HOMEBUILDING HIBERNATION ENDS

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.

CALIFORNIA HOME SALES AND PRICES FALL IN APRIL, BUT BOUNCE UP IN MAY

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!!

ELIMINATION OF HOME INTEREST DEDUCTIONIS IN THE SIGHTS OF CONGRESS

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.

U.S. ADDS 216,000 JOBS & U.S. LAYOFFS LOWEST SINCE 1995

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.

WINNER OF THE EASTER COLORING CONTEST

Congratulations to Kaitlyn Cantrall, the winner of our Easter Coloring Contest! Kaitlyn is 11 years old and lives with her mother and father in Yorba Linda. She received a gift card to Toys R Us and a 1st Place Blue Ribbon. Congratulations Kaitlyn and to all the participants!

WHAT WERE THE ACTUAL NUMBERS

The total number of sales for Orange County in November (the most recent complete month available) was, 2,257, which was down 1.8% from October.  That is a reasonable, seasonal, decline.  It was also down 10.7% from November 2009, which seems like a lot, but if you look at the year-to-date average number of sales of 2,545, there is only a -0.7% differential.  There were 1,407 single-family resale, 614 condos, and 236 new homes.  The last statistic on new homes is worth mentioning because it is a 27.6% increase.  Why does this matter?  Building demand leads to building permits, leads to hiring in construction, the one job sector that is most sluggish in So Cal.  In other words, demand for new homes is a sign of recovery.  The lead price range is still the entry level under $400,000, which had 938 sales.  The slowest price range was from $600,000 to $700,000 with only 196 sales.  The reason for this may be as simple as there is a shortage of properties in that price range because the over $700,000 bracket was fairly healthy with 438 sales.  Notices of Default were up slightly (4.5%) over October, but still down 16.1% from November '09.  Foreclosures are way down, but this is a goofy number as banks have made it clear they have stalled the process on many of their distressed properties.  The number of distressed properties on the market (short sale, or bank owned) remains steady at approximately 39%, which is lower than the peak of the recession, when that number was as high as 56%.

DEMAND FOR HOMES DROPS 12%...PENDING HOME SALES UP?...WHO DO YOU BELIEVE?

There was an article written by the OC Register's Jonathan Lansner that was rather pessimistic, citing that a report by Steve Thomas at Altera Real Estate, as of December 9th said, "After remaining the same for the better part of a month, demand dropped by 12% (in the past two weeks)."  My problem with this article was the headline.  If you read on in the quote by Steve Thomas, himself a real estate broker, the statement clarifies itself, "For the remainder of the year and the first few weeks of the New Year, demand will continue to drop. This is cyclically the slowest time of the year for Orange County real estate."  The headline leads you to believe that real estate is once again plunging, that things may become dire once again.  The actual article is merely talking about a cyclical moment in the market, that is experienced every year in varying degrees.  Two weeks later on December 31st, The National Association of Realtors reported that, "the number of people who signed contracts to buy homes rose in November, the fourth increase since contract signings hit a low in June. "  In fact, its index of sales agreements for previously occupied homes increased 3.5%.  So, who do you believe?  The NAR would obviously know the number of contracts being signed and that would seem to be a worthy statistic.  No one is saying the market is healthy.  But demand plunging?  It would not seem to be the case.