The Orange County inventory has not stopped dropping since June of last year. The inventory beat a record low established in March 2005.
The Orange County active inventory dropped to 4,886 homes, beating a low of 4,912 more than seven years ago. It is fascinating to contrast the incredibly low inventory to the height during the downturn of 17,898 homes in September 2007, more than triple today’s mark. Last year’s height occurred in June with an inventory of 11,388, and it has dropped unabated ever since.
The housing market has become a market of extremes. From the crazy days of mass appreciation, astronomical demand and low inventories from 2000 through 2005, to the Great Recession of 2006* through 2011 with unprecedented depreciation, little demand, and plenty of inventory, the housing market is either on or it is off. There is no in-between, no happy medium. It is either hot or cold, never just right.
For those real estate veterans that have been around for a while, everybody was hoping that housing would morph into a market simple to navigate, good for both buyers and sellers. Sustainable demand along with a manageable inventory would be ideal. Along came 2012 and it was time for an “about face.” If we just read the tea leaves, we would have seen it coming. The continuous drop in the inventory foreshadowed that a change was afoot.
As the inventory dropped to bottom of the barrel levels, interest rates declined to below 4%. Investors caught on first and were already entering the market towards the end of 2011, parking their cash in real estate. They intuitively knew that it was best to buy at a low and real estate was starting to show signs of reaching that low. With low rates and low prices, affordability based upon the median sales price and interest rates reached levels not seen since 1999. Savvy buyers quickly came to the realization that NOW was a great time to buy. From there, the floodgates opened up.
Experts started pointing to a bottom in the market. Warren Buffett exclaimed that he would buy a couple hundred thousand single-family homes if he had the resources to manage that kind of a portfolio. Economists started reevaluating their forecasts and 2012 was all of a sudden looking a lot rosier for housing. But, it just didn’t bottom, a housing recovery was unfolding in many market across the U.S., including Orange County and the rest of Southern California.
From here, expect news of housing appreciation through the rest of 2012. There will be a resurgence in the building industry as building permits skyrocket (inevitable since major earth grading and infrastructure is already well underway throughout the OC). With the media communicating the healing housing market and appreciation, consumer confidence will rise with the knowledge that the “average Joe’s” biggest asset, his home, is moving in the right direction. Housing is the fundamental driver to the eventual healing of the economy as a whole. It has been that way with every modern downturn. Stay tuned…
Demand: As kids heads off to school, demand starts its cyclical slowdown.
The real estate market is transitioning into the Autumn Market. Yes, autumn does not officially begin until the end of September, but it comes early for housing every year. Buyers with kids want to close by the time school begins, so with that window gone, demand starts to slow from the highs of the spring and summer. Demand, the number of new pending sales over the prior month, dropped by 2%, 81 pending sales, and now totals 3,463. That is the highest level for this time of year since I started tracking demand back in 2004, and even exceeds 2009 when the initial first time home buyer tax credit artificially stimulated demand.
Currently, demand is still very close to 2009 numbers, but a major difference is that more short sales are actually closing today compared to back then. It used to be a crapshoot as to whether or not a short sale would ever close. Today, the odds are much more favorable, systems have improved, and short sales are eventually closing.
Last year at this time there were 414 fewer pending sales, a 14% difference. Demand may drop during the Autumn Market, but expect only a slight drop since the inventory is so tight and many buyers have been unsuccessful thus far in their attempts to purchase. For the persistent buyer with a sharp enough pencil and a lot of patience, success is inevitable in time.
By Steven Thomas
Wednesday, September 19, 2012
Low Housing Supply Raises Concerns
Local experts fear it could keep market from making progress
Lack of housing inventory to feed consumer demand is a growing concern in the local market and statewide, a chief housing economist told local Realtors on Friday. Real estate pros fear this dynamic could keep the housing market from making progress because qualified buyers are edging each other out of slimmer pickings.
Leslie Appleton-Young, with the California Association of Realtors, said competition for homes began to heat up earlier this year in light of declining foreclosure resales and increased investor activity. The result, she said, has been increases in both sales and prices statewide, though we are still far from pre-recession peaks.
“The market is in the process … of healing,” she told local real estate pros at a housing summit held by the San Diego Association of Realtors. The event’s other keynote speakers — Gary London, with The London Group Realty Advisors, and Lawrence Yun, chief economist at the National Association of Realtors — echoed similar thoughts about inventory and the fact that California is in the middle of a tepid recovery.
Appleton-Young broke down housing inventory into three key categories, all very different from each other: equity, bank-owned and short sales.
“Equity” sales, or traditional sales, now make up almost 60 percent of total statewide home sales, up from 30 percent in January 2009, Appleton-Young’s numbers show. The share of bank-owned properties in the market has fallen from 60 percent three years ago to 20 percent now. And lastly, short sales, a process more lenders have now streamlined, are up.
This shift in the sales makeup indicates an increased demand in inventory, a higher presence of investors and a lack of distressed homes hitting the for-sale market. In other words, more potential buyers are competing for fewer homes, which can keep the market from moving forward, or at a standstill, speakers said.
London and Yun highlighted San Diego’s lack of housing construction due to an issue that’s specific to this county.
“You’re running out of land,” said Yun, who added that new-home construction has hit a 50-year low nationwide.
London said the age of traditional subdivision construction is over, pushing homebuilders toward going vertical and building in smaller batches.
The lack of inventory and the county’s population growth will help push up prices, though the escalation will not be as rapid as in pre-recession days, London said.
Written by
Lily Leung
Lack of housing inventory to feed consumer demand is a growing concern in the local market and statewide, a chief housing economist told local Realtors on Friday. Real estate pros fear this dynamic could keep the housing market from making progress because qualified buyers are edging each other out of slimmer pickings.
Leslie Appleton-Young, with the California Association of Realtors, said competition for homes began to heat up earlier this year in light of declining foreclosure resales and increased investor activity. The result, she said, has been increases in both sales and prices statewide, though we are still far from pre-recession peaks.
“The market is in the process … of healing,” she told local real estate pros at a housing summit held by the San Diego Association of Realtors. The event’s other keynote speakers — Gary London, with The London Group Realty Advisors, and Lawrence Yun, chief economist at the National Association of Realtors — echoed similar thoughts about inventory and the fact that California is in the middle of a tepid recovery.
Appleton-Young broke down housing inventory into three key categories, all very different from each other: equity, bank-owned and short sales.
“Equity” sales, or traditional sales, now make up almost 60 percent of total statewide home sales, up from 30 percent in January 2009, Appleton-Young’s numbers show. The share of bank-owned properties in the market has fallen from 60 percent three years ago to 20 percent now. And lastly, short sales, a process more lenders have now streamlined, are up.
This shift in the sales makeup indicates an increased demand in inventory, a higher presence of investors and a lack of distressed homes hitting the for-sale market. In other words, more potential buyers are competing for fewer homes, which can keep the market from moving forward, or at a standstill, speakers said.
London and Yun highlighted San Diego’s lack of housing construction due to an issue that’s specific to this county.
“You’re running out of land,” said Yun, who added that new-home construction has hit a 50-year low nationwide.
London said the age of traditional subdivision construction is over, pushing homebuilders toward going vertical and building in smaller batches.
The lack of inventory and the county’s population growth will help push up prices, though the escalation will not be as rapid as in pre-recession days, London said.
Written by
Lily Leung
Why you should plan multiple visits to a home before buying
For most of us, a home is usually the largest single investment of a lifetime. Such a large purchase warrants multiple visits before making a purchase and it is recommended that you stagger the times of these visits to get a comprehensive experience of the property. Here are some things to pay attention to when viewing a property.
- Wall-to-wall windows coupled with an open floor plan may seem picturesque midday. Schedule a visit at sunset to get an idea of how light floods through the home and think about how you would ensure privacy at night. It still may be an ideal choice but it is wise to get a realistic view and calculate the cost of window treatments.
- Visit or drive by a prospective home at different times of the day. That seemingly quiet residential street may be a noisy, highway-feeder street during morning or evening rush hour. The same may be true for the morning commute but if you only visited the property midday, you would have no idea.
- The adjacent school may seem like a nice perk, but during school hours, the daily playground noise and extra traffic may be more than you bargained for. If you are viewing the home in the summer, ask your REALTOR® or even neighbors about what you can expect.
- It may be nice to be within walking distance to bars and restaurants, but consider the amount of pedestrian traffic. Will late night foot traffic lead to noise or disorderly conduct? Also, remember you can always visit the local police department to get crime statistics of an area.
Thursday, September 6, 2012
Good Energy Saving Investments
Planning to do some remodeling soon? Time to replace old appliances? Consider these energy efficiency suggestions when you make purchases.
Install a whole house fan
A whole house fan is permanently installed in your attic and draws cool air into your home through the windows while forcing hot air out through your attic vents. Use after sundown when the outside temperature drops below 80 degrees, and in the early morning to cool your house and help reduce your air conditioning use. (Save: up to 5 percent)
Install window shading
Install patio covers, awnings, and solar window screens to shade your home from the sun. For additional future savings, use strategically planted trees, shrubs and vines to shade your home. (Save: 5 percent)
Solar control window films applied to existing glass in windows and doors is an effective method to reduce peak demand during hot months and conserve energy anytime air conditioning might be required. In addition to the energy management benefits, the use of these films can also reduce exposure to ultraviolet radiation and reduce glare. Vist the International Window Film Association for more information. (save 5-10 percent)
Invest in a new air-conditioning unit
If your air conditioner is on the way out, buy an ENERGY STAR® air conditioner. (Save: up to 10 percent)
Seal your ducts
Leaking ductwork accounts for 25 percent of cooling costs in an average home, so have your ducts tested and have any leaks or restrictions repaired by a qualified contractor. Note: duct cleaning is not the same as duct sealing. As of October 1, 2005, if you install a new central air conditioner or furnace, your ducts will have to be inspected. (Save: 10 -20 percent)
Replace your refrigerator with an ENERGY STAR® model
Refrigerators with a top or bottom freezer design can save you an additional 2-3% on your bill compared to a side-by-side design. (Save: 10 percent)
Increase attic insulation
If existing insulation level is R-19 or less, consider insulating your attic to at least R-30. (Save: 10 percent)
Install ENERGY STAR® windows
If your windows are due for replacement, ENERGY STAR® windows can make your house more comfortable year-round. (Save: up to 10 percent)
www.fypower.com
First things to do after buying a new home
You closed on your new property. The boxes are off of the moving truck, the furniture is in the right rooms and you are wondering what to do first. Here is a checklist of important tasks that are high priority.
- Test the smoke and carbon monoxide detectors. Install new alarms or change the batteries if necessary.
- Establish an escape plan and safe meeting place with your family in the event of a fire.
- Make sure you know where the main water, gas and electrical shutoff valves are, in case of an emergency such as a burst pipe or gas leak.
- Determine which outlets serve which circuits and then label the breakers.
- Change the alarm system code, garage code, and any other password-sensitive devices.
- Change all of the locks and make a few sets of spare keys.
- Update your car insurance, driver's license and voter registration to reflect your change of address.
- Have all your mail and magazine subscriptions forwarded to your new address. Keep a close eye on your bank accounts and credit cards, because during a move you are especially susceptible to identity theft if mail is not delivered to your current address.
- Unpack any and all medication that may be needed. Also, make sure you have a first aid kit readily available and a fire extinguisher in the kitchen pantry.
- Add any child locks that are necessary, on toilets, kitchen appliances, medicine cabinets, and any doors that lead outside. Do not forget to place child safety gates and safety plugs in outlets if you have small children.
Finally, It Is Time to Buy a House
Warren Buffett famously once said: "Be fearful when others are greedy, be greedy when others are fearful."
And if you're not instinctively scared of the housing market, then global warming, saturated fat, running with scissors and the bogeyman probably aren't keeping you awake at night, either.
The fact that everyone is scared to dabble in-much less commit to-housing makes it a close-to-perfect investment based on Mr. Buffett's principle. But buying real estate is a good long-term investment for many more reasons, some of which have only become apparent in recent weeks.
The most striking: Housing prices rose sharply from April to May. The S&P/Case-Shiller Index rose 2.2% in 20 of the nation's big cities. Prices shot up more than 3% in Chicago, Atlanta, San Francisco and Minneapolis. Even Detroit's housing market scored a gain, inching up by 0.4%.
Nationally, the increase was the first in seven months. More importantly, the increase matched other data and empirical evidence this spring that foreclosures slowed and inventories were shrinking. Simple economics suggests that as the supply of distressed property slows, buyers will be forced into higher-price properties.
In addition, interest rates on 30-year fixed mortgages have tumbled below 3.5%. For those who can get credit, these aren't just historically low rates; they are one-sided deals tilted toward borrowers.
Other good signs: Housing starts rose 6.9% in June. Home-building stocks are on the rise, with the Philadelphia Housing Sector Index up 27% so far this year. And for those who can invest in property, rents continue their ascent. Prices are at a 10-year high, with the median unit renting for $710 a month. Real-estate website Trulia found that it is cheaper to buy than rent in each of the nation's 100 biggest metropolitan areas.
In other words, if you can buy a home today, you can save the difference it would cost you to rent even if you stay in the home just five years. If you can buy a property and rent it, it is almost certain that the rent will cover the cost of the financing-and the property will appreciate.
Here's where the fear comes in. From 30% to 50% of existing mortgages in the U.S. market are underwater, depending on the estimate. That means many borrowers are trapped in their homes and loans. They either can keep paying and hope prices will improve or walk away, putting downward pressure on home prices.
Foreclosure rates have leveled off, but market analysts believe an increase is likely.
Here's why. Since the financial crisis, 3.7 million homes have been foreclosed on, but an additional 1.4 million remain in the national foreclosure inventory, according to CoreLogic, a real-estate research firm.
Finally, a housing recovery won't happen, or could be snuffed out, by a rotten economy. There's never been significant growth in housing with high unemployment. And as Dow Jones's Kathleen Madigan noted, "Potential buyers must feel secure with their job prospects before they commit to long-term mortgages. Higher loan standards mean banks want to see an applicant's solid income history before lending."
There is plenty to be afraid of when it comes to home buying. But in the current investing climate, housing presents an attractive long-term investment that should hold steady or even have upside surprise in the short term.
Fixed-income yields have fallen to historic lows, and the stock market has traded in a range, rising and falling skittishly on jobs, growth data and the news from Europe.
Recently, I was forced to choose between renting and buying. I decided to buy because it offered immediate monthly savings compared to renting, not to mention a mortgage-interest deduction.
So this is at least one case where I'm putting my money where my keyboard is.
Mr. Buffett would remind us that investments of any kind are not without risk. Each should be considered with the investor's time horizon and appetites. But he also has acknowledged that real estate is especially attractive when financing is cheap, there is pent-up demand and prices have been driven down by a spooked market. Put another way, it's time to be greedy.
By DAVID WEIDNER
And if you're not instinctively scared of the housing market, then global warming, saturated fat, running with scissors and the bogeyman probably aren't keeping you awake at night, either.
The fact that everyone is scared to dabble in-much less commit to-housing makes it a close-to-perfect investment based on Mr. Buffett's principle. But buying real estate is a good long-term investment for many more reasons, some of which have only become apparent in recent weeks.
The most striking: Housing prices rose sharply from April to May. The S&P/Case-Shiller Index rose 2.2% in 20 of the nation's big cities. Prices shot up more than 3% in Chicago, Atlanta, San Francisco and Minneapolis. Even Detroit's housing market scored a gain, inching up by 0.4%.
Nationally, the increase was the first in seven months. More importantly, the increase matched other data and empirical evidence this spring that foreclosures slowed and inventories were shrinking. Simple economics suggests that as the supply of distressed property slows, buyers will be forced into higher-price properties.
In addition, interest rates on 30-year fixed mortgages have tumbled below 3.5%. For those who can get credit, these aren't just historically low rates; they are one-sided deals tilted toward borrowers.
Other good signs: Housing starts rose 6.9% in June. Home-building stocks are on the rise, with the Philadelphia Housing Sector Index up 27% so far this year. And for those who can invest in property, rents continue their ascent. Prices are at a 10-year high, with the median unit renting for $710 a month. Real-estate website Trulia found that it is cheaper to buy than rent in each of the nation's 100 biggest metropolitan areas.
In other words, if you can buy a home today, you can save the difference it would cost you to rent even if you stay in the home just five years. If you can buy a property and rent it, it is almost certain that the rent will cover the cost of the financing-and the property will appreciate.
Here's where the fear comes in. From 30% to 50% of existing mortgages in the U.S. market are underwater, depending on the estimate. That means many borrowers are trapped in their homes and loans. They either can keep paying and hope prices will improve or walk away, putting downward pressure on home prices.
Foreclosure rates have leveled off, but market analysts believe an increase is likely.
Here's why. Since the financial crisis, 3.7 million homes have been foreclosed on, but an additional 1.4 million remain in the national foreclosure inventory, according to CoreLogic, a real-estate research firm.
Finally, a housing recovery won't happen, or could be snuffed out, by a rotten economy. There's never been significant growth in housing with high unemployment. And as Dow Jones's Kathleen Madigan noted, "Potential buyers must feel secure with their job prospects before they commit to long-term mortgages. Higher loan standards mean banks want to see an applicant's solid income history before lending."
There is plenty to be afraid of when it comes to home buying. But in the current investing climate, housing presents an attractive long-term investment that should hold steady or even have upside surprise in the short term.
Fixed-income yields have fallen to historic lows, and the stock market has traded in a range, rising and falling skittishly on jobs, growth data and the news from Europe.
Recently, I was forced to choose between renting and buying. I decided to buy because it offered immediate monthly savings compared to renting, not to mention a mortgage-interest deduction.
So this is at least one case where I'm putting my money where my keyboard is.
Mr. Buffett would remind us that investments of any kind are not without risk. Each should be considered with the investor's time horizon and appetites. But he also has acknowledged that real estate is especially attractive when financing is cheap, there is pent-up demand and prices have been driven down by a spooked market. Put another way, it's time to be greedy.
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