Friday, September 23, 2011


Orange County home prices rose 9.5% in August (the latest full month available) and that's good news, no matter how the papers try to spoil it.  The papers posted that prices dipped to their lowest in 5 months, but that is a misleading quote.  Did prices go down? No.  Did the median price go down?  Yes.  There is a difference.  When you have nearly 400 more sales in one month, and the number of sales under $400,000 is nearly 4 to 1 to home sales over $700,000, your median price is going to fall.  It does not mean that prices dipped nearly 5% as recent headlines read.  In fact, even as prices fell in some areas by 1-3%, other prices rose depending on location, condition, and competition.  Homes that are in prime condition and properly staged to represent a home a buyer could picture themselves living in, are likely to garner over list price, especially if they are equity sales.  If the recent market has taught us nothing else, it is that buyers everywhere are tiring of the, "patience equity" achieved by hanging around for months during a short sale escrow.  They can last 3 months to a year.  Buyers are showing up in droves for properties that are in an equity position, prepared to pay a premium to be able to close in 30 to 45 days.  Sellers that are in that position, may well be in the driver's seat, especially if the only competition in their neighborhood is distressed properties.  The exact numbers will be featured in a later paragraph, but here are some big numbers for the state: there were 37,734 new and resale houses and condos sold statewide in August.  The number of sales typically does increase from July to August, but to give it some context, the lowest July is 29,764 in 1992 and a high arrived in 2005 of 73,285.  It is easy to see we're way above the low, but nowhere near  the high.  In fact the average is 48,344.  We do have a ways to go, but for some who remember the sting only California really felt in the early 90's, it's not your imagination, it was worse then,  than it is now.


Orange County's total number of sales was 2,780.  That was an increase of 13.2% over July and a 9.5% over August 2010. The median price declined 4%.  There were 1,834 single-family resales, 793 condos, and 153 new homes.  There were 1,264 sales under $400,000 and it plunged to 440 sales from $400,000 to $500,000.  Prices from $500,000 to $600,000 dropped even further to 341.  Just when you thought it couldn't go lower, $600,000 to $700,000 fell to 227 sales.  Finally, over $700,000 came in at 478.  There were 2,007 Notices of Default, and 1,466 Notices of Trustee Sale (the final step before foreclosure).  There were 712 properties that actually went to Trustee Sale; of those 204 were purchased by investors, and 508 went back to the bank.  Those 508 represent the next batch of REO or real estate owned, bank properties that will be hitting the market in future months.  Now some good news:  If it seems like all properties on the market these days are distressed, they truly aren't.  For example, of the 1,871 single-family resale (discrepancy from above numbers is simply a different data provider),  1,271 were equity, only 300 were short sales and 280 were bank owned sales.  In other words, 1,271 to 580.  A whole lot more equity activity is going on than people think.  And there is a better price point.  Sellers who worry that they won't get as much value because of comparable sales dragging them down, median per square foot values were, $288, $252 and $237, respectively.  We are not out of the woods, and no one is saying that we are, but, there are buyers, there are sellers, there are many people entering into real estate transactions, and it is possible to get a loan.


The loan limits will be falling across the board regardless of county.  However, it is important that you check with a lender to find out what the precise new limits are in your county.  That being said, interest rates are so low, that even with an extra quarter of third of a percent increase, buyers should still be in pretty good shape.  It is unclear at this moment whether or not Congress will raise the limits back up to their current levels.  They did it once before, but the word on the street is, not this time.  The limits roll back at the end of September.


One interesting thing happened in 2010...the rise in million dollar sales.  Last year saw 22,529 home sales over $1,000,000 in the Golden State of California, which was a 21% increase.  Statewide, 463 homes sold for over $5,000,000 and the most expensive home sold, based on public records, was a 35,378 square foot, 15 bedroom, 7 bathroom, Bel Air property, which sold for $50,000,000.  Of the million dollar buyers in 2010, 29% paid cash.  Those that did choose to finance, the average down payment was nearly 40%.  That makes sense, as most lenders are unlikely to give an interest only or 5% down payment.  What that really gets back to is the buyer having some skin in the game.  Sharing an equal amount of risk with their own money, and pledging to protect their investment by repaying the borrowed money.  This is a concept that a lot of buyers across the country forgot, as everyone got caught up in free money fever.  As we continue to right ourselves in our economy, these upper end buyers lead the way not only in equity gaining traction once again, but also in their confidence to buy the upper end product, of that most American made product... our homes.  

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