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

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

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

Finally, summer is here and so are home sellers’ wild expectations.

THE Best Time of Year to Sell

Here’s a hint: it is NOT Summer.

Every year the real estate industry deals with the same cyclical phenomena, homeowners who feel that summer is the best time of year to sell.  Unfortunately, buyers do not agree.  Buyer activity actually peaks during the spring.  Summer is the second best time of the year to sell.  Can somebody please communicate that to all of the Sellers who have been fooled and are placing their homes on the market in droves?  This year has been no different, and with the end of the Federal $8,000 Tax Credit on April 30th of this year, buyer demand has definitely already peaked.  Homeowners are fooled into thinking that the Orange County real estate market is the hottest during the summer because the county is a summertime vacation destination.  Since the process in finding a home and closing takes at least a few months, more buyers start looking during the spring.  In finding a home during the spring, buyers can close and move over the summer months.  So, buyer DEMAND is higher during the spring and CLOSINGS are then higher during the summer.  If buyers find something during the summer, they close during the fall.  NEWSFLASH: if they have kids, school has already started.  For parents, moving while the kids are in school is not typically easy.  Thus, parents prefer to close during the summer.  We are almost through July, the window of opportunity to close before school starts is fading fast.  What is reported by the media does not help either.  Newspapers and the nightly news report on SOLD data.  Rarely do they talk about current demand, homes placed into pending status.  As more and more homeowners hear about the incredible SOLD statistics, they get excited to hear about an increase in the median sales price and an increase in the number of closed sales.  The data is very accurate, BUT is a snapshot of activity 45 to 60 days back when the buyers first wrote the offer to purchase, springtime.  Homeowners are making decisions based upon what is happening in the rearview mirror. Homeowners need to be aware of current demand, a snapshot of the most recent pending activity.  In doing so, they will realize that demand is down 28% since peaking back on April 29th.

Active Listing Inventory

The inventory has grown unabated by 54% so far this year.

The Orange County housing inventory grew by the largest amount so far this year, adding an additional 418 homes in the past two weeks and now totals 11,235.  The market has not breached the 11,000 mark since the beginning of April 2009.  Last year at this time the inventory was at 8,895 homes, 2,340 fewer than today.  The inventory has not stopped growing at all this year as more and more pent up homeowners have opted to place their homes on the market at unrealistic levels.  The same media reports of median home price increases and year over year increases in the number of closed sales have fooled these pent up sellers into believing that the market has recovered and that it is a great time to take advantage of the market.  It is true that agents have tons of buyers in the market that have written many unsuccessful offers thus far and homes that are priced well are receiving multiple offers.  The market disconnect lies in the fact that inventory has been increasing on the backs of unrealistic homeowners who have placed their homes on the market at overpriced levels.  Today’s “spreadsheet buyers” are not willing to pay much of a premium for a home just to end their unsuccessful string of offers.  They will maybe pay an extra few thousand dollars, but not the 5 to 10% premium many sellers are vying for.  As more overpriced homes are placed on the market, it is just a matter of time before buyers start getting discouraged and slow their effort in finding a home.

Housing Demand

Not much of a change in demand

It is important to reiterate that demand has already dropped 28% since peaking in the Spring.  The drop has been more profound this year due to the end of the Federal First Time Home Buyer Tax Credit at the end of April.  Demand, the number of new pending sales over the prior month, increased by 10 in the past two weeks and now totals 2,870.  From here, demand typically rises slightly and peaks at the end of August before slowly deteriorating for the remainder of the year.   Last year at this time demand was at 3,306 pending sales, 436 more than today.

Expected Market Time

After bottoming in April, the expected market time for OC homes has increased by 66%

With an increase in the active listing inventory and almost no change in demand, the expected market time increased from 3.78 months two weeks ago to 3.91 months today.  The overall market is still a “seller’s market,” but it is moving in the wrong direction.  Remember, this seller’s market is different.  There may be a lot of buyers and a lot of competition, but spreadsheet buyers are unwilling to pay much of a premium over the last comparable sale.  At the end of April, the expected market time was at 2.35 months.  Last year at this time the expected market time was at 2.69 months.  For homes priced above $1 million, the expected market time is 10.68 months.  Contrast that with homes priced below $1 million where the expected market time is 3.37 months.

Foreclosures and Short Sales

Over the past two weeks the active distressed inventory has grown the most this year.

The active distressed inventory grew by 150 homes over the past two weeks and now totals 3,457 total foreclosures and short sales, levels not seen since May of 2009.  The active distressed inventory started the year with 2,555 homes and has since grown by 35%.  The distressed inventory now represents 31% of the current active inventory.  Last year at this time, there were 2,616 distressed homes on the market, 841 fewer than today.  The number of foreclosures within the active listing inventory increased by 35 homes in the past two weeks from 578 to 613.  The expected market time for foreclosures is 1.79 months, 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 115 homes over the past two weeks and now total 2,844.  The expected market time for short sales is 2.71 months, still a HOT seller’s market, but slower than the 1.53 month market back in April.

Orange County Housing Report: Best Time of Year to Sell is a post from: Orange County Real Estate-Orange County Homes For Sale

So, you’re browsing through the online listings of homes for sale in Orange County, and you come across a great little house that says, “No Appraisal Financing!”.  Woohoo!  That sounds easy…

HomePath

You may have heard of a new Federal home loan program called HomePath.  HomePath loans feature several tempting benefits, such as low down payments, flexible terms (fixed-rate, adjustable-rate, or interest-only), low down payments, no mortgage insurance, and no appraisal fees.  In fact, you can get a HomePath loan with no appraisal at all!

Why would someone lend you money on a home with out an appraisal to verify the value of the property?  Because this feature is only available on Foreclosed homes that Fannie Mae owns.  In other words, since Fannie Mae owns the REO, they’re willing to loan you the money to buy it from them without an appraisal – as long as you accept it “AS IS”, with all potential repairs and rehab your responsibility.

Know Your Options

In addition to this one major caveat, there are other reasons you might want to consider something other than a HomePath loan.  HomePath loans tend to have higher pricing adjustments that will push your interest rate (and monthly cost) much higher than it would be with a conventional loan, or even an FHA loan with mortgage insurance.  If you’re interested in a home that requires major repairs, you can look into an FHA 203k loan – and build the cost of the repairs into your financing.

What’s the bottom line?  There is no free lunch, and if it seems too good to be true it probably is, so home buyer beware.  The “no appraisal” feature of HomePath loans was designed with a specific purpose of giving buyers flexibility in purchasing Fannie Mae REO’s, but it comes with a cost that may make other programs a better choice depending on the specific situation – on the specific Orange County home that you want to buy.  The details matter!

A Home Loan with NO APPRIASAL? Too Good to Be True? 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.

The Orange County Housing Inventory has inflated by 48% since the beginning of the year on the backs of unrealistic sellers.

Unrealistic Sellers

Overpriced homes have flooded the market.

Reports of tremendous competition among buyers have fueled unrealistic seller expectations.  Reports of multiple offers and homes selling quickly have fueled it as well.  Reports of an increase in the median sales price did not help either.  Yes, there has been a lot of demand and homes have sold quickly, procuring multiple offers.  However, none of this would have happened had it not been for a major increase in home affordability.  There has been a culture shift in the past few years where people have gone from spending frivolously (and often recklessly) to saving, paying off debt and making sure that every penny counts.  Five years ago home buyers were racing to buy homes at whatever price.  Today, buyers have become “spreadsheet” buyers, not wanting to pay much more than the last closed sale, regardless of the amount of competition.  Sure, after writing offer after offer after offer a buyer is more willing to up the ante a bit and pay a couple thousand dollars above the most recent comparable sale, but they are NOT going to pay an extra $25,000.  That is how we have experienced slight appreciation over the past year.  In the hottest ranges, buyers have been willing to pay a little bit extra to procure a home.  Over the course of the past year, the small incremental increases have amounted to a positive change in pricing.  But think about it; a 5% change in pricing did not happen overnight.  The reports in a change in pricing are YEAR OVER YEAR.  Back in the heydays of the mid-2000’s homes were increasing a lot faster.  That just is not the case this time around.  Homeowners have been fooled, thinking the market has not just bottomed, it has recovered.  There have been so many homeowners who have sat on the sidelines waiting for the market to recover so that they could finally sell.  These pent up sellers have been placing their homes on the market at ridiculous values.  They have taken an increase of 5% over a year to mean that they can price their home 5% above the most recent comparable sale.  Spreadsheet buyers are just not going to bite.  The economy is too fragile for this line of thinking.  Yes, there is a premium to selling a home with equity versus the short sale down the street; HOWEVER, a buyer is not going to pay thousands of dollars more.  The bottom line: sellers really need to take a hard look in the mirror and ask whether or not they really can drop to the realistic fair market value of their home.  If not, they need to stop wasting everybody’s time and pull their home off of the market.

Active Listing Inventory

The proof that unrealistic sellers have flooded the market, an unabated increase in the inventory.

This year the Orange County housing inventory has grown by 3,524 homes, a 48% increase.  In the past two weeks, the inventory has grown by 355 homes, a 3% increase, and now totals 10,817.  Last year at this time the inventory was at 8,946 homes, 1,871 fewer than today.  Every range has experienced growth, but the most substantial growth can be found between $250,000 and $1 million with a 71% increase.

Housing Demand

Independence Day typically marks a drop in demand, this year is not exception.

Since artificially peaking at the end of April due to the end of the First Time Home Buyer Tax Credit, an $8,000 incentive, demand has dropped 28%.  Demand, the number of new pending sales over the prior month, decreased by 247 in the past two weeks and now totals 2,860, levels not seen since January of this year.  From here, demand typically rises slightly and peaks at the end of August before slowly deteriorating for the remainder of the year.

Expected Market Time

After bottoming at the end of April, the expected market time for homes in the OC has increased to its highest level of the year.

With an increase in the active listing inventory and a decrease in demand, the expected market time increased from 3.37 months two weeks ago to 3.78 months today.  The overall market is still a “seller’s market,” but it is moving in the wrong direction.  Remember, this seller’s market is different.  There may be a lot of buyers and a lot of competition, but spreadsheet buyers are unwilling to pay much of a premium over the last comparable sale.  At the end of April, the expected market time was at 2.35 months.  Last year at this time the expected market time was at 2.66 months.  For homes priced above $1 million, the expected market time is 10.61 months.  Contrast that with homes priced below $1 million where the expected market time is 3.22 months.

Foreclosures and Short Sales

So far this year, the distressed inventory has grown by 29%.

The active distressed inventory has increased from 2,555 homes at the beginning of the year to 3,307, levels not seen since May of 2009.  The distressed inventory now represents 31% of the current active inventory.  Last year at this time, there were 2,766 distressed homes on the market, 541 fewer than today.  The number of foreclosures within the active listing inventory increased by 19 homes in the past two weeks from 559 to 578.  The expected market time for foreclosures is 1.73 months, 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 71 homes over the past two weeks and now total 2,729.  The expected market time for short sales is 2.52 months, still a HOT seller’s market.

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.

Orange County Housing Report: Hey Sellers, Get Realistic!! 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.
After dropping nearly 22%, Orange County housing demand is now in a normal summer cyclical pattern.

Housing Demand:

Over the last 5 years the average drop in demand was 3.2%, this year it was only 2%.
Whatever the reason, the end of school, graduation, the start of summer, demand cyclically drops at this time of year.  The only difference this time around is that demand had already dropped 20% due to the end of the Federal first time home buyer tax credit.  When demand reached 3,979 pending sales on April 29th, the height for 2010, and the highest threshold in almost five years, there was a rush to purchase by first time home buyers.  That segment accounted for 25% of Orange County’s housing activity.  With so many of them pushing to purchase by a deadline, it left a void in demand for the six weeks that followed the expiration.  It wasn’t until the past two weeks when the normal housing pattern for Orange County reemerged.  Earlier in the year, the market followed a normal pattern as well, until March and April.  Demand grew by 30% in those two months, and then subsequently, dropped almost 22% in May and June.  Demand, the number of new pending sales over the prior month, decreased by 60 in the past two weeks and now totals 3,107.  For the second report in a row, demand is less than the

prior year with 522 fewer pending sales compared to 2009.  From here, demand typically falls in the next two weeks and then climbs at the end of July.  With the distraction of the Fourth of July weekend coming up, that sounds fairly accurate.

Active Listing Inventory:

The inventory has continued to grow unabated since the beginning of the year.
Last year the inventory dropped by 36%.  This year, however, the Orange County housing inventory has grown by 3,034 homes, a 43% increase.  In the past two weeks, the inventory has grown by 345 homes, a 3% increase, and now totals 10,469.  This is also the second report in a row where the inventory is higher than last year.  Last year the inventory was at 9,188 homes, 1,274 fewer than today.  The drop in demand is partially to blame for the increase in the inventory, but keep in mind that it was still increasing unabated when demand was at its highest level in years.  We have also heard that the market is really hot in lower price ranges, which is true, just ask any buyer.  However, all ranges have experienced an increase in inventory, especially homes between $250,000 and $1 million.  For homes priced between $500,000 and $750,000, the inventory has increased by 60%.   The reason for the increase in inventory is because there are many homeowners who have held off on selling their home, pent up sellers, who have been waiting for the market to turn so that they could take advantage of the market and sell their home.  Homeowners have heard about the hot market in the lower ranges with a lot

of activity, multiple offers and homes selling for very close to their asking prices, and in many cases, above their asking prices.  The problem is that many of these pent up homeowners are placing their homes on the market at unrealistic levels, thousands above the most recent comparable and pending sales.  Buyers in today’s market have become “spreadsheet buyers,” pouring over the comparables and not wanting to pay much more than the last buyer.  With demand hot, many are willing to pay a bit of a premium to purchase their dream home, but more along the lines of an extra $5,000, not $15,000 or more.  As long as the overall economy’s health is in limbo and more distressed homes are hitting the market, buyers are unwilling to pay an extravagant premium to own a home.  As a seller, it is imperative to carefully consider all recent comparable sales, taking into account location and amenities, and price accordingly.  Then, listen carefully to how the market responds to your home and make any necessary adjustments.

Foreclosures and Short Sales:

Since October 1, 2009, the distressed inventory has grown by 37%.
The active distressed inventory has increased from 2,346 homes on October 1st and now totals 3,217, levels not seen since May of 2009.  The distressed inventory now represents 31% of the current active inventory.  Last year at this time, there were 2,919 distressed homes on the market, representing 32% of the active inventory.  The number of foreclosures within the active listing inventory increased by 29 homes in the past two weeks from 530 to 559.  The expected market time for foreclosures is 1.52 months, 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 108 homes over the past two weeks and now total 2,658.  The expected market time for short sales is 2.28 months, still a HOT seller’s market.

Interest Rates:

Interest rates are at a 60 year low and will NOT last.
Everybody is so focused on price and the current historically low interest rates have become an expected part of our real estate market.  However, with all of the money that the Federal government has poured into our economy, there is a real threat of major inflation on the horizon.  One of the only ways to counter the threat is to raise rates.  Due to the lackluster economy, the Federal Reserve is currently stuck and unable to raise rates in the short run, but sooner or later they will be forced to make a change.  Rates are predicted to increase to 6% over the course of the next year.   As interest rates rise, buyers can afford less of a home.  This is best illustrated in an example.  For a buyer with an income of $100,000 and putting 20% down, a rise in interest rates from 5% to 6% equates in a drop in home affordability from $590,000 to $540,000, a $50,000 drop.  Buyers waiting for that “good buy” may find it next year, but at a price, with higher rates and a larger monthly payment.

Orange County Housing Report: Demand is Normal Again is a post from: Orange County Real Estate-Orange County Homes For Sale

Interest rates touched all time lows this week, then bounced up a little.  The Fed announced concerns about the global and US economy at the policy meeting this week and stated their intention to keep rates near zero for the foreseeable future.  No V shaped recovery in the U.S. Equities, Bonds, commodities, and rates all down.

More Financial News

Here’s the latest scoop from Scott Glass of Wells Fargo in Mission Viejo

FNMA/FHLMC Rates below 5%

Conforming and high balance conforming loans are pricing below 5% with no discount points paid.

Jumbo Rates in the Mid 5% range

Jumbo rates are staying in the mid to high 5% range without paying discount points. 5/1 Arms are pricing below 5%. Limited capital and very tight underwriting guidelines are still major factors in the Jumbo market

FHA Rates also Drop below 5%

FHA rates are also dropping and are bouncing between 4.75 and 5.125 on 30 year loans. 5/1 ARMS remain below 4%.

What Does It Mean to Me?

The bottom line is that mortgage interest rates have never been lower, and combined with the drop in home prices over the last few years, this may be one of the best home buying opportunities in the history of Orange County Real Estate.  If you’re thinking of buying your first home or making an investment, now is the time to act!

Mortgage Rates Flirting with All Time Lows is a post from: Orange County Real Estate-Orange County Homes For Sale

The drop in demand ever since the end of the Federal first time home buyer tax credit on April 30th is slowing and leveling off.

Housing Demand

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 rear view 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

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

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

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 30th 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.

Orange County Real Estate Activity by City

Orange County Housing Report: Demand Returning to Normal is a post from: Orange County Real Estate-Orange County Homes For Sale