OC Real Estate Report_05_2010
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Transcript of OC Real Estate Report_05_2010
8/9/2019 OC Real Estate Report_05_2010
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1May 2010 | OCdwellings
favorable news for the
economyand
housing
T HE IMPROVED JOB OUTLOOK
WAS ACCOMPANIED BY
IMPROVEMENT IN CONSUMER
ATTITUDES:
■ A March 2010 Move.com survey found
that one in ve potential home buyers
plan to buy a home in the near future, and
17% want to buy an investment home.
■ A Fannie Mae National Housing Survey
conducted between December 2009
and January 2010 found that 65% of
respondents believe it’s a good time to
buy a house, and nearly 31% say it’s a
very good time. 44% say they expect their
personal nancial situation to improve in
the next year.■ The National Association of
REALTORS® Pending Sales Index
was up 8.2% in February. Pending sales
are calculated by the number of signed
purchase contracts.
■ The NAHB/Wells Fargo Housing
Market Index rose four points in April, a
signicant improvement after six months
of no movement.
■ Building permits were up 34.1% in
March 2010 from a year ago — the
biggest annual gain since February 1992.
■ Housing starts are up 1.6% to a seasonally
adjusted annual rate of 626,000 units,
and February housing starts were revised
to show a 1.1% increase (previously
reported as a 5.9% decline). This is the
biggest improvement in 17 months.
The impact of consumer sentiment is critical
to metrics such as household formation. As
the NAHB points out, “Household formations
slowed from a 20-year average annual growth
rate of 1.3% to less than 1% in 2008 and to a
post-World War II low of 0.34% in 2009.” That
means we’re about 1.2 million households
short of normal. If people return to the normal
rate of household formation, we could actually
have enough demand for housing to reignite a
housing boom.
The housing market turns positiveWhile there’s no question that pressure is still
intense from the distressed end of the housing
market – short sales, foreclosures and home
price declines – one benet is undeniable.
Homes are more affordable than they’ve
been in a decade. The average household can
afford more than 70% of the homes that have
been recently sold on the market. During the
housing peak in the mid-2000s, the typical
household could afford only 40% of homes
sold, says the NAHB.
According to the National Association of
Realtors’ Affordability Index, in 2009, a
median income family had 171.6% of the
income necessary to qualify for a mortgage on
a median-priced home, assuming a 20% down
payment and principal and interest totaling less
than 25% of household income. At that time,
the median existing-home price was $172,100
and the median income was $61,845.
The reason buyer interest is growing is that
prices have fallen to pre-boom levels — and
that has attracted the attention of renters.
According to Move.com, nearly 67% of
renters plan to buy a home at some point in
the future.
It’s no coincidence that the home ownership
rate is also 67%, a sustainable, practical
number for both sides of the market — home
owners and renters.
Federal Reserve Chairman Ben Bernanke
was cautiously optimistic enough to tell the
Joint Economic Committee of Congress in
orange county real estate report | may 2010
Ladera Ranch Residences
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Orange CountyLike other areas of Southern California, Orange County is in a blistering seller’s market in
homes priced under $1 million, but supply starts to build when prices rise above $3 million.
However, upscale and unique homes aren’t expected to sell at the same pace as more
affordable homes. When upscale supplies approach two years on hand or more, then
the market is sluggish or stagnant.
*A balanced market is widely accepted as having six months of inventory on hand with market conditions favorableto both buyers and sellers. A buyer’s market is characterized by conditions such as high inventories, falling prices,concessions by sellers, and incentives among other indicators. A seller’s market has low inventories of homes for sale,escalating prices, and keen competition between buyers, including multiple offers.
mid-April that he believed consumer demand
would be sufcient to replace the government
stimulus efforts of the past two years in
keeping the economy growing.
The withdrawal of government support is
already impacting the housing market, with
mortgage interest rates beginning to uctuate.This may cause some home buyers to jump
in before rates go much higher, or it could
temporarily cool the market. However, with an
improving economy, it’s unlikely that buyers
will be too deterred by higher interest rates in
the short term, knowing that housing prices
might also go higher.
The Mortgage Bankers Association has
predicted that mortgage rates will rise,
possibly near 5.8% to 6.0% by the end of
the year; but that’s not likely to impact sales.
The Associated Press Economy Survey of
44 leading national economists found that
while sales prices will lower in 2010 by a
minuscule 0.1%, they’ll rise 2.3% in 2011.
It also predicted that home sales volume will
rise in both 2010 and 2011, perhaps as new
households start forming again.
Employment turns positiveBecause employment and housing are
lagging indicators in a recovery, April may
have seemed worse than it actually was.
For example, the Bureau of Labor Statistics
announced that March 2010 showed the rst
rise in monthly employment since December 2007, and revised earlier estimates to show
that jobs were more stable than had been
previously reported. But that cheerful news
didn’t arrive until mid-April, while the nation
was busy preparing its tax returns. The upshot
is that 162,000 nonfarm jobs were added in
March, reversing an average 200,000 monthly
loss in Q4 2009. (Note: About 48,000 of those
jobs went to temporary census workers.)
California Outlook According to a joint report by the California
Association of REALTORS® and DataQuick,
230 out of 357 cities in California showed anincrease in median home prices over a year
ago. The state median price was up 20.8%
year-over-year, to $301,790. Unsold inventory
is now strongly in the seller’s court, with only
ve months of supply on hand. Homes that
sold were on the market a brief 39.2 days,
compared to 48.2 days a year ago.
Among other reasons for sellers to celebrate is
the fact that price reductions are halting. At the
end of April 2010, Trulia.com announced that
20% of its listings have been reduced in price,
compared to 27% a year ago. This represents a
26% improvement in asking prices.
California metros were among the most
improved in holding the line on listing prices.
San Diego, for example, showed a 52%
improvement, from 25% of homes with price
reductions in April 2009 to 12% in April 2010.
San Francisco reported a 45% improvement,
from 30% of homes with at least one price
reduction to 17% of homes reduced in April
2010. Los Angeles improved 40% year-over-
year, from 33% of homes reduced in April
2009 to 20% of homes in April 2010.
Furthermore, only a few California cities
saw large price reductions in April 2010. Of
the top 50 cities in the U.S., Long Beach,
California, had 23% of listings with reductions
in April 2010, with an average reduction of
10%. Los Angeles reported 20% of listings
with reductions, with an average 11% off the
list price. Sacramento had 18% of listings with
reductions, with an average 10% off the list
price. Others include Oakland (16%, 12% off
list), Fresno (15%, 10% off list), San Diego
(12%, 9% off list) and San Jose (12%, 7% off
list).
It’s a great time to buy a home. While no one
can predict the future, it does appear the market
has stabilized. Mortgage interest rates, despite
recent spiking, are still nearly three points
below “normal.” Home prices have turned
the clock back to 2004 in many areas, and as
national incentives are expiring, California
tax incentives will pick up through the end
of the year. Note: California tax credits take
effect immediately following the conclusion
of federal tax benets, and are anticipated to
be exhausted in the rst 30 days of offering.
BuyersDon’t assume that waiting will get you a
lower price. With inventories at an average
ve-month level or less, it’s not likely the
home you have your eye on will linger on the
market very long. In some price ranges, sellers
are receiving multiple offers within days of
putting their home on the market. Make your
best offer, and look forward to building your
own equity.
SellersDo not anticipate the market by setting asking
prices above recent comparables. Lendingguidelines require that sales comparables go
back as far as a year, which may not reect
the current seller’s market as much as you
might like. While lenders have discretion,
they don’t want to take risks on rising prices
without seeing several months of sustained
price growth.
kendra stevens REALTOR ® License #01845227
independently owned and
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10.1
8.1
7.7
5.4
4.2
2.9
2.6
2.5
0.0 2.0 4.0 6.0 8.0 10.0 12.0
$900K and over
$800K - $899K
$700K - $799K
$600K - $699K
$500K - $599K
$400K - $499K
$300K - $399K
Under $300K
8.6
4.0
3.8
3.2
2.9
2.4
2.3
1.9
0.0 2.0 4.0 6.0 8.0 10.0
$900K and over
$800K - $899K
$700K - $799K
$600K - $699K
$500K - $599K
$400K - $499K
$300K - $399K
Under $300K
$300
$306
$332
$320
$499
$0 $100 $200 $300 $400 $500 $600
PENDING SALE
HOLD DO NOT SHOW
CLOSED SALE
BACKUP OFFERS
ACTIVE
Sellers should carefully consider current buyer
demand when pricing their home for sale.
When list prices per square foot of Backup
and Pending status properties are below that
of Active properties, sellers should ask for
pricing counsel from their Agent.
Detached homes are selling nearly as
fast as they can close in the affordable
ranges. Only when prices rise above
$900K do supplies start to build toward a
buyer’s market.
Attached homes are selling nearly as
quickly as detached properties, but
supplies start to build once prices leave
the conforming loan ranges.
The gap between active listings prices
per square foot and that of closed sales
underscores the heated seller’s market
in the affordable price ranges. Higher
backup offers suggest that sellers have
pricing strength.
Detached Properties - Inventory in Months
Attached Properties - Inventory in Months
Detached Properties - Pricing Realty for Sellers, per square foot
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4May 2010 | OCdwellings
$235
$246
$264
$255
$333
$0 $100 $200 $300 $400 $500
PENDING SALE
HOLD DO NOT SHOW
CLOSED SALE
BACKUP OFFERS
ACTIVE
Sellers should carefully consider current buyer
demand when pricing their home for sale.
When list prices per square foot of Backup
and Pending status properties are below that
of Active properties, sellers should ask for
pricing counsel from their Agent.
1,3481,291
1,560
851945
1,0711,005954
976 1,031943960
0
300
600
900
1,200
1,500
1,800
0
300
600
900
1,200
1,500
1,800
New Listings Listings Absorbed
New Listings 960 943 976 1031 954 1005 1071 945 851 1348 1291 1560
Listings Absorbed 966 916 1078 1052 1000 999 987 825 802 1046 1118 1586
2009/04 2009/05 2009/06 2009/07 2009/08 2009/09 2009/10 2009/11 2009/12 2010/01 2010/02 2010/03
2,100 2,095
2,711
1,237
1,406
1,658
1,5091,542
1,611 1,6471,5501,503
0
500
1,000
1,500
2,000
2,500
3,000
0
500
1,000
1,500
2,000
2,500
New Listings Listings Absorbed
New Listings 1503 1550 1611 1647 1542 1509 1658 1406 1237 2100 2095 2711
Listings Absorbed 1567 1527 1627 1553 1618 1559 1423 1342 1158 1298 1569 2223
2009/04 2009/05 2009/06 2009/07 2009/08 2009/09 2009/10 2009/11 2009/12 2010/01 2010/02 2010/03
The gap between active attached home
list prices and solds is not as vast as that
of detached homes, possibly due to
the greater availability of near-same
comparables.
Detached home sales volume and
inventory levels reached their lows in
December 2009. For the next three
months, new listings expanded 54%, along
with absorption rates up 48%.
New listings of attached homes also hit
bottom in December 2009. Since then,
sellers have released 46% more inventory
to the market. Fortunately for them,
absorption rates are up 50% for the same
period.
Attached Properties - Pricing Realty for Sellers, per square foot
Detached Properties - Monthly Listings Taken and Absorbed
12 Months through March 2010
Attached Properties - Monthly Listings Taken and Absorbed
12 Months through March 2010
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