Danawoods pool home!

This beautiful home offers 4 bedrooms and 3.5 baths. Situated at the end of a cul-de-sac with views through the canyon down to the ocean. Updated throughout this home offers a master bedroom on the lower level as well as the upper level. Serene back yard with private pool and spa.
$959,000
For a private showing call us at 949-300-1600.
www.mcgarvingroup.com

Market Time Report: Demand Far Exceeds 2007 Levels

Demand is not only dramatically surpassing 2007 levels, it is just shy of matching 2006 levels. The big difference in comparing current demand to demand over the past two years is that it has been improving unabated throughout 2008. This is so contrary to the constant stream of negative news regarding the housing market. That is due to the fact that the media is only provided with SOLD data, which is a snapshot of demand a couple of months ago. As a matter of fact, Dataquick, the company that provides the statistical SOLD and median price data to the media, is going to release the figures for April next week. Orange County housing demand did not exceed last year’s demand until the beginning of April, which will not reflect in the SOLD data until May’s data at the earliest. With that in mind, expect next week’s sold data to fall short of exceeding last year’s levels. The disparity will be closer than last month’s comparison, but it will still fall short. This is not due to escrows falling apart; it is because in March of this year there were fewer homes placed into escrow compared to March in 2007. So, it is a matter of time before the data that the media is supplied catches up to the story of today: demand is much stronger than last year. Demand, a snapshot of the prior 30 days of escrow activity, has continued its ascent by adding an additional 118 escrows in the past two weeks, bringing the current total to 2,658. Just last year demand was at 2,010 escrows, 648 fewer than today, off by 26%. Two years ago demand was at 2,741 escrows, 83 additional compared to today, or 3% more.
“Steady as she goes” is this best way to sum up the current active inventory. After the active inventory dropped by 604 homes on January 1, 2008, a normal, cyclical phenomena, from 15,328 to 14,724, since reaching 15,363 on January 30th, the inventory has only grown by an additional 94 homes, or six-tenths of one percent. That does not mean that only 94 homes have come on the market within in that time period; instead, it means there are almost an equal number of homes coming on the market as there are coming off. During the same period of time last year, the active inventory grew by 4,193 homes, or 35%. In 2006, it grew by 4,628, or 57%. The current active inventory is now at 15,457 homes, 20 additional homes compared to two weeks ago. Last year, there were 631 additional homes and climbing at a steady rate. Two years ago there were 2,761 fewer homes on the market; however, if it continues along its current, persistent trajectory, the inventory will be less than the 2006 mark by the end of July of this year.
With steadily increasing demand and a stable active inventory, the expected market time has continued its 2008 descent. Starting the year at 15.6 months, the market time has dropped significantly to 5.82 months today. This is the first drop below the six month mark in 14 months. Last year at this time the market time was at 8.0 months and two years ago it was at 4.63 months. As can be seen below, the expected market time is not following any trends of the prior two years other than the initial beginning of the year drop. If demand continues to improve and the inventory remains steady, the market time can continue to improve.
What other trends can be discerned from the current data? First, it is safe to say that the current market is much different than the past two years. There is tremendous activity for all homes below $500,000. This range now accounts for 47% of the current active inventory and 58% of demand. Last year, this range accounted for only 26% of both the active inventory and demand. Foreclosures only account for 7% of the current active inventory, totaling only 1,082, but they account for 25% of current demand. The expected market time for foreclosures has dropped to 1.61 months, a deep sellers market. Thus, it makes sense that foreclosures are not only fetching multiple offers, many are selling for above their asking prices. Short sales, where the homeowner owes more than the current market value of their home, total 29.7% of the current active market, 4,596 homes, but only 19% of demand. The expected market time is 8.94 months. HOWEVER, these statistics are extremely misleading as most buyers and all agents can attest to. A large portion of these active listings already have secured an acceptable offer, and in many cases, multiple offers, signed by both the buyer and seller and submitted to the bank, or banks, because they are “subject to lender approval.” Yet, they remain on the market as active listings. This is permissible as long as there is a signed “short sale agreement” that allows the seller to continue to actively market their home until formal lender approval occurs. The reports from the streets are that close to 50% of all short sale listings have mutually signed offers that are in the lenders hands for their approval process. This process can take anywhere from a few weeks to months. With 77% of all short sales below $500,000, demand is under stated. So, there is a boat load of activity in the lower ranges in Orange County. The bottom line is this: short sales and foreclosures have enabled housing prices to drop substantially since demand peaked in the first half of 2006. At the beginning of the current cycle there was a stalemate where buyers did not want to buy and sellers did not want to come off of their pricing perches. But, with the implosion of the subprime market and, subsequently, the financial market and lending liquidity, the housing landscape changed significantly. The housing boom had been underwritten by adjustable, subprime loans that began to rapidly reset in the second half of 2007. An unprecedented number of homeowners defaulted on their loans. This trend will continue until the end of 2008 when subprime loan resets will significantly diminish. Currently, 36.7% of the active inventory is either a foreclosure or short sale. Demand increased considerably as prices dropped to levels not seen in years. We are currently experiencing a wave of first time home buyer activity. Almost every Realtor® is working with a first time home buyer. Two years ago nobody was working with a first time home buyer and parents were wondering if their children would ever be able to afford a home in Orange County. First time home buyers have been priced out of the market for years and now that affordability has greatly improved, demand has skyrocketed. The new FHA loan limit of $729,750, allowing buyers with some credit issues who can afford the payment to put as little as 3% down, has helped fuel demand in the lower ranges as well.
Where’s the demand in the upper ranges? Finally we are seeing a bit of relief from the affects of the financial market. The disparity between the old $417,000 conventional loan limit and the new $729,750 limit has dropped from three-quarters of a percent to one-eighth. That is a major shift in financing which should increase demand up to the $800,000 level. The disparity between the old conventional loan limit and the new super jumbo loan limit, loans above $729,750, has improved from 1.5% down to 1%. These disparities should continue to improve as the year progresses, and should reach much more comfortable levels by the end of the Summer. So, demand in the upper ranges should slowly improve as liquidity is slowly restored this year. Also, there was a six month lag between the slowdown of the lower and upper ranges in 2007. It stands to reason that a similar lag would apply in the improvement in demand. Demand in the lower ranges really did not surge until the end of February. That would place an increase in demand for upper ranges at the end of August.

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/

Market Time Report: The First Time Wave is Growing

Compared to last year, demand is stronger, there are fewer homes on the market and the expected market time is much lower. The first time home buyer wave continues to grow and plant the seeds to an eventual recovery. The reports from the streets of Orange County are unanimous: first time home buyers are fueling a surge in activity that continues to flourish and has been steadily growing since the middle of February. Multiple offers in the lower ranges, homes priced below $500,000, are now quite common throughout Orange County. This chart illustrates how demand has not only surged past the 2007 level, but is quickly approaching the 2006 level. Until just four weeks ago, year over year demand had not been stronger than the prior year since September 2005, the beginning signs of the current slow cycle. Demand, a snapshot of the prior 30 days of escrow activity, has climbed by an additional 166 escrows in the past two weeks to 2,540. Last year at this time, demand was at 1,863 escrows, 677 fewer than today. Two years ago it was at 2,701, or 161 additional escrows.

The active listing inventory has remained steady in 2008. In the prior two weeks, the active inventory has dropped by 119 homes to 15,437. We started the year with 14,724 homes, 713 fewer than today, but that was after shedding 1,050 homes in December 2007 with sellers pulling their homes off the market for the holidays. Still, that only represents a 5% increase so far this year compared to a 37% increase in the inventory last year. Two years ago there were 3,481 fewer homes on the market; however, the inventory was growing at an extremely rapid rate in 2006. The inventory had already increased by 65% to this point and it continued to grow by another 34% until reaching its peak of 16,006 homes back in August 2006. Today, the active inventory has steadily remained just under 16,000 homes and appears as if it will continue along that path.

With steadily increasing demand and a stable active inventory, the expected market time has dropped like a rock. Starting this year with a market time of 15.6 months, a deep buyers market, the market time has improved to its lowest mark of the year to date at 6.08 months, a 61% drop. Last year the market time was at 8.33 months and climbing at an alarming rate that would spook any buyer considering purchasing. Two years ago the market time was at 4.43 months and climbing. By the end of June 2006, the market time had blossomed to 6.33 months.

So, it is safe to say that the Orange County housing market has definitely changed gears this year. The lower ranges and the flood of first time buyers are entirely responsible for this change. What changed? The answer is quite simple: the significant drop in prices has allowed buyers that have been sitting on the fence to finally afford to buy once again. After being priced out of the market with rampant appreciation earlier this decade, affordability is finally improving and inviting buyers that have been waiting a long time to finally purchase. Properties priced below $500,000 account for 47% of the entire active inventory and 56% of demand. Last year, this same range accounted for only 26% of the active inventory and demand. Detached homes below $750,000 are actually experiencing a slight sellers market, below the five month mark. The volume of distressed homes in the lower ranges has provided the fuel for the decline in pricing. 77% of all distressed properties are priced below $500,000 and 94% are priced below $750,000. Short sales and foreclosures now make up 36% of the current active inventory versus 35% two weeks ago. There are now 5,576 distressed properties on the market. The overwhelming majority, 81%, are short sales, sellers with loan balances that exceed the current market value and are “subject to lender approval.” For short sales, there are currently 4,504 active listings and demand is at 544 escrows. The expected market time is at 8.28 months, dropping from 9.86 months two weeks ago. But, this statistic is extremely misleading, just ask a buyer searching for a home. A large portion of the 4,504 active listings already have secured an offer on the property signed by both the buyer and seller, yet they remain active on the market. The reason is that there is also a signed short sale agreement that allows the seller to continue to actively market their home until formal lender approval occurs. This process takes anywhere from a couple of weeks to months. Unfortunately, there is no way of knowing which short sale listings already have an agreed upon offer submitted to the bank other than contacting the listing agent directly for their verbal answer. So, true demand in Orange County is actually understated. The word on the street is that close to 50% of all active short sale listings already have an agreed upon offer submitted to the lender. If those were to be truly changed to “pending escrow” status, the demand count would increase considerably, the inventory would drop and the market time would drop as well. Unfortunately, not all short sales with offers submitted for lender approval are actually approved. Roughly 1 out of 3 are accepted. Many are rejected because they are priced too far under their true market value. With increased demand comes more realistic pricing of short sales. As this year progresses, expect the lender acceptance rate to grow closer to 1 out of 2.

Where’s the demand in the upper ranges? The financial crunch is still impacting liquidity in the upper ranges. Demand is off by more than 30% compared to last year for all homes priced above $750,000. Remember, the conventional loan limit and FHA loan limit were both just raised to $729,750. However, there are now three tiers of loan rates: the old conventional loan limit up to $417,000, $417,001 up to the new limit of $729,750 and then $729,751 on up. The original intent was to expand the lower interest rates of conventional loans to higher ranges in areas with much higher prices, like Orange County. Historically, major changes in federally backed loan programs were carefully put together for the better part of a year. This time, the financial industry was given about a month to create and implement a significant change. The credit markets are just now adapting to the new loans. Part of that adaptation is the three tier system. Until the entire secondary market becomes more comfortable with these changes, the discrepancy in interest rates between each tier will be sizeable. There is about a three-quarter point differentiation between each tier. As the market adapts to the new program and liquidity is restored in the financial markets with investors once again purchasing pools of loans, the discrepancy between the tiers will shrink to about a quarter of a point. The experts are predicting that there will be considerable improvement by the end of the third quarter of this year, by the end of the summer. Currently, for loans above $729,750, the interest rates, loan qualifications and down payment requirements are extreme barriers to entry. That does not bode well for homes priced above $800,000, where the rate is approximately 1.5% above the $417,000 rate. This has impacted the upper range dramatically. All ranges above $1 million are experiencing market times above ten months; the higher the range, the higher the expected market time. Not surprisingly, the areas in Orange County that are impacted with market times above ten months are Corona Del Mar, Coto de Caza, Laguna Beach, Newport Beach and Newport Coast. These areas should all improve by the end of the summer with improvements in the financial markets.

With demand off in the upper ranges by more than 30%, do not be surprised when the media reports a significant year over year drop in the median sales price. With the lower ranges hot and the upper ranges not, the median value will be much lower. The average pending sales price a year ago was at $869,000 compared to $605,000 today. This is partially due to the decline in prices, but it also has a lot to do with a major decline in demand in the upper ranges. For the first three quarters of 2007, prior to the beginning of the financial crunch, the number of sales above $1 million in all of California was only off by 3% compared to the prior year. For homes below $1 million, sales were off by almost 30%. A month after the start of the financial crunch, September of 2007, sales above $1 million were down 26% compared to the prior year. The upper ranges have been impacted ever since. As liquidity is restored in the upper ranges, do not be surprised by an increase in demand in the upper ranges and an increase in the median sales price.

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/