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




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

[email protected]

independently owned and

operated




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




$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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OC Real Estate Report_05_2010