Sunday, March 4, 2012


Hang on to your hats for this month's column because there is going to be a lot of information to absorb, nearly all of it positive!  Many reports have emerged as we began 2012 that would seem to indicate that the economy is, in fact, getting better.  Last month we quoted an economist that said the economy would improve, but that it wouldn't "feel like it did."  Well guess what?  It is noticeable.  Jonathan Lansner, who has been particularly pessimistic, in general and specifically to real estate, has written several recent articles that have been...well, encouraging.  National job stats say we added 243,000 jobs in January, and unemployment dove to a 2 year low of 8.3%.  Orange County, according to Lansner, added 40,000 in December.  That's the largest increase in Orange County, "working folks since January 2001 -- yes, 11 years ago."  The stock market had its best rally in over 4 years, returning to pre 2008 levels and has seemingly stabilized and is inching slightly upward.  What other intrinsic factors have led to everyone "feeling better?"  There isn't enough space in this newsletter to deconstruct all the elements of this now slow but steady recovery.  However, let's hone in on the real estate side.  First of all, interest rates... The fed's decision to keep them low through 2014 was met with a positive rally on Wall Street.  Buyers are willing and able to buy.  In fact, there are inventory issues, as in, not enough product to go around.  A seeming paradox is prices dipping slightly even with increasing demand.  Wild stuff.  But if a property is properly priced, expect multiple offers if you're a seller, and increased demand if you're a buyer.  Obviously there are exceptions to this depending on condition and location of the properties.  California added more construction jobs than any other state in the country for the past year.  Construction is a very important indicator of recovery for California.  Generally speaking, the first sign of recovery is car sales, check mark here, as last year was a banner year, particularly for Detroit.  After cars come houses, and new ones are a part of that.  There were only 302,000 new homes sold in the US in 2011, according to the Commerce Department.  And that was the worst year since 1963.  So construction coming back in California... Awesome! 



Warren Buffett, the greatest investor of the last century privately has told the people closest to him that, “buying a home right now will be the best opportunity in their lifetime."  Here are some other quotes:  Washington Post -- Housing Market and Economy Showing Encouraging Signs... The Wall Street Journal -- From Bottom Up, Sign of Housing Recovery... USA Today -- Housing Outlook is More Upbeat... Freddie Mac -- With the New Year comes a sense of cautious optimism.  There are some positive signs in the job market and consumer confidence; housing is starting to raise hopes for continued gradual economic recovery... Fannie Mae -- The housing sector will likely take incremental steps forward in 2012.



The numbers for December (the last complete month available) are as follows:  The total number of sales was 2,572.  That was a 12% increase in volume over November but still 6% down from December 2010.  There were 1,621 single-family resale, 750 condos and 201 new homes sold.  1,066 of the 1,621 were equity sales and the rest were distressed, either short sales or bank owned properties.  Condos were split 50/50 equity to distressed.  There were 1,019 Notices of Default (a 22% decline from the previous year) and 535 foreclosures trustee sales.  Of those, 382 went back to the banks and the rest sold to investors who attended the auctions.  A more interesting number is the 1,700 Notices of Trustee Sale recordings.  Conceivably, all these should go to auction.  And yet that number is few than 600.  Where are the other 1,100 preforeclosures?  The bottom line?  Short sales.  The banks would far rather sell short, than foreclose, for many reasons.  If a person is in a distressed property in the process of foreclosure, they likely can get a postponement and sell the property short.  The average monthly payment has decreased to $1,948, thanks to low interest rates, a 5% decrease from the previous year.



According to bloggers at KCM Blog we can watch these trends emerge: 1.) Buyers will return -  We're already seeing it as housing supply dips below 5 months (6 months inventory is considered a neutral market).  2.) Foreclosures will increase - Yeah, maybe, but this newsletters say the banks will defer more to short sales.  3) Prices will soften - This was covered already and is more applicable to other parts of the country that don't have the demand and population of So Cal.  Expect more stability than not, unless you are in outlying areas such as Victorville, Hemet, Sun City, Palm Springs, etc.  4.) Short sales increase - The appropriate response to this is... !!!  5)  This last trend isn't from KCM, but is more local fodder, namely inbound moves by the three major van lines jumped by 6% the past year.  Although a state by state analysis roaming the internet put California in neutral as far as migration goes, the moving statistics don't lie.  Allied, Atlas, and United all reported a 6% increase.  That's sizeable.  This column will end on this note of optimism; there are a lot of positive indicators, statistics, and trends on which to hang your positive outlook.  But an even more organic way of testing is people's attitudes, parking lots at malls and restaurants, durable goods sales and traffic.  All of these are moving in an upward direction, so as our cousins in England always say, "Keep Calm, and Carry On."  See you next month.


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