Sunday, February 24, 2013


Let's put it this way, California hasn't looked this good to buyers in 8 years.  All of us who live in the Golden State, and who own or have owned property, have borne the brunt of a grueling recovery.  Actually, it was a market in free fall, that caused all kinds of pain, wrecked havoc not just in our fair state, but the shot heard round the world.  But a lot has changed in the last 8 years.  Part of the pain of a recession is that there seems no way out but to just grind it out.  Time, stamina, and determination have been local themes to Californians and in fact citizens of real estate everywhere.  Now we find builders are back in a big way, inventories are at historic lows (and by low, try less than half of the top of the 2006 market), money is cheap, and our state especially, is drawing buyers from all over, particularly cash buyers.  In fact, according to DataQuick, one in three Orange County buyers in 2012 paid cash.  Not surprisingly, the number of deals-- greater than 10,000, was the highest since California's last down market of 1992, twenty years ago exactly.  Why this insistence on history repeating itself?  Some would say it is because real estate is cyclical.  Others would say it is because people never learn that what goes up must come down.  Cycles do happen in real estate, and the cause for each generation's ups and downs do differ.  But germane to the process is a bubble, expanding for that economy's purpose, driven by that unique component of that expanding market.  But purely speaking, it is supply and demand driven.  The fuel to the fire this last time around was free loaded lending, irresponsible at best, and many would argue borderline illegal at worst.  Recovering from that has been painful and difficult for not only sellers and buyers, but the professionals left behind to deal with the cleanup of the heyday.  It is safe to say that we have today, a much healthier housing market, real lending standards, and the current pace of selling is based on legitimate pent up demand, from both move up buyers, first time buyers, and investors who still recognize the bottom of a market, although quickly rising.  They are coming in with cash from all over the world, some to stay in the market, holding properties as rentals, some still trying to "flip" properties to the many buyers out there, and some buying luxury second homes.  Read on and you'll learn some interesting information on current numbers, sales, foreclosures, and tips on buying and selling, and why the perfect time to do both is right now!


The last full month of numbers available is December.  The total number of sales was 3,070.  That number is up 19.4% from December of 2011.  The median price of homes rose in Orange County 9.2%, which outpaced the country's uptick of 5.5%.  There were 2,010 total single-family resale transactions, 796 condominiums and 264 new homes that closed escrow in December.  The rise in new homes was 31% from the same period a year ago, and watch for that number to expand rapidly over the next 5 years.  The total number of Notices of Default for all of So Cal for the fourth quarter was 20,879.  Compare that to the same quarter of 2011 and that number jumps to 34,013.  Orange County's number plummeted 49.5% from 4,297(fourth quarter 2011) to 2,169 for 2012.  A point of interest: million dollar home buying reached a 5 year high in 2012.


The first reasons to list now jump out at you... 1)Demand is high--everyone has been waiting for this moment, so perfect a combination is low interest rates, and a bottomed out market.  2)Supply is low--just not enough to go around.  Your home has a multiple audience, and that's a good thing.  3)New construction is just under way.  Your home has a head start in the fact that it's ready to go now.  A resale home in competition with a shiny, bright, brand new home, will frequently lose out.  List now, while that competition is still low.  4)Interest rates--Does anything else have to be said about 3.5% ??? It won't last forever.  The higher interest rates go, the more buyers are priced out of your homes price range-- that means less competition and fewer multiple offers and that means less $$$ for your home.  5)Timelines are shorter--the pipeline is not as full this time of year.  Shorter escrows mean less time for things to go wrong.  And that's a good thing.


1)Prices are on the rise.  The Home Price Expectation Survey polls 100 economists, investment strategists and housing market analysts.  All report to expect rising prices for the next 5 years.  2)Mortgage rates will increase.  They are being kept artificially low to keep our economy moving.  Inflation is a concern and is hovering nearby.  They can't stay low forever.  3)Rents are continuing to skyrocket.  And you can't deduct your rent.  Interest deduction on your primary home remains one of the very best write offs for the average tax payer.  4)New Mortgage Regulations to be announced--6 regulators, including the Dept. of Housing and Urban Development, the Office of Comptroller of the Currency, and the SEC are currently drafting the new Qualified Residential Mortgage (QRM) rule.  It will concern minimum down payments and minimum FICO scores.  Buying could get a lot tougher.  5)Timelines will be shorter.  


Who knows what the future holds.  The economy seems to be recovering, but there are a lot of causal factors that could derail progress.  But this author thinks in a positive light.  Corporate earnings posted extremely well in the last report.  Jobs are being added.  Foreclosures are down.  And it would seem world over, that there is more stability and forward movement.  In light of your circumstances of what is best for your family and your economic goals, look to see what real estate can add to your investment portfolio.   Rentals, second homes, and your primary home remain great investments because of the ability to leverage.

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