SOME GOOD NEWS AT LAST AS OUR LOCAL ECONOMY, INCLUDING REAL ESTATE, APPEARS TO TURN THE CORNER

Hang on to your hats for this month's column because there is going to be a lot of information to absorb, nearly all of it positive!  Many reports have emerged as we began 2012 that would seem to indicate that the economy is, in fact, getting better.  Last month we quoted an economist that said the economy would improve, but that it wouldn't "feel like it did."  Well guess what?  It is noticeable.  Jonathan Lansner, who has been particularly pessimistic, in general and specifically to real estate, has written several recent articles that have been...well, encouraging.  National job stats say we added 243,000 jobs in January, and unemployment dove to a 2 year low of 8.3%.  Orange County, according to Lansner, added 40,000 in December.  That's the largest increase in Orange County, "working folks since January 2001 -- yes, 11 years ago."  The stock market had its best rally in over 4 years, returning to pre 2008 levels and has seemingly stabilized and is inching slightly upward.  What other intrinsic factors have led to everyone "feeling better?"  There isn't enough space in this newsletter to deconstruct all the elements of this now slow but steady recovery.  However, let's hone in on the real estate side.  First of all, interest rates... The fed's decision to keep them low through 2014 was met with a positive rally on Wall Street.  Buyers are willing and able to buy.  In fact, there are inventory issues, as in, not enough product to go around.  A seeming paradox is prices dipping slightly even with increasing demand.  Wild stuff.  But if a property is properly priced, expect multiple offers if you're a seller, and increased demand if you're a buyer.  Obviously there are exceptions to this depending on condition and location of the properties.  California added more construction jobs than any other state in the country for the past year.  Construction is a very important indicator of recovery for California.  Generally speaking, the first sign of recovery is car sales, check mark here, as last year was a banner year, particularly for Detroit.  After cars come houses, and new ones are a part of that.  There were only 302,000 new homes sold in the US in 2011, according to the Commerce Department.  And that was the worst year since 1963.  So construction coming back in California... Awesome!

WHAT ARE INVESTORS, BANKS, AND MEDIA SAYING ABOUT HOUSING?

Warren Buffett, the greatest investor of the last century privately has told the people closest to him that, “buying a home right now will be the best opportunity in their lifetime."  Here are some other quotes:  Washington Post -- Housing Market and Economy Showing Encouraging Signs... The Wall Street Journal -- From Bottom Up, Sign of Housing Recovery... USA Today -- Housing Outlook is More Upbeat... Freddie Mac -- With the New Year comes a sense of cautious optimism.  There are some positive signs in the job market and consumer confidence; housing is starting to raise hopes for continued gradual economic recovery... Fannie Mae -- The housing sector will likely take incremental steps forward in 2012.

WHAT WERE THE ACTUAL NUMBERS?

The numbers for December (the last complete month available) are as follows:  The total number of sales was 2,572.  That was a 12% increase in volume over November but still 6% down from December 2010.  There were 1,621 single-family resale, 750 condos and 201 new homes sold.  1,066 of the 1,621 were equity sales and the rest were distressed, either short sales or bank owned properties.  Condos were split 50/50 equity to distressed.  There were 1,019 Notices of Default (a 22% decline from the previous year) and 535 foreclosures trustee sales.  Of those, 382 went back to the banks and the rest sold to investors who attended the auctions.  A more interesting number is the 1,700 Notices of Trustee Sale recordings.  Conceivably, all these should go to auction.  And yet that number is few than 600.  Where are the other 1,100 preforeclosures?  The bottom line?  Short sales.  The banks would far rather sell short, than foreclose, for many reasons.  If a person is in a distressed property in the process of foreclosure, they likely can get a postponement and sell the property short.  The average monthly payment has decreased to $1,948, thanks to low interest rates, a 5% decrease from the previous year.

5 TRENDS TO EXPECT FOR 2012

According to bloggers at KCM Blog we can watch these trends emerge: 1.) Buyers will return -  We're already seeing it as housing supply dips below 5 months (6 months inventory is considered a neutral market).  2.) Foreclosures will increase - Yeah, maybe, but this newsletters say the banks will defer more to short sales.  3) Prices will soften - This was covered already and is more applicable to other parts of the country that don't have the demand and population of So Cal.  Expect more stability than not, unless you are in outlying areas such as Victorville, Hemet, Sun City, Palm Springs, etc.  4.) Short sales increase - The appropriate response to this is... !!!  5)  This last trend isn't from KCM, but is more local fodder, namely inbound moves by the three major van lines jumped by 6% the past year.  Although a state by state analysis roaming the internet put California in neutral as far as migration goes, the moving statistics don't lie.  Allied, Atlas, and United all reported a 6% increase.  That's sizeable.  This column will end on this note of optimism; there are a lot of positive indicators, statistics, and trends on which to hang your positive outlook.  But an even more organic way of testing is people's attitudes, parking lots at malls and restaurants, durable goods sales and traffic.  All of these are moving in an upward direction, so as our cousins in England always say, "Keep Calm, and Carry On."  See you next month.

WHAT WILL 2012 BRING FOR SOUTHERN CALIFORNIA REAL ESTATE?

Well, gee, let me get out my crystal ball and take a look... No it isn't meant to be a completely flippant statement, but at this point, everyone is guessing, if they're honest about it. But we can make some pretty good calculations, and estimations based on what's actually happened and inventories. First of all, you must remember that home ownership is about a whole lot more than a cash investment. Yes, it's a hedge against inflation (more on that below), and yes, it's the only investment where you can leverage your cash on such a large transaction. Those points alone should make real estate attractive. But houses were never meant to be ATM's, as many have sadly discovered, and they were not meant to be flipped as fluently as trading stocks, which still others have discovered. But for the long term buy and hold mentality, it's hard to beat real estate. And, that philosophy was just discussed by 3 economists in the New York Times in the December 31st Business section. But home ownership is much, much, more. It is where you raise your family, it is your sanctuary, and it is a quality of life embedded in your investment. But maybe most importantly, it's a way to protect your housing dollar from ever rising again...EVER. To find out what next year will look like? Read the whole newsletter, and you should get a pretty good idea. A summary statement might be, look for the beginnings of the turnaround, for prices to bottom out by 2nd quarter, interest rates to stay killer for at least 6 months, and the overall economy to do its part, as it's projected to grow about 4% this year (last year was approximately 2.7%).

WHERE WILL HOUSING PRICES GO THIS SPRING?

This column is not about to make serious predictions, but there are some indicators worth noting. First of all, the slough off of foreclosures last year due to moratoriums and fraudulent robo signing issues should be off the radar and allow foreclosures to ramp back up. That should mean more competition with the short and equity seller, as well as some pent up listing activity of people who didn't want to list during the holidays. The first and second quarter is always when you see the most listing activity. Following are 4 brief statements by various entities about spring pricing. Zillow believes we not see a bottom in prices until the first quarter of 2012. Standard and Poor thinks prices will drop 5% in the next few months. JP Morgan Chase believes prices will depreciate 6% to 7% over the next 6 months. Barclays says prices will fall 7% by the end of the first quarter of 2012. One thing everyone seems to be in agreement on: housing prices will bottom out by mid-2012 and then stay flat, bringing this down market to an end. A long recovery may be in the offing, but it will be hard for buyers to stay on the sidelines with current pricing and interest rates. Don't be fooled by a house that MAY decline another 2%-3%, but be stuck with a higher interest rate on the loan that more than eradicates any savings on the housing price.

WHERE IS THE SILVER LINING?

The silver lining in real estate is always the future: because the future is where the pent up demand is heading. If you think this overly optimistic, think about the following...
Trulia conducted a survey with Generation "Y", trying to determine future buying trends. One of the questions asked was whether or not they believed in home ownership as part of the American Dream. A staggering 65% said "Yes!" In fact, it was integral to their future plans for family and investment. So where are they? Many are living at home, saving money, and waiting. In fact, the number of young people living with parents in 2003 was approximately 4 million. By 2007 that number had increased to 4.7 million. This year that number is 5.9 million. That's a lot of people who intend to buy, when you figure out 65% of that number. That doesn't include move up buyers of Generations "X" and "Y" who are already in the market. And it doesn't consider the retiring of the "Boomers" and the transfer of wealth. As this year progresses, there will likely be ups and downs. But we planning for an optimistic year ahead. Why not?

ARE YOU GETTING RIPPED OFF?

Across the country, people who need to have their locks changed go to hire a locksmith – and they are actually being ripped off. Here’s one example in Sandy Springs, GA. This has become a very serious problem and I want to make sure you and your family and friends don’t fall into this trap.

http://communitylock.us2.list-manage1.com/track/click?u=35eaa7ce272aaf29e09911071&id=43c0f1c83a&e=bac0d3238d

Here’s what’s happening: consumers are looking up locksmiths in the yellow pages or online. They think they are calling a reputable business when actually the number is routed to somewhere else, like New York or Florida. These people (who usually don’t have any license or special training) show up at your house to replace your lock. They typically quote 4 or 5 times as much as the current market prices.

The quality of work is sub par, and a lot of times the lock will need to be replaced because they are cheap locks, cylinders, and keys. Dozens of these “companies” are using fake addresses so that they can’t be traced and found, and their numbers get disconnected once any suspicion is aroused.

Fortunately, just being armed with this information is the most important way to make sure that it doesn’t happen to you or your friends and family.

Here’s how you can keep yourself safe:

• If you are in need of a locksmith, get a referral from someone you trust.
• If you can’t find a good referral, do some research and make sure that the address and company checks out. The police are not allowed to give referrals or recommendations, however the local chamber of commerce can.
• When you decide on a locksmith, make sure to get their license number and double check it with the California State Contractors License Board to make sure it is valid.
• If the deal doesn’t feel right, call it off.
• If you live in or near Anaheim, call Community Lock Safe & Service for your needs. Our locksmiths are licensed and have proudly served our community for over 30 years. It’s our job to help you keep your home and business safe.

Call me today if you have any questions.

HOMEOWNERSHIP: REPORTS OF ITS DEATH ARE EXAGGERATED

This headline was posted by the KCM Crew, authors of a blog for a real estate website called, "Keeping Current Matters."  It's a great name for a blog, because in real estate, keeping current does indeed... matter.  The above mentioned article randomly addresses the many negative articles regarding real estate, many of which have been published in local southern California papers.  This newsletter, although not political, strongly disagrees with scare tactics and negative ploys designed solely to sell papers.  After numerous recent articles all playing on the word, "scary", a pun on the Halloween holiday, let's level the playing field with some real numbers and let you, the discerning and intelligent reader, make up your own mind. 
 
Local papers would have you believe that the sky is, in fact, falling; real estate will never recover and will never be the same. More on that later, with some real numbers that are a little sobering.  But first, homeownership itself; is it dwindling?  Is it, "on its way out?"  Hardly.  In fact, pick up a copy of the recently released Fannie Mae 2011 3rd quarter National Housing Survey.  Both Generation Y (birthday mid-1970's to mid-1990's) and Generation X (mid-1960's to mid-1970's) have stronger beliefs in the importance of homeownership than those of the general population... yes that would be the boomers, and boomers have loved real estate.  It seems clear that as the economy improves, so will housing demand.

BUT DON'T BELIEVE THAT THERE IS NO DEMAND FOR HOUSING NOW

In fact, local associations of Realtors and Multiple Listing Data indicate that inventory is quite low.  Part of the reason sales have slowed is there simply isn't enough saleable product out there.   In this type of market, there will always be properties on the market that are technically available inventory, but simply have too many problems to overcome.  They need a particular type of buyer.  These properties can make it appear there is more inventory than is actually "saleable."  Frankly, it is surprising that people who can buy, have chosen to back away from the market because of predictions of a triple dip.  It's a "cost vs. buy" analysis.  If you believe in home ownership, its tax deductions, its features of durability and stability for yourself and your family, then prices coupled with interest rates should make for a fairly attractive picture.  Yes, prices could go down, but what it actually costs you, may never be better.  Also loan programs could change and availability could change, since lending has been very volatile.  But what won't change is the historic and undeniable return on investment that occurs in real estate every 10 years.  Sometimes the cycle is shorter; sometimes the downturns (such as this one) are annoying.  But check on a property, any property, and see what it sold for in 2000, and what its value is today, in the midst of our worst downturn.  REMEMBER THE PROMISE OF MORE ON THE TOPIC, "REAL ESTATE WILL NEVER RECOVER?..."
 

            REAL ESTATE AS A LONGER TERM INVESTMENT SINCE 2000

        DOW +6.7%          S&P -12%        NASDAQ -30%          REAL ESTATE +43%

THE SHIP APPEARS TO BE TURNING, OR HOUSE PRICES TO FALL OVER NEXT SIX MONTHS

Well, both are true.  October 31st, CNN Money reported: "Home prices headed for triple dip."  Fiserv (a financial analytics company), has predicted a 3.6% fall in prices on a national basis by next summer.  Now remember, southern California is a very different place than Las Vegas or Florida.  But still, nationally it means that the Case-Shiller Home Price Index is going to fall to 35% below its peak in 2006.  But what Ken Johnson, Ph.D. (Florida International University and Editor of the Journal of Housing Research) points out, is that the dip depends on circumstances being in place to lessen the impact that market anxiety causes.  What circumstances?  According to Johnson they are sometimes referred to as "housing affordability measures, and some of them are:  1) Price of income to the house 2) mortgage payment to income  3) buy versus rent analysis for various markets that encourage buying.  Did you know that the payments to income ratios are at a 30-year low in all 50 states?  Why haven't the local papers reported that?  The downturn in prices will bring more affordability factors into play for more people, especially the Gen Xers and Gen Yers, which is where the pent up demand is going to come from in the first place.

Also of interest locally to southern California is the best prognosis for recovery you can have: skilled labor, desirable location, and economic resiliency.

CENTURY 21 AWARD FEATURED IN THE NOVEMBER 2011 REAL ESTATE MAGAZINE

Have you seen David Romero's exclusive interview with RISMedia's Real Estate Magazine? Read our President and CEO's thoughts about a new brand of real estate professionalism and the hope for a better, stronger America:

"We understand that every customer has different needs, different goals, and differing communication preferences. Our job is to provide the best and most current insights and information for every buy and seller, and to be there fr them in every way along the journey." - David Romero

Click here for the entire article

HOME SALES PERK UP & PRICES FALL...NOT AS MUCH AS YOU MIGHT THINK

Orange County home prices rose 9.5% in August (the latest full month available) and that’s good news, no matter how the papers try to spoil it.  The papers posted that prices dipped to their lowest in 5 months, but that is a misleading quote.  Did prices go down? No.  Did the median price go down?  Yes.  There is a difference.  When you have nearly 400 more sales in one month, and the number of sales under $400,000 is nearly 4 to 1 to home sales over $700,000, your median price is going to fall.  It does not mean that prices dipped nearly 5% as recent headlines read.  In fact, even as prices fell in some areas by 1-3%, other prices rose depending on location, condition, and competition.  Homes that are in prime condition and properly staged to represent a home a buyer could picture themselves living in, are likely to garner over list price, especially if they are equity sales.  If the recent market has taught us nothing else, it is that buyers everywhere are tiring of the, “patience equity” achieved by hanging around for months during a short sale escrow.  They can last 3 months to a year.  Buyers are showing up in droves for properties that are in an equity position, prepared to pay a premium to be able to close in 30 to 45 days.  Sellers that are in that position, may well be in the driver’s seat, especially if the only competition in their neighborhood is distressed properties.  The exact numbers will be featured in a later paragraph, but here are some big numbers for the state: there were 37,734 new and resale houses and condos sold statewide in August.  The number of sales typically does increase from July to August, but to give it some context, the lowest July is 29,764 in 1992 and a high arrived in 2005 of 73,285.  It is easy to see we’re way above the low, but nowhere near  the high.  In fact the average is 48,344.  We do have a ways to go, but for some who remember the sting only California really felt in the early 90’s, it’s not your imagination, it was worse then,  than it is now.

HOME MAINTENANCE TIPS FOR FALL

As summer fades into fall, see our checklist to preserve the health of your home.

1. Clean the gutters: As you clear leaves, dirt, and pine needles from gutters, examine downspouts for damage. Check the flashing around your chimney and look for damage to the roof that may lead to leaks.
2. Change the filters: Change the air filter in your central air conditioning system or if you have a window air conditioning unit, remove from the window or place a waterproof cover over it to prevent damage. Change filters in stove vents, clothes dryers and room fans if applicable.
3. Drafty days: Evaluate the seal and caulking around the window frames to prevent losing heat in the winter.
4. Fix leaky faucets: Avoid broken pipes in cold winter months and repair leaky faucets in your kitchen, baths, and laundry room now.
5. Clean sweep: Examine and clean your fireplace damper and ensure the flue is operating correctly. A professional chimney sweep may be necessary.
6. In hot water: Often, if you live in an area with hard water, extra amounts of sediments build up in your hot water heater. Drain and make sure rust is not developing.

TOP PRIORITIES FOR FIRST TIME HOME BUYERS

It’s easy for first-time homebuyers to become overwhelmed as they begin their home search. Often, buyers get distracted by a newly renovated kitchen or finished basement, and lose sight the big picture when choosing a home. See below for three factors that should be a priority as you navigate the home buying process.

1. Pricey proposition - Set a price point BEFORE you start looking for homes. It is important to talk with your REALTOR® about your budget so he/she can focus on homes within your price range. It’s helpful to leave yourself a financial cushion when deciding on what to spend. Factor in closing costs, repairs, down payment and even unexpected expenses to help you find a price you feel comfortable with.

2. Location, location, location - This is one of the few things you absolutely cannot change about your property. If you need to be in close proximity to mass transit or within a specific school district, only view homes that fall within this area. Is it really your dream home if you are out of your desired commuting distance? Also, be aware of the condition of the neighborhood. Is it safe for you to live or desirable should you decide to sell down the line?

3. Room to grow - Remember to ask yourself how long you plan on staying in your new home. Will the one-bedroom loft or two-bedroom cottage work for you in five years?

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.)