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SoCal has 2 in the top 5 – NICE!

Originally Posted at Orange County Real Estate

The Safest Towns in America is a post from: Orange County Real Estate-Orange County Homes For Sale

September home sales down 10.7% – Lansner on Real Estate is a post from: Orange County Real Estate-Orange County Homes For Sale

Seems The Duke’s heirs are duking it out over is Real Estate is a post from: Orange County Real Estate-Orange County Homes For Sale

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I’m jealous – my wall of books is minuscule in comparison.

Originally Posted at Orange County Real Estate

Now that’s a library! is a post from: Orange County Real Estate-Orange County Homes For Sale

Test test.  Test test.  Test test. 

Originally Posted at Orange County Real Estate

Test is a post from: Orange County Real Estate-Orange County Homes For Sale

Here’s the latest Housing Report from Steven Thomas, President of Altera Real Estate.

It is time for buyers to start focusing on historically low interest rates; they won’t last forever.

Interest Rates

Rates are at ridiculously low levels and seem to be taken for granted.

I have always been fascinated how almost nobody focuses on how rates affect purchasing power.   These low rates actually pencil out to be so much better than the $8,000 First Time Home Buyer Tax Credit; yet, the lower rates just have not stimulated demand like the credit.  Consider a $500,000, 30 year mortgage at 4.375%.  The monthly payment would be $2,496 per month.  The same monthly payment at 5.375%, where rates were just one year ago, would be for a mortgage of $446,000.  That is a $54,000 difference, almost seven times the tax credit.  That’s one way to look at the incredible savings today’s low interest rates offer buyers.  Now, let’s take a look at the difference in payment for the same mortgage amount.  The payment on a $500,000, 30 year mortgage at 5.375% is $2,800 per month, or $304 per month more compared to the 4.375% rate.  In just five years, the savings would be a very impressive $18,240.  Over the life of the loan, 30 years, the savings would be $109,440.  These numbers are mind boggling.  Yet, first time home buyers tripped over each other clamoring to purchase a home prior to the end of the tax credit on April 30th. But, now, in the face of the lowest interest rates in our lifetime, buyers just aren’t rushing to purchase.  As soon as the economy starts to improve, interest rates will increase by at least one percent.  As a buyer, today’s rates should be very motivating.  The best time to purchase is during a buyer’s market with rock bottom rates, not when the market is appreciating again. Unfortunately, low rates don’t seem to sell like an $8,000 credit.  So, let’s put phrase it in a way that will sell: “Give yourself an $18,240 tax credit by purchasing now before rates rise just one percent.” For further perspective, rates were at 8% at the beginning of 2000.  For a $500,000 mortgage, the monthly payment would be $3,669, an additional $1,173 per month.  In 1990, rates were at 10%, which would be $4,388, an additional $1,892 per month.  Buyers cannot afford to ignore today’s rates.  They should not be taken for granted.  As soon as the economy improves, rates will increase and buyer’s purchasing power will begin to erode.

Demand

With the begging of the Autumn market, demand drops 7%.

In looking at demand, the First Time Home Buyer Tax Credit pulled demand forward.  To take advantage of the credit, a buyer had to be under contract on or before April 30th.  Since reaching the height in demand at the end of April, demand has dropped 32%.  Demand, the number of new pending sales over the prior month, dropped by 203 over the past two weeks and now totals 2,690 pending sales, a 7% drop.  The incredible rates should spur demand.  It will be interesting to see where demand goes over the coming weeks now that the kids have settled in at school.

Active Listing Inventory

It appears as if the listing inventory is climbing towards a peak of 12,000 homes.

The active listing inventory gained 175 homes in the past two weeks and now totals 11,892.  The inventory has actually grown unabated since the beginning of the year.  If demand was just slightly hotter, the inventory would actually drop.  It started the year at 7,165 homes and has increased since by 4,727, a 66% increase.  This year marked the exit of the discretionary seller.  Instead, the market has been plagued by homeowners who have been sitting on the sidelines anticipating a turnaround in the housing market.  With demand artificially stimulated at the beginning of the year by the tax credit, sellers were fooled into thinking that the market had indeed turned around.  They took reports of year over year increases in the median sales prices and stories of heated demand and multiple offers as the perfect time to dive into the market.  Unfortunately, seller after seller entered the market and anticipated appreciation like just a few years ago and priced their homes at unrealistic levels, thousands of dollars above the last comparable or pending sale.  The end result is a ton of homes have been sitting on the market overpriced and the active inventory has increased unabated.    A SPECIAL NOTE FOR SELLERS:  reduce your home to market value or pull your home off the market immediately and wait for the overall economy to dramatically improve.

Expected Market Time

The lower ranges have slowed but not nearly like the stalled upper end.

For homes priced below $1 million, the expected market time is 3.87 months.  This range represents 82% of the active inventory and 93% of demand.  For homes priced above $1 million, the expected market time is 12.02 months, the higher the range, the slower the expected market  time.  This range represents 18% of the active inventory, but only 7% of demand.  The slowest range, homes priced above $4 million, has an expected market time of 70 months.   The hottest market in Orange County is Foothill Ranch with an expected market time of only 2.38 months and an average list price of $467,000.  The slowest market in Orange County is Newport Coast with an expected market time of 12.08 months and an average list price of $4.4 million.  The expected market time for all of Orange County is 4.42 months.  Last year at this time the expected market time was 2.33 months.

Foreclosures and Short Sales

With demand slowing, the distressed inventory continues to grow.

The active distressed inventory grew by 110 homes over the past two weeks and now totals 4,026 total foreclosures and short sales, levels not seen since April of 2009.  The active distressed inventory started the year with 2,555 homes and has since grown by 58%.  The distressed inventory now represents 34% of the current active inventory.  Last year at this time, there were 2,384 distressed homes on the market, 1,642 fewer than today.  The number of foreclosures within the active listing inventory increased by 24 homes in the past two weeks from 684 to 708.  The expected market time for foreclosures is 1.84 months, still an exceptionally 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 86 homes over the past two weeks and now total 3,318.  The expected market time for short sales is 3.61 months, much slower than 1.53 months posted last April.

Orange County Housing Report: Interest Rates Trump Tax Credit is a post from: Orange County Real Estate-Orange County Homes For Sale

Here’s the latest Orange County Housing Report from Steven Thomas, President of Altera Real Estate.

Since it is back to school for the youngsters, it is time to update Orange County’s housing report card.

Housing Demand:  C

After starting off the year with decent demand, we quickly realized that it was artificially high due to the Federal first time home buyer tax credit where buyers had to have a pending deal by April 30th.  After April 30th, demand plunged as many buyers had already scurried to find something prior to the cutoff date.  Basically, demand was pulled forward.  Buyers that would have purchased during the summer had to buy early to cash in.  In looking back, the original first time home buyer tax credit that ended in November was needed to help jump start an extremely sluggish market.   The latest tax credit may have done more damage than good.   The pumped up pending sales figures ultimately led to pumped up closed sales figures.  Reports of a year over year rise in demand, sales and the median sales price enticed many sidelined homeowners to place their homes on the market at unrealistic prices.  They mistakenly thought that the market was turning along with home appreciation.   With the end of the tax credit, demand, the number of new pending deals over the prior month, dropped significantly from its end of April peak of 3,979 pending sales.  Demand now totals 2,893 pending sales, a 27% drop from its height.  The current pace of pending sales is following a normal cycle, a mirror of 2008 demand.

Active Listing Inventory:  D+

The active listing inventory is finally reaching a peak, gaining only 67 homes in the past two weeks, the smallest increase so far this year.  Unfortunately, even with the best demand since 2005 for the first four months of the year, the inventory has increased unabated.  It started the year at 7,165 homes and has increased since by 4,552, a 64% increase that now totals 11,717 homes.  As stated above, many homeowners have been sitting on the sidelines as pent up home seller waiting to hear that the market had finally rebounded.  With reports of homes flying off the market, full price offers, multiple offers, increases in the median sales price, and year over year improvements in demand and closed sales, it seemed like a perfect timing to sell.  Homeowner after homeowner was duped into placing their home on the market at unrealistic prices.  Many translated a year over year 7% increase in the median sales price as a green light to place their homes 7% above the most recent comparable or pending sale.  Therein lies the disconnect; today’s buyers are what we refer to as “spreadsheet buyers.”  Spreadsheet buyers are not willing to pay much more than the very last comparable or pending sale.  For the right home, they may pay a few thousand dollars more, but not tens of thousands more.  Buyers do not want to overpay for a home.  They will meticulously look over a spreadsheet of sales activity and arrive at a price in which they think is fair.  They just are not ready to pay a premium given the current economy.  Until the economy starts humming along, spreadsheet buyers are here to stay.  A SPECIAL NOTE FOR SELLERS:  the housing market is not appreciating; so, if you are overpriced, either reduce your home to market value or pull your home off the market immediately and wait for the overall economy to dramatically improve.

Interest Rates:  A+

Every time somebody says that there is no way that interest rates can go any lower, they drop further and hit a new record.  Rates are at such ridiculously low levels right now, we will never see them this low again during our lifetime.  Rates were supposed to increase after the Federal Reserve halted their purchase of pools of loans back in March.  Instead, Europe’s ill economy became the worldwide focus and investors from around the world started parking their money in US Treasuries.  Instead of an increase in rates, they dropped to unimaginable levels.  A WARNING TO BUYERS: do not forget the ramifications of increasing rates on purchasing power; as rates rise, the amount you will be able to afford will drop.  As an example, a buyer with an income of $100,000 and putting 20% down, a rise in interest rates of 1% equates to a $50,000 drop in home affordability.  When the economy eventually improves, investors are going to pull out of the “safe haven” of US Treasuries and rates will climb overnight.  For perspective, rates were at 17% in 1980, 10% in 1990, and 8% in 2000.

Lower Ranges – Below $1 million: B

The lower ranges have dropped in value considerably and have instigated the return of first time home buyers and investors.  With an expected market time of 3.49 months for all homes priced below $1 million, the activity has helped keep a lid on falling prices with so many distressed properties on the market.  40% of the active inventory below $1 million is distressed, either a short sale or foreclosure, so decent activity is needed to counteract all of the distressed properties.  Right after the end to the tax credit, the expected market time in May was at 2.12 months.  So, things have slowed somewhat, but the lower ranges still have sufficient demand to keep prices stable.

Upper Ranges – Above $1 million:  F

It seems as if the end of the tax credit affected the upper ranges as well, even though buyers within that range don’t qualify for the credit; their incomes are too high.  Since the end of the tax credit, the expected market time for homes priced above $1 million increased from 7.53 months to 11.54 months today.  That’s a deep buyers market.  When the expected market time reaches double digits, market activity seems frozen.  There are currently 2,354 homes priced above $1 million, but demand is only at 204 pending sales.  A bottom has not yet been reached in the upper ranges as prices are a bit stickier and have been slow to drop.

Foreclosures:  A

Foreclosures are still the hottest segment of the Orange County housing market.  The current expected market time is 1.81 months, a deep sellers market.  There is still a voracious appetite for foreclosures due to the notion that they are incredible deals.  But, banks price their homes according to the market value and only discount for property defects, poor condition and/or a poor location.  Ask any buyer that has come across a foreclosure within their home search and they will tell you that the competition is over the top.  Contrary to popular belief, foreclosures do not plague the market. Buyers should not expect a wave of foreclosures, either.  The slow methodical pace of foreclosures will only increase slightly over time.  There are currently only 684 foreclosures on the market, representing only 6% of the total active inventory.

Short Sales:  F+

Short sales are by far the Achilles heel of the housing market.  Absolutely nothing is more frustrating than short sales.   There is nothing “short” about a short sale.  Short sales are homeowners who owe more than their home is worth.  They are pulled off the market after a seller accepts an offer from a buyer; however, they cannot close until the lender, or lenders in many cases, approve of the sale.  The lender(s) allow the sale to close, taking less than a full payoff of the outstanding loan.  This process can take anywhere from a few weeks to months.  Short sales that close quickly are a gross exception to the rule.  In a short sale, there are three approvals that need to take place.  First, the buyer must qualify to purchase the home.  Second, the seller must have a true hardship, no money secretly tucked away, in order to qualify for a short sale.  Last, the home must appraise for close to the agreed upon price between the buyer and the seller.  A lender is not in a rush to accept a short sale payoff where the home is selling for $25,000 below the real market price.  Many short sales are grossly under priced, which ultimately leads to a rejection by the lender.  There are obstacles to putting together a short sale.  Outstanding homeowner association dues, outstanding property tax payments, collection agencies, attorneys, first trust deed holders, second trust deed holders, all potentially stand in the way to closing a short sale.  There are currently 3,394 short sales that are pending, 57%of all pending activity.  Yet, only 480 short sales closed last month.  At that rate, it will take about seven months to deplete just the short sale pending activity.  There are still an additional 3,232 current active short sales that need to be absorbed as well.  The expected market time for all short sales is at 3.24 months.  Right after the end of the tax credit in May, the expected market time was at 1.7 months.  So, short sales are hot, but they used to be sizzling, similar to foreclosures.  The reputation of short sales has turned off many would be buyers.  The short sale process is improving, but at a glacial pace.

Orange County Housing Report: Back to School Report Card is a post from: Orange County Real Estate-Orange County Homes For Sale

So, you’re buying a new house and there’s something special you’d like left behind, cleaned, fixed, painted, pulled out, explained, or even permitted in the Orange County house you’re buying – put it in the contract!

The California Association of Realtors Residential Purchase Agreement (CAR RPA) clearly states that homes are sold in their present condition – “as is” as of the date of acceptance – the date that the contract was finally signed by all parties.  It does not automatically include anything that you might think reasonable, such as having the carpet professionally cleaned. Or the tile flooring. Or the stove. Or the kitchen drawers. Or the windows. Only what was agreed to upon acceptance, stipulated as included items or additional terms is included in the contract. Anything above and beyond what is in the contract at the time of acceptance has to be negotiated and agreed to by the buyer and the seller. In writing. On another official CAR form – usually a Request for Repairs. Failure to make it official in this way may mean misunderstanding and missed expectations of the part of both the buyer and seller. Ask for it in the contract. End of story.

Now, do some sellers automatically take care of cleaning the carpets, cleaning the cabinets, touching up the paint, filling in the nail holes when they take down their pictures?  Sure. Sometimes. But that would be a BONUS to you.  But if it’s not in writing, you can’t count on it, and there are just as many sellers who pack the moving van and take off having done only the bare minimum of the things that were in the contract or negotiated in the Request for Repairs.

Tip to all my Realtor Friends out there – do it the right way. An email is not a written contract. Just because you email me to say your client really really wants the carpets professionally cleaned does not in any way obligate the seller to clean the carpets. Your email does not count as an amendment to the purchase contract. Ever. Never. Always present your clients’ requests on the appropriate CAR form, with their signatures on it where required. In the case of carpet cleaning, home cleaning, window cleaning, or tile cleaning – I would suggest to include these requests on a Request for Repairs. Even if an RR has been fully executed – there’s a space on the form to note the number of Request for Repairs – just like Counter Offers – there can be multiple Request for Repairs. Just note it as RR 1 or 2 or 3 or whatever number is next in line. Simple. Is the seller obligated to agree? Absolutely not. So you’d better put your marketing hat on and queue it up nicely for your buyer! Make it as easy as possible for the seller to say yes and you increase your chances of getting it accepted.

Always get what you expect and agree to between buyers and sellers in writing on the correct CAR form.

If You Really Want It, Put it in the Contract is a post from: Orange County Real Estate-Orange County Homes For Sale

Wouldn’t you like to know what Real Estate Agents fear telling you?  Well, now you can!  Our new site is dedicated to doing just that for home buyers and sellers in today’s crazy Orange County Real Estate market.  Selected articles also appear in the Orange County Register Real Estate section every Sunday.

Advice for Home Buyers

Here are a few examples of recent topics we’ve covered:

What Buyers Say vs What Agents Hear

Attention Home Buyers and Sellers – Be Mature

You Want the Carpets Cleaned Before You Move In? Put it in the Contract

Heads Up Home Buyers – 80/20 is the Rule!

Home Inspection Tips Number One and Number Two

Have fun reading and watching the videos, and please feel free to leave comments or make suggestions for topics of interest.

Straight Talk for Home Buyers is a post from: Orange County Real Estate-Orange County Homes For Sale

Every industry has its share of custom jargon – terms that insiders use amongst themselves as a kind of code language or short hand to communicate with each other. This jargon comes across as Mumbo Jumbo to you and me. Well, surprise, surprise – the Real Estate biz is no different! So here’s a translation of terms and phrases you might hear thrown around while you are in Escrow – whether you’re a buyer or a seller these are good to know about.

Appraisal Came in At Value – this is the code term for “the appraiser has done a comprehensive report to determine that the price the buyer and seller have agreed to in the contract is, indeed, the market value of the home. The appraiser’s assessment of the value of the home is the same exact number as the purchase price in the contract.” The alternatives are Appraisal Came in Below Value or Appraisal Came in Above Value - these will be topics of an upcoming blog.

Appraisal Conditions - this means that the appraiser sited some things that must be addressed prior to having a completely official appraisal of the value of the home. Typically, these are things that you’d need to actually live in the home. Like to repair a broken furnace so you don’t freeze to death in the winter. Or replace a missing stove so you can cook food to eat in your home. Or repair toilets so you can…. well, you know that part.

In Underwriting – the buyers’ application for a loan has to go through Underwriting – this is the department of the bank or loan company that assesses the risk and gives the green light (or not) to go through with lending the money. Being In Underwriting means they are putting the buyer under a microscope (with a much tighter focus these days.) Most buyers want to be Out of Underwriting with as few conditions as possible.

Prior to Doc Conditions – but sometimes Underwriting gives a conditional approval – like saying to the buyer “maybe we’ll give you the money to buy this house if you jump through a couple more hoops for us. And we won’t even let the next department which actually generates the Loan Documents (Docs) do their job until these additional hoops have been jumped through.” This could be current pay stubs, updated bank statements, or an up-to-the-minute credit check. But the loan’s not going any further until these conditions are met. Period.

Prior to Funding Conditions – and then the Underwriter says “OK – we’re close. Go ahead and Draw Docs but I’m not going to release the money until these other conditions are met.” More hoops. But the good news it the loan process can inch forward!

Draw(ing) Docs – generate//create the buyer’s physical loan documents. These days, Docs are usually emailed to escrow. But there are still some dinosaur companies that have to print out and snail mail the Docs. Uggh.

Packaging the Docs – Once the buyer has gotten a cramp in his/her wrist signing the mountain of documents to secure the loan, the Escrow officer has to organize, copy, collate, bind, fed ex, fax, and other mysterious processes that constitute Packaging the loan documents to be returned to the lending institution.

Calling for Funds – Everything is nice and tidy, that pesky anal retentive Funder has dotted every i and crossed every t and given the green light for the bank to release the money from the loan into the Escrow account it belongs in to actually complete the purchase. Horray!

Set up to Record – this is when the stars all line up and there is peace in the Escrow universe. All the money is in – the funds from the loan and the buyers’ additional money to close (remainder of their down payment and closing costs.) The Escrow officer coordinates with the Title Officer to record the transfer of the Grant Deed from the seller to the buyer. Here in Orange County, recordings are done twice each day – once for everything submitted prior to 8 AM and once again for everything received before 3:30 PM. On days when the County Recorders office is open.

We’re Confirmed – What everyone is waiting to hear – this marks the Close of Escrow. This is when the County Recorders office give the Title Company confirmation that the Grant Deed has been recorded and the transfer of ownership is complete.

This is just my way of explaining these code words – as a Realtor representing buyers and sellers going through this process every day. I’m just trying to put it in every day terms and give you an idea of what it means to your Escrow experience when you hear these terms. Keeping it Real in Orange County Real Estate. Make sense?

Call me if you have any questions! Or if your ready to jump in!! Leslie 949-330-0789

Escrow Mumbo Jumbo – Real Estate Jargon Translated into English is a post from: Orange County Real Estate-Orange County Homes For Sale