OC Housing Report: Mid Year Checkup

Article and pictures courtesy of Steven Thomas, QEDS

Hello!

With half of 2017 in the rearview mirror, it is helpful to take a
look at where housing has been, where it is now, and where
it is heading.

Housing Checkup: Every once in a while, it is helpful to take a step back and evaluate the overall health of the current housing market and the latest trends.
The Orange County housing market has been hot for a very long time. It is working on its sixth year of continuous appreciation. Home values have surpassed record heights reached in June of 2007. There have not been enough homes on the market, buyers continue to trip over each other in pursuit of their piece of the American Dream, and multiple offers are the norm. That adequately describes the first half of 2017, so where do we go from here? Will it be more of the same or will the market evolve?

Let’s take a step back from the relentless real estate market for a moment. With a stethoscope, thermometer, and blood pressure cuff in hand, here are the latest trends and current heartbeat of the Orange County housing market:

2017 has been the year of the extremely lean active inventory. The year started with only 4,071 homes on the market, the lowest level since 2013. Since then, the active inventory has grown, but at a much slower pace than normal. It has been slim pickings. There have been 6% fewer homes placed on the market so far this year compared to 2016. In the past month alone, 11% fewer homes have entered the fray, resulting in an active inventory that only grew by 78 homes. It seems as if the housing market has already peaked, yet the inventory has not quite reached the 6,000 home mark. The inventory needs to be at 8,000 homes for it to move away from a seller’s market to one that is balanced, not favoring a buyer or seller; but that is not going to happen anytime soon. Today’s inventory is 18% lower than last year. It will remain at about 6,000 homes through the rest of the Summer Market and then will start to fall during the Autumn Market as unsuccessful homeowners throw in the towel, realizing that both the Spring and Summer Markets will be in the past.
Demand has been hot this year, but has been muted a bit due to a lack of inventory. With fewer homes coming on the market this year, demand has not reached its full potential. In spite of that, it has reached levels similar to last year, surpassing 2016 for the first couple of months. From there, it has fallen slightly short of last year’s levels. The latest reading has demand surpassing 2016 slightly. From here, demand will slowly drop as summer progresses. It will continue its descent throughout the Autumn Market and will reach the lowest levels of the year during the Holiday Market, Thanksgiving through January 2018. With demand slowing a bit due to all of the summer distractions, carefully pricing is fundamental in order for sellers to find success. That will hold true for the remainder of the year.
The expected market time is on the rise, but the overall market is a lot hotter than last few years. Supply (the inventory) and demand (recent pending sales) determines the expected market time. That is the amount of time it will take for a newly listed home to be placed into escrow. When it drops below 2 months, it is a HOT seller’s market. From February through the mid-June, the market was HOT, two months longer than last year. Since then, the market has exceeded 60 days, indicating a tepid seller’s market. In a tepid seller’s market, carefully pricing is essential and appreciation slows. Sellers were getting away with stretching the asking price and home values were appreciating swiftly. With the Summer Market rolling along, the pace has slowed a bit. For all of Orange County, it has risen from 51 days in the heart of the Spring Market to 63 days today. All price ranges are slowing, but it is still HOT below $750,000. It is important to note that the higher the price, the longer it takes to find success. The market will continue to slow throughout the summer. As the market downshifts, buyers move away from a willingness to pay any price to obtain a home, to a strong desire to pay the Fair Market Value for a home, a value determined by the most recent pending and closed sales. It will remain a tepid seller’s market for the remainder of 2017.
Closed sales are slightly higher than last year and it looks as if that will not change for the remainder of the year. Through the first half of the year, there have been 15,658 closed sales compared to 15,219 last year, 3% more. With slightly higher demand for the remainder of the year, closed sales will remain a bit higher than last year.
Luxury home sales have surpassed last year’s record pace, but there is still a lot of seller competition to overcome in order to find success. The luxury market is best defined as the top 10% of closed sales, or $1,250,000 and higher. For the first six months, there have been 1,864 closed luxury sales compared to 1,532 last year, 22% more. That is a record number of luxury sales in Orange County. However, as of today there are 2,089 active listings above $1,250,000, more than have sold in the first half of this year. Today, the expected market time for luxury homes is 190 days. For proper perspective, that would mean that escrow would open up at the end of January of next year. Keep in mind, the expected market time is even longer in the higher price ranges. For homes priced above $2 million, the expected market time is 269 days, opening escrow in April 2018.
In spite of the Federal Reserve raising the short-term rate, interest rates have slowly inched their way back below 4%. The Federal Reserve has been talking a big game for a few years now about raising the short-term rate. After years of bluffing, they have backed up all of the talk and have raised rates three times, including the one last December. Yet, rates have not been behaving at all like expected by economic experts or prognosticators. After the presidential elections in November, interest rates climbed significantly at the prospect of inflation and reached 4.375% by the end of 2016. However, with the realization that the new presidential administration’s inflationary policies may take years to implement, long-term interest rates have floated back down to below 4%, reaching 3.91% in June. As international economic uncertainty continues, everybody is seemingly “parking their money” in US Treasuries as a “safe haven,” ultimately insuring that the low interest rate environment continues. Interest rates will not change much for the remainder of the year and they will continue to stoke the flames of demand.

Active Inventory: The active inventory increased by only 47 homes in the past couple of weeks.
The active listing inventory added an additional 47 homes in the past two-weeks, a 1% increase, and now sits at 5,983, poised to surpass the 6,000 home mark. The inventory is only slowly growing and it looks as if this year’s peak will be right around that 6,000 home mark. Quite simply, not enough homes are coming on the market as more and more homeowners are opting to stay put.

Last year at this time, there were 7,329 homes on the market, 1,346 additional homes or 22% more than today.

Article and pictures courtesy of Steven Thomas, QEDS

 

Demand: Demand decreased by 2% in the past couple of weeks.
Demand, the number of homes placed into escrow within the prior month, decreased by 55 pending sales in the past two-weeks and now totals 2,830, a 2% decline. Demand is off the most in the entry-level market, homes priced below $500,000. With 38% fewer homes available below $500,000 compared to this time last year, it is no wonder that demand is off by 18% year over year.

Last year at this time, there were 47 fewer pending sales, totaling 2,783. The current expected market time increased from 62 to 63 days in the past couple of weeks, a much hotter market than last year’s 79 days. At 63 days, the market is no longer a HOT seller’s market, but a tepid seller’s market with muted appreciation.

Article and pictures courtesy of Steven Thomas, QEDS

 

Luxury End: Luxury demand decreased by 4% in the past couple of weeks while the inventory grew by 1%.
In the past two weeks, demand for homes above $1.25 million decreased from 344 to 329 pending sales, a 4% decline. The luxury home inventory increased from 2,068 homes to 2,089, up 1%. The luxury market downshift is due to summer distractions. The supply is up and demand is down.

For homes priced between $1.25 million and $1.5 million, the expected market time increased from 120 to 123 days. For homes priced between $1.5 million to $2 million, the expected market time increased from 155 to 176 days. In addition, for homes priced above $2 million, the expected market time increased from 266 days to 269 days. At 269 days, a seller would be looking at placing their home into escrow around the beginning of April of next year.

Article and pictures courtesy of Steven Thomas, QEDS

 

Orange County Housing Market Summary:

The active listing inventory increased by just 47 homes, or 1%, in the past couple of weeks, and now totals 5,983, knocking on the door of the 6,000 home level. Last year, there were 7,329 homes on the market, 1,346 more than today.

• There are 38% fewer homes on the market below $500,000 today compared to last year at this time and demand is down by 18%. Fewer and fewer homes and condominiums are now priced below $500,000. This price range is slowly disappearing.

• Demand, the number of pending sales over the prior month, decreased by 2% in the past couple of weeks, dropping by 55 pending sales and now totals 2,830. The average pending price is $829,260.

• The average list price for all of Orange County remained at $1.6 million. This number is high due to the mix of homes in the luxury ranges that sit on the market and do not move as quickly as the lower end.

• For homes priced below $750,000, the market is HOT with an expected market time of just 39 days. This range represents 39% of the active inventory and 63% of demand.

• For homes priced between $750,000 and $1 million, the expected market time is 57 days, a hot seller’s market (less than 60 days). This range represents 18% of the active inventory and 20% of demand.

• For homes priced between $1 million to $1.25 million, the expected market time is at 93 days, a balanced market that does not favor a buyer or seller.

• For luxury homes priced between $1.25 million and $1.5 million, the expected market time decreased from 120 to 123 days. For homes priced between $1.5 million to $2 million, the expected market time increased from 155 to 176 days. For luxury homes priced above $2 million, the expected market time increased from 266 to 269 days.

• The luxury end, all homes above $1.25 million, accounts for 34% of the inventory and only 11% of demand.

• The expected market time for all homes in Orange County increased from 62 days to 63 in the past couple of weeks, a tepid seller’s market (60 to 90 days). From here, we can expect the market time to slowly rise throughout the Summer Market.

• Distressed homes, both short sales and foreclosures combined, make up only 1.5% of all listings and 1.8% of demand. There are only 36 foreclosures and 51 short sales available to purchase today in all of Orange County, that’s 87 total distressed homes on the active market, 11 more than two weeks ago. Last year there were 128 total distressed sales, 47% more than today.

• There were 3,229 closed sales in June, a 3% increase over May 2017 and a 3% increase over June 2016. The sales to list price ratio was 97.9% for all of Orange County. Foreclosures accounted for just 0.99% of all closed sales and short sales accounted for 0.87%. That means that 98% of all sales were good ol’ fashioned equity sellers.

 

Have a great week.

Sincerely,
Roy A. Hernandez
TNG Real Estate Consultants
Cell 949.922.3947
Royaltyagent@gmail.com

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OC Housing Report: Waiting on Change?

Story and pictures courtesy of Steven Thomas, QEDS

Hello,

Many would be buyers are holding off on purchasing and
waiting for the market to change.

When Will the Market Change: The Orange County housing market has reached record heights and has been appreciating for over five years now.

The Orange County Housing Market has been going up nonstop for over five years now. It has been like the initial chain lift hill on one of the many roller coasters at Knott’s Berry Farm. Clickety clack, clickety clack, clicket clack… it seems as if the housing roller coaster could go up forever. Yet, many buyers believe that roller coaster ascent has to reach a peak soon.

Housing does not go up forever. There are peaks and there are troughs. There are times when buyers are in control, and there are times when sellers are in control. The skeptical buyers who are waiting for an end to this madness find many reasons for a housing downturn on the horizon. They point to record prices. They recall mid-2007 when the housing market began to unravel; however, prior to it unravelling, almost everybody felt like the market would increase forever. Very few economists and prognosticators forecasted a crippling housing downturn.

It is completely understandable where these buyers are coming from. They are right. The market will eventually reverse course and depreciate. The questions boils down to “when?” The answer is simply, “not anytime soon.”

To better understand why the market is poised to continue to accelerate forward, it is best to dust off that old Econ 101 book that details supply and demand. When there is too much supply and demand is low, it favors the buyer. When there is not enough supply and demand is high, it favors the seller. With years of a lack of supply of homes and red hot demand, it is no wonder that it has been a hot sellers market for quite some time now.

Story and pictures courtesy of Steven Thomas, QEDS

Currently, there are 5,936 homes on the market, the lowest level for this time of the year since 2013. Back then there were 4,732 homes on the market and it was even more difficult for buyers to secure a home than it is today. For housing to move away from a seller’s market towards a balanced market, one that does not favor a buyer or seller, there needs to be at least 8,000 homes on the market for a sustainable amount of time. The more homes on the market, the higher the supply of homes. With more supply often comes softer demand. Only then could housing finally shift towards a buyer’s market.

That is the issue. Supply needs to increase and demand soften. For proper perspective, at the end of June 2007, there were 17,250 homes on the market and the expected market time was over 9-months (that is the amount of time a home is on the market prior to being placed into escrow). Demand (the last month of pending sales) was at 1,894 back then compared to 2,885 today. The current expected market time is 62 days, quite a bit different than a decade ago.

The trend of a lack of inventory and red hot demand stoked by ultra low interest rates, does not look like it will change course anytime soon. Multiple offers is the norm. This holds true for just about any property priced below $1.25 million that is in great condition, nicely appointed, in a good location, and priced right, close to its Fair Market Value. And, in the lower price ranges, buyers are tripping over each other to secure their piece of the American Dream.

For buyers waiting on the market to change, they are in store for a long wait.

Active Inventory: The active inventory increased by only 31 homes in the past couple of weeks.
The active listing inventory added an additional 31 homes in the past two-weeks, a 1% increase, and now sits at 5,936. The biggest issue for Orange County housing this year has been a real lack of inventory. Thus far this year, there have been 6% fewer homes placed on the market. In the past month alone, there have been 10% fewer homes placed on the market. This issue has prevented additional closed sales and has undermined the performance of housing this year.

We can expect the inventory to continue to rise throughout the Summer Market until it reaches a peak somewhere around mid-August. From there, the market will transition into the Autumn Market, from mid-August through Thanksgiving, with fewer homes coming on the market with both the spring and summer in the rearview mirror.

Last year at this time, there were 7,104 homes on the market, 20% more than today.

Story and pictures courtesy of Steven Thomas, QEDS

Demand: Demand decreased by 2% in the past couple of weeks.
Demand, the number of homes placed into escrow within the prior month, decreased by 52 pending sales in the past two-weeks and now totals 2,885, a 2% decline. Demand is off the most in the entry-level market, homes priced below $500,000. With 22% fewer homes that have been placed on the market so far this year below $500,000, demand is now off by 17%. This market has been underperforming all year due to a real lack of inventory.

We can expect demand to drop slightly from now through the end of the summer.

Last year at this time, there were 2 more pending sales totaling 2,887, almost identical. The expected market time increased from 60 to 62 days in the past couple of weeks. At 62 days, the market is no longer a HOT seller’s market, but a tepid seller’s market with muted appreciation. Last year it was at 74 days.

Luxury End: Luxury demand decreased by 7% in the past couple of weeks while the inventory grew by 3%.
In the past two weeks, demand for homes above $1.25 million decreased from 371 to 344 pending sales, a 7% decline. The luxury home inventory increased from 2,011 homes to 2,068, up 3%. The luxury market downshifted with the beginning of the Summer Market. The supply is up and demand is down.

For homes priced between $1.25 million and $1.5 million, the expected market time increased from 96 to 120 days. For homes priced between $1.5 million to $2 million, the expected market time increased from 148 to 155 days. In addition, for homes priced above $2 million, the expected market time increased from 253 days to 266 days. At 266 days, a seller would be looking at placing their home into escrow around the end of March of next year.

Story and pictures courtesy of Steven Thomas, QEDS

Orange County Housing Market Summary:

The active listing inventory increased by just 31 homes, or 1%, in the past couple of weeks, and now totals 5,936, knocking on the door of the 6,000 home level. Last year, there were 7,104 homes on the market, 1,168 more than today.
• There are 39% fewer homes on the market below $500,000 today compared to last year at this time and demand is down by 17%. Fewer and fewer homes and condominiums are now priced below $500,000. This price range is slowly disappearing.

• Demand, the number of pending sales over the prior month, decreased by 2% in the past couple of weeks, declining 52 pending sales and now totals 2,885. The average pending price is $830,508.

• The average list price for all of Orange County remained at $1.6 million. This number is high due to the mix of homes in the luxury ranges that sit on the market and do not move as quickly as the lower end.

• For homes priced below $750,000, the market is HOT with an expected market time of just 38 days. This range represents 39% of the active inventory and 62% of demand.

• For homes priced between $750,000 and $1 million, the expected market time is 59 days, a hot seller’s market (less than 60 days). This range represents 18% of the active inventory and 19% of demand.

• For homes priced between $1 million to $1.25 million, the expected market time is at 79 days, a tepid seller’s market.

• For luxury homes priced between $1.25 million and $1.5 million, the expected market time decreased from 96 to 120 days. For homes priced between $1.5 million to $2 million, the expected market time increased from 148 to 155 days. For luxury homes priced above $2 million, the expected market time increased from 253 to 266 days.

• The luxury end, all homes above $1.25 million, accounts for 34% of the inventory and only 12% of demand.

• The expected market time for all homes in Orange County increased from 60 days to 62 in the past couple of weeks, a tepid seller’s market (60 to 90 days). From here, we can expect the market time to slowly rise throughout the Summer Market.

• Distressed homes, both short sales and foreclosures combined, make up only 1.3% of all listings and 2.2% of demand. There are only 27 foreclosures and 49 short sales available to purchase today in all of Orange County, that’s 76 total distressed homes on the active market, 5 more than two weeks ago. Last year there were 135 total distressed sales, 82% more than today.

• There were 3,147 closed sales in May, an 18% increase over April 2017 and a 4% increase over May 2016. The sales to list price ratio was 97.8% for all of Orange County. Foreclosures accounted for just 1.1% of all closed sales and short sales accounted for 1.7%. That means that nearly 97.2% of all sales were good ol’ fashioned equity sellers.

Have a good weekend!

Sincerely,
Roy A. Hernandez
TNG Real Estate Consultants
Cell 949.922.3947

Have a comment?

Have a question or comment? Looking to buy or sell soon? I'd love to hear from you! Fill out this form for a quick response.

OC Housing Report: Slim Pickens

Story and graphics compliments of Steven Thomas, QEDS

Hello!

For years now the Orange County housing inventory has been
low, but this year it is more pronounced.

Low Supply: The active listing inventory has been down all year and it is currently off by 14% compared to 2016. 

Whew! It is tough to be a buyer looking for a home in today’s market. The biggest complaint has to be that there are simply not enough choices. In fact, nearly 1,200 fewer homes have come on the market so far this year compared to last year. The active inventory currently sits at 5,905 homes; that is 14% fewer than the 6,868 that were available last year.

The trend of fewer homes hitting the market dates back to the beginning of the Great Recession, 2008. Ever since then, fewer and fewer homeowners have placed a FOR SALE sign in their yard. This trend is nothing close to a blip on the radar screen. Something happened to everybody’s collective psyche during the drawn out and bruising recession. Homeowners are staying put.

This year has been off from last year, averaging 222 fewer homes placed on the market each month. As the half way point for the 2017 housing market rapidly approaches, the slower pace has added up. Buyers who have been working hard to secure a home without any luck can attest to the need for additional choices. Yet, the 222 year over year difference is nothing compared to the number of homes on the market during the first decade of the 2000’s. In 2006, there were 2,239 additional homes FOR SALE coming on each and every month. That added up to an additional FOR SALE sign in just about every neighborhood on a monthly basis.

Story and graphics compliments of Steven Thomas, QEDS

 

Price is determined by supply and demand. Just for kicks, imagine that demand remained the same. When the same number of buyers are interested in purchasing a home, yet the supply drops considerably, the highest bidder wins. As a result, prices rise. Essentially, that is what has happened over the past five years. In 2012, demand spiked; however, there were not enough homes on the market to satiate the voracious appetite for buyers to buy. Home values have been on the rise ever since.

In past housing run-ups, homeowners have been encouraged and enticed to join the fray, eager to cash in on the market and make a move. That has not been the case during the current five year run. Homeowners have not been tempted to sell like they did from 2000 through 2007.

ADVICE FOR BUYERS: be realistic out of the gate. Don’t delay in pulling the trigger to write an offer to purchase a home. You do not have to overpay, especially now that the housing has transitioned into the Summer Market. Offer the FAIR MARKET VALUE for a home. Most of all, pack your patience.

ADVICE FOR SELLERS: be realistic out of the gate. Far too many seller hit the market overpriced. The market has been on the rise, but it does a majority of its annual appreciation during the Spring Market. Homes appreciate at a much slower rate for the rest of the year. Orange County detached housing values have been increasing at a pace of about 5% per YEAR. That is 365 days, not 30 days. So, price accordingly. A wise strategy is to price a home at its FAIR MARKET VALUE. The better the price, the more activity that is generated. Multiple offers drive the sales price up.

Active Inventory: The active inventory increased by 3% in the past couple of weeks.
The active listing inventory added an additional 148 homes in the past two-weeks, a 3% increase, and now sits at 5,905. Within the next couple of weeks, the inventory will eclipse the 6,000 home mark. Last year that occurred at the start of May.

We can expect the inventory to continue to rise throughout the Summer Market until it reaches a peak somewhere around mid-August. From there, the market will transition into the Autumn Market, from mid-August through Thanksgiving, with fewer homes coming on the market with both the spring and summer in the rearview mirror.

Last year at this time, there were 6,868 homes on the market, 16% more than today.

Story and graphics compliments of Steven Thomas, QEDS

 

Demand: Demand increased by 1% in the past couple of weeks.
Demand, the number of homes placed into escrow within the prior month, increased by 33 pending sales in the past two-weeks and now totals 2,937, a 1% increase. Demand is off the most in the entry-level market, homes priced below $500,000. With 23% fewer homes that have been placed on the market so far this year below $500,000, demand is now off by 21%. This market has been underperforming all year due to a real lack of inventory.

We can expect demand to drop slightly from now through the end of the Summer Market.

Last year at this time, there were 52 more pending sales totaling 3,989, or 2% more. The expected market time increased from 59 to 60 days in the past couple of weeks. At 60 days, the market is no longer a HOT seller’s market, but a tepid seller’s market with muted appreciation. Last year it was at 69 days.

Luxury End: Luxury demand increased by 6% in the past couple of weeks while the inventory grew by 2%.
In the past two weeks, demand for homes above $1.25 million increased from 351 to 371 pending sales, a 6% increase and nearly the same level as a month ago. The luxury home inventory increased from 1,981 homes to 2,011, up 2%. Even with the increase in demand, the luxury market is NOT a robust seller’s market, taking months in order to find success.

For homes priced between $1.25 million and $1.5 million, the expected market time decreased from 108 to 96 days. For homes priced between $1.5 million to $2 million, the expected market time increased from 144 to 148 days. In addition, for homes priced above $2 million, the expected market time decreased slightly from 256 days to 253 days. At 253 days, a seller would be looking at placing their home into escrow around the end of February of next year.

Story and graphics compliments of Steven Thomas, QEDS

Orange County Housing Market Summary:

The active listing inventory increased by 148 homes, or 3%, in the past couple of weeks, and now totals 5,905, knocking on the door of the 6,000 home level. Last year, there were 6,868 homes on the market, 963 more than today.

There are 35% fewer homes on the market below $500,000 today compared to last year at this time and demand is down by 21%. Fewer and fewer homes and condominiums are now priced below $500,000. This price range is slowly disappearing.

• Demand, the number of pending sales over the prior month, increased by 1% in the past couple of weeks, adding 33 pending sales and now totals 2,937. The average pending price is $845,004.

• The average list price for all of Orange County remained at $1.6 million. This number is high due to the mix of homes in the luxury ranges that sit on the market and do not move as quickly as the lower end.

• For homes priced below $750,000, the market is HOT with an expected market time of just 39 days. This range represents 39% of the active inventory and 61% of demand.

• For homes priced between $750,000 and $1 million, the expected market time is 53 days, a hot seller’s market (less than 60 days). This range represents 18% of the active inventory and 20% of demand.

• For homes priced between $1 million to $1.25 million, the expected market time is at 84 days, a tepid seller’s market.

• For luxury homes priced between $1.25 million and $1.5 million, the expected market time decreased from 108 to 96 days. For homes priced between $1.5 million to $2 million, the expected market time increased from 144 to 148 days. For luxury homes priced above $2 million, the expected market time decreased from 256 to 253 days.

• The luxury end, all homes above $1.25 million, accounts for 34% of the inventory and only 13% of demand.

• The expected market time for all homes in Orange County increased from 59 days to 60 in the past couple of weeks, changing from a hot seller’s market to a tepid seller’s market (60 to 90 days). From here, we can expect the market time to slowly rise throughout the Summer Market.

• Distressed homes, both short sales and foreclosures combined, make up only 1.2% of all listings and 2.1% of demand. There are only 25 foreclosures and 46 short sales available to purchase today in all of Orange County, that’s 71 total distressed homes on the active market, 5 fewer than two weeks ago. Last year there were 138 total distressed sales, 94% more than today.

• There were 3,147 closed sales in May, an 18% increase over April 2017 and a 4% increase over May 2016. The sales to list price ratio was 97.8% for all of Orange County. Foreclosures accounted for just 1.1% of all closed sales and short sales accounted for 1.7%. That means that nearly 97.2% of all sales were good ol’ fashioned equity sellers.

Have a safe Holiday!

Sincerely,
Roy A. Hernandez
TNG Real Estate Consulants
Cell 949.922.3947

Have a comment?

Have a question or comment? Looking to buy or sell soon? I'd love to hear from you! Fill out this form for a quick response.

OC Housing Report: Time to Sharpen Your Pencil

Photos and article compliments of Steven Thomas, QEDS

Hello!

To be successful during the Summer Market, it all boils down to
price.

Achieving the Objective in Selling: Many sellers are pushing the envelope in terms of price and are risking not finding success and wasting valuable market time. 

The transition from the Spring Market to the Summer Market is underway. Seemingly, everybody has become accustom to multiple offers within days of placing the FOR SALE sign in the yard. With so many offers to purchase a home, a bidding war often arises. Reports of record prices swirl around neighborhoods. Many homeowners are tempted to join the fray.

Yet, the market has already started to shift. There aren’t as many multiple offers. Sellers who have stretched their asking prices above the most recent comparable pending and closed sales are sitting on the market without success. Can the shift between the Spring and Summer Markets really be that significant? The answer is a resounding YES.

It is not like the market suddenly transitioned into a buyer’s market. It’s more about supply and demand and carefully pricing a home. Housing is drifting away from a hot seller’s market and moving towards a slight seller’s market. The supply of homes on the market has been on the rise throughout the Spring Market. It has increased by nearly 1,300 homes since the end of February, a 29% rise.

Photos and article compliments of Steven Thomas, QEDS

 

The inventory will continue to grow until it peaks around mid-August. More and more homes will come on the market at a similar pace to the spring, yet many unsuccessful homeowners will accumulate on the active listing inventory. The inventory swells due to this accumulation of unsuccessful sellers. This occurs in every price range, not just the luxury end. In fact, during the Summer Market of 2016, homes between $500,000 and $750,000 had the largest increase compared to any other price range, growing by 18%. The second largest, a 13% increase occurred for homes priced between $750,000 and $1 million.

Demand, the number of homes placed into escrow within the prior month, rocketed upward since the beginning of the year and continued to rise until it reached a peak for 2017 at the beginning of May. During the Spring Market, it increased from 2,651 at the end of February until the May peak of 3,012 pending sales, a rise of 361, or 14%. Since reaching the peak, demand has actually dropped by 4% and sits at 2,904 homes today.

Due to all of the distractions of summer, demand slowly drops. It’s still the second hottest season of the year behind spring, but the shift can be felt within the real estate trenches. The housing market is simply not as robust. It is no longer at a fever pitch that produces instantaneous throngs of potential buyers the moment a home comes on the market.

Photos and article compliments of Steven Thomas, QEDS

Photos and article compliments of Steven Thomas, QEDS

The bottom line: as the supply of homes increases throughout the summer months, it is met with slowly dissipating demand. As the supply increases and demand decreases, price becomes a lot more important in order for sellers to find success. Push the envelope on pricing and homes will sit. Buyers know that home values have been on the rise for years now, but that does not mean they want to stretch much above the most recent comparable closed sale.

Right now is the time of the year when sellers really need to have a reality check, or they risk not achieving their objective in selling their homes. Are they pushing the envelope by stretching the asking price too far above comparable sales? Or, are they priced realistically, close to their home’s Fair Market Value? In order to zero in on the Fair Market Value, it is imperative that a home is compared to the most recent pending and closed sales. Comparing prices is extremely important, but so is the condition, upgrades, location, lot size, and all of the other nuances that go into making a home more or less desirable.

For sellers who are overpriced, the longer they wait to correct their price, valuable market time will have transpired. Since demand slowly drops through the summer months, the deeper a seller gets into the Summer Market, the harder it will be to find success. The reason for the drop, buyers with families typically want to move by the end of summer prior to the kids going back to school at the end of August. In order to close a sale by then, the window of opportunity to place a home into escrow is now through the first few weeks of July.

The moral to the story: it is time for sellers to sharpen their pencils and properly price their homes in order to achieve their objective in selling.

Active Inventory: The active inventory increased by 2% in the past couple of weeks.
The active listing inventory added an additional 134 homes in the past two-weeks, a 2% increase, and now sits at 5,757. We can expect the inventory to continue to rise throughout the Summer Market until it reaches a peak somewhere around mid-August. From there, the market will transition into the Autumn Market, from mid-August through Thanksgiving, with fewer homes coming on the market with both the spring and summer in the rearview mirror.

Within the last month, 8% fewer homes came on the market compared to last year. As a result, the active inventory has been off compared to last year. Last year at this time, there were 6,603 homes on the market, 15% more than today.

Demand: Demand dropped by 10 pending sales in the past couple of weeks.
Demand, the number of homes placed into escrow within the prior month, dropped by 10 pending sales in the past two-weeks and now totals 2,904. Demand is off the most in the entry-level market, homes priced below $500,000. With 23% fewer homes that have been placed on the market so far this year below $500,000, demand is now off by 22%. This market has been underperforming all year due to a real lack of inventory.

We can expect demand to continue to drop slightly from now through the end of the Summer Market.

Last year at this time, there were 118 more pending sales totaling 3,022, or 4% more. The expected market time increased from 58 to 59 days in the past couple of weeks. Last year it was at 66 days.

Luxury End: Luxury demand dropped by 5% in the past couple of weeks while the inventory grew by 1%.
In the past two weeks, demand for homes above $1.25 million decreased from 369 to 351 pending sales, a 5% drop. Since the start of May, luxury demand has dropped by 15%. The luxury home inventory increased from 1,965 homes to 1,981, up 1%. Similar to the rest of the market, demand is dropping for luxury homes while the luxury inventory continues to grow. There is already plenty of seller competition in the upper ranges.

For homes priced between $1.25 million and $1.5 million, the expected market time increased from 90 to 108 days. For homes priced between $1.5 million to $2 million, the expected market time decreased from 162 to 144 days. In addition, for homes priced above $2 million, the expected market time increased from 235 days to 256 days. At 256 days, a seller would be looking at placing their home into escrow around mid-February of next year.

Photos and article compliments of Steven Thomas, QEDS

 

Orange County Housing Market Summary:

• The active listing inventory increased by 134 homes, or 2%, in the past couple of weeks, and now totals 5,757. Last year, there were 6,603 homes on the market, 846 more than today.
• There are 35% fewer homes on the market below $500,000 today compared to last year at this time and demand is down by 22%. Fewer and fewer homes and condominiums are now priced below $500,000. This price range is slowly disappearing.
• Demand, the number of pending sales over the prior month, dropped by 10 pending sales in the past couple of weeks and now totals 2,904. The average pending price is $842,204.
• The average list price for all of Orange County remained at $1.6 million. This number is high due to the mix of homes in the luxury ranges that sit on the market and do not move as quickly as the lower end.
• For homes priced below $750,000, the market is HOT with an expected market time of just 38 days. This range represents 38% of the active inventory and 60% of demand.
• For homes priced between $750,000 and $1 million, the expected market time is 54 days, a hot seller’s market (less than 60 days). This range represents 18% of the active inventory and 21% of demand.
• For homes priced between $1 million to $1.25 million, the expected market time is at 71 days, a seller’s market.
• For luxury homes priced between $1.25 million and $1.5 million, the expected market time increased from 90 to 108 days. For homes priced between $1.5 million to $2 million, the expected market time decreased from 162 to 144 days. For luxury homes priced above $2 million, the expected market time increased from 235 to 256 days.
• The luxury end, all homes above $1.25 million, accounts for 35% of the inventory and only 12% of demand.
• The expected market time for all homes in Orange County increased from 58 days to 59 in the past couple of weeks, a solid seller’s market (less than 60 days), but about to transition into a normal seller’s market (60 to 90 days). From here, we can expect the market time to slowly rise throughout the Summer Market, moving from a seller’s market to a slight seller’s market.
• Distressed homes, both short sales and foreclosures combined, make up only 1.3% of all listings and 1.9% of demand. There are only 32 foreclosures and 44 short sales available to purchase today in all of Orange County, that’s 76 total distressed homes on the active market, 8 more than two weeks ago. Last year there were 148 total distressed sales, 95% more than today.
• There were 3,143 closed sales in May, an 18% increase over April 2017 and a 4% increase over May 2016. The sales to list price ratio was 97.8% for all of Orange County. Foreclosures accounted for just 1.1% of all closed sales and short sales accounted for 1.7%. That means that nearly 97.2% of all sales were good ol’ fashioned equity sellers.

Have a great week.

Sincerely,
Roy Hernandez
TNG Real Estate Consultants
Cell 949.922.3947

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OC Housing Report: Applying the Brakes

Hello!

As housing transitions into the Summer Market, there are more
For Sale signs while demand softens.

The Summer Shift: The annual tradition is no different in 2017, housing is shifting from the Spring Market to the Summer Market. It is the season for commencement speeches, diplomas, and caps thrown into the air to mark the end of a chapter and the beginning of something new. Similarly, this is the season where the robust, hot Spring Market comes to an end, making way for a different market, a new chapter in local real estate, the Summer Market.

While the Summer Market may be the second busiest time of the year for real estate, sellers, buyers, and real estate professionals feel a palpable shift. The active listing inventory slowly and methodically grows from now through mid-August. At the same time, demand softens slightly from the peak of 2017, which occurred two weeks ago.

Many mistakenly think that right now is the absolute best time to come on the market. It is just not true. The best conditions actually occurred at the start of April when the expected market time hit a low. Since then, the expected market time has been slowly rising and will continue to rise from now through the 2017 peak in the active inventory, which typically occurs around mid-August.

Photo/Article courtesy of Steven Thomas.

This shift occurs because summer is full of distractions. From the beach, to the pool, to vacations, buyers’ attention is diverted a bit. Not to mention, the number one distraction, everybody’s kids are on summer break too. It’s just not as easy to see homes when the kids are not confined to their school classrooms.

Even though it will continue to be a seller’s market, overall housing is just about to move from a hot seller’s market to just a seller’s market. The stark difference in this market can be isolated to a bit less activity with not as many offers generated. This shift is much more dramatic in the higher price ranges, from $750,000 and up.

It may be a seller’s market, but sellers really need to approach pricing with extreme caution and care. For sellers who aggressively stretch their asking prices, they risk not being successful and missing both the Spring and Summer Markets. Arbitrarily picking a desired sales price and ignoring the closed and pending sales data is a recipe for disaster and a waste of valuable market time.

For example, a home that sold in December 2016 at $800,000 is not worth $900,000 today, over 12% higher. The market has been appreciating at about 5% annually. That means it takes 365 days for a home to appreciate 5%, not 3 months, not 6 months, not 9 months. It takes a year. On average in Orange County, that $800,000 home would be worth about $820,000, 6-months later. That is 2.5% more.

Additionally, it is worth mentioning that this simple example does not work for every property in every neighborhood. The appreciation rate varies from area to area, neighborhood to neighborhood, and sometimes from street to street. A professional REALTOR® can help dissect the recent closed and pending sales data to help establish the best price for success. Sellers absolutely should NOT utilize Zillow to price a home. Zillow admits it themselves, stating, “The Zestimate® is a starting point in determining a homes’ value and is not an official appraisal.” It is just an approximation and leads to inaccurate pricing. Nothing beats carefully looking at the comparable sales data and comparing the property size, bedrooms, bathrooms, location, amenities, upgrades, condition, lot size, and every other nuance that goes into the sale of a home.

The bottom line is this: the market is slowly cooling right now and the window of opportunity to find success prior to the kids going back to school at the end of August is beginning to close. Sellers find success through accurate pricing. Price out of bounds and risk losing valuable market time during the best time of the year to sell, the Spring and Summer Markets.

Active Inventory: The active inventory increased by 4% in the past couple of weeks.
The active listing inventory added an additional 236 homes in the past two-weeks, a 4% increase, and now sits at 5,623. Expect the inventory to continue to rise until it peaks around mid-August. Even though demand peaks in April to early-May, more homeowners come on the market in the month of June than any other time of the year. Since demand is not as strong, the active inventory grows. As more homes accumulate on the market, there is more seller competition.

Last year at this time, there were 6,267 homes on the market, 11% more than today.

Photo/Article courtesy of Steven Thomas.

Demand: Demand dropped by 3% in the past couple of weeks.Demand, the number of homes placed into escrow within the prior month, dropped by 98 pending sales in the past month, or 3%, and now totals 2,914. In both 2015 and 2016, demand eclipsed the 3,000 mark for two months, compared to just two-weeks this year. A major contributing factor to this year’s phenomenon is the lack of homes coming on the market in the lower ranges. In the last 30 days, there have been 21% fewer homes placed on the market below $500,000, and 11% fewer from $500,000 to $750,000.

We can expect demand to drop slightly from now through the upcoming summer months.

Last year at this time, there were 230 more pending sales totaling 3,144. Current demand is off by 7% compared to last year. The expected market time increased from 53 to 58 days in the past couple of weeks. Last year it was at 60 days, very similar to today.

Luxury End: Luxury demand dropped by 7% in the past couple of weeks while the inventory grew by 4%.
In the past two weeks, demand for homes above $1.25 million decreased from 398 to 369 pending sales, a 4% drop. The luxury home inventory increased from 1,887 homes to 1,965, up 4%. Similar to the rest of the market, demand is dropping for luxury homes while the luxury inventory continues to grow. There is already plenty of seller competition in the upper ranges.

For homes priced between $1.25 million and $1.5 million, the expected market time increased from 89 to 90 days. For homes priced between $1.5 million to $2 million, the expected market time increased from 134 to 162 days. In addition, for homes priced above $2 million, the expected market time increased from 198 days to 235 days. At 235 days, a seller would be looking at placing their home into escrow around mid-January of next year.

Photo/Article courtesy of Steven Thomas.

 

Orange County Housing Market Summary:

  1.  The active listing inventory increased by 236 homes, or 4%, in the past couple of weeks, and now totals 5,623. Last year, there were 6,267 homes on the market, 644 more than today.There are 35% fewer homes on the market below $500,000 today compared to last year at this time and demand is down by 26%. Fewer and fewer homes and condominiums are now priced below $500,000. This price range is slowly disappearing.
  2.  Demand, the number of pending sales over the prior month, dropped by 3% in the past couple of weeks, shedding 98 pending sales and now totals 2,914 , dropping below 3,000 a bit earlier than the past couple of years. The average pending price is $859,899.
  3. The average list price for all of Orange County remained at $1.6 million. This number is high due to the mix of homes in the luxury ranges that sit on the market and do not move as quickly as the lower end.
  4. For homes priced below $750,000, the market is HOT with an expected market time of just 37 days. This range represents 38% of the active inventory and 60% of demand.
  5. For homes priced between $750,000 and $1 million, the expected market time is 55 days, a hot seller’s market (less than 60 days). This range represents 19% of the active inventory and 20% of demand.
  6. For homes priced between $1 million to $1.25 million, the expected market time is at 65 days, a seller’s market.
  7. For luxury homes priced between $1.25 million and $1.5 million, the expected market time increased from 89 to 90 days. For homes priced between $1.5 million to $2 million, the expected market time increased from 134 to 162 days. For luxury homes priced above $2 million, the expected market time increased from 198 to 235 days.
  8. The luxury end, all homes above $1.25 million, accounts for 35% of the inventory and only 12% of demand.
  9.  The expected market time for all homes in Orange County increased from 54 days to 58 in the past couple of weeks, a solid seller’s market (less than 60 days), but about to transition into a normal seller’s market (60 to 90 days). From here, we can expect the market time to slowly rise throughout the Spring and Summer Markets, moving from a deep seller’s market to a slight seller’s market.
  10. Distressed homes, both short sales and foreclosures combined, make up only 1.2% of all listings and 2.5% of demand. There are only 31 foreclosures and 37 short sales available to purchase today in all of Orange County, that’s 68 total distressed homes on the active market, 13 fewer than two weeks ago. Last year there were 141 total distressed sales, 107% more; that’s more than double.
  11. There were 2,663 closed sales in April, a 5% decrease over March 2017 and a 3% decreased over April 2016. The sales to list price ratio was 98.6% for all of Orange County. Foreclosures accounted for just 0.8% of all closed sales and short sales accounted for 1.4%. That means that nearly 98% of all sales were good ol’ fashioned equity sellers

Have a great week.

Roy A, Hernandez
TNG Real Estate Consultants
949.922.3947
RoyaltyAgent@Gmail.com

Photos and article courtesy of Steven Thomas.

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OC Housing Report: The Squeeze on Housing

Story/graphics courtesy of Steven Thomas Quantitative Economics Decision Sciences.

As rates rise, the price of a home that a buyer is able to afford drops
considerably, especially in the higher price ranges.

The Squeeze on Affordability: With interest rates expected to rise, today’s low rates provide buyers the opportunity to afford quite a bit more home.
The United States economy is finally revving its massive engine. Jobs are beating expectations; unemployment has fallen to near pre-recession levels; wages are rising at the fastest pace in years; and, inflation is on the rise. In addition, the new, Trump administration is planning to ramp up infrastructure spending, lower taxes, and focus on jobs, all heavily contributing to much higher inflation expectations. As a result, the Federal Reserve is expected to once again raise the Federal Funds rate this week, which has already had an impact on mortgage rates, rising to a 2017 height.

With all of this positive economic news, what does it mean for the future of interest rates? The historically low 3.5% mortgage rates are officially in the rearview mirror, a chapter in the history books of the housing recovery. Buyers should not wait around for those rates to return. Instead, cashing in on today’s mortgage rate, still historically low, is a wise strategy.

Unfortunately, everybody has become accustom to a low interest rate environment. For proper perspective, in 1990 the interest rate was at 10%. In 2000, it was at 8%. Moreover, just prior to the Great Recession, the interest rate was at 6.4%. No, today’s rates are not as low as last October, but they are still a bargain compared to where they have been over the past 50 years.

It is imperative that buyers understand that the longer they wait to purchase, the greater the risk that rates will rise. As they rise, affordability erodes. For example, if a buyer can afford a $2,500 monthly mortgage payment with 20% down, they could have purchased a $667,000 home last October with a 3.5% rate. Today, with conventional rates at 4.375%, the

purchase price drops to $600,000. As rates rise further, purchasing power continues to crumble. At 4.75%, the $2,500 payment buys a $575,000 home. At 5%, it drops to $558,000. And, at 5.25%, it becomes a $542,000 home, $125,000 less than five-months ago.

For jumbo loans, loans above $636,150, today’s rates are at 4.75%. They were at 4.375% just prior to last November’s presidential election. As a result, if a buyer can afford a mortgage payment of $4,500 per month, they are looking at a $1,034,000 home today compared to a $1,081,000 home back in October. Similarly, as rates rise to 5% and then 5.25%, the purchase price contiues to drop. At 5.25%, it becomes a $978,000 home, $103,000 less than five-months ago.

The current Orange County housing market is sizzling hot with very low inventory and demand through the roof. A lot of what is driving demand is the desire to jump on today’s historically low interest rates before they rise, grinding down a buyer’s purchasing power. Securing a low rate now allows buyers to get more house for their money.

As the economy continues to improve, mortgage rates will rise. For buyers interested in cashing in on today’s low rate environment, the window of opportunity is closing.

Active Inventory: Within the past couple of weeks, the active inventory increased by 2% homes.
Since January 1st, the active inventory has only grown by 500 homes. In the past couple of weeks, it grew by an additional 111 homes, or 2%, and now sits at 4,571. The inventory is not climbing as fast as prior years because current demand is extremely hot. Additionally, so far in 2017, 11% fewer homes have come on the market compared to last year at this time. Within the last month, the trend deepened with 15% fewer homes coming on the market compared to last year. Why aren’t homeowners placing their homes on the market like before? Could it be all of the recent rain? Now that the rain has stopped and the sun is shining, only time will tell. Most likely, more and more homeowners will start coming on the market as Orange County transitions into spring with longer, sunny days.

Last year at this time, there were 5,444 homes on the market, 19% more. Two years ago, there were 5,560 homes on the market, or 22% more.

Story/graphics courtesy of Steven Thomas Quantitative Economics Decision Sciences.

Demand: Demand dropped by 3% in the past two weeks.
Demand, the number of homes placed into escrow within the prior month, decreased by 75 pending sales in the past couple of weeks, or 3%, and now totals 2,575. The drop is attributed to the short month of February. Also, demand would be even stronger if more homes were added to the active inventory. There just are not enough choices to satiate today’s scorching hot demand.

With a slight drop in demand and an inventory that grew a bit, the expected market time increased from 50 to 53 days, still a rock solid seller’s market.

Last year at this time, there were 2,671 total pending sales, 95 more than today, or 4%, but February 2016 was a leap year with an extra day of activity.

Luxury End: The luxury inventory grew by 8% in the past couple of weeks.
Demand is up for Orange County’s luxury home market with 66 additional pending sales compared to last year at this time, 17% higher. The luxury inventory is up by 62 homes, 3% more. The overall expected market time for all homes priced above $1 million is 136 days compared to 155 days last year.

In the past two weeks, demand for homes above $1 million decreased slightly from 465 to 447 pending sales, a 3% drop. The luxury home inventory increased from 1,891 homes to 2,033, up 8% and its highest level since mid-November 2016. The expected market time increased in the past couple of weeks from 122 to 136 days.

For homes priced between $1 million to $1.5 million, the expected market time in the past couple of weeks increased from 76 days to 87 days. For homes priced between $1.5 million to $2 million, the expected market time increased from 129 to 133 days. And, for homes priced above $2 million, the expected market time increased from 227 days to 252 days. At 252 days, a seller would be looking at placing their home in escrow around mid-November.

Story/graphics courtesy of Steven Thomas Quantitative Economics Decision Sciences.

Orange County Housing Market Summary:

• The active listing inventory increased by 111 homes in the past couple of weeks, a 2% rise, and now totals 4,571. There are 11% fewer homes that have come on the market so far this year compared to 2016. Within the prior month, 15% fewer homes have come on the market compared to last year. The inventory should start to rise as the market transitions into the spring and will most likely peak in mid-August.
• There are 50% fewer homes on the market below $500,000 compared to last year at this time and demand is down by 16%. Fewer and fewer homes and condominiums can now be found priced below $500,000. This price range is slowly vanishing.
• Demand, the number of pending sales over the prior month, decreased by 3% in the past couple of weeks, dropping by 75 and now totals 2,576. Today’s demand is 4% lower than last year when it totaled 2,671. The average pending price is $823,575.
• The average list price for all of Orange County is $1.7 million, up from $1.6 million two weeks ago. This number is high due to the mix of homes in the luxury ranges that sit on the market and the recent influx of luxury listings.
• For homes priced below $750,000, the market is HOT with an expected market time of just 31 days. This range represents 37% of the active inventory and 64% of demand.
• For homes priced between $750,000 and $1 million, the expected market time is 55 days, a seller’s market (less than 60 days). This range represents 19% of the active inventory and 19% of demand.
• For luxury homes priced between $1 million to $1.5 million, the expected market time is at 87 days, increasing by 13 in the past couple of weeks. For homes priced between $1.5 million to $2 million, the expected market time increased from 129 to 133 days. For luxury homes priced above $2 million, the expected market time increased from 227 to 252 days.
• The luxury end, all homes above $1 million, accounts for 44% of the inventory and only 17% of demand.
• The expected market time for all homes in Orange County increased slightly in the past couple of weeks from 50 to 53, a solid seller’s market (less than 60 days).
• Distressed homes, both short sales and foreclosures combined, make up only 1.7% of all listings and 3.6% of demand. There are only 25 foreclosures and 52 short sales available to purchase today in all of Orange County, that’s 77 total distressed homes on the active market, 8 fewer than two weeks ago, a drop of 9% and its lowest level since the start of the Great Recession 10 years ago. Last year there were 144 total distressed sales, 87% more.
• There were 1,879 closed sales in February, a 1% drop from January, but more than the 1,847 closed sales posted in February 2016. The sales to list price ratio was 97.3% for all of Orange County. Foreclosures accounted for just 1.2% of all closed sales and short sales accounted for 1.9%. That means that 96.9% of all sales were good ol’ fashioned equity sellers.

Have a great week.

Roy Hernandez
TNG Real Estate Consultants
Royaltyagent@gmail.com
949-922-3947

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The Top Dates for Listing a Home Revealed

Home listings are most likely to debut on Thursdays and Fridays, with Fridays being the most common listing day by a slight margin, according to research by the National Association of REALTORS®.

What are the most popular dates to list? Half of all new listings in 2016 were first listed between March and July, which supports that the spring season is indeed real estate’s busiest time.

The most popular month for new listings is April, followed by March, May, June, and July, according to NAR.

“While home closings exhibit a strong tendency to get done at the end of the month, listings are much steadier throughout the course of the month with a slight tendency to be posted earlier rather than later,” NAR researchers note at the Economists’ Outlook blog.

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Middle-class workers can’t afford to buy homes in L.A. County; Future looks dim

Article/graphics courtesy of Kevin Smith Southern California News Group

Oscar Sol has spent the past five months searching for a home he can afford to buy.

But so far, he has struck out.

“I’m looking for a condo or town home, something in the price range of $300,000 to $350,000,” the 37-year-old North Hollywood resident said. “Homes are too expensive here so now I’m looking in Santa Clarita.”

Good luck with that. Santa Clarita’s median home price — the point at which half of the homes cost more — was $550,000 in December, up 17 percent from a year earlier, according to price tracker CoreLogic. And that’s not the worst of it.

Studio City’s median price rose 28 percent during the same period and other communities posted even bigger annual price hikes, including Montrose (up 34.4 percent), Tarzana (up 44.2 percent), South Pasadena (up 47.8 percent) and Malibu (up 52.6 percent).

MIDDLE-CLASS WORKERS ARE STRUGGLING TO FIND AFFORDABLE HOMES

Sol, who is married with three children and works as an event coordinator, is not alone. Scores of middle-class workers in Southern California are struggling to find homes they can afford. But their search has been hampered by prices that continue to rise. The price hikes have been fueled by tight inventories and the fact that developers are not building nearly enough homes to keep pace with demand.

Speaking Wednesday at a “Housing Our Workers” forum in Van Nuys, representatives from housing, urban development, city leadership, finance, public health, neighborhood councils and other organizations met to discuss the issue. The event was presented by the Southland Regional Association of Realtors and co-sponsored by BizFed Institute, The Valley Economic Alliance and the National Association of Realtors.

“We know there are challenges with the homeless and transitional housing, but we don’t give enough attention to our middle class worker,” Mel Wilson, Southland Regional’s government affairs director, told the group. “Middle-class workers are being squeezed. They don’t make enough money to qualify and purchase a home or a condo, and they make too much to qualify for some of these low down payment and subsidy programs. No one is standing up for the middle-class workers.”

DEVELOPERS ARE NOT BUILDING ENOUGH HOMES

Developers are building an average of 80,000 new California homes a year but that falls well below the 180,000 that are needed, according to recent figures from the California Department of Housing and Community Development.

When viewed through a longer lens, California will need more than 1.8 million additional homes by 2025 to keep pace with the state’s ever-growing population. The state housing and community development department and state Department of Finance based that on population projections and household formation data.

Holly Schroeder, president and CEO of the Santa Clarita Valley Economic Development Corp., attended Wednesday’s housing event and said builders are hampered by all of the fees and regulations.

“We have a general policy in California that people think of as being equitable, which is that housing has to pay its own way,” she said. “That’s a great sound bite, but I think we have to think through what the consequences are. That means that every house — before you put a shovel in the ground or put a piece of lumber up — is going to pay fees for roads, for schools, for fire stations, sheriff’s stations, parks and community centers … all of that, including water and sewer.”

And those costs add up quickly.

“All of these fees, cumulatively in a typical city, are between $80,000 and $100,000 per home,” Schroeder said. “There is also a lot of litigation that makes it hard to build. We’ve been under-producing, which contributes to it. And in addition to the financing, the housing often skews toward more upper income people.”

MIDDLE-INCOME WORKERS ARE LEAVING CALIFORNIA IN SEARCH OF AFFORDABLE HOUSING

Beacon Economics released a trio of reports last year that said the search for more affordable housing is sending low and middle-income workers out of state, while higher-wage workers continue to move in.

“California has an employment boom with a housing problem,” Christopher Thornberg, a founding partner with Beacon, said when those reports were released. “The state continues to offer great employment opportunities for all kinds of workers, but housing affordability and supply represent a significant problem.”

Aside from all the costs, the process of securing land for development can be lengthy.

THE APPROVAL PROCESS CAN BE LENGTHY

“The approval process can take years to get through, so a real estate cycle could have come and gone by the time you get your master plan approved,” said Bill Holman, vice president of land development for Christopher Homes and for Rosedale Land Partners, master developer of the 1,250-home planned community of Rosedale in Azusa.

The biggest constraint, Holman said, is a lack of available land.

“Southern California is pretty spread out and opportunities for large-scale developments are often far from where people want to live,” he said.

Glen Longarini, KB Home’s division president for Los Angeles and Ventura counties, said the development process varies from city to city.

“Some jurisdictions try to streamline it more than others,” he said. “But broadly speaking, the entitlement process can take months, and in some cases, years.”

KB Home has a variety of new homes for sale in such cities as Santa Clarita, Simi Valley, Van Nuys and Palmdale.

What needs to happen……

The groups that came together at Wednesday’s event agreed on several factors that would spur increased home construction:

• The development process needs to be streamlined

• Cities and developers need to engage with neighborhood councils and other community groups early rather than later when housing proposals are under consideration

• Elected officials need to lead with innovative ideas instead of being fearful of neighborhood councils and their constituents

• Housing needs to be looked at in a more holistic manner, taking into consideration how long commutes impact family life and people’s stress levels

• Planning processes should be updated every six years rather than every 10 years or even longer, which has been the case in some cities.

****Article/graphics courtesy of Kevin Smith Southern California News Group

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4 Concrete Reasons to Remodel Your Home in 2017


You know how you’ve always wanted to expand your family room to make it more open? Or how you’ve been dying to add an extra bathroom that you can have all to yourself? Well, our magic eight ball says the outlook is good for your home upgrade dreams: 2017 is a great time to finally take the plunge and renovate or remodel.

Why? Well, according to home improvement experts, your renovation will cost less today than if you were to wait until next year—for a variety of reasons.

“Concrete doesn’t double in a month, but costs do continually tick up,” says Dan Bawden, chairman of the National Association of Home Builders Remodelers and owner and CEO of Legal Eagle Contractors in Houston.

Bawden says renovating will never get cheaper than it is now.

If you’re a glass-half-empty kind of person, that news might bum you out. But we take it to mean 2017 is the most cost-efficient time to renovate. Do it soon—here’s why.

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Reason No. 1: Consumer confidence is improving

As job growth increases and wages improve, people generally feel good about the economy and their future. That makes them also feel good about investing in home improvements.

“Remodeling decisions are made by families based upon their consumer confidence,” Bawden says.

And that confidence, for now, is increasing. In December 2016, the Consumer Confidence Index posted another gain and reached 113.7—a virtually giddy number compared to when the index tanked to its all-time low of 37.7 in January 2009, the height of the Great Recession.

Bawden calls today’s confidence levels a “rising tide of optimism.”

“Last year we had a record year in my company, and I think 2017 is going to be a great year,” he says.

Reason No. 2: Contractor and construction worker availability is decreasing

Now we know 2017 is shaping up to be a busier year for contractors. That’s good news for the economy! But the bad news is this: The busier those contractors get, the longer you might have to wait to begin a remodeling project. Bawden says he already has a six-week wait period to begin new jobs, which is partly due to a dearth of skilled tradesmen available for hire.

And there’s a double whammy: There’s also a national shortage of construction workers—and these workers are not getting any younger.

“The average guy working for me is 55,” Bawden says. “It’s hard to find new people who are good.”

So if you’re hoping to squeeze in a home remodel or renovation, it’s better to do it now, before you’re relegated to the back of a very long line.

Reason No. 3: Financing is still affordable

Although some people might be sitting on piles of cash they can use for a remodel (we’re not jealous or anything), many rely on financing—often by borrowing against the equity in their homes. And these days, it’s a great time to take out a home equity loan or line of credit because home prices are rising and loan rates are still low.

But loan rates are certainly on the rise. At the end of November the interest on home equity loans stood at 4.82%. By the end of December, the rate was 4.97%. And in mid-January of this year, we’re looking at an interest rate of 5.21%.

Still, keep this mind: Even though borrowing costs are rising, so are home values. Lower inventory and mounting demand have bolstered home prices. The median existing-home price in November 2016 was $234,900, up 6.8% from November 2015, according to NAR research.

As the value of your home increases, so does your equity. And it’s primarily the equity in your home—the difference between the fair market value of your home and what you owe—that supports a loan you can use to add that bathroom or replace the roof.

“Having more equity opens up more opportunity,” says Jonathan Smoke, chief economist of realtor.com®. “Since interest rates are low and equity is up, now would be a great time to look into applying for a home equity loan.”

Reason No. 4: Material costs will increase

No matter how low U.S. inflation might be, prices for building materials manufactured around the globe always seem to go up. Even though inflation may be low here, it could be rising in Italy, where the bathroom tile you love is manufactured. Or tariff pressures might make that slab of granite from Brazil more expensive.

The result is that building costs, labor, and insurance, always rise—perhaps not quickly, but inevitably. And wouldn’t you rather remodel when it’s cheaper?

“If you (renovate) a house two years from now, it will be more expensive,” Bawden says. “Prices are always going up.”

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HUD suspends FHA mortgage insurance rate cut

An hour after Donald Trump assumed the presidency Friday, his administration indefinitely suspended a pending rate cut for mortgage insurance required for FHA-backed loans, which are popular with first-time home buyers and those with poor credit.

The move by the Department of Housing and Urban Development — one of the first acts of Trump’s administration — reversed a policy announced in the waning days of the Obama presidency that would have trimmed insurance premiums for typical borrowers by hundreds of dollars a year.

Some Republicans expressed concern that the rate cut could cost taxpayers if the loans started to go sour and the Federal Housing Administration was unable to cover the losses. The agency needed a $1.7-billion bailout from the U.S. Treasury in 2013 after it expanded its role last decade after the collapse of the subprime mortgage market.

The FHA does not issue loans, but instead insures mortgages and collects fees from borrowers to reimburse lenders in case of default. Borrowers can qualify for an FHA-backed mortgage, with down payments as small as 3.5%, even with a credit score as low as 580, which could signal a past bankruptcy or debts sent to collection.

The average credit score of an FHA borrower in the third quarter of last year was 679, a credit worthiness considered to be fair.

FHA-backed loans have seen robust growth in recent years and lenders not chartered as banks now control a majority of the riskier FHA market. The shift toward nonbank lenders also has drawn concerns because banks have strict reserve requirements while the crop of new lenders operates under a variety of business models.

Last week, during a confirmation hearing for Trump’s nominee for HUD secretary, Ben Carson, Sen. Pat Toomey (R-Pa.) argued that private mortgage insurance should play a larger role in the market for homes acquired by buyers who can’t afford traditional 20% down payments.

Carson appeared open to such a possibility and told Toomey it didn’t matter what entity provided insurance, but “we do have to have a mechanism, backstop.”

Carson also said he was surprised by the recent FHA rate cut and promised that if confirmed he would work with the “FHA administrator and other financial experts to really examine that policy.”

The suspension of the rate cut, set to take effect Jan. 27, came before his confirmation vote.

In a letter announcing the suspension Friday morning, HUD, which oversees the FHA, said more analysis is needed on any “future adjustments” to insurance premium rates. For most borrowers, the rate will now remain at 0.85%, rather than 0.60%.

“FHA is committed to ensuring its mortgage insurance programs remains viable and effective in the long term for all parties involved, especially our taxpayers,” the letter to the real estate industry said.

In cutting the insurance premium, the Obama administration had argued that the FHA’s finances had vastly improved since it received its first-ever bailout in 2013 to cover potential losses on the huge volume of low-down-payment mortgages it insured from 2007 to 2009 after the housing bust.

The administration noted that the agency’s Mutual Mortgage Insurance Fund’s capital reserve ratio exceeded requirements for the second year in a row.

“With sufficient reserves on hand to meet future claims, it’s time for FHA to pass along some modest savings to working families,” former HUD Secretary Julian Castro said in announcing the cut.

The suspension of that decision will be a disappointment to home buyers currently out shopping, especially on top of the rise in mortgage interest rates following the November election.

In Los Angeles and Orange counties, the limit on an FHA mortgage is $636,150.

If the planned reductions went into effect, borrowers who put down less than 5% on a $600,000, 30-year mortgage would have saved $1,500 a year. The Obama administration estimated that new FHA borrowers across the nation would have saved an average of $500 a year.

“That is real money,” Southern California mortgage broker Jeff Lazerson said.

Lazerson, president of Mortgage Grader in Laguna Niguel, said he had several clients who were putting off deals so they could get a cheaper insurance rate after Jan. 27.

“We got lots of calls,” he said.

In its letter announcing the suspension of the rate cut, HUD did not give a timeline for any coming decision and said the suspension was indefinite.

The California Assn. of Realtors called for the Trump administration to quickly review the rate reduction, noting it would have saved FHA-backed borrowers in California an average of $860 a year.

“FHA’s single-family home portfolio is financially sound as it has ever been, and we hope that once the new administration has thoroughly reviewed the merits of the premium reduction the suspension will immediately be lifted,” the association’s president, Geoff McIntosh, said in a statement.

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Mortgage rates highest in two years

mortgage-rates-riseMortgage rates increased for the sixth week in a row to highs not seen in more than two years.

According to the latest data released Thursday by Freddie Mac, the 30-year fixed-rate average climbed to 4.13 percent with an average 0.5 point. (Points are fees paid to a lender equal to 1 percent of the loan amount.) It was 4.08 percent a week ago and 3.95 percent a year ago. The 30-year fixed rate hasn’t been this high since October 2014. It has climbed 66 basis points in six weeks. (A basis point is 0.01 percentage point.)

The 15-year fixed-rate average edged up to 3.36 percent with an average 0.5 point. It was 3.34 percent a week ago and 3.19 percent a year ago. The five-year adjustable rate average crept up to 3.17 percent with an average 0.5 point. It was 3.15 percent a week ago and 3.03 percent a year ago.

“The 10-year Treasury yield dipped this week following the release of the Job Openings and Labor Turnover Survey,” Sean Becketti, Freddie Mac chief economist, said in a statement. “As rates continue to climb and the year comes to a close, next week’s [Federal Reserve] meeting will be the talk of the town with the markets 94 percent certain of a quarter-point-rate hike.”

The rapid rise in mortgage rates is due in part to rising long-term bond yields. The 10-year Treasury is one of best indicators of where rates are headed. When yields go up, rates go up.

Although long-term bond yields have retreated a bit this week, they remain significantly higher than they were a month ago.

In an interview with CNBC on Monday, New York federal bank president William Dudley, who along with his colleagues will decide next week whether to raise the Federal Reserve’s benchmark rate, spoke about what’s driving the markets.

“What we’ve seen post-election is we’ve seen bond yields up, equity market up, dollar firmer,” he said. “My judgment is that it seems to be that what people are factoring in is [the] likelihood of more fiscal stimulus and reduced downside risk to the economy.”

Dudley went on to say that the bond market also is experiencing a bit of a “correction.”

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The 9 Most Enchanting, Magical Christmas Towns In Southern California

 

There’s nothing more enchanting than the magic of the Christmas season. One of the best ways to get into the spirit of the holiday is to head to a town that captures all the beauty of Christmas. These nine towns in Southern California will surround you with twinkling light displays, Christmas caroling, towering trees decorated in holiday splendor, and festive eats and drinks that will remind you why this is your favorite time of year.

Anyone who says Christmas isn’t magical in Southern California hasn’t had the pleasure of visiting these charming towns. For more holiday splendor, take a ride on the Magic Polar Express Train in SoCal.