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

Mission Viejo home buyers – check out this new REO listing before it hits the open market! 

This could be the Mission Viejo home you’ve been searching for.  Almost 1500 square feet and detached, all three bedrooms are upstairs.  The master has a walk-in closet while the two additional bedrooms have a Jack and Jill bathroom, and one has a walk-in closet.  this home also has an upstairs laundry room (where most of the laundry is, right?)

There’s an interest list started and private tours can be arranged before it is listed in the So Cal MLS.  If you are interested in Mission Viejo homes for sale and pre-approved for a purchase price in the low $400,000’s – call me for more information.  Leslie 949-678-3373

Mission Viejo REO – Hurry Before it Hits the Market! is a post from: Orange County Real Estate-Orange County Homes For Sale

Could it be graduations, the end of the tax credit, Europe’s influence, a temporary housing lull? Only time will tell, but the Orange County housing market has gone over a speed bump and has slowed considerably.

Housing Demand

Over the past month, housing demand has dropped by 17%.

Demand, the number of new pending sales over the prior month, decreased by 676. After dropping 5% a couple of weeks ago, the dip in demand has gained a bit of momentum. This could be the result of the end of the tax credit, with first time home buyers rushing to purchase with the end of the tax credit on April 30^th of last month. Cyclically, there is a small lull in the market due to the graduation season, but never to this level. There has been so much attention paid to the European debt crisis, buyers could be waiting for clarity in recent economic forecasts, they seem to be all over the board. The speed bump in demand has affected every price range. WARNING: if you are a buyer, the lower price ranges are still incredibly hot. Homes priced below $1 million have an expected market time of 2.52 months. That is off from 2.12 a couple of weeks ago, but still incredibly hot. Buyers can expect multiple offers and a tremendous amount of competition. The upper end, homes priced above $1 million have an expected market time of 8.19 months, the higher the price range, the slower the market.

Active Listing Inventory

From the beginning of the year, the inventory has slowly increased, unabated.

Thus far this year, the active inventory has increased from 7,165 homes to 9,839 homes today, a 37% increase. In just the past couple of weeks the inventory has risen by 283 homes, a 3% increase. This is partially due to a slowing in demand, but it also has a lot to do with many sellers with equity in their homes testing the market with unrealistic pricing. 2006 and 2007 were plagued with unrealistic homeowners who unsuccessfully attempted to sell their homes by trying to sell their homes for prices well above the most recent comparable and pending sales. In 2008 and 2009, homeowners knew that the market was difficult and success

Foreclosures and Short Sales

The number of active distressed homes on the market has reached June 2009 levels.

Like the total active listing inventory, the distressed inventory has slowly increased from 2,555 total foreclosures and short sales at the beginning of the year to 2,991 today, a 17% increase. Not quite the 37% increase like the total inventory, but, none-the-less, significant. Foreclosures have increased from 375 at the beginning of the year to 533 today, a 42% increase. Short sales have increased from 2,180 to 2,458, a 13% increase. There have been more foreclosures to hit the market thus far this year, but there are reports from the trenches that many banks have placed some of their foreclosed homes on the market at unrealistic levels and are not moving. Do not get me wrong, distressed sales are still ON FIRE. It’s like going from scorching105 degree temperatures to 95 degrees, still HOT. The number of active distressed homes on the market, all short sales and foreclosures combined, increased by 97 homes in the past two weeks and now total 2,991, or 30.3% of the current active inventory. The number of foreclosures within the active listing inventory increased by 54 homes in the past two weeks from 479 to 533. The expected market time for foreclosures is 1.58 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 43 homes over the past two weeks and now total 2,458. The expected market time for short sales is 1.97 months, also a HOT seller’s market. Everybody is still looking for a deal, so there’s a lot of competition in purchasing distressed homes.

Interest Rates

Interest rates surprisingly remain at historically low levels.

Interest rates were forecast to start to climb after the Federal government stopped purchasing pools of loans in April, but that has not come to fruition so far. This has a lot to do with the unexpected European financial debt crisis. International investing has turned to a flight to safety, and purchasing United States Treasury Bonds has been at the top of the list. When this happens, interest rates drop. All forecasts still point to an increase in interest rates, about one point in the next year, but the increase has been temporarily stalled. Buyers can still take advantage of interest rates that will not return to the current historically low levels for many years to come.

Originally Posted at Orange County Real Estate

Orange County Housing Report: A Spring Pause? is a post from: Orange County Real Estate-Orange County Homes For Sale

This super-clean home on the Coyote Hills Golf Course in the gate-guarded Pinehurst Greens neighborhood has been on the market almost 4 weeks, and the bank says, “Sell it now!”

Previously offered at $679,900, the list price has now been reduced to $649,900.

Check out the Virtual Tour – three large bedrooms, three baths, a beautiful well-maintained neighborhood, and peaceful back yard garden situated on the 15th hole of the golf course.

Bring an offer and let’s do a deal!

$30k Price Reduction on Foreclosure Home in Fullerton is a post from: Orange County Real Estate-Orange County Homes For Sale

This cute little Single Family Detached home in a wonderful neighborhood is being prepared for market.  It has three bedrooms, one and a half baths, and over 1200 square feet of living space.  Bank Owned homes for sale in Mission Viejo don’t last long these days, so if you’re interested drop me a line or give me a call.  I’ll arrange a private showing and keep you informed about when it might be ready for sale.

Originally Posted at Orange County Real Estate

New Pre-Market Bank Owned Home in Mission Viejo is a post from: Orange County Real Estate-Orange County Homes For Sale

In Pictures: The Severity Of The Foreclosure Crisis Depends On Where You Live is a post from: Orange County Real Estate-Orange County Homes For Sale

Is This THE SIGN That We’ve Hit the Bottom of the Orange County Real Estate Market?

Home buyers take note – when an Orange County, CA REO home hits the market for sale at $177 a square foot, when the recent neighborhood sales indicate a market price of $206 a square foot – what do you think is the outcome?  Before you answer that question – you should know the facts.  So read on!

Orange, CA REO Home Sold in a Weekend for Waaay Over List Price

This well-maintained (read that to be “not a disaster – actually in really decent shape”) REO home for sale in the city of Orange is a two story, 4 bedroom 3 bath home with volume ceilings, island kitchen, pool, spa, gated side yard on a cul-de-sac with beautiful landscaping, room for an RV, and easy access to all the local shopping, freeways, and restaurants – with over 2300 square feet  – getting the picture?  This central Orange County beauty was offered for sale in the Orange County MLS on Friday, and brought in almost 20 offers in less than three days (over the weekend, no less) – most OVER the asking price by 10 – 15%,  and several all cash.  That puts the sales price for this lovely Orange County home right back to current maket value.  What got these buyers off the fence you may ask?  The lure of very agressive pricing and the reality of what the market will bear.  What’s the point you ask?  The point is the prices on Orange County Real Estate are holding – and holding strong.

So take advantage of all the incentives, government stimuli, and great interest rates to go out and find an Orange County home to buy – before you read that the bottom of the Orange County Real Estate Market came today – and you missed it.  You waited until it was too late to claim your stake as a buyer at the true bottom of the market.  But don’t beat yourself up too badly – there is still time to make a great deal on an Orange County, CA home for sale and emerege a true winner in this chaotic market!

Feeding Frenzy – REO Homes Testing the Bottom of the Orange County Real Estate Market is a post from: Orange County Real Estate-Orange County Homes For Sale