The OC Coastal Real Estate Blog

Orange County Housing Market Report

Garry Loss (The OC Coastal Group) — Tue, 28 Jul 2009 21:31:26 -0500

The active distressed inventory, both foreclosures and short sales, has dropped by 56% since reaching its peak last summer. Based upon reports of the “next wave” of foreclosures the distressed inventory was to increase for the past couple of months. But, the wave just has not materialized yet. The distressed inventory dropped by another 150 homes in the past two weeks, bringing the total to 2,616 active on the market today. It now represents 29% of the overall active inventory versus 40% one year ago. It is 3,334 less than the peak of 5,950 on August 7, 2008. Back then there were 1,249 foreclosures within the active listing inventory. Today, that number has dropped to 331. Demand, the number of new pendings sales within the last month, for foreclosures is currently at 614, compared to 861 last year. The problem right now is that there is tremendous demand for foreclosures, just not enough new foreclosures hitting the market. The expected market time currently is .54 months, about two weeks, compared to 1.42 months last year. The rumor mill is rampant with reasons for the shortage of foreclosures: from lenders purposefully holding back their inventory to “it’s just a matter of time” to all of the new tenant foreclosure laws. The fact remains that the “next wave” just has not materialized. Another answer could lie in the fact that there are more short sales that are resulting in a pending sale. The active short sale inventory peaked in May of last year at 4,810. Today, there are 2,285 short sales within the active listing inventory, a 52% drop from its peak. The word on the street is that lenders are “just starting to get it.” That does not mean that all short sales result in a sale and that the process has been simplified. It indicates that a bit of the reluctance to put together a short sale, on the lender’s part, has been lifted. Demand for short sales is now at 1,139 pending sales compared to 549 one year ago. Expected market time has dropped from 8.52 one year ago to 2.01 months today. Clearly the market has changed considerably over the past year for both foreclosures and short sales. Demand, the number of new pending sales over the past month, dropped by only 53 homes over the past two weeks to 3,306, a 2% drop. Last year demand totaled 2,743 pending sales, 563 fewer than today. Two years ago there were 1,822, 1,484 fewer than today. The active inventory dropped slightly by 51 homes in the past two weeks to 8,895, a 1% drop. Last year the active inventory totaled 14,746 homes, 5,851 additional homes on the market compared to today. Two years ago the active inventory reached 17,596 homes, 8,701 additional homes compared to today. The expected market time for all homes in Orange County increased slightly over the past two weeks from 2.66 to 2.69 months. Last year the expected market time was 5.38 months and two years ago the expected market time was at 9.66 months. The total pending count, different than demand in that demand only tracks new pending sales over the past month, increased by 116 homes over the past two weeks to 6,519, its highest level since I began tracking the statistic back in 2007. Last year at this time the total pending count was at 4,192, 2,211 fewer than today. Two years ago there were 2,575, 3,944 fewer than today.

Orange County Housing Demand Update

Garry Loss (The OC Coastal Group) — Mon, 11 Aug 2008 19:52:45 -0500

Fueled by the value and affordability of foreclosures and short sales, demand below $500,000 has swelled to its highest level of the year. Total Orange County demand now exceeds last year’s level by 63% and 2006’s level by 26%. Demand, the number of pending sales over the past month, increased by 197 in the past two weeks to 2,940. After unstoppable growth in the first half of 2008, demand is now following a typical summer cycle. For the first couple of weeks it diminished from June’s record highs and has continued to grow ever since. Typically, demand then starts to drop with the beginning of the Autumn market and the beginning of the school year. However, with the distressed inventory continuing to replenish, value and affordability may continue to provoke demand through the end of the year. Fence-sitters for the past couple of years, and even investors, are sensing a great opportunity to enter the market. 64% of demand, 1,892 pending sales, is found below $500,000, compared to 30%, 537 pending sales, one year ago. It is important to note that the beginning of the financial crunch took place in August 2007. As lenders tightened their requirements overnight, demand dropped by 18% in just two weeks and by 33% in a month. Demand dropped to a trickle and lasted six months. There will be no repeat this year. Value and affordability is a major difference in comparing 2008 to 2007, fueled by a major drop in prices due to that six month abyss. It will be interesting to see where Orange County demand travels from here. It may very well start doing its own thing just as it did at the beginning of the year, breaking from the traditional cycle of diminishing through the Autumn and Holiday markets and either sustaining its current levels or even increasing. Add value and affordability along with waiting on the fence for a few years and you have ingredients that will at the very least continue to spark demand.

Orange County Active Home Listings update

Garry Loss (The OC Coastal Group) — Mon, 11 Aug 2008 19:48:48 -0500

The active listing inventory has shed 398 homes in the past two weeks, bringing it to the lowest level of the year, 14,358. The inventory continues to buck the trend of growing through the Spring and Summer markets. Instead, it has remained just below the 15,000 mark for most of 2008 until its recent drop, bringing it closer to the 14,000 threshold. Two things occurred since the beginning of the year: demand increased unabated and discretionary, non-distressed homeowners remained off the market and nobody tested the waters like prior years. Unlike 2006 and 2007, absent this year was any foolish anticipation of a phenomenal Spring market. 14,358 homes on the market is still high, but it is a lot less pressure on pricing and demand compared to 20,000 homes. Last year at this time the inventory had blossomed to 17,611, 19% higher compared to today, or 3,263 additional homes. Two years ago, the inventory had grown to 15,875, 10% higher, or 1,527 additional homes. The expected market time for Orange County dropped from 5.38 months two weeks ago to 4.88 months today. The expected market time in 2007 was 9.76 months, almost double, and in 2006 it was at 6.81 months.

Orange County Foreclosure and Short Sale update

Garry Loss (The OC Coastal Group) — Mon, 11 Aug 2008 19:46:04 -0500

The distressed home market, foreclosures and short sales, now accounts for 41% of the active inventory and 57% of demand. The distressed inventory grew by 56 additional homes in the past two weeks. An interesting statistic is the portion of distressed homes in the various ranges in comparison to a year ago. Last year 55% of all distressed homes were found below $500,000 and 92% were below $750,000. Today 78% of all distressed homes are located below $500,000 and 94% are below $750,000. It is easy to conclude that the distressed inventory is driving demand. As painful as the distressed inventory has been to pricing, that erosion in pricing has not only brought affordability and value back into the Orange County housing market, it has planted the seeds to an eventual housing recovery.

It is time, once again to clear up the misconception in the short sale market. Short sales occur when a seller can no longer afford their monthly obligations and their outstanding loan(s) exceed the current market value. The seller must be able to document that they truly have a hardship, that their total outgoing monthly bills exceed their monthly income and they do not have a large savings or other source of capital. When this occurs, the homeowner places their home on the market subject to lender approval. Even though the buyer and seller may agree upon price and terms, the pending sale does not close until formal lender approval (and in many cases, more than one lender). HOWEVER, this is where the misconception occurs: a majority of short sales are on the market as active listings even though they already have received an offer, and often multiple offers, and have submitted a ratified contract to the lender(s). They remain as active until they obtain formal lender approval. This is due to a contract that is signed by both the buyer and seller that allows the seller to continue to market the home until lender approval. Unfortunately, this process can take anywere from weeks to months. The end result, buyers encounter homes that already have had tremendous activity and generated many offers. In most cases, short sales are just as popular as foreclosures due to their affordability and value. There are 1,249 active foreclosures on the market and demand for them is at 1,034, representing an expected market time of 1.21 months. In comparison, there are 4,701 short sales on the market. With reported demand for short sales at 656 pending sales, the expected market time is at 7.17 months. This is grossly understated because so many go unreported. Thus, it is hard to navigate among all of the active short sales. The bottom line, expect a lot of competition and activity when dealing with both foreclosures AND short sales.

Orange County Pending Sales update

Garry Loss (The OC Coastal Group) — Mon, 11 Aug 2008 19:38:41 -0500

Total Pending Sales are now at 4,248, a decrease of 22 homes. Remember, this statistic is different than demand, which shows the prior month’s activity. These are TOTAL pending sales, including those that have been pending for months. Compared to last year, total pending sales are up 73%. The year over year discrepancy continues to grow. Four weeks ago, total pending sales were up 61% compared to 2007. The markets are moving in opposite directions. Last year, total pending sales reached only 2,461, 1,787 fewer. Current sold homes not only surpass 2007 levels, it now eclipses 2006 levels as well. The number of sold homes has continued to grow unabated ever since March. The trend is almost identical to demand, the only difference, an apparent 60-day lag in the sold numbers compared to demand.

Lowest price per sq. ft. condo/townhome in all of 92629 that’s not a short sale

Garry Loss (The OC Coastal Group) — Fri, 08 Aug 2008 19:45:29 -0500

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Lowest price per sq. ft. condo/townhome in all of 92629 that's not a short sale! End Unit Townhouse next to large secluded greenbelt. Features include recessed lighting, Win-dor double-paned windows throughout with transferrable warranty, plush neutral carpeting with extra-thick padding throughout, updated kitchen cabinets, granite sink and newer Bosch and GE appliances, built-in entertainment center, new Trex decking off of living room and master bedroom, custom closet organizers and vaulted ceilings in all bedrooms. Garage features overhead storage and bonus workshop and built in storage. Large fenced in back yard perfect for entertaining. New furnace and water heater. Community features ocean view pool and spa. Stroll to beaches, Dana Point Harbor and The St. Regis. Refrigerator, washer and dryer, home warranty plan included. MOTIVATED SELLER will entertain all offers between $549,999 and $574,999. SELLER WILL PAY DOWN 1 POINT ON BUYER'S LOAN OR PAY 12 MONTHS OF HOA DUES OR PAY UP TO $5,000 IN NON-RECURRING CLOSING COSTS ON AN ACCEPTED OFFER!!! . Why wouldn't you buy this home? Virtual tour - http://www.circlepix.com/home/EJSWBK

Features

Bedrooms:	3
Bathrooms:	2.5
Parking:	2
Year Built:	1973
Subdivision:	Dana Vista
Attached on:	1 Side
Garage Size:	1
School District:	Capistrano Unified
Square Footage:	1675
Agent Name:	Garry Loss
Broker:	The OC Coastal Group
MLS #:	L26800

Location

24581 Harbor View Drive, D Dana Point CA 92629

vFlyerId: 1747963

End Unit 3 Bedroom Townhome in Dana Point

Garry Loss (The OC Coastal Group) — Wed, 02 Jul 2008 19:47:17 -0500

End Unit 3 Bedroom Townhome in Dana Point

Location: Dana Hills

Lowest price per sq. ft. townhome in Dana Vista! Not a short sale! End Unit Townhouse next to large secluded greenbelt. Features include recessed lighting, Win-dor double-paned windows throughout with transferrable warranty, plush neutral carpeting with extra-thick padding throughout, updated kitchen cabinets, granite sink and newer Bosch and GE appliances, built-in entertainment center, new Trex decking off of living room and master bedroom, custom closet organizers and vaulted ceilings in all bedrooms. Garage features overhead storage and bonus workshop and built in storage. Large fenced in back yard perfect for entertaining. New furnace and water heater. Community features ocean view pool and spa. Stroll to beaches, Dana Point Harbor and The St. Regis. Refrigerator, washer and dryer, home warranty plan included. Seller will pay down 1 point on buyer's loan on accepted offer. Why wouldn't you buy this home?

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Garry Loss

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Pricing

Asking Price: $589,900

Flexibility: Negotiable

Additional Pricing Information: Seller will pay down 1 point on buyer's loan on accepted offer.

Property Location

24581 Harbor View Drive, D
Dana Point, CA 92629
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Features

Bedrooms: 3

Bathrooms: 2.5

Parking: 2

Year Built: 1973

Subdivision: Dana Vista

Attached on: 1 Side

Garage Size: 1

School District: Capistrano Unified

Square Footage: 1675

Agent Name: Garry Loss

Broker: Re/Max Real Estate Services

MLS #: L26800

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Range/Oven

Full Refrigerator

Washer/Dryer

Dishwasher

Sink Disposal

Microwave

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VFLYER ID: 1747963

What’s happening to the Orange County housing demand in the higher price ranges?

Garry Loss (The OC Coastal Group) — Tue, 06 May 2008 20:52:28 -0500

The financial crunch is still impacting liquidity in the upper ranges. Demand is off by more than 30% compared to last year for all homes priced above $750,000. With demand off in the upper ranges by more than 30%, do not be surprised when the media reports a significant year over year drop in the median sales price. With the lower ranges hot and the upper ranges not, the median value will be much lower. The average pending sales price a year ago was at $869,000 compared to $605,000 today. This is partially due to the decline in prices, but it also has a lot to do with a major decline in demand in the upper ranges. For the first three quarters of 2007, prior to the beginning of the financial crunch, the number of sales above $1 million in all of California was only off by 3% compared to the prior year. For homes below $1 million, sales were off by almost 30%. A month after the start of the financial crunch, September of 2007, sales above $1 million were down 26% compared to the prior year. The upper ranges have been impacted ever since. As liquidity is restored in the upper ranges, do not be surprised by an increase in demand in the upper ranges and an increase in the median sales price.

How do the increased conventional and FHA loan limits impact the Orange County housing market?

Garry Loss (The OC Coastal Group) — Tue, 06 May 2008 20:51:34 -0500

Remember, the conventional loan limit and FHA loan limit were both just raised to $729,750. However, there are now three tiers of loan rates: the old conventional loan limit up to $417,000, $417,001 up to the new limit of $729,750 and then $729,751 on up. The original intent was to expand the lower interest rates of conventional loans to higher ranges in areas with much higher prices, like Orange County. Historically, major changes in federally backed loan programs were carefully put together for the better part of a year. This time, the financial industry was given about a month to create and implement a significant change. The credit markets are just now adapting to the new loans. Part of that adaptation is the three tier system. Until the entire secondary market becomes more comfortable with these changes, the discrepancy in interest rates between each tier will be sizeable. There is about a three-quarter point differentiation between each tier. As the market adapts to the new program and liquidity is restored in the financial markets with investors once again purchasing pools of loans, the discrepancy between the tiers will shrink to about a quarter of a point. The experts are predicting that there will be considerable improvement by the end of the third quarter of this year, by the end of the summer. Currently, for loans above $729,750, the interest rates, loan qualifications and down payment requirements are extreme barriers to entry. That does not bode well for homes priced above $800,000, where the rate is approximately 1.5% above the $417,000 rate. This has impacted the upper range dramatically. All ranges above $1 million are experiencing market times above ten months; the higher the range, the higher the expected market time. Not surprisingly, the areas in Orange County that are impacted with market times above ten months are Corona Del Mar, Coto de Caza, Laguna Beach, Newport Beach and Newport Coast. These areas should all improve by the end of the summer with improvements in the financial markets.

Orange County Foreclosure and Short Sale Market Report - May 1, 2008

Garry Loss (The OC Coastal Group) — Tue, 06 May 2008 20:50:35 -0500

The volume of distressed homes in the lower ranges has provided the fuel for the decline in pricing. 77% of all distressed properties are priced below $500,000 and 94% are priced below $750,000. Short sales and foreclosures now make up 36% of the current active inventory versus 35% two weeks ago. There are now 5,576 distressed properties on the market. The overwhelming majority, 81%, are short sales, sellers with loan balances that exceed the current market value and are "subject to lender approval." For short sales, there are currently 4,504 active listings and demand is at 544 escrows. The expected market time is at 8.28 months, dropping from 9.86 months two weeks ago. But, this statistic is extremely misleading, just ask a buyer searching for a home. A large portion of the 4,504 active listings already have secured an offer on the property signed by both the buyer and seller, yet they remain active on the market. The reason is that there is also a signed short sale agreement that allows the seller to continue to actively market their home until formal lender approval occurs. This process takes anywhere from a couple of weeks to months. Unfortunately, there is no way of knowing which short sale listings already have an agreed upon offer submitted to the bank other than contacting the listing agent directly for their verbal answer. So, true demand in Orange County is actually understated. The word on the street is that close to 50% of all active short sale listings already have an agreed upon offer submitted to the lender. If those were to be truly changed to "pending escrow" status, the demand count would increase considerably, the inventory would drop and the market time would drop as well. Unfortunately, not all short sales with offers submitted for lender approval are actually approved. Roughly 1 out of 3 are accepted. Many are rejected because they are priced too far under their true market value. With increased demand comes more realistic pricing of short sales. As this year progresses, expect the lender acceptance rate to grow closer to 1 out of 2.

Orange County Housing Market Update - May 1st, 2008

Garry Loss (The OC Coastal Group) — Tue, 06 May 2008 20:49:15 -0500

Compared to last year, demand is stronger, there are fewer homes on the market and the expected market time is much lower. The first time home buyer wave continues to grow and plant the seeds to an eventual recovery. First time home buyers are fueling a surge in activity that continues to flourish and has been steadily growing since the middle of February. Multiple offers in the lower ranges, homes priced below $500,000, are now quite common throughout Orange County. Demand has not only surged past the 2007 level, but is quickly approaching the 2006 level. Until just four weeks ago, year over year demand had not been stronger than the prior year since September 2005, the beginning signs of the current slow cycle. Demand, a snapshot of the prior 30 days of escrow activity, has climbed by an additional 166 escrows in the past two weeks to 2,540. Last year at this time, demand was at 1,863 escrows, 677 fewer than today. Two years ago it was at 2,701, or 161 additional escrows.

The active listing inventory has remained steady in 2008. In the prior two weeks, the active inventory has dropped by 119 homes to 15,437. We started the year with 14,724 homes, 713 fewer than today, but that was after shedding 1,050 homes in December 2007 with sellers pulling their homes off the market for the holidays. Still, that only represents a 5% increase so far this year compared to a 37% increase in the inventory last year. Two years ago there were 3,481 fewer homes on the market; however, the inventory was growing at an extremely rapid rate in 2006. The inventory had already increased by 65% to this point and it continued to grow by another 34% until reaching its peak of 16,006 homes back in August 2006. Today, the active inventory has steadily remained just under 16,000 homes and appears as if it will continue along that path.

With steadily increasing demand and a stable active inventory, the expected market time has dropped like a rock. Starting this year with a market time of 15.6 months, a deep buyers market, the market time has improved to its lowest mark of the year to date at 6.08 months, a 61% drop. Last year the market time was at 8.33 months and climbing at an alarming. Two years ago the market time was at 4.43 months and climbing. By the end of June 2006, the market time had blossomed to 6.33 months.

So, it is safe to say that the Orange County housing market has definitely changed gears this year. The lower ranges and the flood of first time buyers are entirely responsible for this change. What changed? The answer is quite simple: the significant drop in prices has allowed buyers that have been sitting on the fence to finally afford to buy once again. After being priced out of the market with rampant appreciation earlier this decade, affordability is finally improving and inviting buyers that have been waiting a long time to finally purchase. Properties priced below $500,000 account for 47% of the entire active inventory and 56% of demand. Last year, this same range accounted for only 26% of the active inventory and demand. Detached homes below $750,000 are actually experiencing a slight sellers market, below the five month mark.

How Should a Home Seller Approach The Orange County Real Estate Market?

Garry Loss (The OC Coastal Group) — Fri, 14 Mar 2008 16:43:11 -0500

Thus far, homeowners have kept their homes off the market, but the Spring market has just begun. There are positive signs in the marketplace for the rest of 2008; however, the market remains a “buyer’s market” unless you are a bank. So, do not place your home on the market unless you absolutely must sell OR you are willing to take a hit in value in order to move up in the market to a more expensive home. For the “move up” seller, 10% of a $500,000 home is less than 10% of a $750,000 home. The net result for the move up seller is a positive savings. If you have to sell in this current market, be prepared to do what it takes to be successful. It is all about location, price, condition and time. Price is extremely crucial to procure a sale; the better the price, the better the odds for success. Condition is important too. Since short sales and foreclosures for the most part are in poor condition, homes in better condition can equate to an increase in price and offer a refreshing alternative for buyers. Be ready to pack your patience; depending upon the area, it can take months to sell. Given last month’s demand, there are still 13,519 sellers who will not be successful in selling their homes over the course of the next month. Competition is intense. Those willing to remove their emotions to make decisions will ultimately achieve their goals in selling. Remember, a lot of the market is relying on banks to make decisions and they are void of emotions.

How Should a Home Buyer Approach The Orange County Real Estate Market?

Garry Loss (The OC Coastal Group) — Fri, 14 Mar 2008 16:42:06 -0500

There was a great article in Time Magazine last month by Dan Kadlec, --titled “Ignore the Headlines!” The article identified something I have been talking about since the beginning of the year, “finance costs will rise as the economy recovers, so trying to time real estate might not pay off.” The article then proceeds to give an example of a rise in rates of just 1%. If home prices were to drop by 10% over the course of a year, but rates rise by 1%, the end result will be a wash and renters would have waited a year and saved nothing. If rates increased by 2%, the monthly mortgage payment would be significantly higher. Rates will inevitably increase to stave off inflation. In 2000, conventional rates were 8% and in 1990 they were at 10%. So, do NOT wait for the bottom of the market. Instead, enter the market when the conditions are most ideal: low rates, tons of choices and plenty of motivated sellers. Go find the best home for your family. Also, be aware that for banks in charge of foreclosures, they have the upper hand and it is a seller’s market for them. In looking at short sales, many already have an offer submitted to the lender for their approval. Also, the higher the price range, the less motivated sellers are due to financial circumstances. 73% of distressed properties are below $500,000 and 94% are below $750,000. This is worth repeating in every single one of my reports - take considerable comfort in the fact that Southern California real estate has always been a historically wonderful long term investment.

What do the new conforming loan and FHA loan limits mean to the Orange County real estate market?

Garry Loss (The OC Coastal Group) — Fri, 14 Mar 2008 16:40:46 -0500

The new loan limits are going to have a significant effect on the market. These new limits won’t address the troubles everywhere, since they are formulated based on an area’s median sales price. So, they will have little effect in most of the country, but they will have a profound influence on California and, specifically, Orange County. Orange County’s limits have been established at the maximum amount of $729,000. On a 10% down loan, that will allow buyers to stretch up to $800,000. That will provide incredible liquidity to our market. With 10% down, the prior $417,000 limit allowed buyers to only look up to $459,000. That represents a difference of $343,000! The loans will be available as of April 1, just a few weeks away. Expect demand to increase substantially as many buyers take advantage of this temporary program. Demand should elevate and then remain at higher levels throughout 2008. The increased loan limits will expire on December 31st of this year. The increase was designed to assist markets like Orange County to get through the current financial crisis, buying precious time for the financial markets to right themselves. That should give the markets plenty of time to restore investors faith in buying pools of non-conventional loans once again. The FHA loan limits will allow buyers with credit blemishes and low down payments to obtain financing. This restores the gap in products with the drying up of the subprime market. FHA financing is a much better alternative to subprime and was common just a decade ago. The problem had been that the FHA loan limit was just too low to provide any help to the Orange County market. The limit had been $367,000 and was virtually non-existent in Orange County. Do not worry, FHA financing is NOT the same as subprime financing. It provides financing to borrowers with some credit issues and lower down payments, but it requires documentation of income and does not allow “payment shock” where a buyer jumps from a low rental payment to a high mortgage payment. FHA has all of the safety gaps and education in place so that buyers do not get in over their heads like they did with subprime financing. So, expect demand to increase substantially due primarily to the increase of both the conventional loan and FHA loan limits.

Orange County Short Sales and Foreclosures Report

Garry Loss (The OC Coastal Group) — Fri, 14 Mar 2008 16:38:37 -0500

Bank owned foreclosures are in vogue and are seeing the most activity. Foreclosures only account for 7% of the total active inventory, but 23% of demand. There currently is only a 2.37 month supply of foreclosures, an extremely valid explanation for all of the multiple offers. And, according to our Realtors® out in the field, what is not reflected in the data is that when a buyer and a seller come to an agreement on a short sale, where the seller’s combined loans against the property exceed the purchase price, most homes are not changed in the Multiple Listing Service (MLS) to reflect the agreement. Instead, they remain on the market as active listings until formal lender approval of the short sale. You see, the buyer and seller may agree on a price, but the seller is really bargaining on behalf of the bank since the bank has to take less than what is owed. They are “subject to lender approval” according to the terms of the contract. So, the standard practice of care out in the field is to keep these homes on the market until lender approval occurs. Also, we are not talking a couple of days for the lenders to respond either. On average, they are taking anywhere from 21 to 90 days to respond. Needless to say, demand is currently understated. This should wash out over the next month as more and more lender approvals hit the market. There are over 4,000 short sales currently on the market, 26% of the current active inventory. Short sales only account for 17% of demand (remember, it is currently understated). Accordingly, the expected market time for short sales is 12.28 months.

Orange County Housing Market Snapshot

Garry Loss (The OC Coastal Group) — Fri, 14 Mar 2008 16:37:06 -0500

The lower ranges, especially distressed properties, are receiving multiple offers. It is difficult to gauge the current real estate market by reading the papers or listening to newscasts. The best way to assess what’s going on in is to poll the Realtors® out in the field, writing offers, guiding buyers from home to home, and representing sellers in the marketing and selling of their homes. The reports are in: the lower ranges, below $500,000, are seeing plenty of activity, with multiple offers and buyers losing out on their first choices. The lower ranges were hit the hardest through the subprime shakeup and they slowed first. Logically, it seems appropriate that this range, the entry level, would be the first to heat up. The below $500,000 range accounts for 45% of the current active inventory and 50% of the most recent demand. One year ago, it accounted for 26% of the active inventory and 28% of demand. First time buyers are stepping into the fray with their first real opportunity to purchase in years. When the expected market time is below the 5 month mark, it is a seller’s market. Everybody is looking for a deal, but it seems that the banks are in the driver’s seat. With the new FHA and conventional loan limits coming, the upper ranges will witness a similar boost in demand shortly.

Demand, the number of homes placed into escrow within the prior month, increased modestly by 73 homes in the past two weeks from 1,820 to 1,893 escrows. Demand is at levels not seen since June of last year. The current active inventory climbed by only 20 homes in the past month two weeks to 15,412 homes. With the active inventory virtually unchanged, coupled with a slight increase in demand, the expected market time dropped from 8.46 to 8.14 months today. That’s a stark difference from the 15.60 month inventory at the beginning of the year. It is still a “buyer’s market,” just not as deep. Last year at this time there were 12,558 homes on the market, demand was at 2,338 escrows and dropping with the start of the subprime crunch, and the market time was at 5.26 months and climbing. Two years ago, there were 9,562 homes on the market and rapidly climbing, demand was at 2,779 escrows and the market time was at 3.44 months.

What’s the difference between the condominium market and the detached home market? The detached home market continues to fare better than the condominium market with a 7.88 month inventory, the first time below eight months since May of 2007. For condominiums, there is an 8.67 month inventory. 31% of the detached home inventory and 37% of the condominium inventory is either a foreclosure or short sale. 67% of all detached homes below $500,000 are either a foreclosure or short sale. For condominiums, 54% below $250,000 are distressed.

How should a home seller approach the housing market?

Garry Loss (The OC Coastal Group) — Tue, 26 Feb 2008 16:36:22 -0600

I will stick to my simple message for over a year now: do not place your home on the market unless you undeniably have to sell. It is all about location, price, condition and patience. Price is based upon a home's location and condition. As a homeowner, you only have control over condition. The homes that are priced well and in great condition sell. That means aggressively pricing according to the comparable sales. Be ready to pack your patience; depending upon the area, it may take six months or more to sell. Given last month's demand, there are still 13,572 sellers who will not be successful in selling their homes over the course of the next month. For sellers, the competition is fierce, which includes emotionless banks that have to purge their assets from their books.

How should a home buyer approach the housing market?

Garry Loss (The OC Coastal Group) — Tue, 26 Feb 2008 16:35:16 -0600

Quite simply, do NOT wait for the bottom of the market. Nobody is going to ring a bell to signal the point at which we reach that bottom. We will not know the precise bottom until months after it has already occurred. Take solace in the fact that the conditions are perfect with low interest rates, hungry, motivated sellers, and plenty of choices, so jump in now and go find the best home for your family. Please understand that these historically low interest rates will NOT last. Just this week, the economic reports are pointing towards inflation, which is not good for interest rates. The Federal Reserve released their "minutes" from their last meeting; policymakers said that when prospects for economic growth improved, "A reversal of a portion of the recent easing actions, possibly even a rapid reversal, might be appropriate." These low interest rates that the entire nation has grown so accustomed to will increase to levels not seen in a while. In 2000, they were at 8%, and in 1990 they were at 10%. A change in interest rates to more historical norms will seriously erode a buyer's purchasing power and will result in much higher payments. Any advantage gained by waiting for prices to reach a "bottom" will be lost in much higher long term monthly payments. Take tremendous comfort in the fact that Southern California real estate has always been a historically wonderful long term investment.

What can we expect from the Orange County housing market in 2008?

Garry Loss (The OC Coastal Group) — Tue, 26 Feb 2008 16:34:12 -0600

With all of the attention at the federal level to righting the housing ship, the Orange County resale market will probably not follow the normal cyclical patterns of the best demand in Spring, followed by a little less demand in the Summer, followed by another drop in the Autumn, followed by the lowest levels of the year during the Holiday market. Instead, we can probably expect stronger traction with the increased liquidity due to the new loan limits throughout the Spring and Summer. We very likely can see higher demand numbers at the end of Summer compared to Spring. This could create a catalyst of "bargain hunters" who will want to feed on the distressed inventory at the end of the year and through the beginning of next year. Stay tuned, there is more to come!

How is the recent passage of the stimulus package going to effect the market?

Garry Loss (The OC Coastal Group) — Tue, 26 Feb 2008 16:32:51 -0600

First, the smart buyer will use the tax rebates to buy down their interest rates for the life of the loan. More importantly, the increasing of the conventional and FHA loan limits will provide a much needed boost to demand in the higher ranges, which have slowed dramatically since the drying up of the financial markets since August. For conventional loans, we can expect rates to be slightly higher than the current conventional rate, but much less than the current jumbo rate. There has been little talk about the importance of the new FHA limits, but they are an important replacement to the demise of the subprime loan. Actually, FHA loans were extremely common just a decade ago; that is until they went out of vogue with the refusal of the Federal Government to change the limits in rapidly appreciating markets. The limit had been $367,000; thus, the subprime was born to fill the need to finance borrowers with damaged credit and little down payments. Unfortunately, without much regulation, the lending industry established a product that paled in comparison to the strength of FHA financing. FHA requires documentation of income and does not allow "payment shock" where a buyer jumps from a low rental payment to a high mortgage payment. FHA has all of the safety gaps and education in place so that buyers do not get in over their heads like they did with subprime financing. The end result: the stimulus package will provide a much needed resource for many to obtain financing, which will ultimately translate to an increase in demand. With the signing of the bill into law last week, we can expect the change to take hold sometime next month.

Orange County Foreclosure and Short Sale update

Garry Loss (The OC Coastal Group) — Tue, 26 Feb 2008 16:31:40 -0600

Is the foreclosure market as bad as reported? Foreclosures and short sales are a significant part of the current Orange County real estate market. Currently, they account for 32% of the active inventory. The flip side of that coin leaves 68% of non-distressed homeowners marketing their homes. But, that percentage has climbed from 27% one month ago, a trend to continue to watch. Of all of the distressed homes on the market, currently 4,859 of the 15,392 total inventory, bank owned foreclosures make up only about 26% of that total. The remaining 74% are short sales, homeowners who are attempting to sell their homes for less than their total outstanding loan balance subject to the lenders’ acceptance. The good news is that most lenders do NOT want to foreclose on a home and WANT to work it out with the homeowner. Lenders are a lot more organized than they were just six months ago, able to handle the increased volume and bring about an amicable solution. Sellers in this situation should only work with a professional Realtor® well versed in the short sale process.

Orange County Housing Market Update

Garry Loss (The OC Coastal Group) — Tue, 26 Feb 2008 16:30:26 -0600

The beauty of up-to-the-minute data is that we know which direction we are headed REGARDLESS of the countless television stories and news articles. This report is a snapshot of the market today. In comparing it to prior snapshots, we can pinpoint trends that won’t reach the pages of a newspaper or the teleprompter of a newscast for weeks, if not months, down the road. The data often confirms the buzz among the agents working in the trenches of the real estate market. Here’s the buzz: increased open house activity; many buyers climbing in cars who are extremely cognizant of value; plenty of short sales; more realistic sellers on the market; and, homeowners opting to NOT market their homes as they are acutely aware of the current market conditions. Let’s see if the “buzz” correlates with the data. Demand, the number of homes placed into escrow within the prior month, increased by 49% over the past month from 1,219 to 1,820 escrows. We have not seen demand at this level in six months, since just before the beginning of the credit crunch in mid-August. The current active inventory climbed by only 147 homes in the past month to 15,392 homes, only a 1% increase. With the active inventory virtually unchanged, coupled with a sharp increase in demand, the expected market time has dropped substantially over the course of the past month from 12.51 to 8.46 months today. We started off the year with a 15.60 month inventory, almost double today’s snapshot. This is not to say that sellers should be jumping for joy with the return of a seller’s market, since for most economists, anything over a six month inventory is dubbed a “buyer’s market.” “Equilibrium” is a market between five and six months. A “seller’s market” doesn’t even register until the market time drops below five months. But, there are a few cities below the six month mark: Aliso Viejo, Anaheim Hills, Brea, Foothill Ranch, Fountain Valley, Huntington Beach and Mission Viejo. To be fair, there are a few areas that are still in a deep buyer’s market with over a year in inventory: Coto de Caza, Laguna Beach, La Habra, Newport Beach, Newport Coast, Portola Hills, San Juan, Santa Ana and Villa Park. Most of these cities will improve as the credit crunch begins to release its stronghold in the coming weeks and months. Last year at this time there were 12,194 homes on the market, demand was at 2,654 escrows and the market time was at 4.59 months. Two years ago, there were 9,038 homes on the market, demand was at 2,892 escrows and the market time was at 3.13 months.

The detached home market is faring a little bit better with an 8.22 month inventory. For condominiums, there is an 8.85 month inventory. 27% of the detached home inventory is either a foreclosure or short sale and 27% of that inventory is vacant. 35% of the condominium inventory is either a foreclosure or short sale and 34% of that inventory is vacant.

How should a home seller approach the housing market?

Garry Loss (The OC Coastal Group) — Tue, 12 Feb 2008 20:31:24 -0600

The message is simple: do not place your home on the market unless you unequivocally have to sell. It will take a great price, great condition and plenty of time to sell. So, price according to the market and the comparable sales and escrow data. Make every attempt to offer a home in nothing less than excellent condition. Be ready for the sales process to take six months or more, or price it accordingly for a quicker sale if necessary. The stimulus package will help demand, but we will remain in a buyer's market. Given last month's demand, there are still 13,691 sellers who will not be successful in selling their homes over the course of the next month. There is a lot of competition, which includes sellers who are upside down on their loans and bank foreclosures who don't have a choice and MUST sell.

How should a home buyer approach the housing market?

Garry Loss (The OC Coastal Group) — Tue, 12 Feb 2008 20:30:10 -0600

With the Federal Reserve, the White House, Congress, our governor, Arnold Schwarzenegger, and the California legislature working to repair the ailing housing market, and the passing of the economic stimulus bill, a bottom to this market is on the horizon. But, as a buyer, understand that nobody is going to ring a bell to signal the bottom of the current housing cycle, just as nobody signaled the end of the housing boom in 2005. To wait for the bottom is foolish. Instead, cash in on the fact that it is a buyer's market that has already erased some of the boom's appreciation. Currently, rates are near historical lows, loan limits are increasing for both conventional and FHA loans, there is very little competition among a sea of housing choices and sellers are eager for an offer. So, if you are a buyer, sit down with a lender and ascertain your affordability limits and payment comfort levels and then go find the home the best fits the needs of your family. Avoid writing lowball offers and, instead, consider that the current sales to list price ratio for the county is 94%. Rather than just take a percentage off of the asking price, research the fair market value based upon the most recent sales and current escrow activity. There are still homes that receive multiple offers and obtain their full asking price. Most buyers forget to consider the importance that the current historically low interest rates will undeniably NOT last forever. Unfortunately, that is an unmistakable fact that very few consider because everybody has grown accustomed to low rates and expect them to continue. As soon as the market starts to turn around, be completely assured that Bernanke and the Federal Reserve will continue their long term plans to thwart the risk of inflation and increase rates. For perspective, let's compare a $600,000 mortgage at 5.5% today (soon possible with the increase in the conventional limit), $3,407, to past benchmarks. With an 8% interest rate in 2000, the monthly payment would be $4,403, almost a $1,000 per month increase. With a 10% interest rate in 1990, the monthly payment would be $5,265, an increase of $1,858 per month. As a buyer, it is simply foolish to just watch prices to gauge the "perfect time to buy." Even another 10% drop in prices will hardly make up for a change in interest rates. With rates low and selection high, this IS the year to buy. You can take comfort in the statistical fact that Southern California real estate has always been a historically wonderful long term investment.

What can we expect from the Orange County housing market in 2008?

Garry Loss (The OC Coastal Group) — Tue, 12 Feb 2008 20:28:49 -0600

The Spring market has officially begun. The stimulus package will take effect sometime in March; cyclically the highest demand is in the Spring. As a result, demand may continue to increase through April or May, rather than reaching a plateau in March. This is great news for the real estate market. Demand should start to mirror year over year comparisons by the end of March. Expect the active inventory to continue to grow throughout the Spring as more homeowners enter the game. Unfortunately, inventory is already standing tall, above the 15,000 mark, so more homeowners coming on the market will only push the inventory towards the 20,000 mark, which could be reached during the Summer market. With the inventory climbing along with demand, we can anticipate the expected market time to hover around the 10 month mark. During the Summer market, June through the first half of August, we can expect demand to drop slightly and the inventory to continue its slow climb. As a result, the expected market time will increase. During the Autumn market, the end of August through Halloween, we can expect the inventory to drop as sellers begin to pull their homes off of the market if they were unable to sell their homes during the Spring or Summer markets. Demand will drop slightly again as the expected market time remains relatively unchanged. Cyclically the slowest time of the year for the real estate market, the Holiday season, Halloween through the first couple of weeks of the New Year, we can expect demand to fall to the lowest levels of the year as a larger number of sellers throw in the proverbial towel and pull their homes off of the market. The expected market time would then increase slightly.