Monday, April 16, 2012


One recent headline in a local paper pointed out "January's Chill."  They meant the prices of the homes had fallen from December 2011, along with the sheer number of sales.  However, January over January (2011 vs. 2012) only showed a differential of 3%.  The numbers will be revealed later in this newsletter, but it will seem a paradox when one realizes that although those numbers might be right, they don't properly reflect what's happening in the actual, real time, market.  And that is...not enough inventory, and lots and lots of buyers.  In fact, late February statistics from market analyst, Steve Thomas, indicated that according to the current pace of sales and the houses available according to the Multiple Listing Service, we were down to 2.1 months of inventory.  This means that if not another house were listed from this point forward, in 2.1 months there would be no more houses for sale.  To give this some perspective, a neutral market, meaning not favoring seller or buyer, is considered to be 6 months.  In 2008 we had a huge buyers market as the inventory hit over 1 year in certain parts of Southern California.  But the times, they have a-changed.  According to Mr. Thomas, for homes priced below $500,000, demand is up 32% compared with last year.  Houses in that price range generally last no longer than 45 days and many of them are snapped up immediately with multiple offers numbering 5 or more.  Active listing inventory dropped in February to the lowest for this time of year since 2005.  What are some of the reasons?  The obvious first is the dirty, little, secret that the media doesn't want to talk about because it doesn't sell papers, but the fact is, the economy is getting better.  Second most obvious reason...almost free money.  Which correlates with reason number three, easier credit, simply more loans going down.  But of all these, perhaps the most important is that people are feeling better about buying.  Not just houses, but about buying everything.  Could it be that people are sick and tired of having a "recession mentality?"  California Association of Realtors has found that affordability is at an all time high in the state.  Certainly this may be true for the baby boomers and every generation since. By CAR's math, if a person or family makes about $60,000, they can qualify for a loan that will buy them an entry level home or condo.  In fact, the median price of Orange County's housing just dropped below $400,000 for the first time in years.  What does this all mean?  Well, good news for sellers who list NOW.  Less competition still, at this point, and a good pool of buyers with money available.  Buyers will be challenged to find a property, at least until more houses hit the market this spring, but will still be able to find some good deals, because the whole marketplace is one "good deal."  Could we see appreciation this spring?  Maybe.  But even if it costs a little more to buy a property with multiple offers, wouldn't you like to know what that property will be worth in 10 years.  Even in the worst downturn ever, properties bought in 2000 saw appreciation of approximately 40%.



The total number of sales for January (the last full month available), in Orange County was 1,872.  This number included 1,218 single-family, 574 condos, and 80 new homes.  The volume of sales was down 27% from December, and only 3% off January 2011.  Prices were down 5.5% overall, with single-family down 6.3% and condos off 9.6% from the previous year.  But a silver lining for the entry level as prices actually went up year over year.  The price range of $400,000 and under shot up 6.9% and $400,000 to $500,000 improved 1.7%.  As expected, the higher price ranges suffered the most decline in volume, especially the $600,000 to $700,000 price range which was off by 20% from January 2011.  There were1, 204 Notices of Default recorded.  This number somewhat reflects the banks intent to short sell many properties, rather than foreclose, as actual foreclosures numbered only 530.  The average monthly payment continues to float downward reflecting the lowering of and stability of interest rates.  It was recorded at $1,958, a decline of nearly 5% from the previous year.



Most economists agree that this year will be better than last year.  But everything this year already seems better.  Restaurants are crowded again; the expensive luxury line hotels experienced a huge surge in 2011.  Theme parks are crowded, and the malls packed once again.  This doesn't necessarily mean everything is rosy.  California's "shadow inventory" has been estimated as low as 5 months and as high as 11 months.  This bodes much better for us than many other states, and certainly other states with even the same "shadow" number, will take much longer to climb out from under because they don't have the volume of transactions or growing populations that we enjoy.  Who is still underwater in a negative equity situation?  A lot of people.  According to KCM Blog, 11.1 million homes are under water, or approximately 22.8% as of 4th quarter last year.  That number increased from the 3rd quarter which was 10.7 million homes and 22%.  Before you panic, this only makes common sense.  If prices are going down, then people are losing equity.  But not all these people are trying to sell, nor should they.  And perhaps, in closing, one should reflect on an important aspect of home ownership, namely, where we live and how we live.  It's great that for many people, housing prices appreciate and it becomes their greatest investment.  But not everyone can live on a coast or in an urban center where there is demand.  Yet despite that, home ownership remains the American Dream, and home ownership first flourished on farms and rural areas, and appreciation was slow, if it was there at all.  No, back in the day, you created the haven where you rested, relaxed, and were sheltered from the storm.  You made your payments and at the end of your working life, you had paid off your home and now could sell it or pass it on to your kids.  Perhaps we all need to remember, houses were never meant for a stock certificate and short hold, then sell. It may be time to return to the true meaning behind the housing market -- a place to call your own, build equity, and eventually, actually own.  See you next month.


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