Thursday, August 18, 2011


 Everyone gets numbers to lie about something sometime.  Are economists any different?  Is the desire to get numbers to match their predictions so important as to exclude reality?  The short answer... Maybe.  Here are some interesting food stats for thought.  All of the headlines have proclaimed a possible double dip.  This column disagrees, and rather thinks we are bouncing along the bottom, represented by slight upticks in certain areas and size of homes and downticks in others.  If you look at just closings, it would appear to be true.  But if you take a look at pending activity, that is sales posted through the Multiple Listing Service and in the real estate offices, you would find that activity is about par with 2010.  Steve Thomas, a real estate analyst, did precisely that.   The number of new sales, according to Steve, declined by just 47 for the past month when compared with a year ago.  In fact there were 3,060 pending homes this past month and 3,107 at this time a year ago, so demand was almost identical.  So where does the Voodoo Math come from?  The closings themselves.  No one in real estate right now will argue the point of how incredibly difficult it is to close transactions.  Title companies report healthy openings, given the market, in fact numbers month over month, all year, that are exceedingly close to those of 2010.  And yet revenue, is low.  Why?  Two really good reasons; first of all, short sales can take 6 to 10 months to close.  So even if your pending sales are at a solid number, the trickle-down effect takes a lot of momentum away.  It is excruciatingly slow to close transactions for other reasons, such as the loan.  Ask any lender, you can have a fully qualified buyer and the process is still long and arduous.  Washington, in its infinite wisdom has placed all kinds of "safeguards" that do nothing more than muck the waters and make it virtually impossible for honest loan officers to do their jobs.  Once again, it's too much, too late.  The offending "lenders" responsible for the sub-prime meltdown, left the business 3 years ago.  Now it is seriously hobbled, by Washington's bureaucracy.  Don't believe it?  Talk to any loan officer with any bank or mortgage company.

The other big fallacy?  There are only distressed sales.  Not true.  Are their foreclosed properties being offered by the banks as REO listings (real estate owned)?  Yes, of course.  Are there short sales?  Yes, of course.   But not as many as the papers would have you think.   See the next column for exact numbers.  But there are an increasingly high number of "equity" or "full" sales.  There are plenty of buyers who will pay a premium for the opportunity to buy a turnkey property with no deferred maintenance and no 6 to 10 month escrow, that needs bank approval.  Another fallacy is that the REO comparables ruin it for the equity seller.  Every area is different of course, but numbers show that for the most part, equity sellers maintain a much higher price per square foot than distressed properties.  The point is, consult a Realtor.  Talk to an expert.  The papers want to sell papers.  That's fine.  But we the general public, owe it to ourselves to do our own investigating.  Because, real estate is a great deal right now, prices are the lowest we may see in our lifetime, and interest rates are lower than they were in the 1950's and they won't stay low forever either. What is your situation?  Only you know, but you owe it to yourself to check it out and not just from the papers.


All Southern California counties (Ventura, LA, OC, Riverside, San Bernardino, and San Diego) sold 18,394 homes in the month of May (the last complete month available).  That was up 0.3% from April, but down 17.4% from a year ago.  (closings, not pendings)  The total number of sales for Orange County was 2,664 and that was off 5.6% from April and 18.2% from a year ago.  Given those overall numbers, here are some worth noting:  There were 1,230 full sales (equity), only 266 short sales, and only 248 bank owned closings.  This is for single-family resale.  Note how many more equity sales there were than distressed.  Condos fared not as well; the ratios were closer to 50/50.  There were 378 full sales, 198 short sales, and 194 REO or bank owned.  Overall median price per square foot was $285 for full sales, $248 for short sales, and $241 for REO.  There were 1,201 notices of default recorded, 1,720 notices of trustee sale recorded.  The disparity in these numbers is mainly due to banks finally finishing the foreclosure process for many homes that have been in default, literally, for years.
There were 473 properties that went to foreclosure auction, that no one bought, and they became the latest crop of bank owned properties.  However there were 222 properties that were purchased at auction by private parties.   Again there was a large number of homes sold under $400,000 -- 1,155 to be exact.  The opposite end, the number over $700,000 was 483.  All other sales fell in between.  (Source: Dataquick / Gregorich/ Public Records) 


Jonathan Lansner of the Orange County Register rightly reported that 1 in 6 homeowners in OC have no equity.  Well, he got his info from CoreLogic, a real estate data and information services company.  What they have is an estimate of 17.5% of homes are "upside down."  This is based on calculations down payments and cash out refinances.  Nationwide, it is estimated to be 22.7% that are upside down, so So Cal isn't looking so bad.  Although there is no arguing that equity is in a tenuous position for many homeowners, this column does take issue with another headline in the Register that read, "Orange County housing still unaffordable."  Really?  You have nothing better to write than a pessimistic, misleading headline like that?  If one went on to read the article, it stated that OC median housing prices were 2 and 1/2 times greater than the US median price.  What a surprise.  So we are pricier than Des Moines, Iowa, or Little Rock, Arkansas, or Topeka, Kansas or a myriad of small towns across America.  Would it not have been more "Apples to Apples" to have compared affordability with other metropolis' such as San Francisco, Los Angeles, Boston, New York, or Miami.  How do we fare then?  Actually, OC has never been so affordable to so many since the early 1970's.

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