Monday, October 1, 2012


The last time homes sold at today’s pace, it was 2009 and there was a very good reason--the tax credit.  So, for homes to be outselling that pace, there must be some pretty good reasons now...and there are.  Interest rates, for one thing, are screaming low, “in the high 3%’s low.”  Lots of investors have bought up the true foreclosed messes out there, have rehabbed them, and are now “flipping” them, meaning the investor is putting them right back up for sale.  These properties generally have a lower price point and demand for them is great.  Next up we have the fact that housing affordability ratios are at their highest level since the early 1990’s.  In fact, homes last month moved in California at the fastest pace and had the biggest year-over-year gain since 2009, according to the California Association of Realtors.  Another fact: homes sold at an annual rate of 572,260 up 21% from the previous year.  The statewide median home price for single-family resale was $312,110, up 6.6% in a year.  And although the median price for a single-family in Orange County fell 1.2% from  ($538,340), the overall median price for all properties, condos, new homes, and single-family, had risen in Orange County by 1.8% from last year.  More on the numbers later, but for now, let’s concentrate on yet another factor -- inventory.  Or better put, lack of inventory.  May of 2011 saw inventory of 5.7 months, almost normal.  By May of  2012, inventory is at 3.5 months and this month was less than 2 months in many Orange County cities.  Any time you have this level of scarcity, demand exceeding supply; homes will sell briskly, lowering the days on market by as much as 30% to 40%.  The next logical question is: If there really is such low inventory, why aren’t prices being driven up?  The answers make some logical sense.  First of all, in certain areas, prices are climbing faster.  There are multiple offers on many properties, and bidding wars are not unheard of right now.  So there are pockets of higher appreciation.  What keeps a bit of a lid on it are two factors: 1) Appraisals.  Many appraisers are hesitant to buy into any hype created by multiple offers, and the entire appraisal system has been re-hardwired to prevent a run up in prices.  Secondly, and this column has written about this before, wages.  Real estate prices ran up so fast and for so long at the beginning of 2000 and on to 2006, that wages were left way behind.  When you take away the “funny money” loans and qualify people for loans the old fashioned way, with the prerequisite that they be able to repay it, wages must be able to withstand market appreciation.  So Cal, along with the rest of the country, is a far cry from this yet.  Realistically, maybe 5-10 years away.



For the last complete month available, the total number of sales was 3,351.  That number includes single-family, condos, and new homes.  The median price was $453,000 and that was up 1.8%.  The increase of sales over the previous month was 13.7%.  The median price for single-family came in higher at $515,000.  That was an increase of 2% from last year.  Condos rose over 10.4% in median price from a year ago with $295,000.  Even new homes saw an increase in value of 4.5% with a median price of $617,750.  All categories saw double-digit increases in volume except new home sales which declined 22.56% from a year ago.  Notice of Default, which had been steadily declining, actually rose in last month to 1005, about a 10% increase.  Notices of Trustee Sale also rose slightly after plummeting in the early summer months by almost 50%.  The tally for those was 1,443.  There were 394 properties that actually went to Trustee Sale; of those, 205 were purchased by private investors, look for those properties to be rehabbed and flipped as stated above.  The other 189 properties went back to the banks, and their fates will be similar, eventually making it to the market place.  Given the current market climate, they will be quickly absorbed.



The results of economic growth for this third quarter are obviously not yet available, and the second quarter results were not stellar.  Growth of 1.5%, although in the right direction, was not enough to seriously curb unemployment and start a serious job burst for most of the country.  California is better off than most of the country, and ironically, it may be our wonderful mild weather that continues to set us apart as the rest of the country struggled with floods, tornadoes, drought, and record setting heat.  Companies that left for easier environmental standards, or tax breaks, may think seriously about returning as their productivity and profits see some challenges as a result of Mother Nature.  Hmm... something to ponder.  As of now the forgiveness of debt for the 1099 income resulting from short sales has made it into Obama’s 2013 budget, to be extended to include 2013.  Although foreclosures are at a 5 year low, it is appropriate to extend this relief.  After all, foreclosures are at a low precisely because the lenders are optioning to do short sales instead.



Ever wonder what properties the other 1/4 of 1/4 of the 1% buy?  (Let’s face it; it’s not the other half...) The highest priced home in California was in Los Angeles for $125 MILLION! Here are the others: 2) Santa Barbara - $79 million  3) Bradbury - $78 million 4) Laguna Beach  $65 million. Wow!


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