Orange County Market Report

 

Orange County Housing Report: Demand Returning to Normal Good Afternoon!

The drop in demand ever since the end of the Federal first time home buyer tax credit on April 30

Housing Demand

th is slowing and leveling off. :

The 4% drop in demand in the last two weeks is much better than the 12% posted two weeks ago. At this point, looking in the rearview mirror, the end of the Federal tax credit definitely had an impact on Orange County housing demand. It is also safe to say that demand prompted many first time home buyers to purchase sooner than originally anticipated. Had the credit not been in place, demand would have been curtailed in both March and especially April. Demand in May and June would have been stronger as well. March and April’s surge due to the housing credit robbed May and June of normal activity. There is nothing cyclical about the recent swings in demand, but it is making its way back to normal. It should be back on track by July. Demand, the number of new pending sales over the prior month, decreased by 136 in the past two weeks and now totals 3,167. That is after a 603 home drop two weeks ago. For the first time since March 2008, demand is less than the prior year with 485 fewer pending sales. Hold your horses if you are a buyer; this does not mean that it’s going to get much easier for buyers anytime soon. The demand trend is now going to change back to a more normal pattern. The expected market time for all homes priced below $1 million is still a very hot 2.71 months. Five months is equilibrium. Anything less than five months is a seller’s market. You may ask, “How can we have a seller’s market without rampant appreciation?” The answer is quite simple: with so many distressed homes on the market, they are keeping a lid on any real, significant appreciation. Anything higher than five months is considered a buyer’s market. For homes priced above $1 million, the upper end, the expected market time is 8.89 months, the higher the price range, the slower the market If you are a buyer, carefully consider the local market conditions and the price range you are looking. For example, homes priced between $1 million and $1.5 million, the expected market time is 5.59, not really a buyer’s nor a seller’s market.

Active Listing Inventory

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For the first time since April of last year, the inventory has crossed the 10,000 home mark. Last year, after increasing by less than 400 homes in the first three months, the total active inventory steadily dropped from a height of 11,606 homes to 7,381, a 4,225 drop or 36%. This year the Orange County housing market has experienced the exact opposite phenomena, increasing unabated by 39% to 10,117. In the past two weeks, the inventory has grown by 278 homes, a 3% increase. This also marks the first time since April 2008 where the inventory is higher than the prior year. Last

year the inventory was at 9,313 homes, 804 fewer than today. What is going on? The answer is quite simple: there are more and more unrealistic homeowners placing their homes on the market at unrealistic levels. They have learned that the market is hot in the lower ranges with buyers competing for homes that generate multiple offers and ultimately sell for their full asking prices. However, buyers are just not ready to pay substantially more than the last comparable closed or pending sale. Sure, given the heated demand, they may pay $5,000 more than the last buyer, but no buyer is prepared to pay a $40,000 premium for a home. Many of these homeowners have been sitting on the fence, unable to sell, waiting for the market to turn so that they can finally achieve what they have been putting off for a while now, moving. The Orange County market was blessed in 2008 and 2009 with discretionary homeowners. They knew that buyers would not pay a premium, so only homeowners that had to sell placed their homes on the market and, most importantly, at

realistic levels. If you are a seller and your home is not generating enough activity and not procuring offers, now is a great time to take a careful look at PRICE. Keep in mind; just because you are an equity seller, buyers are not going to pay you a substantial premium so that they don’t have to deal with all of the hassles in purchasing foreclosures or short sales. Again, a $5,000 premium is more realistic. Many foreclosures and short sales have a ton of upgrades, part of the excess of the last run-up in values. So, as a seller, it is absolutely imperative to do your homework by carefully considering three important factors: location, condition and amenities. A buyer is going to do the same thing. It is important to be able to take a step back, pulling out the emotion of “yeah, but this is my home,” and objectively arriving at the fair market value. Foreclosures and Short Sales

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30% of the current active inventory is distressed. The distressed inventory continued its slow climb this year, adding an additional 89 homes in the prior two weeks and now totaling 3,080, a 3% increase. The inventory has not surpassed the 3,000 mark since June of last year. Last year at this time, there were 3,062 distressed homes on the market, representing 33% of the active inventory. The number of foreclosures within the active listing inventory dropped by three homes in the past two weeks from 533 to 530. The expected market time for foreclosures is 1.45 months, an extremely HOT seller’s market. Short sales, where a homeowner attempts to sell a home for less than the total outstanding loans against a home, requiring lender approval, increased by 92 homes over the past two weeks and now total 2,550. The expected market time for short sales is 2.09 months, also a HOT seller’s market.

Closed Sales

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May will prove to be one of the best months in terms of closed sales in 2010. The number of closed residential resale homes in May totaled 2,789 homes, a 13% increase year over year. But, keep in mind that the tax credit for first time home buyers is for successful contracts that are consummated on or before April 30,

2010, and must close on or before June 30, 2010. The tax credit may have ended for all buyers still looking for a home, but still applies to buyers who put together a contract prior to April 30

Have a wonderful weekend.

Sincerely,

President

th and still able to close by the end of this month. Just as there was a surge in demand in March and April, the surge continued in terms of sales in May and will continue this month. We can expect headlines to reflect this surge when they report May sales later this month.

Steven Thomas Altera Real Estate “Pride Begin s at Home” Office 949.389.7816 Cell 949.874.8221 www.AlteraProperties.com Copyright 2010 – Steven Thomas, Altera Real Estate – All Rights Reserved. This report may not be reproduced in whole or part without express written permission by author.

 

June 10, 2010

OCHousing-Jun-10-10