DID YOU HEAR THE ONE ABOUT...NO HOUSING INVENTORY?

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%.