May Real Estate News

  HOME PRICES ROLL BACK TO 2004 LEVELS... Sales data for the first quarter has arrived and for March specifically, prices have hit the 2004 watermark.  That means the median price is down almost 20% from a year ago.  Both the Los Angeles Times and the Orange County Register reported the Dataquick findings.  Obviously a huge contributor to price adjustments is the absorption of bank owned properties that are finally matriculating into the general real estate population.  The other factor is that sellers that previously were "testing" the market have wisely taken their homes off the market and only serious sellers remain.  That means that motivated sellers realize that their home must be priced to sell and that it will have competition from the bank owned sector. According to Dataquick, the bank owned property typically sells at least 15% below "normal" market prices.  Although it could be argued that the housing downturn is artificially deflated because of the bank owned properties, this writer does not agree.  That's like saying if you hadn't driven the car, you wouldn't have gotten in the accident.  Bank owned properties are germane to this market and will be here for some time.  This is not an overnight correction as people are beginning to realize.  Don't misunderstand, there is light at the end of the tunnel.  These distressed properties are beginning to move.  Read on for the optimist's view...

PRICES ARE DOWN, BUT SALES ARE UP... The next paragraph will have the exact numbers of sales which will still be down from the previous year, but up from the previous month.  The fact is sales are way up from February.  March sales (the latest month available) in Los Angeles, Orange, Ventura, San Bernardino, Riverside and San Diego counties were up 18.8% from February.  According once again to Dataquick, that's still not great as the average increase from February to March for the previous 20 years has been 38%.  Yet I think it's a number worth looking at.  Why?  Because most brokers reported their highest monthly sales in 15 months, which means this March was a heck of a lot better than March of '07.  The current inventory levels have not only stabilized, but they have hit a neutral plateau meaning they don't really favor sellers or buyers.  According to the OC Register (April) supply is hovering at about 6.77 months, meaning if not another house was listed it would take 6.77 months to sell every home currently listed to reach 0% inventory.  This is not a bad number considering the affordability index is rising monthly.  In fact, it's risen from a low of 11% at the height of the market to around 30%.  That's the number of people that can afford to buy a home at current prices.  Even though the emotions of the market favor buyers and because of that supply favors buyers, activity is slowly growing.  Are we out of the woods?  No, let's be realistic and truthful.  But, investors are sneaking back in and there are some great deals out there.  If you need to buy, you need to call me.  There are not a lot of great reasons to wait because the single factor that should sway you is interest rates and they are still at near historic lows.

WHAT WERE THE ACTUAL NUMBERS... The total number of sales was 1,663 which was up 13.1% from February. (Orange County only)  The new median price for the county is $506,000 down from a high of $673,000.  That number includes single-family, condos and new homes.  This is the first time since this newsletter's history that more properties sold in the lowest category than the highest with 402 sales under $400,000 and 398 over $700,000.  The average down payment stayed steady at 22% and the adjustable loan share is down to 34% after peaking well above 70% at the height of the market.  The monthly payment index is 2,645 and that is 10% lower than the same time last year.  That number should keep falling as prices continue to adjust.

BUYING BANK OWNED, FHA LOANS AND THE WHOLE ENCHILADA... There is a lot of conflicting information out there.  Have foreclosures peaked?  Maybe not everywhere, but Orange County is getting close.  The banks took possession of 698 properties in March, down 4% from February and down 13% from January. (Source:Dataquick)  They could spike again, slightly, over the next few months but indications would be that the number is stabilizing.  Some reasons are that more and more lenders are developing work out programs, loan modifications and loan relief.  Short sales are still out there but frankly they are the riskiest bet for a buyer.  You could be tied up for weeks waiting for a response from a lender, unlike a bank owned which is listed for a set price and is ready to go.  Remember, however, that most bank owned properties are sold "as is" and "buyer beware."  They will need work and patience. Don't expect to lowball these properties either as multiple offers are starting to make an appearance on these already price adjusted homes.  I want to say a word about FHA loans.  The loan limit on this product has risen to $729,000 in Orange County.  It allows for a 3% down payment or 5% if it's a "jumbo lite."  The money can be gifted and need not be seasoned.  It is available for refinance up to 97% loan to value for rate and term.  This is a viable option for refinances if some of your equity has been lost.  Please call me for any questions on any real estate matter.  I am your expert on "the whole enchilada!"  See you next month!

P.S.  For a look at how the county shapes up with foreclosures by city, give me a call and I will send you the map which appeared in the OC Register.