Orange County Housing Report: A 2011 Midyear OC Housing Update
July 21, 2011
Good Afternoon!
Not a lot is changing in regards to the Orange County housing market, but it looks as if the second half is poised to be better than a year ago. So, how’s 2011 shaping up thus far and where is housing headed from here? Let’s dig a little bit deeper...
Demand: no tax credit this year, but demand is much more predictable and following a normal cyclical pattern.
This is the first time since 2008 where demand has been able to function on its own without an $8,000 first time home buyer tax credit to skew the numbers. In 2009, the credit expired on November 30th. From April 2009 through November 2009, demand remained well above the 3,000 pending sale threshold, enabling 2009 to be the best year in total sales since 2005, prior to the beginning of the current downturn. In 2010, in order to take advantage of the tax credit, a home had to be pending by April 30th. The market sizzled for the first four months of the year, but dropped considerably after the pending sale deadline. The second half of 2010, with no tax credit, demand was off by 8% compared to 2009. Through today, demand is off by 10% compared to last year. Closed sales are off by 10% as well. Naysayers who have followed this housing report have often pointed to the fact that pending sales are not an accurate gauge of the housing market because many pending deals fall out. True, many pending deals do fall through, but that has been going on for years. There’s really no difference in the frequency of unsuccessful pending sales this year compared to prior years. Thus, if there is a decrease in pending deals this year compared to last year, closed sales will decrease as well. Pending sales is the absolute best gauge for knowing what’s going on in the housing market trenches TODAY. So much attention is placed on closing sales, but that is a very accurate gauge for what was happening in the market two months ago. For example, year over year demand has been off up until this month. Today, demand, the number of new pending sales over the prior month, sits at 2,894 pending sales, 24 more homes than last year. That’s not much, but I will bet all the money in the world that year over year closed sales in September will be nearly the same or slightly higher than last year. Where do we go from here? Demand will continue to follow a normal housing cycle and will be just a little bit better than last year’s numbers. The end of the summer market will occur with the beginning of the new school year. We can expect demand to drop slightly during the autumn market, September through the first couple of weeks of November. Demand will drop to its lowest levels of the year during the holiday/winter market, from Thanksgiving through February. Do to all of the distractions of the holidays, the absolute slowest, rock bottom time of the year for demand is from Thanksgiving through the first few weeks of the New Year.
The Active Listing Inventory: after slightly increasing this year, the inventory will continue to drop through New Year’s Day
After a painful 2007 and 2008, homeowners finally understood that the heydays of the earlier 2000’s were gone and were not coming back anytime soon. Those years were marked by a swelling of the active listing inventory and a majority of sellers were simply unsuccessful. In 2007, the inventory blossomed to nearly 18,000 homes on the market. In 2008, it almost reached 16,000 homes. In 2009, after being fooled for two years, the discretionary homeowner emerged. For the most part, homeowners knew that either they had the stomach to do what it takes to successfully sell or they simply did not place their homes on the market. The active listing inventory dropped by 35% that year, finishing the year at just 7,381 homes, levels not seen since 2005. The first time home buyer tax credit that expired in November helped clean up the inventory substantially. But, it was the discretionary homeowner that saved the day that year. In 2010, the discretionary homeowner took a hiatus and from the beginning of the year until mid-September, the inventory grew by an astonishing 63%, erasing all of the progress of 2009. That happened despite the second $8,000 credit. In the trenches, agents were stating that sellers were placing their homes on the market at unrealistic levels. Bank foreclosures, short sales and equity sellers all fell into the trap of being overzealous. With the spring and summer markets gone, the inventory dropped from September through the end of the year by 14%. 2011 started with an active listing inventory of 9,987 homes and increased by 14% until it reached a 2011 peak a month ago at 11,388. In the past month, the listing inventory shed 68 homes, less than 1%. The agents in the trenches state that there are still plenty of unrealistic homeowners. Most successful sellers have to reduce their price at least once. Homes sell due to three factors: price, location and condition. A homeowner can do nothing about changing their location. They do have control over price and condition. In this market, where every buyer is looking for a “deal” and not willing to pay a dime over the market value, price is by far the most important element to success. Buyers do not care what a seller needs to net from their home. They don’t care if a seller thinks there home is the best and has top notch upgrades. Instead, these spreadsheet buyers are going to carefully arrive at price and will walk away if they feel a seller is not being realistic. They would rather wait for another home to come onto the market than overpay. So, where will the active listing inventory go from here? The inventory may even increase a little through August, but will start to drop during the autumn market and at a more accelerated rate during the holiday/winter markets. Many sellers will throw in the towel after being unsuccessful in their attempts to sell, and will avoid the slower seasons. The listing inventory will not start to increase until after the New Year.
Three Distinctly Different Markets: the expected market time is vastly different depending upon the price range.
In terms of expected market time, there are three distinctly different price ranges. For the county as a whole, the expected market time is just shy of four months. But, we need to drill down a little bit deeper to get the real story. The below $500,000 price range makes up 51% of the active inventory and 68% of demand. That means that only 32% of demand can be found in homes above $500,000. The expected market time for homes priced below the $500,000 mark is only 2.95 months, a seller’s market. In that range, buyers can expect a lot more competition, multiple offers and sales prices at or near their asking prices. The average sale is just 2% lower than the asking price. That’s not a lot of room in the price. Buyers in this range often get burned a couple of times before sharpening their pencils and writing very realistic offers to purchase. Many sellers start off too high, but when they come down to realistic levels, sell very fast. The second distinctly different market is the $500,000 to $1 million range. The expected market time is 4.6 months, very close to equilibrium. Realistic pricing is an absolute must and can still take a while to procure an offer. Buyers in this range still should not get too zealous. The average sale is only 3% off of the asking price. That’s a little bit of room, but buyers who desire to submit low ball offers should not waste their time. The final range is homes priced above $1 million. The expected market time is just under a year. The higher the range, the longer it will take to sell. For homes priced above $4 million, 306 on the market today, the expected market time is 51 months. Buyers looking to buy above $1 million need to know that many homes are unrealistically priced. The average sale is 7% off of the asking price. In this range, 7% is sizable. Sellers need to very carefully arrive at price. They also need to know that there just are not enough buyers in the market looking for high priced homes. Even with an accurate price, many sellers need to pack their patience and wait for the right buyer to come along.
The Distressed Market: the active distressed inventory has remained basically the same all year long.
Yes, everybody is looking for a deal, but this market has its share of definite challenges. The active distressed inventory currently sits at its lowest level of the year, 3,713 homes and has shed 404 homes since the start of the year. Everybody has heard of the infamous “shadow inventory,” but that does not mean there is going to be a wave of distressed homes to hit the market. Instead, the market will go up or down only slightly will be very slow to change. For foreclosures, there are only 687 on the market today with an expected market time of 1.73 months, a very HOT seller’s market. Buyers can expect tremendous competition. Short sales appear to be a great bargain, but when they are priced too far below market value, they procure a lot of attention and so many offers, that they often sell way above their asking prices. Then, the waiting game begins. The average short sale takes months to put together as everybody has to wait on the first trust deed holder, all junior loan holders, and, often, a homeowner association attorney. The deal is not put together until all players agree to take less than what is owed. Some short sales that are not as complicated can take just a few weeks for lender approval, while others can take as long as a year to put together. There are currently 3,026 short sales on the active market, 26% of all active listings in Orange County. The expected market time for short sales is 2.83 months and they attract a lot of attention. Expect more of the same when it comes to the distressed market. It’s not going to change much anytime soon.
Copyright 2011 - Steven Thomas, Broker, www.ReportsOnHousing.com - All Rights Reserved. This report may not be reproduced in whole or part without express written permission by author.
Tuesday, July 26, 2011
Tuesday, May 31, 2011
Orange County Housing Report May 26
Orange County Housing Report: Double Dip Hype
May 26, 2011
Good Afternoon!
I don’t know about you, but I love a double dip… in chocolate! Pundits and the media are transforming something I love into a buzzword based on conjecture and sensationalism.
Double Dip: Searching on Google for “Double Dip Housing” yields 1,175,000 results
Let’s take a closer look. There are 72,000 results for a double dip in housing in just the last 24 hours, 281,000 in the last week, and 924,000 in the last month. So, what consititues a “double dip.” I don’t know about you, but the term sounds so negative, it gives the impression that we may be in store for a second round of price drops equal to the first huge drop. Let me be the first to tell you… NO WAY. The First Dip: the average home in Orange County dropped about 35% in value. The latest statistic that has received tremendous press is the Standard & Poor’s/Case-Shiller home-price index for Los Angeles and Orange counties, where the combined counties dropped 2.1% year over year. Orange County’s current median sales price, $432,000, is 1.6% off from a year ago. Those numbers do not indicate a housing dip. They are part of market fluctuations. Demand and prices have been a little subdued in 2011 thus far. Everybody, including me, tried to explain and rationalize the housing market behavior. I have finally put my finger on it: too much hype about a double dip. The hype may have subdued demand a bit, but it’s not responsible for the latest reports of a drop in the median price. It all stems from the expiration of the first time home buyer tax credit in the spring of last year. The market in 2010 was HOT through the end of April. In order to take advantage of the credit, a property had to be under contract by April 30, 2010. Demand dropped precipitously from May 1st on. It made for a much slower market through December 2010. Essentially, the credit pulled a lot of sales forward to the beginning of the year. With lower sales, year over year prices dropped a little bit. With that drop, the headlines and media talked about the possiblity of a double dip. That was enough to slow down shell shocked consumers and move many buyers to the fence. Yet, prices have already dropped 35%. A 2.1% drop is a giant yawn in comparison. Some economists are forecasting a slight INCREASE in prices for the remainder of the year. Either way, focusing on any kind of dip is silly, given that it will not be a giant dip like in ROUND 1. Instead, buyers should be focusing on record low interest rates. We know that rates will rise, and when they do, mark my words, they will rise fast, erasing any gains in waiting for prices to dip. As a matter of fact, buyers will be paying more in terms of a monthly mortgage payment even if prices dip a little.
Housing Demand: Demand has continued to cool.
Demand, the number of new pending sales over the past month, increased for the first time in two months, adding an additional 10 homes and now totals 3,052 pending sales. Last year at this time demand was at 3,303 pending sales. It was still under the influence of the first time home buyer tax credit. Many buyers that wanted to buy and take advantage of the credit couldn’t because they lost out on several multiple offer situations. Some buyers that fell into this category walked away, but many opted to still buy despite no government subsidy. Today’s demand is not under the influence of a government subsidy. As buyers begin to understand that today’s incredible interest rates are not here to stay, demand will ultimately increase. That may not come until interest rates start to rise because of inflation, which it inevitably will. The likelihood of consumers ever seeing rates like this again during their lifetime is equivalent to the likelihood of gas prices returning to $2.00 per gallon.
The Active Listing Inventory: There has been very little change in the active listing inventory over the past month.
In the trenches I am told that there isn’t a lot of fresh inventory. Unlike last year, the inventory has not been growing at an alarming, unrealistic pace. Sellers’ expectations are more in check and much more discretionary compared to last year. Over the past month, the active inventory has only grown by 88 homes, now totaling 11,219. Last year at this time, the inventory grew by 488 homes within the prior month and totaled 9,839 homes, pushing its way to the 10,000 mark by the first week of June.
The Distressed Market: the active distressed inventory increased by 10 homes in the past couple of weeks.
Contrary to everybody’s expectations, the distressed inventory has actually dropped by 303 homes. Not much has changed within the distressed market. The distressed inventory now totals 3,808 and represents 33.9% of the active inventory. The expected market time for foreclosures is remains incredibly HOT at 1.63 months. There are currently only 669 foreclosures within the active listing inventory, an increase of five homes in the past two weeks. There are currently 3,139 short sales on the active market, decreasing by five homes in the past two weeks. The expected market time is 2.84 months for short sales, also a seller’s market.
Have a wonderful weekend.
Sincerely,
Brian McGarvin
Realtor
Cell 949.370.2652
May 26, 2011
Good Afternoon!
I don’t know about you, but I love a double dip… in chocolate! Pundits and the media are transforming something I love into a buzzword based on conjecture and sensationalism.
Double Dip: Searching on Google for “Double Dip Housing” yields 1,175,000 results
Let’s take a closer look. There are 72,000 results for a double dip in housing in just the last 24 hours, 281,000 in the last week, and 924,000 in the last month. So, what consititues a “double dip.” I don’t know about you, but the term sounds so negative, it gives the impression that we may be in store for a second round of price drops equal to the first huge drop. Let me be the first to tell you… NO WAY. The First Dip: the average home in Orange County dropped about 35% in value. The latest statistic that has received tremendous press is the Standard & Poor’s/Case-Shiller home-price index for Los Angeles and Orange counties, where the combined counties dropped 2.1% year over year. Orange County’s current median sales price, $432,000, is 1.6% off from a year ago. Those numbers do not indicate a housing dip. They are part of market fluctuations. Demand and prices have been a little subdued in 2011 thus far. Everybody, including me, tried to explain and rationalize the housing market behavior. I have finally put my finger on it: too much hype about a double dip. The hype may have subdued demand a bit, but it’s not responsible for the latest reports of a drop in the median price. It all stems from the expiration of the first time home buyer tax credit in the spring of last year. The market in 2010 was HOT through the end of April. In order to take advantage of the credit, a property had to be under contract by April 30, 2010. Demand dropped precipitously from May 1st on. It made for a much slower market through December 2010. Essentially, the credit pulled a lot of sales forward to the beginning of the year. With lower sales, year over year prices dropped a little bit. With that drop, the headlines and media talked about the possiblity of a double dip. That was enough to slow down shell shocked consumers and move many buyers to the fence. Yet, prices have already dropped 35%. A 2.1% drop is a giant yawn in comparison. Some economists are forecasting a slight INCREASE in prices for the remainder of the year. Either way, focusing on any kind of dip is silly, given that it will not be a giant dip like in ROUND 1. Instead, buyers should be focusing on record low interest rates. We know that rates will rise, and when they do, mark my words, they will rise fast, erasing any gains in waiting for prices to dip. As a matter of fact, buyers will be paying more in terms of a monthly mortgage payment even if prices dip a little.
Housing Demand: Demand has continued to cool.
Demand, the number of new pending sales over the past month, increased for the first time in two months, adding an additional 10 homes and now totals 3,052 pending sales. Last year at this time demand was at 3,303 pending sales. It was still under the influence of the first time home buyer tax credit. Many buyers that wanted to buy and take advantage of the credit couldn’t because they lost out on several multiple offer situations. Some buyers that fell into this category walked away, but many opted to still buy despite no government subsidy. Today’s demand is not under the influence of a government subsidy. As buyers begin to understand that today’s incredible interest rates are not here to stay, demand will ultimately increase. That may not come until interest rates start to rise because of inflation, which it inevitably will. The likelihood of consumers ever seeing rates like this again during their lifetime is equivalent to the likelihood of gas prices returning to $2.00 per gallon.
The Active Listing Inventory: There has been very little change in the active listing inventory over the past month.
In the trenches I am told that there isn’t a lot of fresh inventory. Unlike last year, the inventory has not been growing at an alarming, unrealistic pace. Sellers’ expectations are more in check and much more discretionary compared to last year. Over the past month, the active inventory has only grown by 88 homes, now totaling 11,219. Last year at this time, the inventory grew by 488 homes within the prior month and totaled 9,839 homes, pushing its way to the 10,000 mark by the first week of June.
The Distressed Market: the active distressed inventory increased by 10 homes in the past couple of weeks.
Contrary to everybody’s expectations, the distressed inventory has actually dropped by 303 homes. Not much has changed within the distressed market. The distressed inventory now totals 3,808 and represents 33.9% of the active inventory. The expected market time for foreclosures is remains incredibly HOT at 1.63 months. There are currently only 669 foreclosures within the active listing inventory, an increase of five homes in the past two weeks. There are currently 3,139 short sales on the active market, decreasing by five homes in the past two weeks. The expected market time is 2.84 months for short sales, also a seller’s market.
Have a wonderful weekend.
Sincerely,
Brian McGarvin
Realtor
Cell 949.370.2652
Sunday, May 29, 2011
Investing in San Clemente Re4al Estate
Investing In San Clemente Ca Real Estate
If you are among the many, who have been wanting to invest in the San Clemente, Calif., real estate market, then there may not be a better time than the present. While some would prefer to wait until prices are at absolute rock bottom, the harsh reality is that predicting "rock bottom" is difficult in the 21st Century real estate market. While some are reporting that the "new norm" for unemployment is 9%, and that can certainly affect home sales and home pricing, real estate is a cyclical market, and it usually comes back to prominence following extended downturns such as the one the US is currently experiencing.
Recent months in the San Clemente region have seen inventory start to dissipate. That means more people are buying, and less homes are on the market, an indication that pricing may have finally "bottomed." Supply and demand dictates pricing in the real estate market wherever you go. As these factors fluctuate, so, too, can prices. Of the 9 available areas within the San Clemente region, realtors and agents are starting to see unheard of low prices for the quality and location of home. To determine which home you want to live in, you must first decide what is important to you with regards to location. Do you like instant beachside access, or are you more about overlooking views? The areas within San Clemente offer the best of both worlds and the chance to find the home of your dreams in the location of your dreams.
Once you have determined what it is you want from the location, you need to start thinking about home features and square footage. Observe what the price per square foot tagged on the home is, and then compare to other new homes and older homes in the region. Work with your realtor to determine a reasonable offer that will be of serious consideration to the seller. Also, see if there are any buying advantages available, such as short sale home listings. Being able to "rescue" a homeowner from foreclosure can allow you to get into a home at a much cheaper rate than you otherwise would. But for this to be effective, it is important that you act fast.
Acting fast requires the expertise of an experienced agent familiar with the San Clemente region. Scratch that. It requires the expertise of an experienced agent, who knows all 9 areas inside and out. Timing is of the utmost importance to capturing one of these bargain homes, and in order for time to be on your side, you need to know which homes are at risk of becoming short sales so that you can make an offer within minutes. That will give you the competitive advantage over other buyers. Also keep in mind that real estate agents only send in one offer to the bank on a short sale so acting quickly can secure your spot with the bank. Make sure your offer is clean and don't ask for a lot of extra items from the seller. You want to get the seller excited about your offer so they will accept it and send it to the bank for the short sale approval. Buying a home in San Clemente can be a fun venture if you understand the process and have a professional real estate agent on your side.
If you are among the many, who have been wanting to invest in the San Clemente, Calif., real estate market, then there may not be a better time than the present. While some would prefer to wait until prices are at absolute rock bottom, the harsh reality is that predicting "rock bottom" is difficult in the 21st Century real estate market. While some are reporting that the "new norm" for unemployment is 9%, and that can certainly affect home sales and home pricing, real estate is a cyclical market, and it usually comes back to prominence following extended downturns such as the one the US is currently experiencing.
Recent months in the San Clemente region have seen inventory start to dissipate. That means more people are buying, and less homes are on the market, an indication that pricing may have finally "bottomed." Supply and demand dictates pricing in the real estate market wherever you go. As these factors fluctuate, so, too, can prices. Of the 9 available areas within the San Clemente region, realtors and agents are starting to see unheard of low prices for the quality and location of home. To determine which home you want to live in, you must first decide what is important to you with regards to location. Do you like instant beachside access, or are you more about overlooking views? The areas within San Clemente offer the best of both worlds and the chance to find the home of your dreams in the location of your dreams.
Once you have determined what it is you want from the location, you need to start thinking about home features and square footage. Observe what the price per square foot tagged on the home is, and then compare to other new homes and older homes in the region. Work with your realtor to determine a reasonable offer that will be of serious consideration to the seller. Also, see if there are any buying advantages available, such as short sale home listings. Being able to "rescue" a homeowner from foreclosure can allow you to get into a home at a much cheaper rate than you otherwise would. But for this to be effective, it is important that you act fast.
Acting fast requires the expertise of an experienced agent familiar with the San Clemente region. Scratch that. It requires the expertise of an experienced agent, who knows all 9 areas inside and out. Timing is of the utmost importance to capturing one of these bargain homes, and in order for time to be on your side, you need to know which homes are at risk of becoming short sales so that you can make an offer within minutes. That will give you the competitive advantage over other buyers. Also keep in mind that real estate agents only send in one offer to the bank on a short sale so acting quickly can secure your spot with the bank. Make sure your offer is clean and don't ask for a lot of extra items from the seller. You want to get the seller excited about your offer so they will accept it and send it to the bank for the short sale approval. Buying a home in San Clemente can be a fun venture if you understand the process and have a professional real estate agent on your side.
Monday, April 18, 2011
OC Housing Report April 2011
Orange County Housing Report: Welcome to Fantasyland
April 14, 2011
Good Afternoon!
The market realities are much different than buyer expectations when it comes to distressed homes.
Foreclosures and Short Sales: 44% of all sales in March were either a foreclosure or a short sale.
Understandably, every buyer is looking for a deal in today’s market. Nobody sits across from a REALTOR® for the first time and asks to pay fair market value for a home. No way! The market is way down from its height in the mid-2000’s, they should be able to secure a “deal.” That is how the logic flows for buyers today. In reading newspaper articles or watching the news, when it comes to real estate, it is easy to see where everybody arrives at the misconception that it must be a buyer’s market. Buyers gravitate to foreclosures and short sales in search of that proverbial deal. With so many buyers flocking to distressed properties, there is tremendous competition. For the market as a whole, the expected market time is 3.36 months, a slight seller’s market. That’s right, a “seller’s market.” So, if it is a seller’s market, why aren’t home values appreciating right now? The answer is simple; with so many distressed properties on the market, they are keeping a lid on appreciation. Buyers simply do not want to overpay for a home, even if there is a lot of competition with multiple offers. Instead, values are holding steady in the lower ranges, homes below $750,000. Who ultimately is the winning bidder on a home? It is not necessarily the “all cash” buyer. In a multiple offer situation, when two offers are identical, cash beats out a buyer in need of financing. Most homes are sold to buyers that have been burned once or twice before they finally believe that is not a buyer’s market. In order to finally secure a home, they sharpen their pencil and are ready to pay the fair market value for a home. There are plenty of Lowball Larry’s out there writing tons of offers at deep discounts in hopes that somebody out there has to be desperate enough to take their offer. Those buyers ultimately just end up wasting a lot of people’s time, especially the REALTOR® that they are working with. For foreclosures, the expected market time is a sizzling HOT 1.39 months, a deep seller’s market. Buyers should expect the most competition in dealing with foreclosures. Short sales, sellers who owe more than the current market value of their home and require lender approval of any sale, have an expected market time of 2.52 months, also a hot seller’s market. With so many buyers turning to distressed homes to chase after that misleading “deal,” it is no wonder that it is the hottest segment of the market. There are not enough foreclosures to go around, either. They represent only 6% of the current active inventory and 20% of all sales in March. Short sales represent 29% of the active listing inventory and 24%of all sales in March. Yet, there is a disconnect when it comes to short sales. Almost 40% of demand is made up of short sales, but they only make up about 25% of closed sales. The trouble is that, on average, short sales take a very long time to close, and, in many cases, they fall out of escrow and have to secure a new buyer. Short sales are the most complex transaction. Often there are multiple lenders, delinquent property taxes, and delinquent homeowner association dues. When the homeowner falls too far behind in association dues, attorneys often get involved, making the process even more complicated. The sell requires the approval of all lenders and the association and the property taxes need to be paid current. Arriving at a successful close requires a lot of perseverance and patience.
Housing Demand: Demand cooled a bit in the past couple of weeks.
Demand, the number of new pending sales over the past month, decreased by 2%, shedding 76 pending sales and now totals 3,282. That’s still much stronger than the beginning of the year. It will be interesting to see if cooling demand was related to unusually cooler weather and rainstorms or the first sign of a new trend. I am going to go out on a limb and state that it is most likely just a temporary blip on the radar screen.
The Active Listing Inventory: With slightly slower demand, the active listing inventory grew.
Typically, demand increases during this time of the year. Since it actually dropped a little, there weren’t as many pending sales to eat into the active inventory. Instead, the listing inventory increased by 272 homes in the past two weeks and now totals 11,028. That’s the first time that the inventory has surpassed 11,000 homes since November 2010. Last year, the active listing inventory grew unabated as unrealistic homeowners flooded the market. Unrealistic homeowners become unsuccessful sellers until they finally reach the conclusion that the price needs to be dropped to the fair market value or they need to simply pull their homes off the market and throw in the towel. Thus far this year, for the most part, homeowners are figuring it out again: market your home if and only if you have what it takes to get the home sold. Carefully arriving at the fair market value is fundamental to successfully selling.
April 14, 2011
Good Afternoon!
The market realities are much different than buyer expectations when it comes to distressed homes.
Foreclosures and Short Sales: 44% of all sales in March were either a foreclosure or a short sale.
Understandably, every buyer is looking for a deal in today’s market. Nobody sits across from a REALTOR® for the first time and asks to pay fair market value for a home. No way! The market is way down from its height in the mid-2000’s, they should be able to secure a “deal.” That is how the logic flows for buyers today. In reading newspaper articles or watching the news, when it comes to real estate, it is easy to see where everybody arrives at the misconception that it must be a buyer’s market. Buyers gravitate to foreclosures and short sales in search of that proverbial deal. With so many buyers flocking to distressed properties, there is tremendous competition. For the market as a whole, the expected market time is 3.36 months, a slight seller’s market. That’s right, a “seller’s market.” So, if it is a seller’s market, why aren’t home values appreciating right now? The answer is simple; with so many distressed properties on the market, they are keeping a lid on appreciation. Buyers simply do not want to overpay for a home, even if there is a lot of competition with multiple offers. Instead, values are holding steady in the lower ranges, homes below $750,000. Who ultimately is the winning bidder on a home? It is not necessarily the “all cash” buyer. In a multiple offer situation, when two offers are identical, cash beats out a buyer in need of financing. Most homes are sold to buyers that have been burned once or twice before they finally believe that is not a buyer’s market. In order to finally secure a home, they sharpen their pencil and are ready to pay the fair market value for a home. There are plenty of Lowball Larry’s out there writing tons of offers at deep discounts in hopes that somebody out there has to be desperate enough to take their offer. Those buyers ultimately just end up wasting a lot of people’s time, especially the REALTOR® that they are working with. For foreclosures, the expected market time is a sizzling HOT 1.39 months, a deep seller’s market. Buyers should expect the most competition in dealing with foreclosures. Short sales, sellers who owe more than the current market value of their home and require lender approval of any sale, have an expected market time of 2.52 months, also a hot seller’s market. With so many buyers turning to distressed homes to chase after that misleading “deal,” it is no wonder that it is the hottest segment of the market. There are not enough foreclosures to go around, either. They represent only 6% of the current active inventory and 20% of all sales in March. Short sales represent 29% of the active listing inventory and 24%of all sales in March. Yet, there is a disconnect when it comes to short sales. Almost 40% of demand is made up of short sales, but they only make up about 25% of closed sales. The trouble is that, on average, short sales take a very long time to close, and, in many cases, they fall out of escrow and have to secure a new buyer. Short sales are the most complex transaction. Often there are multiple lenders, delinquent property taxes, and delinquent homeowner association dues. When the homeowner falls too far behind in association dues, attorneys often get involved, making the process even more complicated. The sell requires the approval of all lenders and the association and the property taxes need to be paid current. Arriving at a successful close requires a lot of perseverance and patience.
Housing Demand: Demand cooled a bit in the past couple of weeks.
Demand, the number of new pending sales over the past month, decreased by 2%, shedding 76 pending sales and now totals 3,282. That’s still much stronger than the beginning of the year. It will be interesting to see if cooling demand was related to unusually cooler weather and rainstorms or the first sign of a new trend. I am going to go out on a limb and state that it is most likely just a temporary blip on the radar screen.
The Active Listing Inventory: With slightly slower demand, the active listing inventory grew.
Typically, demand increases during this time of the year. Since it actually dropped a little, there weren’t as many pending sales to eat into the active inventory. Instead, the listing inventory increased by 272 homes in the past two weeks and now totals 11,028. That’s the first time that the inventory has surpassed 11,000 homes since November 2010. Last year, the active listing inventory grew unabated as unrealistic homeowners flooded the market. Unrealistic homeowners become unsuccessful sellers until they finally reach the conclusion that the price needs to be dropped to the fair market value or they need to simply pull their homes off the market and throw in the towel. Thus far this year, for the most part, homeowners are figuring it out again: market your home if and only if you have what it takes to get the home sold. Carefully arriving at the fair market value is fundamental to successfully selling.
Saturday, March 19, 2011
Orange County Housing Report For Spring 2011
Orange County Housing Report: Spring is Here!
March 18, 2011
Good Afternoon!
Spring forward has a new meaning this year, Orange County housing demand is springing into action.
Housing Demand: Demand is at its highest level since August of last year.
That’s correct. Demand is taking off DESPITE the lack of government intervention in the form of a tax credit. Last year at this time the market was very robust. But, right after the first time home buyer tax credit ended at the end of April, demand took a giant nosedive. It was right smack in the middle of the spring market, typically the best time of the year in terms of demand. This year is very different. The market is functioning without a credit to artificially stimulate the market. Current demand may be trailing last year’s numbers, but I guarantee that there will not be a nosedive in demand in the middle of this year’s spring market. I have often said that in housing there are no guarantees, but I am willing to make an exception this time. The real estate market is finally following a normal cyclical pattern, something it has not done in years. Here’s a quick recap of a “normal” cycle to refresh our memory. Spring is the best time of the year to sell, the current market. It runs from now through mid-June. Pending sales during the spring translate to higher closings in the summer. The summer is when families prefer to move, when the kids are out of school and can nicely transition into a new school. The summer is the second best time of year to sell, but not quite as robust as the spring. Many summer pending sales do not close until the autumn, right after the kids are in school. The autumn is the third best time of year to sell, as demand contracts a bit more. The slowest time of the year to sell is the holiday market, from Halloween until the first couple of weeks of the New Year. A normal market is refreshing. It is much easier to make decisions when we know what is around the corner.
Demand, the number of new pending sales over the past month, increased by 225 in just two weeks and now totals 2,982. At the beginning of the year, demand was at 1,856 pending sales. Since then, it has increased by 61%. Last year at this time there were 288 additional pending sales, propped up by the $8,000 first time homebuyer tax credit.
The Active Listing Inventory: Homeowners are finally getting it, placing their homes on the market if and only if they have to.
Another refreshing aspect to the current market is the fact that the active listing inventory is not growing uncontrollably like it did last year. Like last year, it has grown unabated since the start of the New Year, but not at the same rate. The active listing inventory only added 67 additional homes over the past two weeks and now totals 10,828, less than a 1% increase. Last year at this time, the inventory grew at a 4% clip in the same two week period, adding an additional 330 homes. There were 8,876 homes on the active inventory back then; but, it had increased by 20% from the beginning of the year, compared to only 8% thus far this year. Last year the inventory grew unabated through mid-September because homeowners were placing their homes on the market at unrealistic levels. Many approached the market as to what they “needed to get” out of their home, instead of what the market would truly bear. The overall market was doing much better in the lower ranges. Multiple counter offers, offers close to or at their asking prices, frustrated buyers, and quick sales were all very common. However, that did not mean that buyers were willing to pay much of a premium for a home. Buyers today are “spreadsheet buyers,” buyers that want to carefully analyze as much data as possible before arriving at an offer price. With so many distressed homes on the market, mixed with uncertainty about the future, values are just not ready to appreciate. That does not mean that buyers are going to land a home at a 20% discount. In February, the sales price to list price ratio was 3%, meaning that the average home sold at only a 3% discount. For buyers, low ball offers are a ridiculous waste of time. Similarly, unrealistic, overzealous pricing by sellers is a ridiculous waste of time. The current trend of realistic, discretionary homeowners is another healthy sign in today’s Orange County housing market.
The Distressed Market: 49% of all closed sales in February were either a short sale or foreclosure.
The distressed market plays a major role in today’s market. 35% of the active listing inventory is either a short sale or a foreclosure. 50% of all homes priced below $500,000 are distressed, the hottest price range with an expected market time of a little over three months. Only 6% of all homes above $1 million are distressed, the coolest price range with an expected market time of a little over eight months. In the month of February, 20% of all closed sales were a foreclosure, 29% were short sales, and 51% were homeowners with equity in their homes, also known as “equity sellers” in the real estate trenches. In the past two weeks, the distressed inventory increased by 52 homes and now totals 3,797. There are 699 foreclosures on the market, increasing by 13 homes in the past two weeks. The expected market time for foreclosures is an incredibly HOT 1.64 months. There are currently 3,098 short sales on the active market, an increase of 39 homes in the past two weeks. The expected market time is 2.65 months, a seller’s market.
Have a wonderful weekend.
Sincerely,
Steven Thomas
Broker
Cell 949.874.8221
Copyright 2011 - Steven Thomas, Broker - All Rights Reserved. This report may not be reproduced in whole or part without express written permission by author.
March 18, 2011
Good Afternoon!
Spring forward has a new meaning this year, Orange County housing demand is springing into action.
Housing Demand: Demand is at its highest level since August of last year.
That’s correct. Demand is taking off DESPITE the lack of government intervention in the form of a tax credit. Last year at this time the market was very robust. But, right after the first time home buyer tax credit ended at the end of April, demand took a giant nosedive. It was right smack in the middle of the spring market, typically the best time of the year in terms of demand. This year is very different. The market is functioning without a credit to artificially stimulate the market. Current demand may be trailing last year’s numbers, but I guarantee that there will not be a nosedive in demand in the middle of this year’s spring market. I have often said that in housing there are no guarantees, but I am willing to make an exception this time. The real estate market is finally following a normal cyclical pattern, something it has not done in years. Here’s a quick recap of a “normal” cycle to refresh our memory. Spring is the best time of the year to sell, the current market. It runs from now through mid-June. Pending sales during the spring translate to higher closings in the summer. The summer is when families prefer to move, when the kids are out of school and can nicely transition into a new school. The summer is the second best time of year to sell, but not quite as robust as the spring. Many summer pending sales do not close until the autumn, right after the kids are in school. The autumn is the third best time of year to sell, as demand contracts a bit more. The slowest time of the year to sell is the holiday market, from Halloween until the first couple of weeks of the New Year. A normal market is refreshing. It is much easier to make decisions when we know what is around the corner.
Demand, the number of new pending sales over the past month, increased by 225 in just two weeks and now totals 2,982. At the beginning of the year, demand was at 1,856 pending sales. Since then, it has increased by 61%. Last year at this time there were 288 additional pending sales, propped up by the $8,000 first time homebuyer tax credit.
The Active Listing Inventory: Homeowners are finally getting it, placing their homes on the market if and only if they have to.
Another refreshing aspect to the current market is the fact that the active listing inventory is not growing uncontrollably like it did last year. Like last year, it has grown unabated since the start of the New Year, but not at the same rate. The active listing inventory only added 67 additional homes over the past two weeks and now totals 10,828, less than a 1% increase. Last year at this time, the inventory grew at a 4% clip in the same two week period, adding an additional 330 homes. There were 8,876 homes on the active inventory back then; but, it had increased by 20% from the beginning of the year, compared to only 8% thus far this year. Last year the inventory grew unabated through mid-September because homeowners were placing their homes on the market at unrealistic levels. Many approached the market as to what they “needed to get” out of their home, instead of what the market would truly bear. The overall market was doing much better in the lower ranges. Multiple counter offers, offers close to or at their asking prices, frustrated buyers, and quick sales were all very common. However, that did not mean that buyers were willing to pay much of a premium for a home. Buyers today are “spreadsheet buyers,” buyers that want to carefully analyze as much data as possible before arriving at an offer price. With so many distressed homes on the market, mixed with uncertainty about the future, values are just not ready to appreciate. That does not mean that buyers are going to land a home at a 20% discount. In February, the sales price to list price ratio was 3%, meaning that the average home sold at only a 3% discount. For buyers, low ball offers are a ridiculous waste of time. Similarly, unrealistic, overzealous pricing by sellers is a ridiculous waste of time. The current trend of realistic, discretionary homeowners is another healthy sign in today’s Orange County housing market.
The Distressed Market: 49% of all closed sales in February were either a short sale or foreclosure.
The distressed market plays a major role in today’s market. 35% of the active listing inventory is either a short sale or a foreclosure. 50% of all homes priced below $500,000 are distressed, the hottest price range with an expected market time of a little over three months. Only 6% of all homes above $1 million are distressed, the coolest price range with an expected market time of a little over eight months. In the month of February, 20% of all closed sales were a foreclosure, 29% were short sales, and 51% were homeowners with equity in their homes, also known as “equity sellers” in the real estate trenches. In the past two weeks, the distressed inventory increased by 52 homes and now totals 3,797. There are 699 foreclosures on the market, increasing by 13 homes in the past two weeks. The expected market time for foreclosures is an incredibly HOT 1.64 months. There are currently 3,098 short sales on the active market, an increase of 39 homes in the past two weeks. The expected market time is 2.65 months, a seller’s market.
Have a wonderful weekend.
Sincerely,
Steven Thomas
Broker
Cell 949.874.8221
Copyright 2011 - Steven Thomas, Broker - All Rights Reserved. This report may not be reproduced in whole or part without express written permission by author.
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