Prior to the Orange County Register article running on Tuesday signaling year over year demand was way up (directly from the Market Time Report), the story was posted on the OCRegister.com website on Monday. From the story on their website on Monday, I received a call from KABC Channel 7 News and a TV van was parked in our lot by 1 pm taping a story about the wave of first time home buyers to be aired at 5 pm. I also received a call from Vikki Vargas and she had questions about the first time home buyer wave for a story they were doing from the article on the KNBC Channel 4 News at 5 pm. I also received a call from KNX1070 news radio and was interviewed by Jim Thorton and Diane Thompson regarding the increased demand and wave of first timers for the afternoon drive. To cap off the day, I was interviewed by the Wall Street Journal regarding a story that they were doing about first time buyers. Needless to say, for a couple of days this week, there was good news regarding the real estate market here in Orange County. The stories have quickly changed since then to the number of foreclosures during the first quarter in the Southland, but Monday illustrates that the media is tiring from all of the negative news. By the way, I have a slew of great emails from all of the news agencies and I will be sending them the Market Time Report as well. Below is the link to the story that caused all of the commotion. Click on the following link to view “Homebuying demand jumps 23%, expert says”: http://www.OurAgentSpot.com/sthomas/RegisterApr22.pdf.
Steven ThomasRE/MAX Real Estate Services"Outstanding Agents! Outstanding Results!"Office
Friday, April 25, 2008
Wednesday, April 23, 2008
Market Time Report: First Time Home Buyers are Back
Current housing demand continues to outpace last year and the reemergence of first time home buyers is a major factor. If you listen to or read all the recent reports regarding “sold” statistics for March, one would quickly come to the conclusion that the real estate market is continuing to sputter along at a slow pace. However, this could not be further from the truth. Sold activity is a snapshot of the past, about a month and a half in the past to be precise. So, March “sold” statistics are really a snapshot of the second half of January through the first half of February. The market did improve during that time but was still extremely anemic as demand, a snapshot of the prior 30 days of escrow activity, grew from 989 escrows in mid-January to 1,630 escrows in mid-February, a gain of 641 escrows. Since then demand has continuously grown to its current height of 2,374 escrows. Last year at this time demand was at 1,925 escrows, 449 fewer than today. This recent escrow activity will translate to sold data reported in the months to come. The big story will be that the year over year sold statistics will be better for the first time since the Autumn of 2005. Demand already crossed that threshold two weeks ago. Some skeptics attempt to discount the uptick in demand, claiming that many will fall out of escrow. That is simply not statistically true. The data does not support their claim. Yes, some escrows do fall out; however, the snapshot of 30 day escrow activity misses some escrows that have already closed because they were less than 30 day escrows. The average escrow is about 45 days, but we do have one, two and three week escrows that won’t show up in the data for long. So, the less than 30 day escrows offset most escrows that fall out. The bottom line: the market is improving. Market time has dropped from 15.6 months at the beginning of the year to 6.55 months today, not as deep of a buyer’s market. The active inventory grew by only 82 homes in the past two weeks to 15,556 homes. The active inventory has not changed much this year and has actually dropped by 61 homes over the past month. Last year at this time the active inventory was only 745 homes fewer homes than today and it was growing at a rate of 700 homes every two weeks.
The majority of the upswing in demand is in the lower ranges. Our agents in the trenches are unanimously reporting that there is a large wave of first time home buyer activity. First time home buyers had been priced out of the market and dwindled in numbers during the last couple years of the housing boom. But, prices have finally fallen to a point where they can now afford to purchase and that is precisely what they are doing. One year ago there were only 408 condominiums priced below $250,000 compared to 1,263 today, more than triple. One year ago there were only 343 detached homes priced below $500,000 compared to 2,848 today, more than eight times. The market time for detached homes below $500,000 is at 4.61 months, a slight seller’s market. It is not a coincidence that 75.7% of all condominiums and detached homes below $500,000 are either a foreclosure or a short sale. This fact has provided many opportunities for first time home buyers to finally enter the market. The first time home buyer activity is the seeds to the rebirth of the Orange County housing market. That does not mean that the market is going to right itself overnight. But, it is the first positive step in the recovery process. It was the lower ranges that were hit hard last March with the beginning of the subprime meltdown and it makes sense that it would be the first to take a step in the right direction. Many homes and condominiums in the lower ranges are receiving multiple offers. Foreclosures and short sales are not only securing multiple offers, they are closing above their asking price.
The upper ranges remain sluggish due to the financial crunch. The financial system is still not functioning properly. Lenders are still having liquidity issues and their lending requirements and interest rates for loans in the upper ranges are too rigid and are deeply cutting into demand. For example, the market time for homes priced between $1 million and $1.5 million is 10.89 months compared to 7.47 months one year ago. The upper ranges will remain sluggish until the financial markets start buying pools of mortgages once again. Since the beginning of the financial crunch in August of 2007, the financial markets have refused to buy any pools of mortgages. But, there are some signs that their appetite has been growing. First, a major national lender attempted to sell a pool of only the best of the best loans at the end of January, but the financial markets would only purchase them for a discount. They repeated their effort in March and the financial markets bought it at “par.” The logjam in the financial markets should begin to ease by the end of the third quarter, as will the disparity between conventional loans up to $417,000 and the new loan limit of $729,750, as well as jumbo loans above $729,750. Currently, there are three tiers of mortgages. The cheapest rates are for loans below the old conventional loan limit of $417,000. Rates for loans between the old conventional limit and the new $729,750 limit are three-quarters of a point higher. And, lenders tack on an additional three quarters of a point for loans above the new limit. As the financial markets’ appetite for pools of loans increases, these disparities will begin to diminish. This will be the second big positive step towards recovery. At that point, demand at the upper end of the Orange County real estate market will increase.
Buyers, what to do? First, it totally depends upon the area and price range on the approach. Naturally, in dealing with foreclosures, short sales and the lower ranges, be prepared for much more competition than any headlines would lead you to believe. There is a strong probability that you will be competing with other buyers in writing an offer on a home. In some cases it will take an offer to purchase above the asking price to secure a home. Due to the sluggishness in the upper ranges, buyers are more in control of their destiny with less competition. For those buyers looking for a deal in the higher ranges, keep in mind that only 5.7% of all distressed homes, foreclosures and short sales, are found above $750,000. Be prepared for increased activity on these properties too because every buyer is looking for a “deal.” Also, it is important to point out that lenders are in the driver’s seat when it comes to foreclosures. Currently, the market time for foreclosures is 2.05 months, a deep seller’s market. It is important to point out that the low interest rates should remain intact throughout 2008, but pressure is mounting for the Federal Reserve to raise rates as they grow more concerned about an increase in inflation. Rates have been favorable for a long time, but do not get comfortable with today’s interest rates, they WILL eventually increase. As soon as the economy starts humming along again, expect the Federal Reserve to reverse course and push rates up higher. By the way, for every 1% that interest rates increase, it erases approximately all of the benefits of waiting for property values to decrease 10%. The payments are virtually identical.
Sellers, what to do? It is extremely difficult to navigate in the current Orange County real estate market. Now more than ever it is essential to have an experienced Realtor® guide you throughout the process. There are numerous variables and market changes to continuously watch for: area short sales, foreclosures, local trends, detached versus attached pricing, etc. Be prepared to constantly reevaluate your pricing position within the market. The key ingredients to a successful sale are an excellent price and excellent condition. In arriving at price, the condition and location increase or decrease the market value. This market can also test a seller’s patience and you must be as prepared for a showing on day 120 as you were the first week. Stage your home for success: turn all the lights on, have soft music playing in the background, open all of the shutters and blinds to allow in natural light, turn on the air conditioning on hot days, box up and store all clutter and your home should be neat as a pin from top to bottom.
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 majority of the upswing in demand is in the lower ranges. Our agents in the trenches are unanimously reporting that there is a large wave of first time home buyer activity. First time home buyers had been priced out of the market and dwindled in numbers during the last couple years of the housing boom. But, prices have finally fallen to a point where they can now afford to purchase and that is precisely what they are doing. One year ago there were only 408 condominiums priced below $250,000 compared to 1,263 today, more than triple. One year ago there were only 343 detached homes priced below $500,000 compared to 2,848 today, more than eight times. The market time for detached homes below $500,000 is at 4.61 months, a slight seller’s market. It is not a coincidence that 75.7% of all condominiums and detached homes below $500,000 are either a foreclosure or a short sale. This fact has provided many opportunities for first time home buyers to finally enter the market. The first time home buyer activity is the seeds to the rebirth of the Orange County housing market. That does not mean that the market is going to right itself overnight. But, it is the first positive step in the recovery process. It was the lower ranges that were hit hard last March with the beginning of the subprime meltdown and it makes sense that it would be the first to take a step in the right direction. Many homes and condominiums in the lower ranges are receiving multiple offers. Foreclosures and short sales are not only securing multiple offers, they are closing above their asking price.
The upper ranges remain sluggish due to the financial crunch. The financial system is still not functioning properly. Lenders are still having liquidity issues and their lending requirements and interest rates for loans in the upper ranges are too rigid and are deeply cutting into demand. For example, the market time for homes priced between $1 million and $1.5 million is 10.89 months compared to 7.47 months one year ago. The upper ranges will remain sluggish until the financial markets start buying pools of mortgages once again. Since the beginning of the financial crunch in August of 2007, the financial markets have refused to buy any pools of mortgages. But, there are some signs that their appetite has been growing. First, a major national lender attempted to sell a pool of only the best of the best loans at the end of January, but the financial markets would only purchase them for a discount. They repeated their effort in March and the financial markets bought it at “par.” The logjam in the financial markets should begin to ease by the end of the third quarter, as will the disparity between conventional loans up to $417,000 and the new loan limit of $729,750, as well as jumbo loans above $729,750. Currently, there are three tiers of mortgages. The cheapest rates are for loans below the old conventional loan limit of $417,000. Rates for loans between the old conventional limit and the new $729,750 limit are three-quarters of a point higher. And, lenders tack on an additional three quarters of a point for loans above the new limit. As the financial markets’ appetite for pools of loans increases, these disparities will begin to diminish. This will be the second big positive step towards recovery. At that point, demand at the upper end of the Orange County real estate market will increase.
Buyers, what to do? First, it totally depends upon the area and price range on the approach. Naturally, in dealing with foreclosures, short sales and the lower ranges, be prepared for much more competition than any headlines would lead you to believe. There is a strong probability that you will be competing with other buyers in writing an offer on a home. In some cases it will take an offer to purchase above the asking price to secure a home. Due to the sluggishness in the upper ranges, buyers are more in control of their destiny with less competition. For those buyers looking for a deal in the higher ranges, keep in mind that only 5.7% of all distressed homes, foreclosures and short sales, are found above $750,000. Be prepared for increased activity on these properties too because every buyer is looking for a “deal.” Also, it is important to point out that lenders are in the driver’s seat when it comes to foreclosures. Currently, the market time for foreclosures is 2.05 months, a deep seller’s market. It is important to point out that the low interest rates should remain intact throughout 2008, but pressure is mounting for the Federal Reserve to raise rates as they grow more concerned about an increase in inflation. Rates have been favorable for a long time, but do not get comfortable with today’s interest rates, they WILL eventually increase. As soon as the economy starts humming along again, expect the Federal Reserve to reverse course and push rates up higher. By the way, for every 1% that interest rates increase, it erases approximately all of the benefits of waiting for property values to decrease 10%. The payments are virtually identical.
Sellers, what to do? It is extremely difficult to navigate in the current Orange County real estate market. Now more than ever it is essential to have an experienced Realtor® guide you throughout the process. There are numerous variables and market changes to continuously watch for: area short sales, foreclosures, local trends, detached versus attached pricing, etc. Be prepared to constantly reevaluate your pricing position within the market. The key ingredients to a successful sale are an excellent price and excellent condition. In arriving at price, the condition and location increase or decrease the market value. This market can also test a seller’s patience and you must be as prepared for a showing on day 120 as you were the first week. Stage your home for success: turn all the lights on, have soft music playing in the background, open all of the shutters and blinds to allow in natural light, turn on the air conditioning on hot days, box up and store all clutter and your home should be neat as a pin from top to bottom.
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, April 5, 2008
Market Time Report: Housing Demand Stronger than a Year Ago
April 3, 2008
Today marks the FIRST time since September 22, 2005 where demand is better than one year ago. The sold statistics, which garner front page headline attention in most media outlets, will not reflect the year over year statistics until May or even June of this year. So, you are hearing it here first, demand is actually better right now compared to last year. You can hear it in our offices too. Here’s the scoop from the trenches: increased showing activity, increased open house activity, buyers are writing more offers, multiple offers in the lower ranges and significantly more first time buyer activity. And, most of this activity was already in the works prior to the new FHA and conventional loan limits taking root in the marketplace. Buyers have been methodically entering the market since the beginning of the New Year. We started the year with demand, a snapshot of the prior 30 day escrow activity, at 944 escrows. There were only 1,473 total escrows on January 1st in all of Orange County with 14,724 homes on the market. That was an inventory of 16.45 months! Since then, demand has increased to 2,286 escrows within the prior 30 days, a 142% increase. Now there are 3,066 total escrows throughout Orange County, a 108% increase from the beginning of the year. Additionally, the active inventory has only grown by 750 homes since we sat on our comfortable sofas and sleepily watched the Rose Parade, bringing the inventory to 15,474 homes. Expected market time has dropped substantially to 6.75 months. Remember, the new FHA and conventional loan limits of $729,750 are just hitting the market now. We are achieving the increase in demand despite a major liquidity problem in the financial markets, meaning loans above $417,000 have been extremely challenging to put together unless a borrower had a lot of money to put down and cream of the crop credit scores. The new loan limits will have a powerful impact on demand. At 10% down, the old $417,000 conventional limit only covered 37% of the current active inventory. The new limits now encompass a stunning 75% of the inventory. The old $367,000 FHA loan limit covered only 23% of the active inventory. The real estate market also has the added benefit of Washington D.C. and every major player that has anything to do with the financial markets focusing programs and legislation aimed at further increasing demand and restoring the financial engine that runs our economy.
Last year there were1,464 fewer homes on the market, but demand was lower by 159 escrows. Demand was dropping fast last year due to the beginning effects of the subprime meltdown that started in March of 2007. Expected market time was almost the same at 6.57 months. Two years ago, the active inventory was at 10,714, demand was at 2,958 and market time was at 3.62 months. Bank owned foreclosures and short sales, homeowners that owe more on their home than the current value, now account for 34.5% of the active inventory. That figure was at 26% at the beginning of the year and 32.8% a month ago.
What about all of the distressed properties in the market place? Bank owned foreclosures are HOT and growing hotter by the minute with an expected market time of just 1.67 months. Two weeks ago that figure was at 2.11 months. Foreclosures only account for 20% of the total distressed market and only 7% of the entire active inventory. Thus, foreclosures are in demand and lenders are calling the shots with multiple offers and no emotional attachment to their “assets.” Their market is similar to the heydays of 2004 and 2005 for all of Orange County. Statistically, short sales have an expected market time of 10.60 months compared to 12.05 months two weeks ago. But, these numbers are not a true reflection of what is really going on in the marketplace. The numbers are grossly understated. Short sales are a totally different animal and should be treated as such. Realtors® out in the field keep a home on the market as an active listing through the Multiple Listing Service until they have formal lender approval of an offer already accepted by the seller. Even when a seller and a buyer agree upon the terms of a contract, escrow is not technically opened until formal lender approval occurs. The lenders have to determine whether or not they are willing to take less than the full loan amount currently encumbering the property. And, if there is more than one loan, each and every lender must sign off on the deal in order for an escrow to proceed. Short sales are “subject to lender approval” and can take anywhere from weeks to months. One of our associates reported from the trenches that they just closed a short sale after a seven month delay in a formal approval. That’s not even the worst case scenario, as many go unapproved and are instead foreclosed upon, wiping out any and all offers currently written on the property. So, when a buyer climbs into a car and finds a short sale that they have interest in, chances are that the home already has an accepted offer that is somewhere in the “lender approval” process. They too can add their offer to the mix and play the waiting game. Many of these short sales are priced at levels to attract buyers, discounting well below the true market price. In this case, the odds of “lender approval” on even full price offers are slim to none. As a consumer, it is best to do a bit of homework and write an offer closer to the market value, above the asking price, increasing the odds of lender acceptance. With more and more homes acquiring multiple offers, that is exactly what is occurring in the market: offers are being submitted for bank approval above the list price.
Everybody needs to keep in mind some fundamental statistics regarding distressed homes. 75% of all distressed properties, foreclosures and shorts sales, are below $500,000 and 94% are below $750,000. Santa Ana accounts for 20% of the entire distressed market in Orange County, 1 in every 5. Anaheim accounts for another 15%, 3 in every 20. The top 5 in total numbers, Santa Ana, Anaheim, Garden Grove, Orange and Lake Forest, account for 49% of all distressed properties, virtually 1 in every 2. With the exception of Orange, all have average list prices below $500,000.
What are FHA loans? The Federal Housing Administration (FHA) offers loans to consumers with some credit blemishes and/or a small down payment. A buyer can put down as little as 3%, all of which can be a gift. FHA is NOT subprime and has been around for years. This is not a program that the government cooked up to replace the void left by the sudden absence of subprime. Rather, with prior FHA loan limits well below the median sales price in Orange County, subprime filled the void. FHA loans require documentation and the buyer must actually qualify.
Buyers, what to do? Slowly but surely, more headlines are starting to illustrate improved demand and a great time to buy. It will take the better part of the next 60 days for the recent increased activity to start changing the tone of the headlines and stories completely. The facts are the facts; the lower ranges, where most of the junk loans occurred, are turning up the heat first. The increased loan limits should restore demand all the way up to $800,000. As liquidity is slowly restored to the financial markets, the upper ranges above $800,000 will in turn start to gain momentum as 2008 plods along. Demand has slowly improved as value has seeped its way back into the market. The conditions are perfect to purchase now and into the horizon: motivated sellers, plenty of homes to choose from, rates are low, new loan programs are available and there are great values out there right now. As a buyer, do not let price be your only determining factor in choosing to purchase. Price is important, but current favorable rates will not stick around forever. Prior to the financial subprime meltdown and financial crunch, the Federal Reserve was methodically raising rates to counter the threat of inflation. The threat of inflation is now high with all of the easing that the Federal Reserve has had to undertake to jump start the economy and the financial markets. Do not get comfortable with today’s interest rates, they WILL eventually increase. As soon as the economy starts humming along again, expect the Federal Reserve to reverse course and push rates up higher. By the way, for every 1% that interest rates increase, it erases approximately all of the benefits of waiting for property values to decrease 10%. The payments are virtually identical.
Sellers, what to do? So far this Spring, homeowners are NOT placing their homes on the market in foolish anticipation of a wonderful Spring real estate market. Thank goodness!!! Quite simply, sellers should continue to bide by a simple rule of today’s market: do NOT place your home on the market unless you absolutely must sell and are motivated to do what it takes to procure a sale, with the right price and condition. With only 2,285 successes over the past month, that leaves the vast majority waiting another month or months. In such a competitive market, it is all about price, location and condition. As a seller, you can do absolutely nothing about the location other than take it into consideration in determining price. Sellers do control their price and condition. After carefully determining an asking price, it still may take time, so pack your patience and be prepared to make changes as the market evolves. Unless you are prepared to market your home as a major or cosmetic fixer, great showing condition is imperative in maximizing your proceeds. Last, be prepared on day 100, just as you were during the first week, for a buyer to walk through the door. Set the stage with the lights on, soft music in the background, window covering opens and make sure your home is neat as a pin inside and out.
Today marks the FIRST time since September 22, 2005 where demand is better than one year ago. The sold statistics, which garner front page headline attention in most media outlets, will not reflect the year over year statistics until May or even June of this year. So, you are hearing it here first, demand is actually better right now compared to last year. You can hear it in our offices too. Here’s the scoop from the trenches: increased showing activity, increased open house activity, buyers are writing more offers, multiple offers in the lower ranges and significantly more first time buyer activity. And, most of this activity was already in the works prior to the new FHA and conventional loan limits taking root in the marketplace. Buyers have been methodically entering the market since the beginning of the New Year. We started the year with demand, a snapshot of the prior 30 day escrow activity, at 944 escrows. There were only 1,473 total escrows on January 1st in all of Orange County with 14,724 homes on the market. That was an inventory of 16.45 months! Since then, demand has increased to 2,286 escrows within the prior 30 days, a 142% increase. Now there are 3,066 total escrows throughout Orange County, a 108% increase from the beginning of the year. Additionally, the active inventory has only grown by 750 homes since we sat on our comfortable sofas and sleepily watched the Rose Parade, bringing the inventory to 15,474 homes. Expected market time has dropped substantially to 6.75 months. Remember, the new FHA and conventional loan limits of $729,750 are just hitting the market now. We are achieving the increase in demand despite a major liquidity problem in the financial markets, meaning loans above $417,000 have been extremely challenging to put together unless a borrower had a lot of money to put down and cream of the crop credit scores. The new loan limits will have a powerful impact on demand. At 10% down, the old $417,000 conventional limit only covered 37% of the current active inventory. The new limits now encompass a stunning 75% of the inventory. The old $367,000 FHA loan limit covered only 23% of the active inventory. The real estate market also has the added benefit of Washington D.C. and every major player that has anything to do with the financial markets focusing programs and legislation aimed at further increasing demand and restoring the financial engine that runs our economy.
Last year there were1,464 fewer homes on the market, but demand was lower by 159 escrows. Demand was dropping fast last year due to the beginning effects of the subprime meltdown that started in March of 2007. Expected market time was almost the same at 6.57 months. Two years ago, the active inventory was at 10,714, demand was at 2,958 and market time was at 3.62 months. Bank owned foreclosures and short sales, homeowners that owe more on their home than the current value, now account for 34.5% of the active inventory. That figure was at 26% at the beginning of the year and 32.8% a month ago.
What about all of the distressed properties in the market place? Bank owned foreclosures are HOT and growing hotter by the minute with an expected market time of just 1.67 months. Two weeks ago that figure was at 2.11 months. Foreclosures only account for 20% of the total distressed market and only 7% of the entire active inventory. Thus, foreclosures are in demand and lenders are calling the shots with multiple offers and no emotional attachment to their “assets.” Their market is similar to the heydays of 2004 and 2005 for all of Orange County. Statistically, short sales have an expected market time of 10.60 months compared to 12.05 months two weeks ago. But, these numbers are not a true reflection of what is really going on in the marketplace. The numbers are grossly understated. Short sales are a totally different animal and should be treated as such. Realtors® out in the field keep a home on the market as an active listing through the Multiple Listing Service until they have formal lender approval of an offer already accepted by the seller. Even when a seller and a buyer agree upon the terms of a contract, escrow is not technically opened until formal lender approval occurs. The lenders have to determine whether or not they are willing to take less than the full loan amount currently encumbering the property. And, if there is more than one loan, each and every lender must sign off on the deal in order for an escrow to proceed. Short sales are “subject to lender approval” and can take anywhere from weeks to months. One of our associates reported from the trenches that they just closed a short sale after a seven month delay in a formal approval. That’s not even the worst case scenario, as many go unapproved and are instead foreclosed upon, wiping out any and all offers currently written on the property. So, when a buyer climbs into a car and finds a short sale that they have interest in, chances are that the home already has an accepted offer that is somewhere in the “lender approval” process. They too can add their offer to the mix and play the waiting game. Many of these short sales are priced at levels to attract buyers, discounting well below the true market price. In this case, the odds of “lender approval” on even full price offers are slim to none. As a consumer, it is best to do a bit of homework and write an offer closer to the market value, above the asking price, increasing the odds of lender acceptance. With more and more homes acquiring multiple offers, that is exactly what is occurring in the market: offers are being submitted for bank approval above the list price.
Everybody needs to keep in mind some fundamental statistics regarding distressed homes. 75% of all distressed properties, foreclosures and shorts sales, are below $500,000 and 94% are below $750,000. Santa Ana accounts for 20% of the entire distressed market in Orange County, 1 in every 5. Anaheim accounts for another 15%, 3 in every 20. The top 5 in total numbers, Santa Ana, Anaheim, Garden Grove, Orange and Lake Forest, account for 49% of all distressed properties, virtually 1 in every 2. With the exception of Orange, all have average list prices below $500,000.
What are FHA loans? The Federal Housing Administration (FHA) offers loans to consumers with some credit blemishes and/or a small down payment. A buyer can put down as little as 3%, all of which can be a gift. FHA is NOT subprime and has been around for years. This is not a program that the government cooked up to replace the void left by the sudden absence of subprime. Rather, with prior FHA loan limits well below the median sales price in Orange County, subprime filled the void. FHA loans require documentation and the buyer must actually qualify.
Buyers, what to do? Slowly but surely, more headlines are starting to illustrate improved demand and a great time to buy. It will take the better part of the next 60 days for the recent increased activity to start changing the tone of the headlines and stories completely. The facts are the facts; the lower ranges, where most of the junk loans occurred, are turning up the heat first. The increased loan limits should restore demand all the way up to $800,000. As liquidity is slowly restored to the financial markets, the upper ranges above $800,000 will in turn start to gain momentum as 2008 plods along. Demand has slowly improved as value has seeped its way back into the market. The conditions are perfect to purchase now and into the horizon: motivated sellers, plenty of homes to choose from, rates are low, new loan programs are available and there are great values out there right now. As a buyer, do not let price be your only determining factor in choosing to purchase. Price is important, but current favorable rates will not stick around forever. Prior to the financial subprime meltdown and financial crunch, the Federal Reserve was methodically raising rates to counter the threat of inflation. The threat of inflation is now high with all of the easing that the Federal Reserve has had to undertake to jump start the economy and the financial markets. Do not get comfortable with today’s interest rates, they WILL eventually increase. As soon as the economy starts humming along again, expect the Federal Reserve to reverse course and push rates up higher. By the way, for every 1% that interest rates increase, it erases approximately all of the benefits of waiting for property values to decrease 10%. The payments are virtually identical.
Sellers, what to do? So far this Spring, homeowners are NOT placing their homes on the market in foolish anticipation of a wonderful Spring real estate market. Thank goodness!!! Quite simply, sellers should continue to bide by a simple rule of today’s market: do NOT place your home on the market unless you absolutely must sell and are motivated to do what it takes to procure a sale, with the right price and condition. With only 2,285 successes over the past month, that leaves the vast majority waiting another month or months. In such a competitive market, it is all about price, location and condition. As a seller, you can do absolutely nothing about the location other than take it into consideration in determining price. Sellers do control their price and condition. After carefully determining an asking price, it still may take time, so pack your patience and be prepared to make changes as the market evolves. Unless you are prepared to market your home as a major or cosmetic fixer, great showing condition is imperative in maximizing your proceeds. Last, be prepared on day 100, just as you were during the first week, for a buyer to walk through the door. Set the stage with the lights on, soft music in the background, window covering opens and make sure your home is neat as a pin inside and out.
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