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.

SHORT SALES CONTINUE TO DOMINATE MUCH OF ORANGE COUNTY

According to recent figures about 46% of Orange County sales are distressed.  Short sales then have an additional obstacle to overcome.  Recent statistics suggest about 43% of those won't close because of bank delays.  There is a new term in today's market, "patience equity."  For those buyers who can weather the storms and delays, they may be rewarded with a great price on a home in a great neighborhood.  There still is no standardized method for processing short sales and there are many irregularities within the same departments of many banks.  But still, this market has produced and will continue to produce many opportunities.  Investors already know this and that accounts for many all cash transactions.  As jobs continue to strengthen, the housing market should mirror that slow but steady progress.  See you next month. 

U.S. ADDS 216,000 JOBS & U.S. LAYOFFS LOWEST SINCE 1995

These were a couple of very encouraging headlines starting out the second quarter of 2011.  Not only were these figures higher than expected, but unemployment also dipped to its lowest level since 2008.  In a recent article OC Register writer Jonathan Lansner had a similar headline, "Job Growth Could Cure Ailing Market."  The gist of the article is really found in the Beacon Economics updated housing forecast for California.  Research manager Jordan Levine finds some optimism that is driven by, "rising employment and incomes, which we project to grow by between 4% and 6% on the income side and 2% to 3% on the employment side."  In other words, people really do need jobs to buy a house.  And their income needs to be proportional to the price.  Something the sub-prime and stated loan programs seemed to forget.  The other encouraging things was that these jobs were "real" jobs; not seasonal, not minimum wage, but substantial jobs in technology, import, service, management, and manufacturing.  Originally the Fed thought job recovery would be 5 complete years.  Statistics now suggest that job recovery will happen by installment, both in types of jobs and location.  Remember, it is projected (see last month for details) that California may be a little slower than some parts of the country, since we were hit so hard by the loan meltdown, but Southern California, specifically Orange County, was projected to emerge first.

DEMAND FOR HOMES REACHES 7 MONTH HIGH

There are also articles stating the opposite.  "Winter Doldrums Worsen, Defying Usual Pattern," was seen on March 16th.  It was published just as demand was taking off.  More on the actual numbers later, but they are down compared to both the month before and the year over year.  But remember, a year ago we had a federal tax credit that was driving thousands of buyers into the market.  This year that is gone, and so the numbers we have may not be quite as high, but they reflect the true market and the true level of recovery.  According to the Orange County Home Inventory Report from Steven Thomas, pending sales at the beginning of the year were1,856.  Since then, it has increased by 61%.  What may be more interesting is a look at "market time" which is how many days on the market it takes a property to sell.  You take that number and combine it with how many properties are available and you get your "market inventory."  In other words, if not another home came on the market starting today, how many months would it take to sell everything we've got, at our current pace.  A seller's market is said to be under 6 months, an even market about 6 months, and a buyer's market at more than 6 months.  Well, right now, believe it or not, that number is under 6 months.  And yet prices are falling.  We may never see this exact market phenomenon again.  Buyers are sensing that there are some very good deals on the market.  But because financing is tight and because there is much competition from REO (real estate owned by banks), cash is king and cash can generally get a lower price.  But, having said all that, it is not uncommon right now to see multiple offers on in demand properties in good locations in the right price range.