This is not one-and-done move by the Fed."
If you are considering buying or selling a home in South Orange County, call on the experts! Dianna and Brian McGarvin 949-370-2652 or visit our website at http://www.pierbowl.com/.
Wednesday, September 12, 2007
The Squeeze on Demand
September 6, 2007
Good Afternoon!
Demand for Orange County has taken a hard hit because of the current financial market crisis, dropping to its lowest level in years. Demand, the number of new escrows within the prior 30 days, dropped to 1,206 from 1,475 just two weeks ago and 1,804 four weeks ago, the beginning of the current financial market troubles. This is the second bump in the road for demand this year, the first coming at the beginning of March when subprime lenders began closing their doors. About four weeks ago, Wall Street realized that their investments in the financial markets were compromised by an insufficient portfolio rating system where “pools” of loans contained subpime loans, despite AAA ratings, the best rating possible. Today, Wall Street, and the rest of the world, will not touch any portfolio of loans because they simply do not trust the system; they don’t know what they are buying. Conventional loans, loans less than $410,000, are fine and the interest rates have been dropping. There are government sponsored agencies, Federal National Mortgage Association (FNMA) and Freddie Mac (FHLMC), that are still buying conventional loans. However, jumbo loans, loans above $410,000, a majority of the Orange County marketplace, are at higher rates and most can only be accomplished by direct lenders such as Wells Fargo or Bank of America who have the ability to fund loans and hold them until the financial markets right themselves or the government steps in. And, for the most part, only borrowers with great credit can obtain jumbo loans or any other “unconventional” loans. In today’s market, buyers should go with direct lenders that are able to fund and hold their loans. The rates on unconventional loans have not dropped recently either. This has had a major impact on demand in housing. With the subprime crunch beginning in March, lenders had already tightened lending requirements. This latest chapter in our market has led to even further tightening, pushing many would be buyers out of the housing market. Experts are now calling for a new rating system to strengthen the financial markets, but that may take a few months. Also, it looks like Bernanke and the Federal Reserve will drop rates by at least a quarter percent and they may be looking at as much as a half percent cut. This should help spark demand as the Fed looks to jump start not only the housing market, but the overall economy. The economy is beginning to feel the effects of the housing market. Many loan programs have all but evaporated. So, in the interim, demand in Orange County is taking a hit. After reaching a record height two weeks ago, the active inventory dropped by 121 homes to 17,760. Because of the drop in demand, the current market time jumped to 14.73 months from 12.12 months two weeks ago and 9.76 months four weeks ago.
Currently short sales and foreclosures in Orange County account for 7% of the active inventory, which has grown from 5% four weeks ago. Of all the short sales and foreclosures currently on the market, 54% are below $500,000 and 92% are below $750,000. Short sales and foreclosures continue to impact areas with a higher proportion of subprime loans funded within the last few years. For example, Santa Ana has a market time of 45.88 months, almost four years, and Anaheim has a market time of 21.59 months, almost two years.
The latest hurdle in the market has spilled over into the disparity between the condominium market and the detached home market. For the first time since April, the detached home market is actually slower than the condominium market. For condominiums, market time has increased from 12.66 months two weeks ago to 14.39 months today. The market time for detached homes has increased from 11.79 months to 14.94 months today. 32.2% of the current active condominium inventory is vacant versus 24.8% of the current active detached home inventory. Overall 27.7% of the active inventory is vacant. Because of the long market times, many homeowners will opt to lease out their homes in anticipation of a stronger future market.
Here’s the big question of the day: where do we go from here? It looks as if Bernanke and the Federal Reserve will be cutting rates when they meet on September 18th between a quarter to a half percent. This should give a moderate boost to housing demand depending upon how large of a cut is made. Depending upon future economic indicators, this could be the beginning of rate cuts. Current demand is 45% less than last year and 63% less than two years ago. Demand will continue to plod along at these anemic levels until the Department of Treasury, the Federal Reserve, congress, Wall Street, etc., repair the secondary financial marketplace. This is just the beginning of the Autumn market when demand drops from the Summer market (just not typically as much as it did over the prior month) and the inventory drops as more and more unsuccessful sellers pull their homes off of the market. However, with demand at such low levels, the inventory will most likely not drop as swiftly as it did last year. The Holiday market, Halloween through the first couple of weeks of the New Year, will be marked be low demand, typically the lowest levels of the year (we may be experiencing the lowest levels right now), and a further drop in the active inventory as even more sellers opt to pull their homes off of the market.
By Steven Thomas
President Remax Real Estate Services
If you are considering buying or selling a home in South Orange County, call on the experts! Dianna and Brian McGarvin 949-370-2652 or visit our website at http://www.pierbowl.com/.
Good Afternoon!
Demand for Orange County has taken a hard hit because of the current financial market crisis, dropping to its lowest level in years. Demand, the number of new escrows within the prior 30 days, dropped to 1,206 from 1,475 just two weeks ago and 1,804 four weeks ago, the beginning of the current financial market troubles. This is the second bump in the road for demand this year, the first coming at the beginning of March when subprime lenders began closing their doors. About four weeks ago, Wall Street realized that their investments in the financial markets were compromised by an insufficient portfolio rating system where “pools” of loans contained subpime loans, despite AAA ratings, the best rating possible. Today, Wall Street, and the rest of the world, will not touch any portfolio of loans because they simply do not trust the system; they don’t know what they are buying. Conventional loans, loans less than $410,000, are fine and the interest rates have been dropping. There are government sponsored agencies, Federal National Mortgage Association (FNMA) and Freddie Mac (FHLMC), that are still buying conventional loans. However, jumbo loans, loans above $410,000, a majority of the Orange County marketplace, are at higher rates and most can only be accomplished by direct lenders such as Wells Fargo or Bank of America who have the ability to fund loans and hold them until the financial markets right themselves or the government steps in. And, for the most part, only borrowers with great credit can obtain jumbo loans or any other “unconventional” loans. In today’s market, buyers should go with direct lenders that are able to fund and hold their loans. The rates on unconventional loans have not dropped recently either. This has had a major impact on demand in housing. With the subprime crunch beginning in March, lenders had already tightened lending requirements. This latest chapter in our market has led to even further tightening, pushing many would be buyers out of the housing market. Experts are now calling for a new rating system to strengthen the financial markets, but that may take a few months. Also, it looks like Bernanke and the Federal Reserve will drop rates by at least a quarter percent and they may be looking at as much as a half percent cut. This should help spark demand as the Fed looks to jump start not only the housing market, but the overall economy. The economy is beginning to feel the effects of the housing market. Many loan programs have all but evaporated. So, in the interim, demand in Orange County is taking a hit. After reaching a record height two weeks ago, the active inventory dropped by 121 homes to 17,760. Because of the drop in demand, the current market time jumped to 14.73 months from 12.12 months two weeks ago and 9.76 months four weeks ago.
Currently short sales and foreclosures in Orange County account for 7% of the active inventory, which has grown from 5% four weeks ago. Of all the short sales and foreclosures currently on the market, 54% are below $500,000 and 92% are below $750,000. Short sales and foreclosures continue to impact areas with a higher proportion of subprime loans funded within the last few years. For example, Santa Ana has a market time of 45.88 months, almost four years, and Anaheim has a market time of 21.59 months, almost two years.
The latest hurdle in the market has spilled over into the disparity between the condominium market and the detached home market. For the first time since April, the detached home market is actually slower than the condominium market. For condominiums, market time has increased from 12.66 months two weeks ago to 14.39 months today. The market time for detached homes has increased from 11.79 months to 14.94 months today. 32.2% of the current active condominium inventory is vacant versus 24.8% of the current active detached home inventory. Overall 27.7% of the active inventory is vacant. Because of the long market times, many homeowners will opt to lease out their homes in anticipation of a stronger future market.
Here’s the big question of the day: where do we go from here? It looks as if Bernanke and the Federal Reserve will be cutting rates when they meet on September 18th between a quarter to a half percent. This should give a moderate boost to housing demand depending upon how large of a cut is made. Depending upon future economic indicators, this could be the beginning of rate cuts. Current demand is 45% less than last year and 63% less than two years ago. Demand will continue to plod along at these anemic levels until the Department of Treasury, the Federal Reserve, congress, Wall Street, etc., repair the secondary financial marketplace. This is just the beginning of the Autumn market when demand drops from the Summer market (just not typically as much as it did over the prior month) and the inventory drops as more and more unsuccessful sellers pull their homes off of the market. However, with demand at such low levels, the inventory will most likely not drop as swiftly as it did last year. The Holiday market, Halloween through the first couple of weeks of the New Year, will be marked be low demand, typically the lowest levels of the year (we may be experiencing the lowest levels right now), and a further drop in the active inventory as even more sellers opt to pull their homes off of the market.
By Steven Thomas
President Remax Real Estate Services
If you are considering buying or selling a home in South Orange County, call on the experts! Dianna and Brian McGarvin 949-370-2652 or visit our website at http://www.pierbowl.com/.
Tuesday, September 4, 2007
Toshiba Tallships Festival
9/8/2007, 9:00am
Toshiba Tallships FestivalSaturday, September 8 – Sunday,September 9 DANA POINT - The Ocean Institute is celebrating its 23rd year hosting the Toshiba Tall Ships Festival, the largest annual gathering of tall ships on the West Coast. The festival will feature a spectacular array of family-fun activities including live music, art & craft shows, exciting living-history demonstrations and a variety of tasty food. Enjoy maritime displays and presentations, Polynesian dancers, sea-chantey concerts, an interactive pirate encampment and dramatic sunset cannon battles. Additionally, you can explore the historic tall ships and listen to the crew share tales of adventure and life at sea. Last but not least, we invite you to explore the Ocean Institute and explore our local ocean life, participate in live parrot shows, play pirate games and join in on special interactive presentations. So, join us for a weekend of fun and adventure as we celebrate the areas rich maritime history.FOR MORE INFO CALL 949496-2274 AT THE OCEAN INSTITUTE, 24200 DANA POINT DRIVE
If you are considering buying or selling a home in South Orange County, call on the experts! Dianna and Brian McGarvin 949-370-2652 or visit our website at http://www.pierbowl.com/.
Toshiba Tallships FestivalSaturday, September 8 – Sunday,September 9 DANA POINT - The Ocean Institute is celebrating its 23rd year hosting the Toshiba Tall Ships Festival, the largest annual gathering of tall ships on the West Coast. The festival will feature a spectacular array of family-fun activities including live music, art & craft shows, exciting living-history demonstrations and a variety of tasty food. Enjoy maritime displays and presentations, Polynesian dancers, sea-chantey concerts, an interactive pirate encampment and dramatic sunset cannon battles. Additionally, you can explore the historic tall ships and listen to the crew share tales of adventure and life at sea. Last but not least, we invite you to explore the Ocean Institute and explore our local ocean life, participate in live parrot shows, play pirate games and join in on special interactive presentations. So, join us for a weekend of fun and adventure as we celebrate the areas rich maritime history.FOR MORE INFO CALL 949496-2274 AT THE OCEAN INSTITUTE, 24200 DANA POINT DRIVE
If you are considering buying or selling a home in South Orange County, call on the experts! Dianna and Brian McGarvin 949-370-2652 or visit our website at http://www.pierbowl.com/.
Friday, August 17, 2007
The Fed steps in
I imagine you have been reading about the liquidity crisis in the lending industry. How can you miss it with big names like Countrywide involved discussions re: a potential bankruptcy. Many of the companies that have imploded have done so due to a lack of available funds for their current loan fundings. This occurs when the commercial lines of credit they have available disappear or are somehow otherwise unavailable (for example, if they are unable to sell the paper and pay off the fundings of previous days...) The concern is that many of the larger institutions will also go down due to the lack of investor funds.
And, the fed steps in:
Today (08/17/2007), in an unprecedented move, the Federal Reserve made an emergency Discount Rate cut of .50% (1/2 percent) in order to attempt to avert further liquidity crisis (cash shortage) in the banking industry.
This does not mean that mortgage rates have been cut. And this is not the same thing as a Fed Funds rate cut. There is an important difference. In order to understand what this means, you need to know a few basic definitions:
The Federal Reserve banks’ primary responsibility is to ensure that
fluctuations in the demand for cash does not disrupt the banking
industry.
Fed Discount Rate: The interest rate at which eligible banks may
borrow funds, usually for short periods, directly from a Federal
Reserve Bank – this is to meet temporary shortages of liquidity
caused by internal or external disruptions (also known as the
Discount Window)
The Discount Rate has very little to do with how retail interest rates ultimately affect consumers of loans and credit, but rather primarily affects the internal stability of the banking industry
Fed Funds Rate: The interest rate at which non-Federal Reserve banks
lends immediately available funds to other non-Federal Reserve banks
overnight (Also known as the Overnight Lending Rate) The Fed Funds rate is the one that is adjusted to increase growth or moderate inflation of our overall economy. This usually has a direct effect on the 10 Year Treasury Bill, which is the primary driver of mortgage rates. A Fed Funds rate change has a significant impact on retail interest rates.
In summary, it would be a mistake to assume that because the Fed Discount Rate has been lowered to help the banks avoid a cash crunch meltdown, that mortgage rates will either drop or go up. This is because the primary Fed Funds Rate has not been revised. In fact, it is just as likely that as the stock market recovers, mortgage rates are more likely to go up than down! This is because bonds will get sold, which raises the yields and therefore mortgage rates.
Any impact of this Discount Rate cut remains to be seen and will only play out in a macro-economic, long term way via restored confidence and liquidity of the banking industry.
If you are considering buying or selling a home in South Orange County, call on the experts! Dianna and Brian McGarvin 949-370-2652 or visit our website at http://www.pierbowl.com/.
And, the fed steps in:
Today (08/17/2007), in an unprecedented move, the Federal Reserve made an emergency Discount Rate cut of .50% (1/2 percent) in order to attempt to avert further liquidity crisis (cash shortage) in the banking industry.
This does not mean that mortgage rates have been cut. And this is not the same thing as a Fed Funds rate cut. There is an important difference. In order to understand what this means, you need to know a few basic definitions:
The Federal Reserve banks’ primary responsibility is to ensure that
fluctuations in the demand for cash does not disrupt the banking
industry.
Fed Discount Rate: The interest rate at which eligible banks may
borrow funds, usually for short periods, directly from a Federal
Reserve Bank – this is to meet temporary shortages of liquidity
caused by internal or external disruptions (also known as the
Discount Window)
The Discount Rate has very little to do with how retail interest rates ultimately affect consumers of loans and credit, but rather primarily affects the internal stability of the banking industry
Fed Funds Rate: The interest rate at which non-Federal Reserve banks
lends immediately available funds to other non-Federal Reserve banks
overnight (Also known as the Overnight Lending Rate) The Fed Funds rate is the one that is adjusted to increase growth or moderate inflation of our overall economy. This usually has a direct effect on the 10 Year Treasury Bill, which is the primary driver of mortgage rates. A Fed Funds rate change has a significant impact on retail interest rates.
In summary, it would be a mistake to assume that because the Fed Discount Rate has been lowered to help the banks avoid a cash crunch meltdown, that mortgage rates will either drop or go up. This is because the primary Fed Funds Rate has not been revised. In fact, it is just as likely that as the stock market recovers, mortgage rates are more likely to go up than down! This is because bonds will get sold, which raises the yields and therefore mortgage rates.
Any impact of this Discount Rate cut remains to be seen and will only play out in a macro-economic, long term way via restored confidence and liquidity of the banking industry.
If you are considering buying or selling a home in South Orange County, call on the experts! Dianna and Brian McGarvin 949-370-2652 or visit our website at http://www.pierbowl.com/.
Monday, July 30, 2007
U.S. Mortgage Rates Recede; 30-year at 6.69%
By Amy Hoak, MarketWatch
RISMEDIA, July 30, 2007—(MarketWatch)—Mortgage rates dropped this week, with Freddie Mac attributing the fall to market concerns of continued weakness in housing demand.
Data released Thursday showed the 30-year fixed-rate mortgage averaging 6.69% for July 20-26, down from the previous week’s 6.73% average. The mortgage averaged 6.72% a year ago. The 15-year averaged 6.37%, down slightly from last week’s 6.38% but above 6.34% a year ago.
The softening rates came after further evidence of sluggish housing demand, Freddie Mac vice president and chief economist, Frank Nothaft, said Thursday.
“For example, building permits fell last month to the slowest pace in a decade, and more recent data on June sales of existing home showed a fourth consecutive monthly decline,” he said in a news release.
Five-year Treasury-indexed hybrid adjustable-rate mortgages averaged 6.30%, down from last week’s 6.35% average and below 6.35% a year ago. The one-year Treasury-indexed ARM averaged 5.69%, down from last week’s 5.72% and below 5.78% a year ago.
To obtain the rates, the 30- and 15-year fixed-rate mortgages, along with the five-year ARM, required payment of an average 0.4 point. The one-year ARM required payment of an average 0.5 point. A point is 1% of the total loan amount, charged as prepaid interest.
Rates easing from previous highs
Increases in mortgage rates last month may have contributed to the continued sluggishness in housing, Nothaft said.
“Several factors contributed to the softening in housing markets this spring,” Nothaft said. “In addition to the tightening of lending standards earlier this year — especially on subprime loans — the 40-basis-point jump in rates on 30-year fixed-rate mortgages in June may have deterred potential buyers.”
According to a separate survey by the Mortgage Bankers Association, mortgage application volume was down a seasonally adjusted 3.6% last week, compared with the week before.
So far this year, mortgage brokers have been closing fewer non-traditional or subprime loans than they did in 2006, according to a report earlier this week from the National Association of Mortgage Brokers.
Subprime loans made up an 11% share of all mortgages offered in April, NAMB said, while in 2006, 13% of mortgage loans were subprime.
As the year progresses, the trend toward lower-risk loans should continue, said David Olson, from NAMB’s research partner Wholesale Access Mortgage Research & Consulting, Inc.
Amy Hoak is a MarketWatch reporter based in Chicago.
If you are considering buying or selling a home in South Orange County, call on the experts! Dianna and Brian McGarvin 949-370-2652 or visit our website at http://www.pierbowl.com/.
RISMEDIA, July 30, 2007—(MarketWatch)—Mortgage rates dropped this week, with Freddie Mac attributing the fall to market concerns of continued weakness in housing demand.
Data released Thursday showed the 30-year fixed-rate mortgage averaging 6.69% for July 20-26, down from the previous week’s 6.73% average. The mortgage averaged 6.72% a year ago. The 15-year averaged 6.37%, down slightly from last week’s 6.38% but above 6.34% a year ago.
The softening rates came after further evidence of sluggish housing demand, Freddie Mac vice president and chief economist, Frank Nothaft, said Thursday.
“For example, building permits fell last month to the slowest pace in a decade, and more recent data on June sales of existing home showed a fourth consecutive monthly decline,” he said in a news release.
Five-year Treasury-indexed hybrid adjustable-rate mortgages averaged 6.30%, down from last week’s 6.35% average and below 6.35% a year ago. The one-year Treasury-indexed ARM averaged 5.69%, down from last week’s 5.72% and below 5.78% a year ago.
To obtain the rates, the 30- and 15-year fixed-rate mortgages, along with the five-year ARM, required payment of an average 0.4 point. The one-year ARM required payment of an average 0.5 point. A point is 1% of the total loan amount, charged as prepaid interest.
Rates easing from previous highs
Increases in mortgage rates last month may have contributed to the continued sluggishness in housing, Nothaft said.
“Several factors contributed to the softening in housing markets this spring,” Nothaft said. “In addition to the tightening of lending standards earlier this year — especially on subprime loans — the 40-basis-point jump in rates on 30-year fixed-rate mortgages in June may have deterred potential buyers.”
According to a separate survey by the Mortgage Bankers Association, mortgage application volume was down a seasonally adjusted 3.6% last week, compared with the week before.
So far this year, mortgage brokers have been closing fewer non-traditional or subprime loans than they did in 2006, according to a report earlier this week from the National Association of Mortgage Brokers.
Subprime loans made up an 11% share of all mortgages offered in April, NAMB said, while in 2006, 13% of mortgage loans were subprime.
As the year progresses, the trend toward lower-risk loans should continue, said David Olson, from NAMB’s research partner Wholesale Access Mortgage Research & Consulting, Inc.
Amy Hoak is a MarketWatch reporter based in Chicago.
If you are considering buying or selling a home in South Orange County, call on the experts! Dianna and Brian McGarvin 949-370-2652 or visit our website at http://www.pierbowl.com/.
Wednesday, July 25, 2007
Realtors expect market rebound by early 2008
Meeting in Orange County, the National Association of Realtors' leadership answer questions about legislation, discount brokers and the Justice Department's anti-trust suit.
By JEFF COLLINS
The Orange County Register
Dana Point The housing market will rebound by the end of this year or the start of next year, with U.S. home prices and sales rising in 2008, the CEO of the National Association of Realtors said during a recent leadership retreat at the Ritz Carlton here.
A new association forecast issued last week projected that prices next year will rise by 1.8 percent, but NAR CEO Dale Stinton was even more optimistic, saying he expects prices to go up as much as 4 percent next year.
"We don't quite see the gloom and doom that other people see," Stinton said. "When you look at the macro data and when you look at the country as a whole, it's still a pretty darn good time to be looking at property."
Stinton's remarks came during an interview last week with national and state leaders of the industry's biggest trade association. The leadership huddled for three days at the oceanfront hotel to prepare for Long Beach broker Dick Gaylord's year as NAR's 2008 president. Among their key comments during the interview:
NAR expects the current session of Congress to focus heavily on housing issues.
Officials defended NAR's position in a 2005 federal anti-trust lawsuit over use of online home listings. The case will probably go to trial in Chicago next winter.
While 11 states ban discount brokers from giving their clients commission rebates, NAR's ethical policies allow such rebates.
Here's a summary of their comments:
Housing legislation
Among the key actions on Congress' agenda this year is a measure that would raise the "conforming" home loan limits for borrowers in California, said Jerry Giovaniello, NAR's chief lobbyist. Currently, borrowers seeking to qualify for loans bought by agencies like Fannie Mae and Freddie Mac are limited to borrowing $417,000, while the median price of a California home is above $590,000.
Other matters before Congress include Federal Housing Administration reforms to make the FHA-insured loans more attractive, creation of an Affordable Housing Trust Fund to pay for development and preservation of affordable homes, and foreclosure hearings to ask regulators why so many homeowners were allowed to get in over their heads, he said.
"What was troubling (about the first foreclosure hearings) is that some regulators said that the companies that were making loans (that ended up in default), 'we don't regulate them. There's no law that says we have to watch what they're doing,' " he said.
Giovaniello said Congress likely will require better disclosure so that borrowers using exotic loans understand what they're getting into.
Anti-trust suit
NAR is sticking by an online home-listing policy that sparked a U.S. Justice Department lawsuit accusing the association of suppressing competition.
At issue is a policy allowing brokers to "opt out" of having their listings appear on another broker's Web site. Critics say the practice seeks to eliminate discount brokers by keeping the listings of big real estate chains off their sites.
Laurene Janik, NAR general counsel, denied that the association is being anti-competitive, noting that only 48 brokers nationwide have used the opt-out policy to keep their listings off another's Web sites. She said that in some cases, Web sites allow sometimes inaccurate Zillow.com price estimates to appear on listings with prices well above Zillow's "Zestimates."
"Agents should be able to say that's not in my interest," Janik said.
Commission rebates
On a related topic, Janik also noted that while 11 states have banned commission rebates, such bans are contrary to NAR's policies.
"The bans have been on the books for many years, she noted, but only recently came into the spotlight as discount brokers sought to rebate part of their commissions to home buyers. NAR's code of ethic says is there's nothing inherently unethical about any gift, premium, prize or rebate that's offered to a consumer so long as it's adequately disclosed, she said.
However, Janik said the association won't seek to have those bans lifted because NAR does not get involved in lobbying at the state level.
"We leave a determination as to what's best for a state up to our state associations," she said.
If you are considering buying or selling a home in South Orange County, call on the experts! Dianna and Brian McGarvin 949-370-2652 or visit our website at http://www.pierbowl.com/.
By JEFF COLLINS
The Orange County Register
Dana Point The housing market will rebound by the end of this year or the start of next year, with U.S. home prices and sales rising in 2008, the CEO of the National Association of Realtors said during a recent leadership retreat at the Ritz Carlton here.
A new association forecast issued last week projected that prices next year will rise by 1.8 percent, but NAR CEO Dale Stinton was even more optimistic, saying he expects prices to go up as much as 4 percent next year.
"We don't quite see the gloom and doom that other people see," Stinton said. "When you look at the macro data and when you look at the country as a whole, it's still a pretty darn good time to be looking at property."
Stinton's remarks came during an interview last week with national and state leaders of the industry's biggest trade association. The leadership huddled for three days at the oceanfront hotel to prepare for Long Beach broker Dick Gaylord's year as NAR's 2008 president. Among their key comments during the interview:
NAR expects the current session of Congress to focus heavily on housing issues.
Officials defended NAR's position in a 2005 federal anti-trust lawsuit over use of online home listings. The case will probably go to trial in Chicago next winter.
While 11 states ban discount brokers from giving their clients commission rebates, NAR's ethical policies allow such rebates.
Here's a summary of their comments:
Housing legislation
Among the key actions on Congress' agenda this year is a measure that would raise the "conforming" home loan limits for borrowers in California, said Jerry Giovaniello, NAR's chief lobbyist. Currently, borrowers seeking to qualify for loans bought by agencies like Fannie Mae and Freddie Mac are limited to borrowing $417,000, while the median price of a California home is above $590,000.
Other matters before Congress include Federal Housing Administration reforms to make the FHA-insured loans more attractive, creation of an Affordable Housing Trust Fund to pay for development and preservation of affordable homes, and foreclosure hearings to ask regulators why so many homeowners were allowed to get in over their heads, he said.
"What was troubling (about the first foreclosure hearings) is that some regulators said that the companies that were making loans (that ended up in default), 'we don't regulate them. There's no law that says we have to watch what they're doing,' " he said.
Giovaniello said Congress likely will require better disclosure so that borrowers using exotic loans understand what they're getting into.
Anti-trust suit
NAR is sticking by an online home-listing policy that sparked a U.S. Justice Department lawsuit accusing the association of suppressing competition.
At issue is a policy allowing brokers to "opt out" of having their listings appear on another broker's Web site. Critics say the practice seeks to eliminate discount brokers by keeping the listings of big real estate chains off their sites.
Laurene Janik, NAR general counsel, denied that the association is being anti-competitive, noting that only 48 brokers nationwide have used the opt-out policy to keep their listings off another's Web sites. She said that in some cases, Web sites allow sometimes inaccurate Zillow.com price estimates to appear on listings with prices well above Zillow's "Zestimates."
"Agents should be able to say that's not in my interest," Janik said.
Commission rebates
On a related topic, Janik also noted that while 11 states have banned commission rebates, such bans are contrary to NAR's policies.
"The bans have been on the books for many years, she noted, but only recently came into the spotlight as discount brokers sought to rebate part of their commissions to home buyers. NAR's code of ethic says is there's nothing inherently unethical about any gift, premium, prize or rebate that's offered to a consumer so long as it's adequately disclosed, she said.
However, Janik said the association won't seek to have those bans lifted because NAR does not get involved in lobbying at the state level.
"We leave a determination as to what's best for a state up to our state associations," she said.
If you are considering buying or selling a home in South Orange County, call on the experts! Dianna and Brian McGarvin 949-370-2652 or visit our website at http://www.pierbowl.com/.
Monday, July 16, 2007
24323 Santa Clara Avenue
Excellent blufftop location down the street from The Headlands in Dana Point. Surrounded by multi million dollar homes. This condo offers two bedrooms and two baths situated all on one level. Gated under ground parking with elevator. Stroll to ocean view lookouts above the harbor.$694,000
For a more information or a private showing call 949-370-2652.
If you are considering buying or selling a home in South Orange County, call on the experts! Dianna and Brian McGarvin 949-370-2652 or visit our website at http://www.pierbowl.com/.
Saturday, July 14, 2007
309 Calle Empalme, San Clemente, CA
Gorgeous single level home with views of the ocean and hills. This home has been remodeled througout. Offering granite kitchen counters and new appliances. Gorgeous travertine floors throughout. Master and second baths offer granite and travertine. Four bedrooms and two baths all emcompass a central atrium with fountain.$999,000-1,039,000
For a more information or a private showing call 949-370-2652.
If you are considering buying or selling a home in South Orange County, call on the experts! Dianna and Brian McGarvin 949-370-2652 or visit our website at http://www.pierbowl.com/.
Thursday, June 28, 2007
Real estate rates down further overnight
30-year fixed rate at 6.28%; 10-year Treasury yield at 5.08%
Thursday, June 28, 2007
Inman News
Long-term mortgage interest rates fell again Wednesday, and the benchmark 10-year Treasury bond yield held at 5.08 percent.
The 30-year fixed-rate average dropped to 6.28 percent, and the 15-year fixed rate dipped to 5.98 percent. The 1-year adjustable sank to 5.52 percent.
The 30-year Treasury bond yield slipped to 5.19 percent.
Rates and bonds are current as of 7:15 p.m. Eastern Standard Time.
Mortgage rate figures are according to Bankrate.com, which publishes nightly averages based on its survey of 4,000 banks in 50 states. Points on these mortgages range from zero to 3.5.
In other economic news, the Dow Jones Industrial Average was up 90.07 points, or 0.68 percent, finishing at 13,427.73. The Nasdaq was up 31.19 points, or 1.21 percent, closing at 2,605.35.
Stock figures are current as of 7:30 p.m. Eastern Standard Time.
If you are considering buying or selling a home in South Orange County, call on the experts! Dianna and Brian McGarvin 949-370-2652 or visit our website at http://www.PierBowl.com.
Thursday, June 28, 2007
Inman News
Long-term mortgage interest rates fell again Wednesday, and the benchmark 10-year Treasury bond yield held at 5.08 percent.
The 30-year fixed-rate average dropped to 6.28 percent, and the 15-year fixed rate dipped to 5.98 percent. The 1-year adjustable sank to 5.52 percent.
The 30-year Treasury bond yield slipped to 5.19 percent.
Rates and bonds are current as of 7:15 p.m. Eastern Standard Time.
Mortgage rate figures are according to Bankrate.com, which publishes nightly averages based on its survey of 4,000 banks in 50 states. Points on these mortgages range from zero to 3.5.
In other economic news, the Dow Jones Industrial Average was up 90.07 points, or 0.68 percent, finishing at 13,427.73. The Nasdaq was up 31.19 points, or 1.21 percent, closing at 2,605.35.
Stock figures are current as of 7:30 p.m. Eastern Standard Time.
If you are considering buying or selling a home in South Orange County, call on the experts! Dianna and Brian McGarvin 949-370-2652 or visit our website at http://www.PierBowl.com.
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