OC Real Estate Report_04_2010

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1April 2010 | OCdwellings

the

stateof the

market

Breaking News – At the time of production of

this report, Governor Arnold Schwarzenegger

signed AB 183, which will provide a tax credit of up to $10,000 to Californians who are

buying their frst home or purchasing a brand-

new home.

F OR THE PAST FEW

YEARS, CALIFORNIA HAS

EXPERIENCED SIGNIFICANT

SETBACKS IN HOUSING —

including its dubious position as the state

with the second-highest foreclosure rate in the

nation.

According to the California Association of

REALTORS® recent study of 2009 and 2010

home sellers, 67% of California home owners

put their homes on the market in 2009 as a

result of difculties related to meeting their

mortgage obligation. That’s a substantial

increase over 2008, when C.A.R. found 20%

of homeowners, or one in ve, sold due to

nancial difculties.

Among the reasons for such sales cited

in 2009 and 2010 were difculty meeting

mortgage obligations (30%), job loss (18%)

and resetting adjustable loans (18%). Lower

housing prices rendered some home owners

unable to renance; others saw home prices

fall below what they owed on their mortgages.

Not surprisingly, only 7.5% of surveyed sellers

reported they had a xed-rate mortgage. 92.5%

had an adjustable rate mortgage (ARM) with a

two-year, three-year or ve-year xed rate, or

a negative amortization ARM.

Nearly half of homes sold in 2009 were

distressed homes in some stage of foreclosure

or short sales. As a result of having such a high

number of distressed homes on the market,

homes that sold in 2009 averaged $20,958 less

than the original asking price and $32,315 less

than the median asking price.

Just as sellers found difculties in meeting

mortgage obligations in 2009, buyers also

faced nancing challenges. A startling 63%

of homes fell out of escrow prior to closing,

with nearly 70% of buyers unable to get an

acceptable mortgage, according to sellers

surveyed. More than 60% of sellers cited

buyers “backing out” as the primary reason the

home fell out of escrow. Other reasons cited

were buyer’s remorse (26%), lender withdrew

and did not fund (24%), and declining home

prices (18%).

Even homes that sold faced hurdles, failing

to close on time 50% of the time compared

to 36% of the time in 2008. Subsequently,

seller condence in buyers’ ability to close

plummeted, with 75% of sellers reporting

concern, an increase from 54% in 2008.

Particularly hard-hit were rst-time sellers

(59%). Nearly half of surveyed sellers had

owned their homes for two years or less,

compared to one-third in 2008. First-time

home sellers increased to 44% of all sellers,

compared to 33% in 2008.

After such a thrashing, one out of three sellers

surveyed moved out of California in 2009,

compared to one in four in 2008. According to

First American CoreLogic, 35% of California

mortgage holders are underwater — meaning

they owe more on their mortgage than their

home is worth. This makes it appear that 2010

will be as challenging for sellers as 2009 was.

Good news for BuyersAs difcult as the market is for sellers, buyers

orange county real estate report | april 2010

Dana Point Salt Creek Beach




Orange CountyLike other areas of Southern California, Orange County is enjoying a healthy seller’s

market in homes priced under $2 million, which proves that affordability is making an

impact on sales volume.

*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.

are responding to extraordinary incentives —

including the most affordable home prices in

a decade, historically low government-aided

mortgage interest rates and a continuing

supply of distressed homes to keep sellers

realistic about pricing.

In addition, the federal tax credit for rst-timeand move-up buyers is good until the end of

April 2010. Qualied buyers need only to have

a solid contract and take possession by June

31, 2010.

Proof that incentives are working is the

increase in rst-time home buyers: 47% in

2009, up from 35.9% in 2008. That’s the

highest percentage increase since 1995.

Typically, says the National Association of

REALTORS®, rst-time home buyers make

up about 40% of the market.

In a recent survey of home buyers, C.A.R.

found that nearly 40% said they would

not have purchased without the tax credit

incentive. One reason for its strong appeal

is that the Federal Housing Administration

(FHA) increased its qualifying loan guarantee

from $362,790 to $729,750 for high-cost areas

such as California. Reecting that move, the

percentage of home buyers using an FHA-

insured loan increased to 32% in 2009 from

18.9% in 2008. These loans also allowed rst-

timers to buy bigger. Most purchased single-

family homes (80%) at an average 1,560

square feet, compared to 1,300 square feet in2005.

Investors also jumped back in the pool,

with 70% purchasing short sales and REOs

(bankowned properties). The median price of

a typical investment property was $232,750,

with a median size of 1,367 square feet.

The momentum generated by rst-time and

move-up buyers purchasing with government

guaranteed loans and investors buying with

cash largely moved mostly homes pricedunder $500,000, causing quick sales, multiple

offers and rising prices in “affordable” homes.

For that reason, the median California home

price is projected to increase to $280,000 in

2010 from $271,000 in 2009.

Like the rest of the nation, home sales volume

declined in February 2010 (-2.2% from

January), but curiously, the median price

rose 14.1% year-over-year, from $245,230 in

February 2009 to $279,840.

California Association of REALTORS® chief

economist Leslie Appleton-Young explains

the anomaly: “Supply continues to lag demand

at the more affordable end of the market, with

a 3.9-month supply of homes priced below

$300,000, compared with the long-run average

of more than seven months. This contrasts

sharply with the nearly 15-month supply of

homes for sales priced at $1 million or more at

the upper end of the market.”

However, large inventories have been chipped

away. For homes priced under $1 million,

inventories are between 3 and 8 months of supply, versus 4.5 to 15 months a year ago.

Homes priced $1 million and above were at

27.9 months of supply on hand a year ago, and

at 15.7 months on hand to date.

Overall, C.A.R.’s Unsold Inventory Index

stands at 6.3 months on hand compared to 7.1

months’ supply a year ago.

Advice for BuyersBecause of uncertainty about what will

happen in the marketplace after the home

buyer tax incentive is removed, home buyersmay be tempted to wait and see if prices fall

further — but that possibility must be weighed

against possible rising mortgage interest rates

or tighter loan standards. Incentives are here

now, and they won’t last.

This is the time to go by the numbers. Weigh

as many calculations as you can, including

tax incentives to help with your closing costs.

Weigh the cost of renting vs. the cost of home

ownership, including at tax time, when home

owners get to take advantage of mortgage

interest rate and property tax deductions,

energy rebates and other incentives.

Advice for SellersBecause buyers currently have the most

incentives, now is the time to put the best

possible price on your home. Keep in mind

that buyers taking advantage of rst-time

and move-up buyer tax credits must make

their decision to buy quickly, so be available

and agreeable for contract negotiations. The

more negatives you can overcome before a

buyer sees your home, the less there will be

to negotiate, and the higher the likelihood of

agreeing on a price and terms quickly andsolidly.

kendra stevens REALTOR ® License #01845227

[email protected]

independently owned and

operated




Detached homes are in a blistering seller’s

market in all price ranges under $1 million.

Attached home sales are also thriving,

with inventories tipping into a mild buyer’s

market once prices rise above the

conforming loan ranges.

The large gap between listing price per

square foot and closed sales further

illustrates the pace of sales in the

affordable ranges.

Detached Properties - Inventory in Months

Attached Properties - Inventory in Months

Detached Properties - Pricing Realty for Sellers, per square foot




Attached home prices per square foot

are generally closer to sold prices than

that of detached homes. Lower-priced

pendings and backup offers suggest price

weakness.

Detached home inventories rose 42%

since December 2009, but the absorption

rate was even higher — up 63% for the

same period.

Attached home sales have also seen

an increase in new listings (+32%) and

absorption rates (+61%) since December

2009.

Attached Properties - Pricing Realty for Sellers, per square foot

Detached Properties - Monthly Listings Taken and Absorbed

12 Months through January 2010

Attached Properties - Monthly Listings Taken and Absorbed

12 Months through January 2010

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operated

OC Real Estate Report_04_2010

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