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Orange County Housing Report: The Distressed Inventory is Dropping

ALTERA Real Estate — Mon, 04 May 2009 09:53:39 -0500

Orange County Housing Report: The Distressed Inventory is Dropping

April 30, 2009

Steven Thomas, President
Quantitative Economics and Decision Sciences, B.A.
Altera Real Estate

The total number of distressed properties, foreclosures and short sales, dropped to its lowest level since December 27, 2007. There are currently 3,724 distressed homes on the active market, 37% off of the peak of 5,950 established in August 2008. The number of active foreclosures has dropped from its November 2008 peak of 1,404 to 529, a 62% drop. It is not just the number of foreclosures that has been dropping; the number of short sales on the active market has dropped by 20% since February, from 4,009 to 3,195. This drop can be directly attributed to much stronger demand for homes priced below $1 million, which accounts for 74% of the active inventory and 95% of demand. Homes above $1 million account for 5% of demand, but 26% of the active inventory. Demand has been incredibly strong in the lower ranges because of two factors: 96% of all distressed properties are found below $1 million; and, jumbo loans, loans above $729,750, are much harder to obtain than conventional loans, loans below that level.

For Orange County, demand, the number of new pending sales over the prior month, increased by an additional 79, now totaling 3,632 and the current height of demand for 2009. Orange County demand has not been at this level since August of 2005, just prior to the beginning of the current cycle. Last year there were 1,092 fewer pending sales, totaling 2,540, 30% less. Two years ago demand was 1,769 fewer, totaling 1,863, 49% less. Three years ago demand was 26% less and totaled 2,701. The recent surge in demand seems to be abating, but this can be attributed to less inventory in the lower ranges. With an expected market time of 1.73 months, the $250,000 to $500,000 range has been incredibly hot and many buyers have written offer after offer with no success. The sales to list price ratio for homes within this range is 100%. So, those buyers looking to scoop up a deal by writing for less than the asking price are, on average, out of luck. The sales to list price ratio for foreclosures within that range is 101%.

The active listing inventory dropped 198 homes in the past two weeks to 10,363. The inventory has not been at these levels since April 2006. At the start of the year the active inventory was at 11,842, 1,479 additional homes compared to today. Last year there were 15,437 homes on the market, 5,074 additional homes compared. Two years ago there were 15,519 homes on the market, 5,156 additional homes. Three years ago there were 11,956 homes on the market, 593 additional homes compared to today. The expected market time dropped from 2.97 months two weeks ago to 2.85 months today. The expected market time last year was at 6.08 months, two years ago it was at 8.33 months, and three years ago it was at 4.43 months. This is the lowest expected market time since October 2005. Total Orange County pending sales continues its surge, reaching record heights for this three and one-half year downturn, totaling 5,733, an 828 home increase over the past month. Last year at this time, total pending sales reached 3,514, 2,219 fewer than today. Two years ago it was at 2,824, 2,909 fewer. Total pending count is different than demand because demand tracks new pending sales over the past month. Total pending count takes into account all pending sales, including those that have been pending for longer than 30-days. The 5,733 tabulation indicates that there will be a surge in sales over the next couple of months.

How should a buyer approach this market? Most buyers have the wrong expectations in approaching the Orange County real estate market. Everybody is acutely aware of the current global recession caused by the financial crunch, so it is understandable that today's buyers want a deal when buying a home. However, buyers fail to consider two important aspects of the current real estate market: there is tremendous demand for lower priced homes and distressed properties; and, today's asking prices already reflect a major drop in value. Prices have reached much more affordable levels just as interest rates have dropped to historical lows, the end result, demand not seen prior to the current downturn. So, buyers need to take a litmus test of the market that they are interested in. Buyers can expect multiple offers and even above asking price sales prices for homes priced below $500,000 and distressed homes. The market has heated up considerably for homes priced between $500,000 and $750,000 as well, with an expected market time of 2.49 months. The market is much stronger between $750,000 and $1 million too, with an expected market time of 4.95 months, considered a market in equilibrium. The incredibly hot demand has been underreported and most buyer have to learn the hard way before getting realistic, writing offers below the asking price and losing out on a property or two. Another reality of the current marketplace is the number of hoops lenders will put you through in funding a loan. Buyers will not only put together the initial loan package; more often than not, the lender is going to request additional paperwork during the pending sale process. As of May 1st, the government imposed an additional hurdle which will change the appraisal process. This new process has a very high potential in delaying the close of a pending sale. It is my humble opinion that these additional hurdles are necessary, but should be postponed until the market has healed. It is easy for politicians to make headlines and change the way lending and appraising is processed in the midst of a downturn, but the real fixes need to come when the market is moving on all cylinders.

Jerry Takes Pride

ALTERA Real Estate — Mon, 27 Apr 2009 10:00:02 -0500

Jerry Takes Pride

ALTERA Real Estate — Fri, 24 Apr 2009 16:09:10 -0500

Orange County Housing Report: The Spring Surge Continues

ALTERA Real Estate — Mon, 20 Apr 2009 14:13:34 -0500

Orange County Housing Report: The Spring Surge Continues

April 16, 2009

Steven Thomas, President
Quantitative Economics and Decision Sciences, B.A.
Altera Real Estate

Demand surged by 33% in the past month as the active listing inventory dropped by 9%. In turn, the expected market time for Orange County dropped from 4.35 months to 2.97 months. Typically in April, the Spring market picks up steam. However, the market has not been "typical" in years, at least not until this year. Demand has literally taken off over the past four weeks. It is almost as if somebody turned the demand switch to its "on" position. Can this be the stimulus package at work? Are the lower interest rates working? Could the recent uptick be attributed to pent up demand? Is the public at large feeling a little bit at ease given the recent improvement on Wall Street? It is most likely a little bit of everything at work. And, this recent trend is not isolated to just the OC; the entire Southern California market has experienced a 25% increase in demand and a 9% drop in inventory over the past month.

For Orange County, demand, the number of new pending sales over the prior month, increased by an additional 306, now totaling 3,553. This is the current height of demand for 2009, and who knows where it will go from here. The last time demand exceeded 3,500 dates back to August of 2005, just prior to the beginning of the current cycle. Last year there were 1,179 fewer pending sales, totaling 2,374, 50% less. Two years ago demand was 1,628 fewer, totaling 1,925, 85% less. Three years ago demand was 21% less and totaled 2,942. Demand has broken from a normal cyclical path and is currently marching to the beat of its own drum. The same happened for the first half of 2008, where demand continued to grow week after week, ignoring normal market gyrations. Demand followed the atypical seasonal ups and downs for the second half of 2008. So, where does demand go from here? We will all have to wait and see, knowing that there are still a lot of buyers actively looking.

Isn't there going to be a wave of foreclosures coming on the market? I am often asked about a foreclosure moratorium or banks holding back on releasing foreclosures so that they do not saturate the market. First off, let's understand the terms when discussing foreclosures. REO, bank owned and foreclosures are all the same thing. Some lenders prohibit the use of the term foreclosure or even bank owned; instead, settling on REO, "Real Estate Owned." In my opinion, there is so much demand for foreclosures that if it were up to me, I would leverage the terms foreclosure and bank owned. Distressed properties also include short sales, where a seller owes more to a lender, or lenders, than a home is worth. In the case of a short sale, even with a successful negotiation between a buyer and seller, the sale is still subject to the lender, or lenders', approval. Lenders cannot prevent homeowners from placing their homes on the market as short sales, where they owe more than a home is worth. They can hold up the approval process, but they cannot stop a seller from trying to sell and submitting an offer for the bank's consideration. So, any moratorium or intentional, intermittent release of foreclosures, would only affect the number of foreclosures or investor bought foreclosures. Yes, investors have been buying, rehabilitating and flipping or buying, rehabilitating and renting, because the "numbers" look good again. Currently, only 15% of the active distressed inventory is a foreclosure. One year ago, it was at 20%. At its height, it was at 24%. Today's active distressed inventory totals 4,006, a drop of 86 in the past two weeks. 613 of the 4,006 are foreclosures, meaning that the remaining 3,392 are short sales. Let's just assume that the rumors are correct and that there had been a moratorium and that lenders were intentionally holding off foreclosures from the market. Even if the total surpassed the record mix of foreclosures, 24%, and rose to 30%, the total would only rise to 1,201, almost doubling from its current level. Yet, what everybody has failed to realize is that there is major pent up demand for foreclosures. Just ask any real estate agent or buyer that has written an offer on a foreclosure. You will quickly find that the norm is multiple offers, accepted offers at or above the list price, and losing property after property due to the bidding wars. This is a reality of today's market that is most often misunderstood. When a buyers journey begins in today's market, they have the expectations of isolating a foreclosure and getting a heck of a "deal" buy offering thousands, if not tens of thousands, less than the asking price. Buyers fail to consider that prices have already fallen between 30% to 40%. Almost all buyers have to learn the hard way about the realities of today's market. There are 613 foreclosures in all of Orange County today and demand is at 938. The expected market time for foreclosures has dropped all the way down to .65 weeks, about a 19 day market, a deep, deep seller's market. So, throw in even double the current number of active foreclosures and they will quickly be eaten up by the insatiable appetite for foreclosures. Given current demand, doubling the foreclosure inventory will increase the expected market time to 1.28 months, about 5 weeks, still a major seller's market. The real story is that short sales are currently more successful than they were a year ago. Today there are 3,392 short sales on the active market and demand is at 1,106, representing an expected market time of 3.07 months. One year ago there were 4,379 short sales on the market and demand was at 444, representing an expected market time of 9.86 months. Some conclusions can be made based upon all of this data: foreclosures are hot; short sales are hot; expect a lot of competition; and, any increase in foreclosure activity will just help relieve current pent up demand.

So how do the rest of the numbers look? The active listing inventory shed 1,045 homes in the past month, a 9% decrease, now totaling 10,561. The inventory has not dropped below 11,000 since the beginning of April 2006. Last year there were 15,556 homes on the market, 4,995 additional homes compared to today. Two years ago there were 14,811 homes on the market, 4,250 additional homes. The expected market time dropped from 3.4 months two weeks ago to 2.97 months today. The expected market time last year was at 6.55 months, two years ago it was at 7.69 months, and three years ago it was at 3.83 months. This is the lowest expected market time since October 2005. There are 1,944 fewer distressed homes on the market compared to the August 2008 height, a 33% drop. The distressed inventory now represents 38% of the current active inventory, dropping from 40% a month ago. Total Orange County pending sales continues to reach record heights. I started tracking the statistic back in September of 2006. After increasing by 475 homes over the past two weeks and 830 over the past month, the total pending count has reached 5,308 pending sales. Last year at this time, total pending sales reached 3,924, 2,121 fewer than today. Two years ago it was at 2,824, 2,556 fewer.

There is a major difference between the lower and upper ranges. Every price range improved over the past two weeks with the exception of homes priced above $4 million. The expected market time for homes priced below $250,000 dropped to 2.23 months. For the hottest range, homes priced between $250,000 and $500,000, the expected market time is 1.8 months. We have not seen the market time below the two month mark since October 2005. For homes between $500,000 and $750,000, the expected market time has dropped to 2.82 months. This range has not seen these levels since February 2006. Between $750,000 and $1 million, the expected market time dropped below the six month mark for the first time since October 2008, now at 5.49 months. For homes between $1 million and $1.5 million, the expected market time dropped below ten months for the first time since October last year as well, now at 9.51 months. For homes priced above $1.5 million, the markets have improved, but still have expected market times in the double digits, stagnant markets. As the lower ranges improve and consumer confidence slowly emerges, the good vibes are starting to flow to the upper ranges. If the latest trends continue, a bottom could be reached in the upper ranges by the end of this year to the beginning of next year.

Troy Takes Pride

ALTERA Real Estate — Mon, 13 Apr 2009 13:01:14 -0500

Orange County Housing Report: Demand Suddenly Surges

ALTERA Real Estate — Mon, 06 Apr 2009 09:46:51 -0500

Orange County Housing Report: Demand Suddenly Surges

April 2, 2009

Steven Thomas, President
Quantitative Economics and Decision Sciences, B.A.
Altera Real Estate

Coinciding with a drop in interest rates and a Wall Street rebound, demand for Orange County housing increased by 22% in just two weeks. Demand, the number of new pending sales over the past month, increased from 2,670 pending sales two weeks ago to 3,247 today, a 577 home increase. Last year's high of 3,060 pending sales was reached on June 12. Orange County demand has not reached this level since September 2005, the beginning of the current downturn. Last year there were 962 fewer pending sales, totaling 2,285, and two years ago there were 1,114 fewer,

totaling 2,133. The active listing inventory shed 580 homes in the past two week, a 5% decrease, totaling 11,026. The active listing inventory has not seen these lower levels since the beginning of April 2006. Last year there were 15,474 homes on the market, 4,448 additional homes compared to today. Two years ago there were 14,010 homes on the market, 2,894 additional homes. The expected market time dropped from 4.35 months two weeks ago to 3.4 months today. The expected market time last year was at 6.77 months, and two years ago it was at 6.57 months. This is the lowest expected market time since March 2006. The distressed homes inventory, foreclosures and short sales, dramatically changed over the past two weeks, dropping by 581 homes to 4,092. The height of the distressed inventory, 5,950, was achieved on August 7, 2008. There are 1,858 fewer distressed homes on the market compared to the height, a 31% drop. The distressed inventory now represents 37% of the current active inventory, dropping from 40% two weeks ago. Foreclosures now have an expected market time of 0.77 months, or three weeks. There are 170 fewer foreclosures on the market, totaling 731. Demand for foreclosures is at 953 pending sales. The foreclosure market is extremely hot. Buyers can expect to compete with multiple offers and sales prices above their list prices. The short sale inventory shed 391 homes in the past two weeks to 3,379 homes. The short sale inventory height, 4,701, was reached on August 7, 2008, coinciding with the total distressed inventory height. There are 1,322 fewer short sales on the market today. Demand for short sales increased by 205 pending sales, totaling 967. Since short sales are subject to lenders approval and are often not changed to pending status until lender approval is received, this may be a sign that lenders are gearing up to curb foreclosures through the accommodation of short sales. Total Orange County pending sales continues to reach record heights week after week. I started tracking the statistic back in September of 2006. After increasing by 355 homes over the past two weeks, the total pending count has reached 4,905 pending sales. Last year at this time, total pending sales totaled 2,852, 1,698 fewer than today. Two years ago it was at 3,047, 1,858 fewer.

Word within the trenches is that there is tremendous activity out there in the lower ranges and with distressed properties. Many buyers first enter the market with anticipation that they are going to somehow be able to obtain a property for tens of thousands less than the asking price. They are quickly learning that there is a lot of competition in the lower ranges and all distressed homes. There just is not enough news highlighting this aspect of the real estate market. The activity in the lower ranges has reached such a high level, that it is starting to reflect in the median sales price for Orange County, which posted its first month over month increase, from January to February 2009, in eight months. Lower interest rates, a lot of stimulus, the massive return of the first time home buyer, the return of investors, have all equated to a sharp uptick in the current Orange County real estate market.

There is a major difference between the lower and upper ranges. For all home below $750,000, the expected market time has been dropped considerably. The best range in Orange County is homes between $250,000 and $500,000, with an expected market time of 2.09 months. 60% of the inventory within that range is either a short sale or foreclosure. The expected market time for homes below $250,000 is 2.46 months. For homes between $500,000 and $750,000, the expected market time is 3.46 months. It shoots up to a 6.4 month expected market time for homes between $750,000 and $1 million. From there, the expected market time blossoms to a stagnant market. The expected market time ranges from 13.11 month, homes between $1 million and $1.5 million, and 43.44 months, homes above $4 million. What this helps illustrate is that the government's focus on freeing up conventional financing, loans up to $729,750, is working within the real estate market. For jumbo financing, where loans are much more difficult to obtain and are at a higher rate, especially above $1 million, demand has just come to a crawl. With no focus from the government on higher ranges, it will not be until a bottom is reached in the lower ranges, which some are predicting during the second half of 2009, and confidence is restored in the financial markets, that decent demand will return to the upper ranges.

For a printable version of the full report, click here

Cynthia Takes Pride

ALTERA Real Estate — Tue, 31 Mar 2009 14:54:58 -0500

Orange County Housing Report: 21% Fewer Distressed Homes on the Market

ALTERA Real Estate — Mon, 23 Mar 2009 10:20:59 -0500

Orange County Housing Report: 21% Fewer Distressed Homes on the Market

March 19, 2009

Steven Thomas, President
Quantitative Economics and Decision Sciences, B.A.
Altera Real Estate

As the market marches forward, the distressed active inventory, both foreclosures and short sales, has dropped by 21% since its peak in August of 2008. There have been various explanations for a dip in the number of distressed sales, like legislation that lengthens the amount of time to file a notice of default (when somebody is behind on their mortgage) and ultimately delay foreclosure. The problem with that theory is that the distressed inventory has been steadily dropping for seven months. The distressed inventory has dropped by 1,277 homes, or 21%. On August 7, 2008, the distressed inventory was at 5,950 homes and represented 41% of the 14,348 total active inventory (both distressed and non-distressed listings). Today, the distressed inventory has fallen to 4,673, 40% of the 11,606 total active inventory. One year ago today, the distressed inventory was at 5,221, 548 more that today, the second report in a row with a year over year improvement. However, the distressed inventory is still extremely high. This inventory needs to drop significantly for the real estate market to start to appreciate once again. The rate that it drops is slow because of the number of bad loans in the system combined with a high unemployment. However, in the lower ranges, the rate of depreciation has slowed remarkably, and even bottomed in some areas. This is due primarily to the extremely high demand in the lower ranges, homes priced below $500,000. This range accounts for 49% of the total active inventory, but 73% of demand. There are some cities with expected market times close to two months, technically a seller's market. A lot of this demand has been fueled by the drop in prices and the desire to acquire a bank owned, foreclosed home. Buyers looking for a home below $500,000 need to be prepared for a lot of competition. The average sales to list price ratio for foreclosed homes is 101%, meaning that, on average, the home is selling for above the list price. Short sales DOMINATE the distressed sales market within Orange County and account for 80.7% of all distressed homes. The other 19.4% are foreclosures, the hottest properties in the county. There are currently 905 foreclosures on the market and demand, the number of homes placed into escrow within the last month, is at 882 pending sales. The expected market time for foreclosure is 1.03 months. Foreclosures are so hot, that multiple offers are the norm. The demand is similar to 2005 demand for all homes, CRAZY seller's market. Buyers in today's market expect a discount and expect to be able to take their time in making a decision to write a purchase offer. Most buyers must learn the hard way, after losing a property or two, that these homes generate tremendous buyer competition. The expected market time for short sales has dropped significantly, now at 4.95 months, but this figure is grossly overinflated due to the nature of short sales. Short sales are where a homeowner attempts to sell their home, owing more than their home is worth. Even though most short sales have an agreed upon purchase offer between a buyer and the seller, most are continually marketed as an active listing rather than as a pending sale because of the belief by many that they do not have an official acceptance until the lender approves the sale at a discount in what is owed. In the trenches, agents are reporting that vast majority of short sales that are a part of the active inventory have offers that are already submitted to the lender(s). Another giant drawback to short sales is that the "lender approval" process can take weeks to months to obtain. Often, by the time a lender does approve of a short sale offer, the buyer has already moved onto another home. The bottom line, there may be a lot of distressed homes on the market, but as a buyer, expect a lot of competition.

So how do the numbers look? In the past two weeks, demand, the number of new pending sales within the prior month, increased by 46 pending sales to 2,670. Last year at this time there were 587 fewer pending sales, totaling 2,083. Two years ago there were 2,195 pending sales, 475 fewer than today. All of the recent stimulus aimed specifically at real estate should begin to trickle down into the Orange County real estate scene in the form of increased demand within the next couple of weeks. In the trenches, agents are already reporting increased buyer interest, increased open house activity and more buyers on the verge of writing after fence sitting for quite some time. All of the ingredients for an increase are there: historically low interest rates, government incentives to purchase now, and a lot of government intervention aimed at placing a sound bottom underneath the housing market. Prices, especially in the upper ranges, may continue to fall; however, what most buyers fail to consider is that these historically low interest rates will not be around forever. Instead, with all of the money that the federal government is pumping into our economy, the U.S. economy will most certainly endure a major increase in inflation down the road. The Federal Reserve responds to an increase in inflation with an increase in interest rates. In 1990, interest rates were thought to be at a great level when they broke just below 10%. At 5%, today's approximate interest rate, the payment for a $500,000 loan is $2,684. At 7%, the payment is $3,327, an increase of $643 per month. At 10%, the payment would be $4,388, a difference of $1,704. Even if homes were to fall an additional 10%, a 7% loan at $450,000 would be $2,994, still $310 a month more than a 5% loan at $500,000. At 10% it would be $1,265 more per month. The beauty of homeownership in Orange County is it is an incredible long term investment. So, if you are a buyer and can live in your home for more than just a few years, ultimately it makes sense to buy as soon as you isolate the home that best fits your family's criteria and budget. It may not pay to wait because after the economy turns around, inflation will increase interest rates. Almost all buyers fail to factor the negative effects of increasing interest rates, which can be profound.

The active listing inventory continues to remain relatively unchanged so far this year, increasing by only 65 homes over the past month, bringing the current total to 11,606. Last year the active inventory was at 15,617 homes, 35% higher. Two years ago there were 1,767 additional homes on the market, totaling 13,373, 15% higher. The current expected market time decreased slightly from 4.41 months two weeks ago to 4.35 months today. Last year the expected market time was 7.5 months. Two year ago the expected market time was 6.09 months. Total Orange County pending sales continues to reach record heights over the past two reports. I started tracking the statistic back in September of 2006. After increasing by 142 homes over the past two weeks, the total pending count has reached 4,550 pending sales. Last year at this time, total pending sales totaled 2,852, 1,698 fewer than today. Two years ago it was at 3,321, 1,229 fewer.

The condition of the Orange County real estate market really depends upon the price range. The story of 2009 remains the same, the lower the price range, the hotter the market. The hottest range is detached homes below $250,000 with an expected market time of only 1.94 months. However, there are only 303 detached homes in that range. The second hottest range is detached homes between $250,000 and $500,000, with an expected market time of 2.27 months. Here's a breakdown of the year over year change in both supply and demand for Orange County's various price ranges for both detached homes and condominiums:

It will be interesting to see the impact of all of the recent stimulus within the various ranges. We can expect the lower ranges to improve and eventually bottom first. It won't be until confidence is restored in the financial marketplace, the current focus of the Federal Reserve, the Obama administration and Congress, that we will see a bottom in the upper ranges.

For a printable version of the full report, click here

Robin Takes Pride

ALTERA Real Estate — Tue, 17 Mar 2009 10:06:24 -0500

Orange County Housing Report: A Stimulating Pause

ALTERA Real Estate — Mon, 09 Mar 2009 10:24:43 -0500

Orange County Housing Report: A Stimulating Pause

March 5th, 2009

Steven Thomas, President
Quantitative Economics and Decision Sciences, B.A.
Altera Real Estate

As all of the details of the various stimulus plans are slowly making their way to Main Street, the Orange County housing market has slowed as well. The tax credit for first time home buyers (individuals who have not owned within the prior 3 years), the increased conventional loan limit to $729,750, the unveiling of the details to help instigate lenders to refinance loans for homeowners who are as much as 5% upside down in their homes, and the unveiling of the finer points to help promote loan modifications, are only just beginning to make their way to the experts and professionals that work within the real estate and lending industries. It is no wonder that there has been a pause in recent Orange County demand as buyers are just not yet aware of how all of the recent fanfare applies to them. Also, there has benn recent news of even more stimulus to come to help resurrect the dormant financial engine that keeps our economy in gear. The frozen financial markets are only moving because the U.S. Treasury is purchasing pools of loans to keep lending flowing. The government is working on incentives to motivate investors to enter the game as well. They are looking to help purchase "toxic assets," a term that simply means "bad loans," to help instigate lenders to lend again. The problem thus far has been that lenders have received billions of dollars from the government only to clamp down further on lending. Part of the problem is that for every loan that is bad, they have to have a certain threshold of capital set aside. With so many bad loans on the books, lenders have had to maintain hordes of capital in the form of reserves and they cannot use that money for new loans. So, this is what the government is sifting through in the background to repair out financial markets and restore confidence in the U.S. financial system once again. As more and more of these programs are unveiled there will be a slight delay until it trickles down to the Orange County marketplace. Similarly, the new higher conventional loan limits that were unveiled in February of 2007 took over a month until it finally hit Main Street in the form of new loans. The latest round of stimulus was only unveiled in the third week of February of this year, but the real estate and financial industries are still ironing out all of the details. With all of the stimulus and record low interest rates, each program is going to slowly trickle down in the form of increased demand in real estate in weeks and months to come.

So how do the numbers look? In the past two weeks, demand, the number of new pending sales within the prior month, decreased by 195 homes to 2,624. Last year at this time there were 731 fewer pending sales, totaling 1,893. Two years ago there were 2,388 pending sales, 236 fewer than today. The affects on demand from the stimulus plan should probably start to play out within the Orange County real estate marketplace over the next month. The active listing inventory has remained relatively unchanged so far this year, increasing by only 43 homes over the past month, bringing the current total to 11,562. Last year the active inventory was at 15,412 homes, 33% higher. Two years ago there were 996 additional homes on the market, totaling 12,558, 10% higher. The current expected market time increased from 4.09 months two weeks ago to 4.41 months today. Last year the expected market time was 8.14 months. Two year ago the expected market time was 5.26 months. Total Orange County pending sales is at a much healthier level compared to the last two years. Currently, total pending sales is at 4,408, an increase of 67 pending sales in the past two weeks. This is the highest level for total pending sales since I began tracking this figure back in September of 2006. Last year at this time, total pending sales totaled 2,524, 1,884 fewer than today. Two years ago it was at 3,419, 989 fewer compared to today. Today marks the first time that the distressed inventory is lower compared to the prior year, after falling by another 99 foreclosures and short sales over the prior two weeks to 4,408. One year ago today, the distressed inventory was at 5,057, 649 more than today. Since peaking on August 7th at 5,950, the distressed active inventory has dropped by 20%; that is 1,166 fewer distressed homes on the active market. The distressed inventory represents 41% of the total active inventory, dropping from 42% two weeks ago. The number of pending sales that are either a short sale or a foreclosure remained at 62%. The expected market time for foreclosures increased slightly from its record low of .99 months two weeks ago to 1.08 months today. Foreclosures remain the hottest category of homes within the Orange County marketplace today. The expected market time for short sales dropped ever so slightly from 5.16 months to 5.14 months today, a record low for the current housing downturn.

The condition of the Orange County real estate market really depends upon the price range. Of course, the lower the price range, the hotter the market. The hottest range is detached homes below $250,000 with an expected market time of only 1.95 months. However, there are only 321 detached homes within the detached active home inventory out of 6,966 total, less than 5%. The second hottest range is detached homes between $250,000 and $500,000 with an expected market time of 2.46 months. There are 1,905 detached homes within that range, 27% of the detached inventory. Here's a breakdown of the year over year change in both supply and demand for Orange County's various price ranges for both detached homes and condominiums:

It will be interesting to witness the ramifications of increased demand in the lower ranges. The lower ranges are already hot and there have been reports from the trenches that a bottom in pricing has been achieved in many areas where prices have not changed over the course of the past few months. As a stronger bottom is established in the lower ranges throughout Orange County, and the flow of financial system is restored, the strength in the market will eventually start to trickle up to the higher ranges.

For a printable version of the full report, click here

Stan Takes Pride

ALTERA Real Estate — Wed, 04 Mar 2009 15:29:54 -0600

Orange County Housing Report: A Stimulating Market

ALTERA Real Estate — Mon, 23 Feb 2009 09:26:57 -0600

Orange County Housing Report: A Stimulating Market

February 19, 2009

Steven Thomas, President
Quantitative Economics and Decision Sciences, B.A.
Altera Real Estate

Demand is surging and last week's newly revealed stimulus plans haven't even hit the Orange County real estate scene yet. Prior to diving into the numbers, let's decipher the impact of both stimulus plans on Orange County housing. This is just an initial overview, as more details will be revealed as these programs are officially launched. First, here is how the Economic Stimulus Plan for 2009 will affect housing:

Tax Credit - $8,000 tax credit for anybody that purchases a home and has not owned a home in the prior three years. This credit is good for all purchases of primary residences from January 1st through the end of November, 2009. For example, if a couple has a tax obligation of $3,000, with the credit applied, they would instead receive a refund of $5,000. The tax credit begins to phase out for couples with incomes above $150,000 and individuals with income above $75,000. They also must live within the home for two years.
Conventional Loan Limit - the conventional loan limit for high cost areas will increase for high cost areas to last year's $729,750 level. The limit had dropped to $625,500 on December 31, 2009. As a result, this will return buyer activity to homes between $700,000 and $800,000.

Here is how the Homeowner Affordability and Stability Plan will affect Orange County housing:

Refinancing Loans - for homeowners with less than 20% equity, they can now refinance their loans. This is for all loans at or below the conventional loan limit. Remember, this now goes all the way up to $729,750 in Orange County, considered a high cost area. This program is not available for homeowners that owe 5% more than their homes are worth.
Stability Initiative - this program is designed for homeowners who are struggling to afford their monthly mortgage obligations due to high mortgage payment to income ratios and cannot sell because prices have fallen too far. The program will reduce a homeowner's monthly obligation to levels (debt ratios) that are more sustainable. Homeowners that are still current on their mortgage can apply as well. This program is also aimed at loans at or below the conventional loan limit. The lender will be required to modify the loan down to a 38% mortgage debt to income ratio. Lenders will accomplish this by reducing the interest rate or the outstanding amount owed. The federal government will match the lender's reduction dollar-for-dollar down to a 31% debt to income ratio. After 5 years the rate could increase. There is a monthly incentive to stay in the home after it is modified, up to $1000 per year for 5 years.
Low Mortgage Rates - the Treasury Department is doubling its pledge to invest money in Freddie Mac and Fannie Mae in an all out effort to keep interest rates at their current historically low levels and to maintain the proper flow of loans.

In Orange County, we are already experiencing tremendous demand in the lower ranges. These stimulus plans will ultimately help our local real estate market further. How far reaching will play itself out over the coming months, but we are already seeing quite a bit of activity earlier this year compared to 2008. A bottom in pricing in the lower ranges may be right around the corner, which ultimately would increase confidence. Establishing a bottom in the lower ranges is essential in stopping the fall in ALL ranges. In no means will the flow of short sales and foreclosures stop; however, the levels will start to drop. With lower levels of distressed homes and higher demand, the market will improve.

So how do the numbers look? In the past two weeks, demand, the number of new pending sales within the prior month, increased by 148 homes to 2,891. Last year at this time there were 999 fewer pending sales, totaling 1,820. Two years ago there were 2,463 pending sales, 208 fewer than today. It will be interesting to see the affects of the stimulus plan on Orange County housing demand over the next 60-days. The active listing inventory has remained flat so far this year, decreasing by 19 homes over the past month, bringing the current total to 11,541. Last year the active inventory was 33% higher at 15,392 homes. Two years ago there were 653 additional homes on the market, totaling 12,194. The current expected market time dropped from 4.31 months two weeks ago to 4.09 months today. This is the lowest expected market time since April, 2006. Last year the expected market time was 8.46 months and dropping. It was dropping because demand was finally being restored after a major price depreciation due to a 6-month hiatus in buyer activity. Two year ago the expected market time was 4.59 months. Total Orange County pending sales is at a much healthier level compared to the last two years. Currently, total pending sales is at 4,341, an increase of 322 pending sales in the past two weeks. In 2008, Orange County did not reach the current level until June, the tail end of the Spring market. The difference this year, the Spring market has really just begun. Last year at this time, total pending sales totaled 2,333, 2,008 fewer than today. Two years ago it was at 3,391, 950 fewer compared to today.

There are 190 fewer distressed homes on the market, both foreclosures and short sales. Since the end of November, the total number of active distressed properties has dropped by 918 homes, a drop of 19%. The distressed inventory represents 42% of the total active inventory, dropping from 44% two weeks ago. 62% of all pending sales are either a short sale or a foreclosure, dropping from 61% two weeks ago. The expected market time for foreclosures dropped to its lowest level of the downturn, .99 months. That's correct; it stands at a little less than a month. Short sales dropped to its lowest level as well with an expected market time of 5.16 months.

What about the upper end? When the expected market time for a range falls above the 12 month mark, competition is so fierce and demand is so low that it is basically a deep buyer's market. A change of several pending sales can adjust the expected market time dramatically, since the number is so small to begin with. Over the past couple of weeks that was demonstrated in spades. The expected market time changed considerably as demand increased. However, it is still a deep buyer's market. For example, the expected market time for the $4 million plus market dropped from 60.0 months to 33.36 months. What happened? Demand increased from 5 to 11 pending sales and the active inventory increased from 352 to 367 homes. So, demand is up, but it is still at a level where it is nothing to write home about. Demand for every range above $750,000, with the exception of the $1.5 million to $2 million range, increased. It would be great if this trend continued, but most of these homes are financed with jumbo loans, loans above $729,750. It is still extremely challenging to procure a jumbo loan and the rates are almost 2% higher than conventional rates. These loans are scrutinized so carefully because lenders cannot sell them off to investors, so they need to keep these loans on their balance sheets instead. The government is not going to touch this sector. Instead, the upper ranges will be restored when confidence in the financial system restores to Wall Street and the international investment community.

For a printable version of the full report, click here

Congress Improves Homebuyer Tax Credit

ALTERA Real Estate — Wed, 18 Feb 2009 08:49:44 -0600

From NAR -

The centerpiece of the tax section of the stimulus package was the first-time homebuyer tax credit. After considerable and stressful negotiations, the tax-writers who negotiated the final package were able to make only modest improvements to the rules enacted in 2008. Most of the mechanics of the credit will be the same as under the 2008 rules: the credit will be claimed on a tax return to reduce the purchaser's income tax liability. If any credit amount remains unused, then the unused amount will be refunded as a check to the purchaser. In brief, these are the changes made:

The credit amount is increased from $7500 to $8000.
The credit continues to apply only to first-time homebuyers.
Changes are effective for purchases on or after Jan 1, 2009 and before Dec 1, 2009.
2009 purchasers can make an election to claim the credit on their 2008 tax return.
The credit is refundable. The amount of the refund is computed as part of the 1040 tax return filing.
The unpopular repayment feature of the 2008 version is eliminated for 2009 purchasers. Unfortunately, eligible 2008 purchasers will still be required to repay the credit.
While the repayment is eliminated for 2009, any credit that is taken for 2009 will be recaptured and paid to the IRS from sales proceeds if the residence is sold within three years of the date of purchase.
DC homebuyers are eligible for the $8000 credit (In 2008, DC homebuyers had a separate, nonrepayable $5000 tax credit available to them that had already been in effect for several years.)
Purchasers who finance their 2009 purchases with funds from a state/local housing bond authority will be eligible for credit.

A link is provided below to a chart that compares the 2008 and 2009 versions of the credit. A link is also being prepared with a Q&A to further explain the credit. It will be posted as soon as it has been completed.

After NAR's 2008 Annual Meeting in Orlando, our message on the tax credit had three parts: eliminate the repayment feature, extend the credit past its June 30 expiration to the end of 2009 and extend the credit to all purchasers. The House version of the tax package eliminated the repayment feature, but for 2009 purchases only. Neither the date extension nor the expansion to all buyers was included. Then, when Senator Johnny Isakson (R-GA) successfully offered an amendment to increase the credit to $15,000, expectations and hopes were heightened considerably.

Unfortunately, when it was time for House and Senate conferees to reconcile the very different tax packages each body had passed, many provisions affecting many industries fell by the wayside. In the end, the size of the stimulus package and its balance of spending and tax cuts were sharply reduced from the bills that had passed in both bodies. Those differences were as follows:

Size of entire tax package:

As passed the House: $296.3 B (36% of total H.R. 1 package)
As reported from Senate Finance Committee: $325 B
As passed the Senate (Collins-Nelson): $385.3 B (45% of total H.R. 1 package)

Size of final tax package: $276 B (35% of total H.R. 1 agreement)
While the tax package did not require any "pay fors," it was nonetheless necessary to provide revenue scores for the package so that Congress could keep within the set boundaries. They were particularly concerned, as well, that the burden of the cuts and discarded provisions did not fall disproportionately on any particular industry. In the end, there simply was not enough revenue to go around.

Chart comparing the 2008 and 2009 versions of the credit >

Obama Administration Announces Financial Stability Plan

ALTERA Real Estate — Wed, 18 Feb 2009 08:48:53 -0600

From NAR - On February 10, 2009, Treasury Secretary Timothy Geithner announced broad outlines for the Obama Administration's Financial Stability Plan. Much more detail is needed. The Plan has 6 key elements:

1. Financial Stability Trust. After a bank "stress test" to assess a bank's condition, eligible banks may receive federal assistance to support their capital position, until the return of private capital investments. As NAR has urged in its Housing Stimulus Plan, federal funds will be conditioned on the bank increasing lending beyond what would have occurred otherwise.

2. Public-Private Investment Fund. This fund will be used to remove troubled assets from the books of banks and will seek to leverage public capital to leverage private capital for the program. The initial program level will be $500 billion, with potential growth to $1 trillion. NAR supports retargeting the TARP program to get bad assets off the books of banks to enable them to make more loans.

3. Consumer and Business Lending under TALF. The Plan would expand the Term Asset-Backed Securities Loan Facility (TALF) to promote additional consumer and business lending. The current $200 billion program will be expanded to up to $1 trillion and, as urged by NAR, will allow the Fed to accept commercial real estate mortgage loans as security for loans to lenders. The Treasury Department will continue to consult with the Federal Reserve on further expansion to other asset classes, including private residential mortgage backed securities.

4. Transparency and Accountability, Monitoring and Conditions. The entire program will require transparency, accountability, and conditions on the use of the assistance, requirements long-supported by NAR. Recipients must account for how they use every dollar received, including how many new loans are being provided and how many mortgaged-backed and asset-backed securities they have purchased. All recipients must commit to participating in mortgage foreclosure mitigation programs.

5. Housing Support and Foreclosure Prevention. The Administration has announced it is still developing a program to minimize foreclosures and restructure troubled mortgages, with details to follow soon. It plans include maintaining downward pressure on interest rates through the ongoing Fed program to purchase $500 billion of mortgage-backed securities (MBSs) of the government sponsored enterprises (GSEs), using $50 billion to prevent foreclosures, and establishing national standards for loan modifications. NAR's Plan strongly supports lower interest rates to stabilize the housing markets and create a foundation for the economic recovery.

6. Small Business and Community Lending Initiative. The plan seeks to reverse the huge decline in Small Business Administration lending by unfreezing the secondary markets for small business loans.

Visit the Financial Stability Plan website >

President Signs the Stimulus Bill

ALTERA Real Estate — Wed, 18 Feb 2009 08:48:03 -0600

From NAR - H.R. 1, the "American Recovery and Reinvestment Act of 2009" (AARA), passed the House on February 13, 2009, by a vote of 246 - 184. On the same day, the Senate passed the bill by a vote of 60 - 39. The President signed the bill on Tuesday, February 17, 2009. The bill is a $780 billion package, with roughly 35% of the package devoted to tax cuts (mostly for 2009) and the rest to spending intended to occur in 2009 and 2010.

The mix of provisions of interest to REALTORS® changed frequently throughout the legislative process, with changes continuing to be made just hours before the measure was released prior to the vote. In the end, the elements of NAR's housing agenda were included. Congress and the President have announced that a finance and housing package (including tax provisions) will be the next "big" initiative, so Congress has by no means finished its work as it affects the housing industry and REALTORS®.

The bill includes the following provisions:

Homebuyer Tax Credit - The bill provides for a $8,000 tax credit that would be available to first-time home buyers for the purchase of a principal residence on or after January 1, 2009 and before December 1, 2009. The credit does not require repayment. Most of the mechanics of the credit will be the same as under the 2008 rules: the credit will be claimed on a tax return to reduce the purchaser's income tax liability. If any credit amount remains unused, then the unused amount will be refunded as a check to the purchaser.

More details are available below in the Federal Tax Report>
FHA, Fannie Mae and Freddie Mac Loan Limits - The bill reinstates last year's 2008 loan limits for FHA, Freddie Mac, and Fannie Mae loans. These limits were equal to the greater of 125% of the 2008 local area median home price or $271,050 for FHA and $417,000 for Fannie and Freddie, with an overall maximum cap of $729,750. For the few areas where the 2009 limits were higher, the higher limits will apply. In addition, the bill includes language providing the HUD Secretary with the discretion, if warranted, to increase the loan limit for any "sub-area", i.e.an area smaller than a county. The Secretary's discretion is again limited by the $729,750 cap. These 2009 limits will expire December 31, 2009.

The inclusion of these loan limit provisions in the final bill is a victory for homeowners, buyers and REALTORS®. While these new limits were included in version of the original stimulus bill approved by the House, the bill first approved by the Senate did not. NAR's Call for Action to both the House and the Senate prior to the final vote advocated strongly for the provisions which were then included in the final bill approved by both Chambers. NAR has estimated the new 2009 Loan Limits by county.
Neighborhood Stabilization - Division A, Title XII of the bill provides $2,000,000,000 in additional funding for the Neighborhood Stabilization Program (NSP). The NSP was created by the Housing and Economic Recovery Act of 2008 (Public Law 110-289) to provide grants through the Community Development Block Grant program (CDBG) to states and localities to address the problems that can be created when whole neighborhoods are decimated by foreclosures. The funds can be used to purchase, manage, repair and resell foreclosed and abandoned properties. In addition, the funds can also be used by states and localities to establish financing methods for the purchase and redevelopment of foreclosed properties. After purchase the homes must be used to assist individuals and families with incomes at or below 120% of area median income. Twenty-five percent of funds must be used for households with incomes at or below 50% of area median income. By leveraging their expertise in partnership with others from both the public and private sector, REALTORS® in many communities have been making important contributions to their local communities' neighborhood stabilization programs.

More information on how REALTORS® can contribute to local community NSP efforts>
Commercial Real Estate - Commercial real estate is impacted primarily through those provisions of the bill focused on green building and energy efficiency as well as business tax incentives. H.R. 1 provides significant funds for state energy programs, which could be used to support commercial property owners' investment in energy efficiency upgrades while commercial property owners seeking to invest in alternative energy systems for onsite power generation would benefit from the Department of Energy Renewable Energy Loan Guarantees Program. Of particular benefit to small businesses would be certain provisions of the bill that provide tax relief in the area of bonus depreciation and capital expenditures, as well as the 5-Year carryback of net operating losses for small businesses.
Rural Housing Service - The bill provides an additional $500 million to existing USDA Rural Housing programs. The RHS provides both a guaranteed loan program and a direct housing loan program for those meeting the program's eligibility criteria. The direct loan program will receive $270 million while $230 million will be allocated for unsubsidized guaranteed loans. It has been reported that this level of funding would provide for an additional 192,000 homeowners.
Low Income Housing Grants - Allow states to trade in a portion of their 2009 low-income housing tax credits for Treasury grants to finance the construction or acquisition and rehabilitation of low-income housing, including those with or without tax credit allocations.
Tax Exempt Housing Bonds - Tax-exempt interest earned on specified state and local bonds issued during 2009 and 2010 will not be subject to the Alternative Minimum Tax (AMT). In addition, financial institutions will have greater capacity to purchase tax-exempt state and local bonds.
Energy Efficient Housing Tax Credits & Grants - To promote green jobs and energy independence, ARRA invests significantly in efforts to make homes and buildings more energy efficient. The bill provides state and local governments with $6 billion in energy efficiency and conservation grants for energy audits, retrofits and financial incentives. Through 2010, homeowners will be able to claim a 30% tax credit (up from 10%) for purchases of new furnaces, windows and insulation. Another $5 billion will be available to modernize the nation's electricity grid and install smart meters on homes that help to save consumers money. There is also $5 billion for weatherization assistance for low income households and $2 billion for federally assisted housing (section 8) efficiency efforts.
Transportation Investments - The bill provides $46.7 billion to states and localities for capital investment for surface transportation projects including highways, bridges, transit, and rail projects. NAR policy supports increased spending on the types of transportation infrastructure addressed in the bill with the exception of Amtrak and high-speed inter-city rail where NAR has no policy. These investments will tend to moderate traffic congestion and support a variety of transportation alternatives which will improve the quality of life of American communities and bolster the value of real estate.
Broadband Deployment - The bill creates $7.2 billion in grants to promote broadband deployment in unserved and underserved areas and for mapping the availability of broadband service in the U.S. Any entity is eligible to apply for a grant including municipalities, public/private partnerships and private companies as long as they comply with the grant conditions. The grants are subject to "network neutrality" requirements to ensure that broadband networks be free of restrictions on content, sites, or platforms, on the kinds of equipment that may be attached, and on the modes of communication allowed. The bill also charges the FCC is with developing a national broadband plan that shall seek to ensure that all Americans have access to broadband capability and shall establish benchmarks for meeting that goal.

These provisions are important victories for REALTORS® because increased broadband access promotes economic growth and expands opportunities for home sales. A 2006 Commerce Department report determined that property values are 6% higher in communities where broadband is available.

Orange County Housing Report: Demand Takes Off

ALTERA Real Estate — Mon, 09 Feb 2009 11:49:15 -0600

Orange County Housing Report: Demand Takes Off

February 5, 2009

Steven Thomas, President
Quantitative Economics and Decision Sciences, B.A.
Altera Real Estate

Even though the United States is waiting on the stimulus package, demand for Orange County real estate is beginning to take off. In the past two weeks, demand, the number of new pending sales within the prior month, increased by 24% to 2,671 pending sales, an increase of 674 homes. Last year at this time there were 1,103 fewer pending sales, totaling 1,568.

Two years ago there were 2,463 pending sales, 208 fewer than today. After slowly increasing in demand during the first few weeks of the New Year, demand has surged and is following a course similar to 2007. It will be interesting to see what happens to demand as the Obama stimulus package is passed in the coming weeks. In the past two weeks, the total active inventory decreased by 41 homes to 11,519. Last year there were 3,740 additional homes on the market, totaling 15,259. Two years ago there were 464 additional homes on the market. The current expected market time dropped from 5.39 months two weeks ago to 4.31 months today. Last year the expected market time was 9.73 months and two year ago it was 4.87 months. Total Orange County pending sales is at a much healthier level compared to the last couple of years. Currently, total pending sales just eclipsed the 4,000 pending sale mark and now stands at 4,019. Last year, total pending sales did not surpass the 4,000 mark until June.

Last year at this time, total pending sales climbed to 1,969, 2,050 less than today. Two years ago it was at 3,026, 993 fewer compared to today. There has not been much of a change along the distressed property front. The total number of distressed homes on the market, both foreclosures and short sales, dropped by 31 homes in the past couple of weeks and now stands at 5,073, 44% of the total active inventory. 63% of all pending sales are either a short sale or a foreclosure. The expected market time for foreclosures dropped to the lowest level of the current downturn, 1.08 months. Foreclosures are HOT and are selling almost as fast as they are placed on the market. Many buyers looking for a deal are fooled into thinking that they can purchase a foreclosure at a massive discount, only to find that multiple offers are generated on foreclosures and the average sales to list price ratio is 101%. That's right, on average foreclosures are selling for above their list price. The expected market time for short sales also dropped to their lowest level of this downturn, 5.78 months. Foreclosures and short sales have driven prices down to levels where affordability has improved tremendously fueling an increase in first time home buying and overall demand. Lastly, the upper end market is still extremely stagnant and will remain so until the economy improves and something is done about jumbo financing. Currently, jumbo financing begins at $625,500, has a much higher interest rate, and qualifying is a lot more difficult than conventional financing.

So, where is the real estate market going from here? The real estate market is going to dramatically improve with the right stimulus package. The Obama administration and Congress is feverishly working on a major stimulus package and should be passed within the coming week. Let's examine some of what they are strongly considering:

Reduce interest rates to at least 4.5%
Increase the conventional loan limit for high cost areas from $625,500 back to $729,900
Eliminate repayment of the $7,500 first time home buyer tax credit and make it available to all buyers

The Federal Reserve and the FDIC are working on programs to prevent foreclosure and increase loan mitigation. Out in the real estate trenches, the topic of the day is "loan modifications." The industry is acutely aware that all eyes are on decreasing the flow of foreclosures and finally putting a bottom under the housing market. In terms of units, Orange County housing bottomed out between the fourth quarter of 2007 and the first quarter of 2008; just take a look at current demand compared to demand last year, 70% higher. Pricing is a different story, and only with a bump in demand are we going to experience a true bottom in pricing. With historically low interest rates, an increased conventional loan limit, a buyer tax credit, foreclosure abatement and other forms of stimulus, the end result will be an increase in housing demand and a high probability of reaching a bottom in pricing around mid-year.

The final whistle of the Super Bowl marked the beginning of the Spring real estate market. Sure enough, there already was a considerable increase in demand. From here, demand will continue to rise and will most likely receive an "Obama bounce" with the passing of the stimulus package. With demand increasing and a return of the discretionary homeowner opting to keep their homes off of the market unless they really have to sell, we can expect the active listing inventory to remain flat or even slightly fall. The expected market time will fall as well to levels not seen in quite some time. The undercurrent of foreclosures and short sales will continue to fuel supply; but, depending upon the reach of the stimulus package, this flow may begin to ebb. Up to this point, the Orange County real estate market has been controlled by lenders (foreclosures and short sales). However, it has come to the point that not only the Orange County real estate market, but the entire national real estate market, is in the hands of our government. They know that the first step to turning around our economy is to stop the fall of real estate values and the flow of foreclosures and short sales. Stay tuned... round one is going to be signed by President Obama within a week.

For a printable version of the full report, click here

Cam Takes Pride

ALTERA Real Estate — Tue, 03 Feb 2009 15:17:17 -0600

Altera takes pride

ALTERA Real Estate — Tue, 03 Feb 2009 14:28:37 -0600

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Orange County Housing Report: Waiting on Stimulus

ALTERA Real Estate — Mon, 26 Jan 2009 10:29:02 -0600

Orange County Housing Report: Waiting on Stimulus

January 22, 2009

Steven Thomas, President
Quantitative Economics and Decision Sciences, B.A.
Altera Real Estate

With only a small change in the past two weeks, the official beginning of the Spring market will most likely be delayed until the MAJOR stimulus package that the Obama administration and Congress are currently working on is revealed. The stimulus package is targeted for a mid-February launch. Currently everybody seems to be cautiously waiting for change. The stimulus package promises to be nuclear in its reach, and it needs to be to begin to turn around the current economic situation. In 2009, the United States government is poised to be vigilante and relentless in their pursuit to turn things around. We will see foreclosure aid, more financing aid, job creation, tax breaks, small business incentives and more. Legislation and Federal Reserve involvement will be aimed at reducing interest rates and narrow the spread from the low rate that banks borrow money to the much higher interest rates that are passed onto consumers. The good old fashioned pendulum has been out of control. For years, lenders were carelessly lending with no restrictions and now they have battened down the hatches to the point that only the best of the best can qualify for anything outside of a government backed conventional or FHA loan, loans up to $625,500. So, the lending pendulum has swung from out of control lending to too many restrictions and hurdles to adequately meet real lending demand. That is the crux of the issue that our government is painstakingly trying to change. In sticking with the pendulum analogy, the financial market would be much healthier somewhere in between. The real question is just how long it is going to take for the financial markets to thaw and restore the backbone of our economy. One thing is for certain, the government is about to apply a relentless full court press until they have applied enough stimulus to turn the tide. Stay tuned, the government is working on giving the ailing economy a major Valentine's Day gift.

So, what do the current numbers look like? In the past couple of weeks, the active inventory has increased by 273 homes to 11,560. Last year at this time there were 15,245 homes, a difference of 3,685. Two years ago there were 11,895, 335 additional homes compared to today. Demand, the number of new pending sales within the prior month, increased by 138 in the past two weeks, sitting today at 2,146 pending sales, an increase of 7%. Last year, demand was at 1,219, 927 fewer than today. Two years ago, there were 216 fewer pending sales, totaling 1,930. The expected market time dropped slightly in the past couple of weeks from 5.62 months to 5.39. Last year, the expected market time was at 12.51 months, and two years ago it was at 6.16 months. One thing is for certain, all of the numbers today illustrate a much better start to a New Year compared to both 2007 and 2008. Here's how Orange County compares to the rest of Southern California:

The number of distressed homes, foreclosures and short sales, dropped by 14 homes in the past two weeks, totaling 5,104, 44.2% of the active listing inventory. Here's a county comparison of distressed sales:

In Orange County, distressed homes are fueling a majority of the current activity. 77% of all distressed sales are below $500,000 and 90% are below $750,000.

The government is basically underwriting most of the current demand since they are propping up conventional and FHA financing, loan limits up to $625,500. All homes below $750,000 account for 71% of the current active inventory and 91% of demand. So even though 29% of the active inventory is above $750,000, it accounts for only 9% of demand. This is primarily due to the current financial crunch where financing outside of conventional and FHA loans has become very difficult to obtain. Since the government is currently doing nothing to help jumbo financing, these loans are sitting on a lender's balance sheet. With conventional and FHA financing, the government is currently purchasing these loans to revitalize the flow of financing below the $625,500 limit. Investors are virtually sitting on the sidelines; only the government is currently propping up demand. Homes that fall within jumbo financing parameters, above $750,000, are suffering from no government intervention. This phenomenon will continue until either investors' confidence is restored or the government steps in. The higher the price range, the slower the market. For homes between $750,000 and $1 million, the expected market time is 8.87 months. For homes between $1 million and $1.5 million, the expected market time is 17.88 months. For homes above $4 million, the expected market time is 116.67 months. There are 350 homes on the market above $4 million and demand is only at 3. In 2008, this range posted its best expected market time in March at 17.67 months. Until jumbo financing improves through government intervention or investor confidence is restored, the upper ranges can expect only slight improvements.

What can we expect in the Orange County real estate market from here? The Spring market will most likely take off after the major stimulus package is passed in mid-February. Demand will continue to improve, the inventory will rise slightly, and the expected market time will drop. Good news for the health of the real estate market is the fact that discretionary homeowners are not being fooled by aspirations of a strong Spring market; instead, most are choosing to not compete. Historically low interest rates will fuel demand as well, and we can expect rates to eventually remain in the mid-4's, which is unprecedented. Distressed sales will also continue to fuel demand as more and more new distressed properties hit the market. We can expect strong numbers of distressed sales throughout 2009 with the distressed inventory falling slowly but surely. With so much stimulus, low interest rates and increased affordability, the current down cycle, now going on its third year, has a strong chance of bottoming as early as the middle of the year.

For a printable version of the full report, click here

Orange County Housing Report: A Much Better Start

ALTERA Real Estate — Mon, 12 Jan 2009 12:11:52 -0600

Orange County Housing Report: A Much Better Start

January 8, 2009

Steven Thomas, President
Quantitative Economics and Decision Sciences, B.A.
Altera Real Estate

The Orange County housing market is in a much better place in starting 2009 compared to the last couple of New Years. Prices are down, affordability is up and interest rates are at historically low levels. The housing market and the financial markets have the attention of every corner of the government. The Federal Reserve, Congress, the Bush Administration, the incoming Obama Administration, Democrats and Republicans alike, everybody has their collective eye on the ball, putting a bottom underneath the housing market, thawing the financial markets and reversing the trend of unemployment. With all of that in mind, many buyers have already taken advantage of the Orange County housing market despite the slowest season of the year for real estate, the Holiday market. After President-Elect Obama is sworn into the office in about two weeks, we will have officially left the distractions of the holidays behind and entered into the beginning stages of the Spring market. The Spring market this year will be marked by increased demand and an inventory that will prove to be slow to grow. So, where are we right now? First, let's take a look at the current active inventory. The inventory has shed just over 1,100 homes in the past month and now sits at 11,287 homes. Last year, we started 2008 with 14,944 homes on the market, 3,657 more than today. In 2007 there were 11,643 homes on the market, 356 additional compared to right now. Don't be fooled by the similarities in these numbers because 2007 was much different than today. Today we have discretionary sellers who expect tremendous competition from distressed properties, both short sales and foreclosures. In 2007, many homeowners expected the Spring market to be hot and homes coming on the market outpaced demand considerably; thus, the inventory grew. In 2008, the discretionary seller knew what to expect and the number of homes that came on the market kept up with demand. In 2009, we can expect it to be quite similar to 2008. Due to the distractions of the heart of the holidays, demand, the number of new pending sales over the course of a month, took a cyclical drop of 314 homes over the past four weeks to 2008. But, this is typically the low point of the year for demand. At this time last year, demand was at 998 pending deals, 1,010 fewer than today. Demand is 101% stronger than last year... incredible! Two years ago demand was at 1,496 pending sales, 512 fewer than today. Three years ago demand was at 1,573 pending sales. The expected market time is currently at 5.62 months. Last year's expected market time was at 14.97 months, and it was at 7.78 months two years ago. The distressed inventory, foreclosures and short sales, dropped by 401 homes over the past month, bringing the total to 5,118, its lowest point since March of last year. That's a 7.2 % drop. Distressed properties now make up 45.3% of the inventory, a slight drop over the past couple of weeks. 69% of all pending sales are distressed sales right now. Obviously, the distressed inventory is helping fuel demand. 79% of all distressed homes are isolated below $500,000 and 92% are found below $750,000. It is no wonder that the lower end of the market has been a lot hotter than the rest of the market. All homes, distressed and the non-distressed traditional homeowner, below $500,000 make up 53% of the active inventory and 73% of demand. The lower ranges are also hotter than the rest of the market due to the fact that the government is backing all conventional financing and FHA financing up to $625,500. That does not mean that there are not great deals in the upper ranges; it means that it there are a few more hoops to leap through in financing above the $625,500 loan limits.

So, if you are a buyer, how should you approach this market? It is a great time to be a buyer. It has been more than worth the wait for the patient buyers that have been sitting on the fence. Now, I am hearing again of so many buyers trying to predict the bottom of the housing market. It absolutely astounds me at the number of buyers that flocked to purchase back in 2005 after tremendous appreciation year in and year out. Real estate booms and busts are cyclical and it could not last forever. After tremendous depreciation in housing, this is the time to purchase. This is the time to flock to real estate, when prices are down. Why buy near a peak in appreciation? The time to buy is somewhere near the bottom of the trough of a downturn. Would it be so bad if the market continued to drop for another year? Not really. Prices have already dropped considerably to this point, and most of that drop took place when we bottomed in demand from August of 2007 through February of 2008. The bottom line, if you find the home that best meets your family's desires and budget, and you are not planning to move in a couple of year, than BUY. This is Orange County, a very desirable place to live with a shortage of buildable land, plenty of great weather and beaches and historically an excellent long term housing investment. Buyers in this market need to be aware that there is plenty of competition for distressed properties and homes in the lower ranges. The sales to list price ratio for foreclosures is currently 101%, meaning that, on average, they are selling for slightly above the list price. The sales to list price ratio for short sales is currently 97%, meaning that offers written for 10% less than the asking price have a much less chance of success. Know the market that you are considering and utilize the expertise of an experienced real estate agent to guide you through the myths and hurdles of Orange County housing in 2009.

So, if you are a seller, how should you approach the market? If you are a homeowner and you absolutely, unequivocally have to sell, than do not hesitate to place your home on the market immediately at the best price and in the best condition. Homes that are priced well and in great condition have a much better chance in successfully selling in a shorter amount of time. So, carefully arrive at price by placing the most emphasis on current pending sales and recent comparable sales, sales within the prior 90-days. Major discounts from the prior sales are not necessary, but do not "pad" the asking price because there is a dollar amount that you are looking for. Unfortunately, the market does not care what you need to net from your home. Be prepared to make any changes or modifications to the asking price or condition based upon new pending and closed sales and buyer showing feedback. Sellers too need to know their market and utilize the expertise of an experienced real estate agent to achieve success. The area expert may not be the best choice. Instead, look to the real estate agent that knows and understands the current market with a track record of success, a market expert.

For a printable version of the full report, click here

FREE Two Part Powerhouse Event

ALTERA Real Estate — Thu, 08 Jan 2009 13:06:51 -0600

Join us for a FREE Two Part Powerhouse Event to help you make the most out of 2009!

OC Housing Predictions for 2009
by Steven Thomas, B.A. Quantitative Economics and Decision Sciences

and

5 Trends that Will Make You or Break You in 2009
by Chris Pollinger, Mastery Coaching

Time : 12pm-3pm

Date: Monday, Febuary 2nd, 2009

Location: OCAR Auditorim, 25552 La Paz Road, Laguna Hills CA 92653

RSVP: Karen Schaefer at KSchaefer@AlteraProperties.com or 949.389.7814

Orange County Housing Report: The Government Will Fuel Demand

ALTERA Real Estate — Mon, 01 Dec 2008 08:38:34 -0600

Orange County Housing Report: The Government Will Fuel Demand

November 26, 2008

Good Afternoon!

Now that the financial markets are frozen, the Federal Reserve has stepped in and will buy mortgage-backed securities to the tune of $500 billion. Almost immediately, rates dropped by about a half of a percent. As a result, more and more buyers will take advantage of rates and GOBBLE up homes right here in Orange County. Since the economy has put on the brakes as a direct result of the financial crunch and housing market, the government is poised to step in and do just about whatever it takes to get the economy back on track. The fundamental key to fixing the economy is to fix the lending crisis. We have moved from a subprime meltdown, March 2007, to a financial crunch, August 2007, to a completely frozen financial system, October 2008. The problem is that there are very few investors willing to purchase "pools of loans" on the secondary market. The financial system depends upon this. Even though current "pools" have real quality loans where borrowers actually have to qualify for the loan, nobody is stepping up to invest. The problem is that these investment pools had been rated by a few different companies and their rating systems were inaccurate and flawed. So, investors do not know who to trust at this point, and nobody has properly invested in the secondary markets. This is one crisis that is just not willing to work itself out without government support. With the government stepping in to purchase the mortgage-backed securities, suddenly rates dropped to the lowest level of the year. This is perfect timing if you are a buyer about to purchase. This is the first of many steps that the Federal Reserve, the U.S. Treasury and Congress will take to get our economy back on track. President-elect Obama has surrounded himself with a lot of talent in the past couple of weeks to address the current economy. America voted for change, and that is exactly what America is going to get. We can expect there to be sweeping changes reminiscent of Franklin D. Roosevelt. There will be programs to abate foreclosures and unemployment. There will be programs to encourage buyers to purchase in today's housing market. So, change is in the air and Orange County housing will be a direct beneficiary. This may take a several months to totally trickle down to housing, but some of the programs, like what the Federal Reserve did earlier this week, will have an immediate noticeable impact. Let's put a half point rate drop in proper perspective. Dropping from 6% to 5.5%, a buyer would save $158.55 per month, or $1,902.60 per year, with a $500,000 loan. Put in another way, the payment for a $500,000 loan at 6% is the same as the payment for a $528,000 loan at 5.5%. So, a buyer that had been looking at a loan of $500,000 could either pocket the savings or look at spending about $28,000 more with no effective change in their mortgage payment.

So, how do the numbers look? It is too soon to see the impact of the change in rates on demand. This change comes in the midst of the Holiday market, the slowest season for Orange County housing. The impact may not be felt until the end of January, the beginning of the Spring market. Current demand, the number of new pending sales within the prior month, dropped by 111 homes in the past two weeks to 2,446. Last year at this time, though, there were only 1,243 pending sales, 49% fewer. Two years ago there were 531 fewer pending sales, a 22% difference. The total active inventory is now at 12,947 homes after dropping by 311 homes in the prior two weeks. Last year there were 3,822 additional homes on the market and 625 additional homes two years ago. The expected market time is currently at 5.29 months, a small increase from 5.18 months two weeks ago. Last year the expected market time was at 13.49 months and 7.09 months two years ago. There are now 5,795 distressed homes on the market, foreclosures and short sales, a drop of 6 homes in two weeks. Last year there were 3,525 distressed homes on the market, 2,270 fewer. The difference is that the today's distressed inventory has been at a plateau since June. Last year at this time the distressed inventory was rapidly increasing. In November 2007 alone, the distressed inventory increased by more than 500 homes. 78% of all distressed homes are below $500,000, compared to 63% a year ago. 93% of all distressed properties are found below $750,000, the same as 2007. The distressed inventory represents 45% of the total active inventory and 66% of demand versus 21% and 26% respectively one year ago. Back in June of this year the distressed inventory represented 40% of the active inventory and 49% of demand. There were actually 103 additional distressed homes on the market and 123 additional distressed homes embedded within demand. The big difference currently is that we are in the throes of the Holiday market and there are fewer discretionary home sellers, sellers with equity in their homes, on the market. Discretionary sellers don't have to sell. They have a choice and would rather enjoy the holidays.

So, if you are a buyer, how should you approach this market? My educated bet is that the government's comprehensive attention to the economy, financing, foreclosures and housing will have a significant impact on the Orange County housing market. Factoring in Obama's New Deal after he takes his oath of office in January and factoring in the delay in implementation, I am actually going to call a bottom in the market at around June 2009. It could come even sooner, time will tell. I am certain the doomsayers, a.k.a. the "bloggers," will eat me alive, but the fundamental ingredients are all there: robust activity in homes below $500,000, lower interest rates, home affordability at levels not seen in years, more government programs to come. The below $500,000 range is significant as it represents 70% of the active inventory. Also, it is important to note that the lower ranges always lead in a housing market recovery. Home prices have already completed a majority of their movement. From August 2007 through February 2008, prices dropped between 3 to 5% per month. Now, they are on pace to drop between ½% to 1%, but will stop and plateau in about six months. So, if you are a buyer willing and able to stay in your home for the next several years, be assured that your investment in your home will more than pay off. Many discount the notion that we will ever return to rapid appreciation, but in markets like today, prices often drop below the "true" bottom as "would be" buyers hesitate and sit the market out until they are assured that the "water is perfect." Yes, I am saying that current pricing is below where pricing really should be. This will be proven out in a couple of years from now after everybody is properly informed that the market bottomed out a while ago. Economists and experts alike can never tell you precisely when a bottom is occurring; instead, after there is months of data, they will establish that a bottom occurred somewhere in the past. For the first year after a bottom is called, buyers will be skeptical and sit the market out, waiting for the "herd." After many buyers enter the market, the new "herd mentality" of our economy will ignite a wave of buying that will drive demand through the roof and we will realize rapid appreciation once again. The naysayers can chime in again and point to charts, experts and economists that state the opposite, but nobody is picking up on the newest element of our current economy, the "herd mentality." If you need proof, take a look at Wall Street over the past month and a half. The swings up and down are unprecedented. There is no rush right now, but if I were a buyer, I would isolate the perfect home for my family right now. Do not be afraid to the pull the trigger. Even if prices drop a few percentage points more, know that in the long run you will do fine. Orange County housing is an excellent long term investment and much better than stocks and bonds. Be very aware that in arriving at price, the average sales to list price ratio for all of Orange County is 97% and for foreclosures it is 101%. If you are contemplating writing an offer at 90% of the asking price, be assured that the data is not in your favor and that the chance that your are wasting everybody's time and paper is rather significant.

So, if you are a seller, how should you approach the market? Unfortunately I have already heard of sellers willing to wait for the government to step in to fix the housing market. As a seller, if you have to sell within the next 18 to 24 months, you are not sitting in as good of a position as buyers. Sellers that have the ability to sit on the sidelines longer will be fine. So, even though we are in the midst of a Holiday market, if you have to sell, price your home according to the market value, or slightly below, and have your home ready to show each and every day, from day 1 to day 101. As a seller you never know when the buyer of your home is going to walk through your door, so be ready. In arriving at price, be acutely aware of your location and condition. Are there power lines nearby? Can you hear street traffic from your home? Is your home in perfect move-in condition? Remember, with so many homes on the market, competition is fierce and if two homes are identical, but one has a better location, that is the home that will always sell first. As a seller, carefully choose the agent that is going to represent you in the sale of your home. It's not about price; it's about experience and knowledge to help navigate through the challenging housing market. It is not brand that will sell your home. It is not the "area expert" that will sell your home. It is not the licensed friend or family member that will sell your home. To be successful in this market, you need an actual expert in real estate. Somebody that knows the local market inside and out with data, a proven track record and experience. This is the market where the agent interview is the most important element in selling your home. So, interview carefully and do not jump to a quick decision. I personally know of an individual who went with the "subdivision" expert over the "market "expert to save in commission dollars. He sold the home with the subdivision expert after 14 months on the market and $250,000 in price reductions. Had he paid a few thousand dollars more and hired the market expert, he would have netted an additional $140,000. The moral to the story: if you are a buyer or seller, hire an expert to best represent your family.

Have a wonderful Thanksgiving weekend.

Sincerely,
Steven Thomas
Altera Real Estate
President

Quantitative Economics and Decision Sciences, B.A.
"Pride Begins at Home"
Office 949.389.7816
Cell 949.874.8221
www.AlteraProperties.com

Thanksgiving is for the cherished memories

ALTERA Real Estate — Wed, 26 Nov 2008 13:45:50 -0600

Thanksgiving is for the cherished memories of favorite times shared with those who mean so much.

Imagine what it was like. To step off towards a fresh start and away from the shackles that held you back. To embark on a brave new adventure with those who chose to take the journey into the promise of a better tomorrow. Can you feel the wind on your face, smell the freshness in the air or see a land full of opportunity?

We can.

With the launching of Altera, we've had a similar experience over the last few months,and I've got to tell you, we have had our share of hurdles. But I can tell you we are THANKFUL and don't regret a thing.

Since 1985, we've focused on assembling the most experienced and highly professional agents in the business and today, the result is a nine-office company comprised of the best agents who have an impeccable reputation spanning Orange County's finest communities. Truly the best of the best who are committed to working together to build a better tomorrow.

Just like those early pilgrims who took time out of building their vision that would become this great nation we live in, we take time out to remember and give thanks to those who have helped make it happen.

I hope your Thanksgiving is a beautiful reminder of all the wonderful things in your life.

YOU ARE CORDIALLY INVITED

ALTERA Real Estate — Fri, 14 Nov 2008 09:09:54 -0600

YOU ARE CORDIALLY INVITED TO A
RIBBON CUTTING CEREMONY
AND GRAND OPENING OF

MONDAY, NOVEMBER 17TH
4:00 P.M. TO 6:00 P.M.
301 MAIN STREET, SUITE 112
HUNTINGTON BEACH, CA

RSVP: Adriana 714-489-2400

Beach towns miss much of O.C. homebuying rebound

ALTERA Real Estate — Tue, 21 Oct 2008 10:19:09 -0500

Since we contributed to the numbers behind today's article in the OC Register, we thought we should post the info here. If you want a copy of the full report please visit us at www.AlteraProperties.com

Beach towns miss much of O.C. homebuying rebound
by ocregister.com

A regional analysis of DataQuick's September homebuying report shows the county's beach-close communities had the smallest sales bounce from last year's debacle.

DataQuick identified 393 homes selling in beach cities' ZIP codes last month, up 28% from a year ago. In these 17 ZIPs, last month's median price change was 17.2% vs. a year ago.

Now, before you say what "What's wrong with 28%?" ... compare that to other O.C. regions ...

Mid-county ZIPs had 869 sales, surging a stunning 134% from a year ago. In these 24 ZIPs, last month's median price change dropped 25.9% vs. a year ago.
North inland ZIPs had 651 sales, rising 76% from a year ago. In these 23 ZIPs, last month's median price change was off 22.0% vs. a year ago.
South inland ZIPs had 665 sales, up 52% from a year ago. In these 19 ZIPs, last month's median price change was down 17.9% vs. a year ago.
All told, countywide sales were up 62% vs. Sepember 2007 while the median selling price fell in the past year by 25% .

It may be a matter of price. The median Beach town selling price was $754,500 vs. south inland's $490,000; north inland's $480,000 and mid-county's $363,750. A report by Steve Thomas at Altera Real Estate shows pending deals to buy O.C. million-dollar homes down 32% in six months.

Inland housing's recent popularity was help explain the sharp drop in the median selling price. A year ago, the pricey beach was 21% of September sales. last month? Just 15%. Of course, the steep discounting seen inland may be the key to selling homes in these troubled times.