Tuesday, June 21, 2011


This was the headline of the Orange County Register on Sunday May 22nd.  The entire real estate section was focused on all the housing developments that are picking up steam by most So Cal builders.  The California division president of Fieldstone communities delivered the following quote, "It makes sense (to build) again.  We can deliver a product where there's demand.”  This column has been emphasizing for a few months, that the lapse in building over this fairly prolonged period of time, will result in heavy pressure on the resale market.  That's good for homeowners who have hung in there, despite the odds, and have stayed current on payments and are riding out this temporary loss of equity.  Why do I say temporary?  Let's look at investments for the last ten years.  There is not enough space here to do a comparison chart, but do your own.  Take a look at the S & P 500, the Dow Jones, Nasdaq, and Real Estate.  Let's see which one, held from 2000 to 2010 (the worst decade, all agree, in real estate) and see which investment fared best.  The short cut answer: real estate.  Also, with that investment, you managed to leverage your money and buy something somewhere between 10 X's and 5 X's your investment, depending on your down payment.  You more than likely fixed your housing cost, unlike renting, and if you didn't use your home like an ATM, you have built equity.  Let's not forget one of the best tax breaks for the middle class, interest deduction.  Buying real estate doesn't sound so bad... No wonder they're building again.  All agree building has been in the tank.  This column has reported how low permits and percentages have been off.  So after nearly 2 years of a blank in the building department, 28 developments have started the building process in one way or another.  According to Irvine-based housing consultant John Burns, "builders are coming out of hibernation."  The projects together include approximately 3,000 homes and townhouses and duplexes.  Compare that to the paltry 1,600 of 2008-09.  But catch up doesn't happen overnight.  Short sales and foreclosures will continue to be a part of the market mix for several years to come, and certain buyers will be drawn to them for either "patience equity" or investors looking to rehab and sell.  Equity, or standard sales, will continue to rule the qualified buyer who can afford to pay market rate for a turnkey property.


There is no doubt in anyone's mind, who works in real estate full time, that 2011 has had an uneven edge to it.  One month sales seem solid, the next, it sputters.  The real culprit in this is not affordability; it's at an all time high.  It's not selection, there is ample inventory, and it's not a lack of qualified buyers or motivated sellers.  The real culprit is the impression that the media has given as to the availability of money.  Many people think it's tighter than ever.  Getting a loan is difficult.  Actually, that's not true.  So if you are a buyer who has been staying away because you think you can't get a loan unless you have a 740 FICO and 20% down, go start looking for your dream home, because that's not the truth.  Do you have to be qualified?  Yes.  Do you have to have a job?   Yes.  Can you get a stated income loan?  No.  Can you get a fully documented FHA, VA, or Conventional loan?  YES!!


If you care about your right to own property, if  you believe in the last true deduction for the middle class that amounts to more than a hill of beans, this should be a cause you that catches your attention.   Eliminating home interest deduction is definitely part of the deficit reduction conversation, and it shouldn't be.  For those of us who are not wealthy, and cannot take part in the many loop holes that keep corporations and individuals from paying their fair share, this is our best deduction.  Please contact your federal senators and congresspersons and make your voice heard.  If we don't take a stand as homeowners, they will take it for us.  Fight for your right to the American Dream and to an honest deduction that should be a matter of course.


These were a couple of very encouraging headlines starting out the second quarter of 2011.  Not only were these figures higher than expected, but unemployment also dipped to its lowest level since 2008.  In a recent article OC Register writer Jonathan Lansner had a similar headline, "Job Growth Could Cure Ailing Market."  The gist of the article is really found in the Beacon Economics updated housing forecast for California.  Research manager Jordan Levine finds some optimism that is driven by, "rising employment and incomes, which we project to grow by between 4% and 6% on the income side and 2% to 3% on the employment side."  In other words, people really do need jobs to buy a house.  And their income needs to be proportional to the price.  Something the sub-prime and stated loan programs seemed to forget.  The other encouraging things was that these jobs were "real" jobs; not seasonal, not minimum wage, but substantial jobs in technology, import, service, management, and manufacturing.  Originally the Fed thought job recovery would be 5 complete years.  Statistics now suggest that job recovery will happen by installment, both in types of jobs and location.  Remember, it is projected (see last month for details) that California may be a little slower than some parts of the country, since we were hit so hard by the loan meltdown, but Southern California, specifically Orange County, was projected to emerge first.

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