HOMEBUILDING HIBERNATION ENDS

This was the headline of the Orange County Register on Sunday May 22nd.  The entire real estate section was focused on all the housing developments that are picking up steam by most So Cal builders.  The California division president of Fieldstone communities delivered the following quote, "It makes sense (to build) again.  We can deliver a product where there's demand.”  This column has been emphasizing for a few months, that the lapse in building over this fairly prolonged period of time, will result in heavy pressure on the resale market.  That's good for homeowners who have hung in there, despite the odds, and have stayed current on payments and are riding out this temporary loss of equity.  Why do I say temporary?  Let's look at investments for the last ten years.  There is not enough space here to do a comparison chart, but do your own.  Take a look at the S & P 500, the Dow Jones, Nasdaq, and Real Estate.  Let's see which one, held from 2000 to 2010 (the worst decade, all agree, in real estate) and see which investment fared best.  The short cut answer: real estate.  Also, with that investment, you managed to leverage your money and buy something somewhere between 10 X's and 5 X's your investment, depending on your down payment.  You more than likely fixed your housing cost, unlike renting, and if you didn't use your home like an ATM, you have built equity.  Let's not forget one of the best tax breaks for the middle class, interest deduction.  Buying real estate doesn't sound so bad... No wonder they're building again.  All agree building has been in the tank.  This column has reported how low permits and percentages have been off.  So after nearly 2 years of a blank in the building department, 28 developments have started the building process in one way or another.  According to Irvine-based housing consultant John Burns, "builders are coming out of hibernation."  The projects together include approximately 3,000 homes and townhouses and duplexes.  Compare that to the paltry 1,600 of 2008-09.  But catch up doesn't happen overnight.  Short sales and foreclosures will continue to be a part of the market mix for several years to come, and certain buyers will be drawn to them for either "patience equity" or investors looking to rehab and sell.  Equity, or standard sales, will continue to rule the qualified buyer who can afford to pay market rate for a turnkey property.

ORANGE COUNTY JOBLESS RATE AT 2 YEAR LOW

Sometimes people want good news so badly, that they massage the numbers to get what they want.  This is not the case with this month's job report.  The unemployment rate fairly plunged from 9.1% to 8.6%.  When dealing with such big numbers, this half a point drop surely signifies a lot of jobs.  The national outlook has been equally positive with large orders up for most companies and jobs being offered are of a substantial nature, i.e., not just service industries. Leisure and hospitality added jobs, as did professional and business services.  Manufacturing was fairly flat with a loss of 800 jobs.  Look to see jobs continue to make certain inroads as 2011 continues.

CALIFORNIA HOME SALES AND PRICES FALL IN APRIL, BUT BOUNCE UP IN MAY

There is no doubt in anyone's mind, who works in real estate full time, that 2011 has had an uneven edge to it.  One month sales seem solid, the next, it sputters.  The real culprit in this is not affordability; it's at an all time high.  It's not selection, there is ample inventory, and it's not a lack of qualified buyers or motivated sellers.  The real culprit is the impression that the media has given as to the availability of money.  Many people think it's tighter than ever.  Getting a loan is difficult.  Actually, that's not true.  So if you are a buyer who has been staying away because you think you can't get a loan unless you have a 740 FICO and 20% down, go start looking for your dream home, because that's not the truth.  Do you have to be qualified?  Yes.  Do you have to have a job?   Yes.  Can you get a stated income loan?  No.  Can you get a fully documented FHA, VA, or Conventional loan?  YES!!

FINALLY, A NOTE ON MORTGAGE DEBT AND SHORT SALES

There was a great article in USA Today that reported that mortgage debt is falling at a record pace.  Attributed to low interest, mainly, and also refinancing, and frankly, defaults, have freed up more than $100 billion.  To put this in perspective-- it's comparable to all unemployment benefits for one year or this year's Social Security payroll tax cut.  Nicolas Carroll, a journalist on consumer finance had this to say, "This is a form of economic stimulus that goes to Main Street rather than Wall Street."  Homeowners have trimmed interest payments alone by 11% -- or $67 billion a year.  Remember what was said earlier about getting a loan.  This includes refinancing to better your interest rate or your terms.  You could qualify.  A final note on short sales.  They should be called long sales, on that we can all agree.  The banks are very fussy and make buyers and the sellers go to great lengths to successfully close these transactions.  Often times you are dealing with a second and third lender who must also agree to the terms of the sale and make requests for partial payment.  They are the most difficult of the 3 types of sales mentioned in the "numbers" paragraph.  Do your homework, do everything the lender asks, and make sure you have help.  Maybe a lot of help... See you next month.

SOUTHERN CALIFORNIA REAL ESTATE IS A WILD RIDE, BUT ORANGE COUNTY LOOKS BEST

Maybe there is truly no comfort for any type of investment in these uncertain economic times, but probably for the first time for the newer generations, it really is hard to predict what’s coming next.  Having said that, real estate, taken the beating that it has, may still be the most resilient product out there.  Why say that?  Take a property purchased in 1990 at $260,000.  That property peaked in 2006 at $830,000.  The market indeed crashed and that same property plummeted in value to $630,000.  Now let’s look at the value left in that property, through the worst downturn in the history of California real estate, and see how the initial investment value of $260,000 is looking.  It is still nearly 2 1/2 times in value what it started at.  Let’s also remember that the owner leveraged their money by putting only 20% down in their own cash investment to achieve those returns.  Let’s also remember that the owner lived in the property and wrote off the interest on the loan.   How do you think this investment has fared over 20 years compared to an initial investment of $52,000 in a dot com or Internet stock that fell on the bubble burst we  all experienced a few years ago?  Most of those investments that were victim of that bubble are completely gone, not worth the paper on which they were written.  This makes for a centering point, one which we all can rally around.  Real estate is a sound investment.  With prices still stabilizing, which will end as we ride out this year, there are opportunities galore.  And don’t think the low interest rates will last forever... ever hear of a word called “deficit?”  Watch what the billionaires are doing, and think about what you want to do. (Figures are from public record documents and sales comparables for value.)

ELIMINATION OF HOME INTEREST DEDUCTIONIS IN THE SIGHTS OF CONGRESS

If you care about your right to own property, if  you believe in the last true deduction for the middle class that amounts to more than a hill of beans, this should be a cause you that catches your attention.   Eliminating home interest deduction is definitely part of the deficit reduction conversation, and it shouldn’t be.  For those of us who are not wealthy, and cannot take part in the many loop holes that keep corporations and individuals from paying their fair share, this is our best deduction.  Please contact your federal senators and congress persons and make your voice heard.  If we don’t take a stand as homeowners, they will take it for us.  Fight for your right to the American Dream and to an honest deduction that should be a matter of course.

CONSIDER THIS WHEN CHOOSING THE BEST HOME FFOR YOUR NEEDS

When selecting a property there are several major factors to consider. Compromise is expected in the home buying process. You can always upgrade laminate countertops to granite or factory cabinets to custom, but be aware of the essentials you need in a property before you buy.Location, location, location. This is one thing that you cannot change! Where you buy will most likely be at the top of your necessity list. Do you need easy access to highways for your commute to work? Perhaps you need to be near public transportation because you do not have a vehicle. Save yourself time and money by focusing only on areas that work for you.

1. Education. Public schools dictate enrollment according to school district boundaries. You may be surprised to find where lines are drawn. Are you trying to move, or stay in, a highly
   rated district? You may wish to visit area schools to get a feel for which place is best for your family.
   
2. Crime doesn’t pay. Research the local crime rates. Some neighborhoods experience higher levels of crime, both violent and petty. Safety to you and property are valid considerations.
   
3. Be neighbor conscious. Your property value is affected by the condition of the prospective neighborhood. Be sure to drive up and down adjacent streets. Are homes and yards in good repair? You want neighborhoods that reflect care and attention.
    
4. Size matters. Take the lot size into consideration; if you need more living space is there room to expand? Check local zoning laws to verify you can build up or out.