OC Real Estate Report_07-09

8/9/2019 OC Real Estate Report_07-09

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1July 09 | OC dwellings

THE NATIONAL ASSOCIATIONOF REALTORS® (NAR) reportedthe largest jump in pending sales innearly eight years, largely due to the

$8,000 tax credit stimulus for rst-time home buyers. Existing home sales increased 2.9%,reversing a downward trend in March.

The median home price dropped 15.4% froma year ago to $170,200 – the second largest

yearly price decline on record. The cause for the dramatic plunge is the rise of foreclosuresand short sales, which impacted as many as45% of homes sold. Distressed homes swelledinventories, driving them to 10.2 months onhand, up from 9.6 months on hand in March.

Mortgage interest rates have hovered near or below 5% for benchmark xed rate loans for as long as ve months, as home buyers took advantage of a trifecta of opportunities: lowinterest rates, high inventories, and low prices.

First-time home buyers now make up nearly50% of the market, up from an average of 30%.

Housing Outlook ImprovesSouthern California rst-time home buyerswere joined by investors buying bargain-

priced properties, and the sales pace increasedfor the tenth consecutive month, according toMDA DataQuick.

The percentage of absentee owners in themarket, which has stood at 15% since 2000,suddenly jumped to 18.6% in April 2009.

For the seventh month in a row, SouthernCalifornia foreclosures accounted for morethan 50% of sales, bringing the median sales

price down from the rst quarter of 2009.Foreclosure sales were notably higher inlandthan along the coast, and builders added littleinventory due to heavy competition fromdistressed homes.

Another weight putting downward pressureon the median sales price is low sales volumein the luxury ranges. Inventories of homes

priced above $900,000 — out of conformingloan range — are at an 18-month high, whilemany communities have less than two months’inventory of homes priced under $300,000.

“Jumbo” mortgages – those above $417,000 — are harder to get. Although conforming

loans can be obtained up to $730,000, therelatively high cost of living in SouthernCalifornia meant that only 10.9% of homessold in April were purchased with jumboloans. Before August 2007, when the creditmalaise began, nearly 40% of Southland saleswere in the jumbo range.

Nonetheless, overall home prices acrossCalifornia increased 1.4%. The median pricerose to $256,700. Home buyers should bedelighted that despite rising prices, homes arestill priced 36% below 2008 levels, accordingto the California Association of REALTORS®.Prices are rising on volume of sales, which isup almost 50% for the same period.

The takeaway: buyers may nd declining prices in some price ranges and accelerating prices in others.

Tax credit updateWith ve months left on the federal tax

housing salesareclimbing

orange county real estate report | july 09

With affordability reachingunprecedented levelsnationwide, including

Southern California, housingsales are climbing.




Orange CountyOrange County housing is still a tale of two markets. As of June 2, 2009, homes in theconforming loan price ranges (up to $417,000) and jumbo conforming price ranges (up to$730,000) are in a fast-paced seller’s market. As little as 3.2 months of inventory on handfor homes priced under $300,000, and 5.1 months on homes priced up to $899K. Luxuryhomes priced above $900,000 are in a buyer’s market, at 13.1 months of inventory.

credit for rst-time home buyers, the credit isexpected to continue fueling entry-level homesales.

Mortgage interest rates still abargainIdeal home buying conditions don’t lastfor long. Currently, home buyers enjoy tax

bene ts, low prices, generous selections

and low mortgage interest rates — but it’sinevitable that one or more of these conditionswill change.

Mortgage interest rates are already beginningto climb, reaching 5.6% for the week endingJune 11, 2009. That’s still well below a year ago, when they averaged 6.32% — so currentrates should be more than attractive to home

buyers, particularly in view of lower home prices and greater selection. Home buyers whoare concerned about rate increases would dowell to look at Freddie Mac’s historical tableon benchmark mortgage interest rates.

Between 1972 and 2008, mortgage interestrates have seen an annual high of 16.63% with2.2 points and an annual low of 5.83% with 0.6

points. (Discount points are the percentage of the loan the lender charges to provide a givenrate.) From a historical perspective, there has

not been a single year since 1972 when interestrates have been lower than they are right now.

And a rise in interest rates can be negated bylower home prices. Here’s why: if interest ratesrise 1/8th of a point, that translates to about$25 or less a month in monthly payments on aconforming loan, and $9,000 over the full termof a 30-year loan. But if a home buyer pays

$9,000 less for a home, these higher interestcosts are negated.

For example, if home prices have sunk by 15%over the past year, home buyers are paying$15,000 less, or $85,000, for a $100,000 home.They’re paying $60,000 less, or $340,000,for a $400,000 home. That 1/8th point risein interest rates is negligible compared to theopportunity to buy a home at a 15% discount.

This explains why mortgage interest rates andhome prices don’t always rise or fall in tandem

— and if they do, it’s not for long. As home buyers rush to take advantage of mortgageinterest rates and other stimuli, lenders reachtheir capacity to provide loans, and interestrates inevitably rise.

Advice to home buyers: be ready to makeyour move by pre-qualifying with your lender.

If interest rates move up before you’ve lockedin your rate, make sure you still qualify. Tolock in your rate, you must be pre-approved,which means you’ve shared your nancialinformation with your lender.

Advice to home sellers: price it right the rsttime. With rst-time home buyers dominatingthe market, a home in move-in condition will

always sell faster than one that needs updating.If you have a higher-priced home, your homehas to be in better condition and better pricedthan your competition.

Ideal home buying conditions don’t last for long.Currently, home buyers enjoy tax bene ts, low prices,generous selections and low mortgage interest rates - butit’s inevitable that one or more of these conditions will

change.

kendra stevens REALTOR ® License #01845227

[email protected]

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As of June 2, 2009, detached homes inOrange County are selling at a blisteringpace under $899K. Only homes pricedabove $900K are in a buyer’s market.

Attached homes are also in a seller’smarket, up to $699K.

As the seller’s market heats up, detachedhome listings are being absorbed faster than new inventory is be added, as ofMay 2009.




Attached home listings are also beingabsorbed faster than new inventories areadded, as of May 2009.

Detached home sales volume is up 40.8%in Q1-2009 on a 30.7 percent drop in pricesyear-over-year.

Sales volume in attached homes is alsoup, 45.8% year-over-year in Q1-2009.

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OC Real Estate Report_07-09

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