Thus far, the big surprise of 2008 is the fact that the inventory has not grown this year. In fact, over the past six weeks, the inventory has been dropping. The active inventory was at 14,944 homes on January 10, 2008, my first report of the year. In comparison, today, there are 104 fewer homes, or 14,840. So far in 2008, the peak in inventory was established on March 20th at 15,617 homes, 777 additional homes compared to today. Last year at this time we were contending with an inventory that had grown by 5,607 homes from the start of 2007, growing from 11,643 homes to 17,250. The 2007 peak was achieved on September 20th at 17,898 homes. The rate of growth was even more staggering for 2006, growing from 7,635 homes at the beginning of the year to 14,946 by the end of June, a 7,311 home increase. The big difference this year compared to the prior two years is the fact that the conventional, non-distressed, discretionary home seller simply refuses to compete with the distressed inventory completely controlled by lenders, foreclosures and short sales (short sales are homeowners who owe more than their homes are worth, requiring lender approval of any sale). In January, 3,858 of the 14,944 homes on the market were distressed properties, 26% of the inventory. Today, 5,946 of the 14,840 homes on the market are distressed properties, 40% of the inventory. The non-distressed, discretionary seller inventory has dropped from 11,086 to 8,894 homes, a 2,192, a 19% drop. That is significant and has allowed the seeds to an eventual recovery to begin to germinate.
The other big story is that demand is now far better than both the 2006 and 2007 levels. Demand dropped in the past two weeks by 54 homes to 3,006 pending sales within the prior month. That is the first time this year that demand conformed to its normal cycle, dropping at the end of June. Dating back to 2004, when I first started tracking Orange County housing market numbers, demand has always dropped from mid-June to the end of June. However, demand is much stronger compared to the last two years. Last year, demand was at 1,894 pending sales, 1,112 fewer than today, or 37% less. Two years ago, demand was at 2,362, 644 fewer than today, or 21% less. Where is this demand coming from? Essentially, the lower ranges, all homes below $500,000, where the pressure from distressed homes has been greatest and eroded prices to a level where affordability has radically improved. With lower interest rates and a significant drop in prices, a bit over 20% in the prior two years, a wave of first time home buyer activity has unfolded before our collective eyes. Let’s take a quick look at demand and inventory for the $0 to $500,000 range compared to the market in total over the past few years:
Year % of Total Demand % of Total Inventory
2008 59% 48%
2007 26% 27%
2006 27% 22%
2005 30% 22%
So, this phenomena is a new element to the Orange County housing market, fueled by distressed properties and a lot of first-time home buyer activity. The word out in the field is that investors are now making their way back in the office too because prices have dropped to the point where a property will “cash flow,” meaning that the monthly cost is more than covered by the rent that is received. I personally have not heard of properties that will “cash flow” in many years. So, affordability has allowed the seeds to an eventual recovery to begin to germinate too.
What other trends can be discerned from the current data? The expected market time increased slightly over the past two weeks from 4.86 to 4.94 months. For all homes below $1 million, the expected market time is better than the last two years. All homes below $750,000 are experiencing a market time at four months, compared to around nine months last year. For homes between $750,000 and $1 million, the market time is at 6.23 months compared to 7.24 months last year. Foreclosures and distressed homes make up 40% of the active inventory, but if somebody is just looking for a foreclosure deal and does not want to deal with the hoops, delays and red tape that come along with short sales, they are in for a lot of competition. The foreclosure active inventory has remained at similar levels since mid-February, growing from 1,040 homes to only 1,171 homes. The foreclosure inventory makes up only 8% of the total market and only 20% of the distressed inventory. AND, buyers are flocking to them in droves. The current expected market time for foreclosures is down to 1.32 months, a SUBSTANTIAL sellers market. Expect multiple offers and very strong sales to list price ratio, meaning they are selling for their asking prices. The list to sales price ratio for all foreclosures is 99%. For homes above $500,000 the ratio is 100%. Yes, some do sell below their asking prices, given the condition and area; but, many sell well above their asking prices. Also, you can expect that the higher the range, the fewer number of foreclosures. 86% of all foreclosures are below $500,000 and 97% are below $750,000. If you are looking for that foreclosure “deal” above $750,000, stand in line and expect a lot of competition. Short sales make up 32% of the active inventory and 80% of all distressed sales. WARNING, do not be fooled by the 7.2 month expected market time for short sales. This statistic is extremely deceiving. There is actually tremendous demand for short sales and a majority of all active short sales actually have an offer to purchase that has been accepted by the seller and submitted to the lender. Short sales are “subject to lender approval,” meaning they are not officially a pending sale and officially pulled off the market until formal lender approval. So, about roughly half of the 4,789 currently active short sales have offers submitted to a lender for approval. This process can take anywhere from weeks to months to receive formal lender approval. And, even though the buyer and seller have executed an agreement, that alone does not guarantee that the lender is just going to rubber stamp an approval. The lender will want to be certain that the buyer, seller and property all qualify. The lender will make sure that the buyer is properly approved and able to close on the short sale. The lender will also make sure that the seller is truly a “hardship” case and does not have a savings account, a 401k nor owns other homes. Last, the lender will make sure that the property was not placed on the market at an artificially low level just to attract offers to purchase. In that case, they would be better off foreclosing and marketing the property themselves. Keep in mind that a majority of our market is controlled by lenders who are not emotionally involved and will approach these homes as assets and not homes. They work in the Asset Management Department and have computer programs and spreadsheets that control their decisions.
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, June 30, 2008
Tuesday, June 17, 2008
Market Time Report: Demand Surges as the Inventory Drops
June 12, 2008
From day one of 2008, demand has improved week after week unabated. This week it surged and the inventory dropped as a result. Demand, the number of new pending sales over the prior month, grew by an additional 390 homes in the past two weeks to 3,060. Demand has not been at this level since September of 2005. That date is significant because it was the end of the nine year housing run. The Autumn of 2005 was the beginning of the end for the long run-up in Orange County housing. One year ago today, there were 1,075 fewer pending sales, totaling only 1,985. Current demand is 54% better than last year. Two years ago there were 548 fewer pending sales. We have not experienced demand at this level in 33 months. This year’s demand has broken from traditional cycles and has continually increased. The total pending count has increased substantially as well, growing from a low of 1,456 pending sales at the beginning of the year to 4,256 today.
The other half of the story is that the active inventory has dropped below the 15,000 mark for the first time since the beginning of January. Over the past two weeks the Orange County active inventory has dropped by 390 homes to 14,880. Over the past month the inventory has dropped by 577 homes. The last time I reported inventory below 14,880 dates back to April 19 of last year. There’s a big difference between last year and this year though. In 2007, the inventory grew from 11,643 homes at the beginning of January to its peak in September of 17,898 homes. From April 19, 2007, to June 14, 2007, the inventory grew by more than 2,000 homes. Just like demand, the active inventory has broken away from the traditional real estate cycle. Even in a hot seller’s market, the active inventory tends to grow beginning in the Spring and peaking in the Autumn. The big difference this year is that many homeowners do not want to market their homes and compete with the volume of short sales, sellers who owe more than their homes are worth, and foreclosures. It is difficult to compete with distressed sellers and the unemotional banks that currently control our market. The general public is acutely aware that it is a buyer’s market and that it takes a lot of time and patience to sell. So, sellers were not hastily placing their homes on the market in anticipation of an incredible Spring. I was expecting the inventory to grow to 20,000 homes, but I simply did not factor that the public would perceptively refrain from marketing their homes without proper motivation.
Where is all of this demand coming from? I am unaware of any forecasts that called for demand to increase unabated. The continuous newspaper and televised news reports have described a desperate and bleak real estate market. There are also countless real estate blogs that are so extremely negative, they implicitly seem to be cheering for the “sky to fall.” Yet, demand has blossomed. Therefore, we know that buyers in today’s market did not make their decisions based upon any economic forecasts, media reports or Internet blogs. The general public, once again, exceeded my expectations tremendously. Based upon where we started at the beginning of the year, less than 1,000 pending sales, I personally did not expect demand to increase beyond the 2,000 mark. Instead, it just surpassed the 3,000 mark. Once again, I simply did not factor that the public would perceptively see the real value in today’s marketplace. We know that there are no cheerleaders on the sidelines encouraging buyers to buy. The naysayer would argue that the real estate industry and the agents out in the field may be pushing buyers along. That simply is not the case. Instead, prices have come down significantly because of distressed properties, sellers that absolutely have to sell regardless of the market. Also, affordability has improved dramatically. The increase in the FHA and conventional loan limits to $729,750 has improved financing. Ultimately, these factors have fueled the current wave of first time homebuyer activity. Many first time homebuyers have been priced out of the market for years. The current market has paved their way to homeownership. Many prognosticators mistakenly attempt to treat housing simply as a commodity and attempt to diagnose and forecast based upon numbers and lines. Yet, there is something deeper to consider, a place we affectionately refer to as “home.” Not somebody else’s home, your very own home. There is an inherent desire for homeownership. It is an emotional attachment that goes beyond the data.
What other trends can be discerned from the current data? As a result of the increase in demand and the decrease in the active inventory, the expected market time has dropped significantly from 5.82 months two week ago to 4.86 months today. This is the first time in 16-months that the market time has dropped below the five month mark. Last year, the expected market time was at 8.5 months. Two years ago, it was at 5.68 months. The sold data is just now surpassing year over year levels. Last year, there were 2,081 sales in the prior 30-day period compared to 2,300 today. In July, all media outlets will be reporting that this month’s sales will be better than last year. That is an incredible lag compared to what is going on in the market today. Two years ago, there were 2,899 closed sales. 39.6% of the current active inventory and 48.8% of demand is either a short sale or a foreclosure. The non-distressed conventional home seller is still a larger portion of demand. These are sellers that are carefully approaching the market with proper motivation, patience and market knowledge. Many are successful because the pride in their homes show in their superior condition and upgrades compared to the distressed homes that they are competing with. Superior condition and a competitive price in the marketplace is a recipe for success. 78% of all distressed homes are priced below $500,000 and 94% are below $750,000. There just are not as many distressed “deals” in the upper ranges, as many buyers in the marketplace would attest to. Due to the financial crunch, the interest rates and lender requirements for super jumbo loans, loans above $729,750, has really negatively affected demand in the upper ranges. Demand for homes above $750,000 is off by 27% compared to last year. With homeowners intuitively keeping their homes off the market, the current active inventory of homes in the upper ranges is also off by 23% compared to last year. The surge in demand is really isolated to homes below $500,000, where demand is up 233% compared to last year and yet the active inventory is up only 57%. The expected market time is 4.05 months compared to 8.58 months last year. For homes between $500,000 and $750,000, demand is up only 2% compared to last year; however, the active inventory is down by 51%. The expected market time is 4.14 months compared to 8.63 months last year. Not until liquidity is restored and the financial crunch eases will demand for homes in the upper price ranges increase. Currently, there are only slight signs of improvement. It is going to take the better part of the rest of this year for conditions to improve for the upper tier. In the lower ranges, due to the nature of distressed homes, there will still be pressure in pricing. However, with demand rising and so many multiple offers, the drop in pricing will not be as steep as it has been over the last 12-months.
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/
From day one of 2008, demand has improved week after week unabated. This week it surged and the inventory dropped as a result. Demand, the number of new pending sales over the prior month, grew by an additional 390 homes in the past two weeks to 3,060. Demand has not been at this level since September of 2005. That date is significant because it was the end of the nine year housing run. The Autumn of 2005 was the beginning of the end for the long run-up in Orange County housing. One year ago today, there were 1,075 fewer pending sales, totaling only 1,985. Current demand is 54% better than last year. Two years ago there were 548 fewer pending sales. We have not experienced demand at this level in 33 months. This year’s demand has broken from traditional cycles and has continually increased. The total pending count has increased substantially as well, growing from a low of 1,456 pending sales at the beginning of the year to 4,256 today.
The other half of the story is that the active inventory has dropped below the 15,000 mark for the first time since the beginning of January. Over the past two weeks the Orange County active inventory has dropped by 390 homes to 14,880. Over the past month the inventory has dropped by 577 homes. The last time I reported inventory below 14,880 dates back to April 19 of last year. There’s a big difference between last year and this year though. In 2007, the inventory grew from 11,643 homes at the beginning of January to its peak in September of 17,898 homes. From April 19, 2007, to June 14, 2007, the inventory grew by more than 2,000 homes. Just like demand, the active inventory has broken away from the traditional real estate cycle. Even in a hot seller’s market, the active inventory tends to grow beginning in the Spring and peaking in the Autumn. The big difference this year is that many homeowners do not want to market their homes and compete with the volume of short sales, sellers who owe more than their homes are worth, and foreclosures. It is difficult to compete with distressed sellers and the unemotional banks that currently control our market. The general public is acutely aware that it is a buyer’s market and that it takes a lot of time and patience to sell. So, sellers were not hastily placing their homes on the market in anticipation of an incredible Spring. I was expecting the inventory to grow to 20,000 homes, but I simply did not factor that the public would perceptively refrain from marketing their homes without proper motivation.
Where is all of this demand coming from? I am unaware of any forecasts that called for demand to increase unabated. The continuous newspaper and televised news reports have described a desperate and bleak real estate market. There are also countless real estate blogs that are so extremely negative, they implicitly seem to be cheering for the “sky to fall.” Yet, demand has blossomed. Therefore, we know that buyers in today’s market did not make their decisions based upon any economic forecasts, media reports or Internet blogs. The general public, once again, exceeded my expectations tremendously. Based upon where we started at the beginning of the year, less than 1,000 pending sales, I personally did not expect demand to increase beyond the 2,000 mark. Instead, it just surpassed the 3,000 mark. Once again, I simply did not factor that the public would perceptively see the real value in today’s marketplace. We know that there are no cheerleaders on the sidelines encouraging buyers to buy. The naysayer would argue that the real estate industry and the agents out in the field may be pushing buyers along. That simply is not the case. Instead, prices have come down significantly because of distressed properties, sellers that absolutely have to sell regardless of the market. Also, affordability has improved dramatically. The increase in the FHA and conventional loan limits to $729,750 has improved financing. Ultimately, these factors have fueled the current wave of first time homebuyer activity. Many first time homebuyers have been priced out of the market for years. The current market has paved their way to homeownership. Many prognosticators mistakenly attempt to treat housing simply as a commodity and attempt to diagnose and forecast based upon numbers and lines. Yet, there is something deeper to consider, a place we affectionately refer to as “home.” Not somebody else’s home, your very own home. There is an inherent desire for homeownership. It is an emotional attachment that goes beyond the data.
What other trends can be discerned from the current data? As a result of the increase in demand and the decrease in the active inventory, the expected market time has dropped significantly from 5.82 months two week ago to 4.86 months today. This is the first time in 16-months that the market time has dropped below the five month mark. Last year, the expected market time was at 8.5 months. Two years ago, it was at 5.68 months. The sold data is just now surpassing year over year levels. Last year, there were 2,081 sales in the prior 30-day period compared to 2,300 today. In July, all media outlets will be reporting that this month’s sales will be better than last year. That is an incredible lag compared to what is going on in the market today. Two years ago, there were 2,899 closed sales. 39.6% of the current active inventory and 48.8% of demand is either a short sale or a foreclosure. The non-distressed conventional home seller is still a larger portion of demand. These are sellers that are carefully approaching the market with proper motivation, patience and market knowledge. Many are successful because the pride in their homes show in their superior condition and upgrades compared to the distressed homes that they are competing with. Superior condition and a competitive price in the marketplace is a recipe for success. 78% of all distressed homes are priced below $500,000 and 94% are below $750,000. There just are not as many distressed “deals” in the upper ranges, as many buyers in the marketplace would attest to. Due to the financial crunch, the interest rates and lender requirements for super jumbo loans, loans above $729,750, has really negatively affected demand in the upper ranges. Demand for homes above $750,000 is off by 27% compared to last year. With homeowners intuitively keeping their homes off the market, the current active inventory of homes in the upper ranges is also off by 23% compared to last year. The surge in demand is really isolated to homes below $500,000, where demand is up 233% compared to last year and yet the active inventory is up only 57%. The expected market time is 4.05 months compared to 8.58 months last year. For homes between $500,000 and $750,000, demand is up only 2% compared to last year; however, the active inventory is down by 51%. The expected market time is 4.14 months compared to 8.63 months last year. Not until liquidity is restored and the financial crunch eases will demand for homes in the upper price ranges increase. Currently, there are only slight signs of improvement. It is going to take the better part of the rest of this year for conditions to improve for the upper tier. In the lower ranges, due to the nature of distressed homes, there will still be pressure in pricing. However, with demand rising and so many multiple offers, the drop in pricing will not be as steep as it has been over the last 12-months.
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, June 3, 2008
Market Time Report: Stronger Demand Now Exceeds 2007 AND 2006 Levels
Current Orange County housing demand not only obliterates 2007 levels, but it now has surpassed 2006 levels as well. Demand has reached a mark not seen in 24 months. Thus far this year, it has charted a course that is not at all cyclical and has improved unabated. The most rational reason for this break in tradition is pent up demand, specifically, pent up first time home buyer demand. It is important to reiterate from prior reports: locally, statewide and nationally, everybody seems to be fixated on SOLD data versus what is going on right NOW within the housing market, PENDING data. Why you may ask? Because SOLD data is so readily available and is actually public record. PENDING data is much harder to gauge and very few consistently report it because the data is not publicly available. The SOLD data set’s biggest flaw is that it tells a story about the real estate market about two months ago. I compare it to looking in your rearview mirror. It does a great job of letting you know where you have been, but it is not a very good gauge in letting you know what is just around the corner. I would not want to drive my car solely looking through the rearview mirror. Sold data is helpful in comparing where we have been compared to prior months or years, but is NOT a leading indicator that points to where we are going from here. PENDING data, on the other hand, gives us the ability to navigate looking out the front windshield. There may be curves and mountains to climb or descend down the road, but at least I can tell you where I am going right NOW. A lot can change in two months too. For example, current demand, the number of homes placed into escrow within the prior month, is at 2,720 homes versus 2,285 two months ago, a 19% improvement. The prior two month period experienced a 46% improvement. Current sold home levels surpassed 2007 levels for the first time starting just two weeks ago, whereas demand beat year over year levels a little over two months ago. So, expect the media to report that June SOLD data surpassed 2007 levels in the middle of July.
The storyline really has not changed much this year: demand is continuing to grow; the active inventory has changed very little this year; and expected market time has dropped like a rock. The current active inventory dropped by 187 homes in the past two weeks to 15,270 homes. Thus far, the 2008 height in the active inventory was achieved on March 20th, 15,617 homes. The inventory was at 14,944 homes on January 11th. Not much of a change. In comparison, last year’s inventory grew from 11,643 homes in the middle of January to 16,500 a year ago from today, a 42% increase compared to a 2% increase this year. Current demand is at 2,720 escrows versus 1,862 escrows last year and 2,618 escrows two years ago. Thus far this year demand has improved by 173%. The current expected market time is presently at 5.61 months versus 8.86 months just one year ago and 5.16 months two years ago. Market time has not yet surpassed 2006 levels because the active inventory was at 13,502 homes two years ago. However, the active inventory was rapidly growing two years ago and reached the 15,000 mark at the beginning of July. If current demand continues to improve and the inventory remains steady or drops, the expected market time will continue to improve.
What other trends can be discerned from the current data? First things first, a lion’s share of demand is relegated to the lower end. Demand in the lower ranges, below $500,000, is up 203% compared to last year and the listing inventory in this range is up just 66%. For homes between $500,000 and $750,000, demand is down by only 8% and the inventory is down by 47% compared to last year. In the upper ranges, from $750,000 and above, demand is off by 27% compared to last year and the inventory is down by 21%. This shift in demand has everything to do with the continued problems stemming from the financial crunch in obtaining financing above $729,750, the current conventional loan limit. It also has a lot to do with the current wave of first time home buyer activity fueled by the distressed properties, a significant drop in prices and an increase in affordability. This shift in demand has changed the mix of SOLD data significantly. This shows up in the overly hyped “median sales price.” The median value is when you line up a list of all of the SOLD values from least to greatest and then take the exact middle value, which becomes the often reported “median sales price.” Yes, prices have come down, probably more along the scale of 12% year over year for the county as a whole, BUT they have not come down 20.5% year over year as reported in April’s median sales price. There is a much better, more sophisticated calculation undertaken by the Office of Federal Housing Enterprise Oversight, OFHEO, which tracks repeat sales. Unfortunately the OFHEO takes a back seat to the median sales price. After the first quarter of 2008, they have the drop in pricing pegged at 11.16%. The OFHEO scrutinizes recent conventional loan activity; thus, some argue that if it included the upper range, that the drop would be even larger because of the lingering effects of the financial crunch. I disagree. The upper ranges are dropping in value; however, most of the distressed activity has been isolated to the lower ranges. Only 7% of the 5,909 current distressed homes on the market, foreclosures and short sales, can be found above $750,000. There are only 431 out of the 4,907 homes currently on the market above $750,000 that are distressed. Prior to the significant entry of distressed properties last year, there was a tug of war between buyers and sellers and values were really not decreasing by much. Once you throw in homeowners and banks that absolutely, unequivocally have to sell, price becomes the motivating factor to procure a sale. Currently, 62.4% of all homes below $500,000 are either a foreclosure or short sale. Don’t jump to any conclusions that prices will continue to drop like a rock in this range. This is the range that has witnessed the sharpest increase in demand. Demand within this range has grown from 917 homes just three months ago to 1,579, a 28% increase, while the inventory has only grown by 8%. From the beginning of the year, demand has jumped 305% for homes below $500,000 and the inventory has only grown by 19%. The expected market time has actually dropped to 4.6 months for this range, a slight seller’s market reading. Let’s not get ahead of ourselves, the nature of distressed properties puts pressure on pricing because of the enormous quantity in the current market. Thus, expect prices to continue to drop, just not at the same rate the prior nine months.
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 storyline really has not changed much this year: demand is continuing to grow; the active inventory has changed very little this year; and expected market time has dropped like a rock. The current active inventory dropped by 187 homes in the past two weeks to 15,270 homes. Thus far, the 2008 height in the active inventory was achieved on March 20th, 15,617 homes. The inventory was at 14,944 homes on January 11th. Not much of a change. In comparison, last year’s inventory grew from 11,643 homes in the middle of January to 16,500 a year ago from today, a 42% increase compared to a 2% increase this year. Current demand is at 2,720 escrows versus 1,862 escrows last year and 2,618 escrows two years ago. Thus far this year demand has improved by 173%. The current expected market time is presently at 5.61 months versus 8.86 months just one year ago and 5.16 months two years ago. Market time has not yet surpassed 2006 levels because the active inventory was at 13,502 homes two years ago. However, the active inventory was rapidly growing two years ago and reached the 15,000 mark at the beginning of July. If current demand continues to improve and the inventory remains steady or drops, the expected market time will continue to improve.
What other trends can be discerned from the current data? First things first, a lion’s share of demand is relegated to the lower end. Demand in the lower ranges, below $500,000, is up 203% compared to last year and the listing inventory in this range is up just 66%. For homes between $500,000 and $750,000, demand is down by only 8% and the inventory is down by 47% compared to last year. In the upper ranges, from $750,000 and above, demand is off by 27% compared to last year and the inventory is down by 21%. This shift in demand has everything to do with the continued problems stemming from the financial crunch in obtaining financing above $729,750, the current conventional loan limit. It also has a lot to do with the current wave of first time home buyer activity fueled by the distressed properties, a significant drop in prices and an increase in affordability. This shift in demand has changed the mix of SOLD data significantly. This shows up in the overly hyped “median sales price.” The median value is when you line up a list of all of the SOLD values from least to greatest and then take the exact middle value, which becomes the often reported “median sales price.” Yes, prices have come down, probably more along the scale of 12% year over year for the county as a whole, BUT they have not come down 20.5% year over year as reported in April’s median sales price. There is a much better, more sophisticated calculation undertaken by the Office of Federal Housing Enterprise Oversight, OFHEO, which tracks repeat sales. Unfortunately the OFHEO takes a back seat to the median sales price. After the first quarter of 2008, they have the drop in pricing pegged at 11.16%. The OFHEO scrutinizes recent conventional loan activity; thus, some argue that if it included the upper range, that the drop would be even larger because of the lingering effects of the financial crunch. I disagree. The upper ranges are dropping in value; however, most of the distressed activity has been isolated to the lower ranges. Only 7% of the 5,909 current distressed homes on the market, foreclosures and short sales, can be found above $750,000. There are only 431 out of the 4,907 homes currently on the market above $750,000 that are distressed. Prior to the significant entry of distressed properties last year, there was a tug of war between buyers and sellers and values were really not decreasing by much. Once you throw in homeowners and banks that absolutely, unequivocally have to sell, price becomes the motivating factor to procure a sale. Currently, 62.4% of all homes below $500,000 are either a foreclosure or short sale. Don’t jump to any conclusions that prices will continue to drop like a rock in this range. This is the range that has witnessed the sharpest increase in demand. Demand within this range has grown from 917 homes just three months ago to 1,579, a 28% increase, while the inventory has only grown by 8%. From the beginning of the year, demand has jumped 305% for homes below $500,000 and the inventory has only grown by 19%. The expected market time has actually dropped to 4.6 months for this range, a slight seller’s market reading. Let’s not get ahead of ourselves, the nature of distressed properties puts pressure on pricing because of the enormous quantity in the current market. Thus, expect prices to continue to drop, just not at the same rate the prior nine months.
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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