Sales Slump Ends 33 Months Later

It was hard to miss this August 19th headline in the Orange County Register.  In fact, it was an end to the longest home buying slump on record.  Never mind that the slump ending is directly attributable to still increasing foreclosures, and a still decreasing median home price.  After all, the buyers had to live through the first half of the decade, so sellers will have to live through the second half of the decade.  The real estate market is usually comprised of 3 types of markets; seller, buyer, and neutral.  So what exactly has been happening to generate the positive press?  First of all and possibly most important is affordability has made a comeback.  At the end of the selling frenzy and sub-prime debacle, affordability was a scant 11%.  No housing market will remain healthy when only 11 out of 100 people can afford to buy a home.  We have now risen back above 50%.  Secondly, there are screaming deals out there and even though there are a lot of them, there are not as many as there were.  In other words, according to the Orange County Register (August 26^th 2008), Orange County home demand is up 103% versus a year ago.  A report by Steve Thomas shows that, "fresh pending sales from the past month rose 51% in two weeks to 2,991.  One year ago, demand was 1,475."  But the really interesting part is that supply is at its lowest level in 16 months. (OC Register)

                The Associated Press ran a similar headline, "Sales of Existing Homes in U.S. rose in July, Realtors Group Says."  In fact, sales increasing are a national phenomenon of the moment.   At the end of August, according to Jonathan Lansner' column, who was quoting Steve Thomas' Market Update, supply, or active listing inventory in SoCalMLS, fell 289 homes in two weeks to 14,059, the lowest level since April 5^th, 2007.  Even though another wave of foreclosed properties is definitely on the way, for the first time in months the number of distressed properties to hit the market fell in July.  Finally, First American CoreLogic reported that prices are not falling as fast as they once were. (Lansner: OC Register)  This may suggest that although prices are likely to continue to drop into 2009, it probably won't be nearly as fast, as prices are leveling off.