WHAT ARE THE ACTUAL NUMBERS?

The last complete month of data available paints a stable, if still somewhat troubled story.  The total number of sales was 2,929 for single-family resale and condominium resale.  This does not include new home sales for the month of July.  Single-family posted 1,547 equity sales, 327 short sales and 224 bank owned listings sold.  Condos had 486 full sales, 232 short sales and 113 bank owned.  Although distressed sales will be with us for the foreseeable future (at least 3-4 more years), equity sales are climbing, indicating many sellers believe the market stable enough to warrant their return.  There were 343 trustee sale auctions, with 170 being purchased at the sale by investors and 173 returning to the bank, where they will eventually become REO listings.  The total number of Notices of Default was 1,406 along with 1,008 Notices of Trustee Sale.  Both these numbers are down drastically from 2011.

FIVE BIGGEST REAL ESTATE OPPORTUNITIES GOING FORWARD

1) The 6,000,000 25-34 year olds who are still living at home.  This generation scored over 65% on belief in home ownership and a desire to buy.  2) The "green" initiative.  Conserving and changing how we live in our homes will shape the next 20 years.  This is both for new construction, which will be hurrying to catch up once it starts up and also for existing home improvements.  3) The ever increasing Latino population and their belief in home ownership.  4) Baby Boomers rapidly approaching retirement with special housing needs, the need to downsize, and also their financial aid to their children to buy.  5) The new opportunity in short sales.  The banks continue to see its usefulness as a tool to reduce bad loans, and this will continue to create buying opportunities to the patient buyer.

4 MYTHS OF SHORT SALES

Other than the fact that you must be patient and hang on for the roller coaster, there are many positives to buying a short sale.  But did you know there are also many positives to selling as a short sale?  Don't think that it isn't possible for you, rather arm yourself with the facts and talk to your lender.  1) Banks don't want to participate -- Nothing could be farther from the truth.  Banks know that they will save on average $50,000 per property, by selling short over the carrying costs of a bank owned listing.  2) No options to foreclosure -- Simply not true.  Many homes have had 2 or 3 postponements of trustee sales in order to allow a short sale to close.  There is also the "deed in lieu of foreclosure, that some banks will allow.   3) Short sales will cost me money out of pocket -- Definitely not true!  Not only will you have no cost to close, after submitting the proper hardship package, but in some cases the seller receives $3,000 to $25,000 from the bank at the close of escrow.  This is no guarantee, of course, as it depends on your lender and your type of loan.  4) If I go through a short sale, I cannot buy another house for a long time. -- Well, first of all, if a home is foreclosed on, the waiting period to buy again is approximately 7 years.  So you can't do any worse with a short sale.  If you have mitigating factors as to why you had to move and sell short, and you were not behind on your payments, in many cases, you can buy again, immediately.  Most short sellers are looking at between 1 and 3 years to re-enter the housing market, again depending on how badly credit was bruised and how quickly it has been repaired.

WHAT WILL NEXT 5 YEARS BRING TO HOUSING PRICES?

Does this sound like a loaded question?  There may be as many answers to that question as there are people in the USA, but it seemed like a good lead off question for this month's report.  In fact, the opinion reflected in the following numbers are reported by "Pulsenomics", a group of 100 economists, investment strategists, and housing market analysts.  After their conference they reported housing prices to start upward in 2013.  Here is the 5 year projection:  (A) 2012 - (-).4%  (B) 2013 - (+)1.3 %  (C) 2014 - (+)2.6%  (D) 2015 - (+)3.2%  (E) 2016 - (+)3.5%.   The average pre-bubble (1987-1999) annual appreciation was 3.6%.  How can Pulsenomics make such a prediction when the housing market still seems in such dire trouble?  There are several factors to consider.  Firstly, the plummet of "shadow inventory."  It is at its lowest number since 2008.  In fact, according to Mark Fleming, the chief economist for CoreLogic, "Since peaking at 2.1 million units in January of 2010, the shadow inventory has fallen by 28%.  The decline in the shadow inventory is a positive development because it removes some of the downward pressure on house prices.  This is one of the reasons why some markets that were formerly identified as deeply distressed, like Arizona, California and Nevada, are now experiencing price increases."  Prices in southern California certainly have not skyrocketed, nor does any Realtor or economist wish them to do so.  A lesson, hopefully, has been learned regarding ascending markets that rise on false theories or practices.  However, there are slight bumps upward in certain areas only.  Literally, a price may rise for a certain neighborhood, based on competing properties, or simply more buyers for that area than sellers.  But you will note that overall, prices remain flat for 2012, even slightly down.  Those are national numbers and obviously California is on different footing, particularly southern California, which has been projected to recover more quickly than northern California, and the rest of the country. 

IF INVENTORY IS SO LOW, WHY AREN'T PRICES RISING NOW?

This is a good question.  Isn't housing economics simply the law of supply and demand?  And if it is, with inventory so low, (and inventory is low, with the possibility that pending sales will rise above available homes for sale, a true market anomaly), why aren't prices rising more quickly right now?  The answer to these questions may not be obvious, but there are some reasonable answers.  First of all we are in a counter-intuitive market.  So what would seem to be an obvious outcome is not, and in fact, the opposite occurs.  In this case, prices are still going down, despite some listings that sell over list price, in some price ranges or neighborhoods.  Remember that the list price was aggressively LOW, not HIGH, to begin with.  And although historically low interest rates, (seriously 3-4%??), are driving the demand which is rapidly lowering available inventory, there is a key factor which is keeping a lid on housing prices--- WAGES.  In fact, this column will report it first, that as long as wages stay flat, and they have been flat for the last 7 years, prices will be forced to keep a lid on it.  Why?  Simple.   Housing affordability is part and parcel to a healthy housing market.  We saw what happened in 2006 with double digit appreciation.  That was appreciation that was so fast, there was no way wage increase percentiles could keep up.  Housing appreciation went to 11% in southern California, and the industry created unsustainable financing, (a nicety for horrible loan programs), that propelled a booming market well past when it should have adjusted and created the terrible mess we have been in for the past 5 years.  Some industry analysts believe we are in for 5 more years of pain, some believe, as in the previous article, that we are beginning to climb out now.  Time will tell, but it does appear that the housing market has and is stabilizing.

WHAT WERE THE ACTUAL NUMBERS?

The total number of May sales for Orange County, (the last full month available), was 3,124, not including trustee sales auctions, where investors paid cash at the courthouse steps for 169 properties.  There were 1,542 equity sales, (non short), for single-family, and 506 equity sales for condos.  The short sales numbered 371 for single-family and 238 for condos.  Bank owned listings sold nearly all that was listed with 304 single-family and 163 for condos.  There were 1,294 Notices of Default recorded, down nearly 35%, and 987 Notices of Trustee Sale, which has declined sharply from monthly highs of over 1,700 in 2011.  The median price for all of Orange County for all homes was $435,000 which is up 2.4% for year over year for May (2011).  The slight increase comes from rises in condos and new homes, not single-family which actually declined 1%.  However, the big news is in the volume of homes sold which rose 23.1% in May 2012 compared with May 2011.  It would seem we are headed in the right direction.

CHAPMAN REPORT FORECASTS OC HOME PRICES TO JUMP 7.1% IN 2013

The median price in OC is expected to rise for 2012.  But does 7.1% seem like "pie in the sky?"  First of all, OC is predicted to lead California in recessionary recovery on almost all fronts, and California will likely beat most parts of the country.  But look carefully at what the Chapman Report actually reports.  They see a decline in the number of foreclosed homes and homes selling "short."  We already discussed the fact that the shadow inventory is shrinking.  The absence of those homes, that represent the low end of the market in pricing values, will allow equity properties to force prices up slightly for averages, but probably not a big jump in appreciation overall.  Nonetheless, we are on track for a stronger housing market.  They reported that homebuilding is projected to increase 27.3% this year and 15.1% in 2013, nearly triple what it's been.  Finally, Chapman predicts a housing shortage over the next eight years as construction still lags behind population growth.  As this column has reported in past months, the millennium generation believes in home ownership, is coming of age, and wishes to buy.  Expect the housing market to be as resilient as the citizens who live here.