DON'T BELIEVE EVERYTHING YOU READ

Newspaper accounts would have you believe that housing prices have gone up even as fewer homebuyers are willing to pay more.  That's because, as covered before in this column, year over year prices are still slightly rising because of the influence of the 2013 numbers in the median configuration of pricing.  In fact, prices are stable and low interest rates are having a "yawn" effect on would be buyers.  But if you can get in now, you should.  Every poll taken recently, regarding the Millennial Generation, indicates strong belief in home ownership.  They poll even higher than did the Boomer Generation and they've driven real estate prices for 30 years.  But the M generation will not go into extreme debt for home ownership.  Just like the Great Depression shaped that generation, so has the Great Recession shaped the M generation.  They are savers; practical in nearly every way.  Look for them to save and save and then...buy.  So why get in now?  Because sometime in the next 2-3 years, supply and demand will take over and prices will rise again.  The next 24 months may be some of the most reasonable months of housing appreciation that So Cal will see for the next decade.  Other reasons for modest growth?  Just as the stock market cannot forever climb just because of cheap money, and without earnings by those companies, real estate cannot sustain long term appreciation without affordability and that comes from payroll earnings.  Salaries and incomes must catch up and then saddle up side by side for the most successful and sustainable market.  Are we on our way towards this?  Yes, unmistakably we are, and it cannot hurt for all who can find their ideal home or investment, to do so before increased competition limits your choices. Prices will not come down significantly, in fact, probably only based on condition, location, and competition.  A good recovering market is in the works.

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WHAT WERE THE ACTUAL NUMBERS?

The total number of sales for the month of July, (the last complete month available), was 3,255.  That breaks down to 2,008 single-family resale, 894 resale condos, and 353 new homes.  The only increase in sales was for new homes which rose 53%. Since there has been so little product for so long during the recession, it isn't a big surprise to see that jump as new home inventory makes a come back.  Resale single-family and condos were both off about 15%.  All numbers compare this July with the same month 2013.  The median price rose for both single-family and condos, but has cooled to a much healthier 5.6% and 5.1% respectfully.  These numbers represent a 3 year low for volume, dating back to 2011.  Supply certainly isn't back where it should be and buyers will continue to struggle with pricing.

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WHAT ARE THE WORLD RANKINGS FOR "LIVABILITY"

Melbourne ranked number 1, Vancouver a not surprising number 3...clean air, safe streets, natural beauty etc.  but actually, rankings were done by The Economist, and the editors were looking for other factors, such as worker safety, economic sustainability; in other words, the way a multinational corporation might look at a region.  The U.S. doesn't pop up until # 26 - Honolulu.  Pittsburgh was #30, Miami #36.  There are other cities such as Boston and Seattle also ranked, and Los Angeles (one might stretch this to thinking So Cal, as this is a macro approach) # 42, incredibly ahead of San Francisco at # 52, undoubtedly because of housing affordability.

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EXPECT CHEAP MONEY TO STAY AROUND

Fed chief Janet Yellen is staying committed to keeping interest rates low until job growth is completely recovered. Lenders are talking about a mini refinance boom this coming year.  If you plan to purchase be sure to get prequalified, and if you are selling, demand that all prospective buyers already be screened and qualified to make an offer on your home.  

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A "SUSTAINABLE RECOVERY", LOW FORECLOSURES, RENTS AT THEIR HIGHEST, INVENTORY STRUGGLES...A MIXED BAG FOR THE SUMMER HOUSING MARKET

Last month was "the" discussion on slumping prices.  Really, what's happened is the large gains from 2013, which are always used in the month over month comparisons, are finally weakening the pricing "stew", as more months of 2014 are thrown into the mix.  Simply put, 2013 saw double digit gains, and 2014 has been flat to maybe 4%.  Hey, that's not necessarily a bad thing, as 2013's gains were not sustainable and in fact, another year like it would have seriously hurt the long term real estate market.  The main reason for the hot market last year, lots of investor flips, willing buyers, and cheap money, have not entirely disappeared.   However, buyers are being more discerning, inventory constrictions are being keenly felt, and cheap money is no longer a motivating factor.  But what we all want is a sustainable recovery and we are on our way.  Foreclosures are at their lowest level since 2006.  There are two main reasons for this; a growing economy, more job stability, and rising home prices which are allowing distressed owners who have been under water to exit those properties either breaking even or a small portion of equity.  On the other side of the "prices are too high" argument, are the quickly rising rents.  In fact, the Orange County Register reported that O.C.'s biggest complexes hit $1,729 for its average asking rental price.  That's barely $100 less than San Francisco.  Potential buyers that have never done a "Rent vs. Own" comparison, or who think spending nearly $2,000 a month on rent, (figure $2,400 to 3,500 for a house), receiving neither a tax break or equity build is financially prudent, really should reconsider.  The direction rents are traveling, purchasing may make the most sense.  At least until interest rates rise considerably.  Inventory has definitely grown consistently the last 2 months.  Nationally, according to the National Association of Realtors, it has hit 5.5 months, the first time in 2 years.  Locally, we are at about half that, but much better than the first quarter of 2014.  In no way is this market a snap to figure out.  The question you ask yourself should be a personal one:  "What are my financial goals and my personal desire for my housing needs?"  Answer that one and take action, before the market becomes even more unpredictable.

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WHAT WERE THE ACTUAL NUMBERS?

Orange County saw its median price for ALL homes rise to $600,000, up 10% from the same month of 2013.  (All figures are from June of 2014, the last complete month available.)  The resale median was $650,000, up 6.6% and condo price was $400,000, up just 4.2%.  The total number of sales was 3,309, just barely off the 2013 pace (1.2%), showing a strong second quarter gain in volume.  The break down was as follows:  1) Resale - 1,963  2) Condos - 893 3) New Homes - 453.  Note that the increase in the median price for a condo was substantially less than single-family.  

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MORE HOMES SELLING FOR 1 MILLION-PLUS

The shift was noticeable--- million dollar sales have been booming relative to the rest of the market.  This partially explains the rise in the median price of homes.  Remember, median is not the average, but rather half--half the homes sold above this mark and half sold below it.  A higher number of homes over a million, will raise that mark.  It's important to understand this distinguishment because it dispels the myth that we are in another bubble.  We are not in another bubble.  Already established by many economists is the belief that this slow down in the number of sales, coupled with growing inventory is a more "normal" market.  But conversely, million dollar sales have sped up.  In fact, sales of homes for $1 million and up rose 11.5% year over year in O.C.  This at a time when overall sales have declined over 8%.  This offers an explanation into numbers that seem contrary to what market analysts proclaim.

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OWNER OCCUPIED VERSUS INVESTMENT--HOW IT BREAKS DOWN

It is interesting to note when people buy to own and when they buy to invest.  It does follow economic times to a tee.  from 2003 through 2007, the range of people who owned to occupy was between 60% to 67%.  When the housing bust came along and financing tightened, and prices plummeted, that occupied statistic rose to 73% from 2008 through 20112.  Investors from 2003 to 2007 were at a high of 21% to 28%.  Likewise with the bubble burst the investor purchase from 2008 to 2010 dropped to 17%.  Currently, 2013 saw the owner occupied stat at 67% and the investor hovering from 20% to 27%.  It is an encouraging footnote that despite any market turbulence, there remains a strong foothold for real estate investment as a pathway to building wealth.  Good luck to you all this next month in charting your financial and real estate course for the future.

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A SUSTAINABLE RECOVERY WITH A FEW HICCUPS ALONG THE WAY

No economic recovery is perfect, in any sector; jobs, manufacturing, import/export, tourism, restaurants/services, and housing. There will be recovery and sputter, ebb and flow. Let’s concentrate on housing. There has been much positive news that relates to housing, primarily jobs and construction. New homes are still off a full 50% from a “normal” market, but the housing projects and construction starts by America’s biggest builders are definitely making a comeback. In fact, they are the highest they’ve been since 2008. In fact, new home sales jumped 18.6% last month, even as sales for single-family resale slowed. The volume of sales for existing homes fell for 8 consecutive months. Before anyone starts screaming that the sky is falling again, must remember that we are reporting a decline in sales for 2014 compared with 2013, which had been the hottest year since 2006 with double digit appreciation. For the volume to flatten out and prices to stabilize, southern California needed inventory. It appears that at last this is happening. The problem now...watch out sellers. You cannot simply tack on an extra fifty or one hundred thousand to your sales price, because that’s what your neighbor did last year. Prices have softened, you have more competition, and buyers are taking their time. With interest rates staying so low, there is no real outer motivating factor to drive a rapid market. Classic economics would tell you we are far from a neutral market, we still don’t have enough inventory. But it certainly feels that way, as buyers peruse through open houses and are reluctant to make offers. If you are a seller who has a location or floor plan and no competition, you no doubt may still field multiple offers. But don’t expect necessarily an all out bidding war. Part of the reason is that more of the buyers are now millenials. They won’t overspend to get exactly what they want, as the baby boomers did when they were the driving force behind the market. Millenials are pickier, they are conservative about their debt, and a deal must make sense for them. Plus, many have been living in multi-generational family situations, and they are in no hurry to move.

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MORE ON MILLENIALS, THE BETTER YOU UNDERSTAND THEM

The big statistic is that 3 of 4, or roughly 75%, plan on buying a home in the next 5 years. As far as student debt goes, it’s not as bad as you think; 58% owe $10,000 or less and 18% owe between $10,000 and $20,000. The biggest mitigating factor will be what the Fed does with interest rates in 2015 through 2016. By 2017, one would fully expect interest rates to be floating in an organic economic system once again. We’ll see.

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WHAT WERE THE ACTUAL NUMBERS?

The total number of homes sold, all categories, was 2,981. (This for May, the last complete month available.) That was off 18.3% compared with May of 2013. Resale homes hit 1,855. a decline of 21%. Condos sold at a pace of 786 and lost 22.4% year over year. New homes hit that high of 340 and rose in volume by 18.1%. The median price of all types blended was $595,000 and that was up 10% year over year. Prices are definitely diving back down. Appreciation overall is expected to stay around 4% to 6% for 2014. Single-family resale rose 8.3% and condos 11%. Foreclosures continue to hover near an 8 year low. All of So Cal had 10,010 Notices of Default, or NOD’s, for the first quarter of 2014. Orange County had a paltry 1,244 NOD’s.

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IF WE PUT REAL ESTATE AND MUTUAL FUNDS SIDE BY SIDE, HOW DOES IT LOOK?

Looking at real estate as an investment, putting aside the considerations that it also provides shelter, and a tax write off, here is the breakdown of return on in vestment, by age group: 1) 18-29 Real Estate - 25% / Mutual Funds - 21% 2) 30-49 RE - 34% / MF 23% 3) 50-64 RE - 30% / MF 28% 4) Over 65 RE - 31% / MF - 28% Hopefully, you have found some good information with which to evaluate your own situation in regards to the real estate market.

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REPORTS ARE IN, 2013 WAS A SELLER'S MARKET!

Please don't misunderstand, buyers that took action, still bought 20% below the high of2007, but due to tight inventory, sellers enjoyed many multiple offer opportunities and bids were sometimes over list price.  As a result, the 2013 housing market had its biggest gains since 2004.  Increase demand coupled with limited supply resulted in a 19.7% jump in home prices.  Having reported that, December was still a very slow month for sales for the resale home in Sothern California.  In fact, they were at a 6 year low in volume, according to Data Quick,  even as prices jumped, for precisely that reason, low inventory, more demand on  the housing that was available. (More on the exact numbers later).  What is the outlook after one month of 2014?  Decidedly, it is a mixed bag: 1) Inventory remains tight, although listings are already starting to hit the post-Super Bowl market pick up.  Sellers who list early without waiting until the official spring season will be rewarded with a brisk and busy market.  The O.C. jobless rate dropped to 5.2% reportedly at the end of January.  The Fed has trimmed back another 10 billion a month in its commitment to buy bonds.  The response overall has been favorable which means expect interest rates to continue to inch upwards.  If you are a buyer looking to keep as much purchasing power as possible, pay more attention to interest rates than housing prices, because therein lies your true north.  You qualify for a loan based on what you can pay, so be cost sensitive more than price sensitive.  There has been some solid economic news reported, such our 4th quarter 3.2% annual rate of growth, based largely on consumer spending which is usually a signal that people are feeling better about their own personal economic outlook.  Consumer confidence is a key to any serious turnaround coupled with hiring trends and housing.  But the strength of the report also came from the type of spending; durable goods such as cars, technology, and appliances.  Spending on services also rose significantly meaning traveling, dining out, and other non-essentials are also coming back.  There is a ways to go yet, hiring being the key and still lagging behind the high of 2006.  Expect as those numbers increase, so will the housing market continue to heat up.

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WHAT WERE THE EXACT NUMBERS?

The total number of houses sold in Orange County for December, (the last full month available), was 3,089.  That number shows a .6% increase in sales volume, but is very deceptive.  The number of single-family resale homes was 1,730 which was a 13.9% decrease from December of 2012.  Condos came in at 777 which was down 2.4%.  It was not hit nearly as hard because entry level buyers often find themselves in a condo, and that market segment has been very steady.  Million dollar plus homes have also seen record numbers, as reported here last month.  The missing segment has been the move up buyer or move down buyer.  As more and more homeowners get their equity position back, and new construction ramps up, giving those specific buyers a new place to go to, expect to see the middle price range come into its own in 2014.  Speaking of new homes, the number of sales for December was 582, a 120% increase year over year.  Distressed sales accounted for 24% of the December 2012 market, while in 2013, distressed sales numbered only 14%.  The median price for all house rose 21.3% to $570,000.  Separating out the condos, the median price was $372,000 a 22% rise and single-family resale was $639,000, rising 21%.  All figures are comparing December 2012 to December 2013.  More information is available at www.dqnews.com.

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FIVE REASONS NOT TO BE A "FOR SALE BY OWNER

It's always tempting to do something yourself.  Get rid of the middle man, save yourself some dough.  Most people would never fill their own cavity, paint their own house, or fix their fender after an accident.  Yet with their greatest investment, people can be downright cavalier.  There are many problems to selling your own home, which are detrimental to your peace of mind and certainly to your pocketbook.  You may save the twenty or thirty thousand on commission, but you may lose two or three times that by mispricing your home or tying it up with a buyer who can never close, but that gets you under contract and keeps you from selling to someone who could buy.  Here are the top 5 reasons: 1) There are too many people you have to communicate within a real estate transaction, whose job description you know nothing about and therefore cannot properly represent yourself, i.e. , Home Protection services, termite, appraiser, lawyers for the buyer, the lender, the loan underwriter, the escrow agent, a home stager  (properly staged homes can get up to $50,000 or more for your home.), to name a few .  2) Qualifying a buyer - as already stated, once under a signed contract, you are obligated for an escrow period, even if the buyer can't buy.  A preapproved letter means nothing, you're looking for a prequalified buyer.  If you don't know all the differences, it's trouble waiting to happen.  3) Negotiating on your own home.  This is a dangerous area; overprice it and sit forever, under price it and you'll be sorry forever.  Knowing not only comparable sales, but all the attributes that add to your homes price is paramount.  4) Pricing your home.  As already stated, price is a sensitive topic.  Ask too much, and the perception is already out there that your home is overpriced.  How do you know when an offer is legitimate or a lowball offer, looking to capitalize on your lack of knowledge.  5)  Most importantly, keeping your family, your home, and its valuables safe from real predators, and cyber predators.  Where will you advertise? Craig's List, Angie's List?  The Penny Saver, somewhere else online?  How will you hold open houses?   What will you do when 10 or 15 people come at once?  And what if all those people are not actual buyers?  How do you qualify them, how to you control them once they step into your home?  These are not scare questions.   These are very real scenarios that Realtors deal with every day and have professional procedures to protect you, your home, and to sell your home for the highest price, with the least amount of inconvenience.  Truly, this is something to think about.

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