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OC Housing Report: Payment Not Price

October 9, 2019 By Roy Hernandez

Hello!
When it comes to housing, everybody puts way too much emphasis on the price of a home when they should really be taking a closer look at the monthly payment.

Focus on the Payment: Just a year ago mortgage rates were at 4.75% and rising, substantially higher than today’s 3.5% rate. Everyone has done it. When it is time to look for a brand-new car, narrowing down the car of choice is the first step. After isolating the perfect car, the next step is to sit down and negotiate. Once the initial paperwork and credit application are complete, the salesperson leaves the negotiating table and visits privately with the manager. Upon their return, they then go over the payment for the car. After going back and forth to lower the monthly obligation by $20, it is not uncommon to get up and start calling around other dealers to see if a better payment is out there. After all, it will be the same monthly amount that will come out of the checking account for five-years!

In purchasing a home, buyers tend to focus a bit too much on the price of a home and do not consider enough the monthly payment. After settling on a home and closing, the price no longer matters, it is the payment that is withdrawn from the checking account every single month for 30-years. It happens 360 times for a home loan versus 60 for a car. As a society, why is so much time devoted to the monthly payment for a car and not a home?

Everybody is focusing on how high values are today. For detached homes they are up 60% in Orange County since bottoming in 2011. Homes appreciated significantly from 2012 through 2017. In June of 2017, values eclipsed the record peak reached prior to the Great Recession in June 2007. Since breaking the record, values have only increased slightly. Homes are not appreciating much at all in 2019. Many believe that home values are unaffordable and have reached a peak. That is what a lot of buyers are hoping for. That is simply not correct, home values have not yet peaked.

Many buyers are sitting on the sidelines and waiting… and waiting. They are trying to time the market. Yet, economists and prognosticators will attest that timing markets is next to impossible. As a result, many capable buyers have been permanently sitting on the sidelines rather than cashing in on an excellent opportunity.

Housing is in a very good spot right now and it has everything to do with interest rates. In November of last year, the 30-year mortgage climbed all the way to 5%. Consequently, housing slowed to a crawl. But, since then rates have plummeted to 3.5%, that is down 30%. For a $700,000 loan, that is a $614 per month savings, or $7,373 per year. That is a HUGE savings!

In digging a little deeper, prior to the Great Recession, mortgage rates were at 6.35% in 2007. A $625,000 home with 20% down had a monthly payment of $3,111 back then. Today at 3.5%, the monthly mortgage payment is only $2,245, an $866 per month savings, or over $10,000 per year! The difference is jaw dropping.

The giant savings are a result of excellent interest rates. They have been an absolute lift to housing this year and the momentum is slowly building. Homes are not unaffordable today like they were prior to the Great Recession. So, just because home values have returned to their prior recession levels, the current low interest rate environment is very good for housing. And, rates are not going to change much anytime soon.

In Orange County, demand is up 13% year over year and the active inventory is down 8%. And, unlike last year, the inventory is dropping right now. It will continue to drop through the end of the year and 2020 will start with a lot fewer homes than the start to 2019. With lower rates, demand will be stronger at the beginning of 2020. As a result, the market will be a lot hotter than what everybody has become accustom to.

An important message for buyers: do not wait on the sidelines. Instead, cash in on these incredible rates now. An important fact to remember, buyers do NOT have to put 20% down to purchase a home. FHA financing allows buyers to buy a home with as little as 3.5% down.

Active Inventory: The current active inventory dropped by 4% in the past two-weeks. In the past two-weeks, the active listing inventory dropped by 244 homes, down 4%, and now totals 6,616, levels not seen since March. There are fewer and fewer choices for buyers as fewer and fewer homes enter the fray. Many homeowners are waiting until next spring to place their homes on the market; and, many sellers are throwing in the towel now that both the Spring and Summer Markets are in the rearview mirror.

Last year at this time, there were 7,201 homes on the market, 585 more than today, or a 9% difference. The inventory is MUCH different than last year when it continued to rise through Thanksgiving.

Demand: In the past two-weeks, demand dropped by 4%. Demand, the number of new pending sales over the prior month, dropped by 90 pending sales in the past two-weeks, a 5% drop, and now sits at 2,311. Demand will continue to drop for the remainder of the year and will rapidly drop after Thanksgiving, similar to the active listing inventory.

Last year at this time, there were 261 fewer pending sales than today, 11% less.

Since both supply and demand are falling at the same rate, in the past two-weeks the Expected Market Time remained unchanged at 86 days, a slight Seller’s Market (60 to 90 days), where home values do not change much, and sellers get to call more of the shots during the negotiating process. Last year, the Expected Market Time was at 105 days and rising, much slower than today.

Luxury End: The luxury market continued to slow. In the past two-weeks, demand for homes above $1.25 million decreased by 25 pending sales, an 8% drop, and now totals 304. The luxury home inventory decreased by 81 homes and now totals 2,257, down 3%. The overall Expected Market Time for homes priced above $1.25 million increased from 213 days to 223 over the past two-weeks, a bit sluggish.

Year over year, luxury demand is up by 25 pending sales, or 9%, and the active luxury listing inventory is up by an additional 132 homes, or 6%. That may be more seller competition, but at least demand is stronger. The Expected Market Time last year was identical at 228 days, slightly slower than today.

For homes priced between $1.25 million and $1.5 million, in the past two-weeks, the Expected Market Time decreased from 136 to 121 days. For homes priced between $1.5 million and $2 million, the Expected Market Time increased from 155 to 171 days. For homes priced between $2 million and $4 million, the Expected Market Time increased from 278 to 332 days. For homes priced above $4 million, the Expected Market Time increased from 555 to 557 days. At 557 days, a seller would be looking at placing their home into escrow around April 2021.

Orange County Housing Market Summary:

The active listing inventory decreased by 244 homes in the past two-weeks, down 4%, and now totals 6,616. Last year, there were 7,201 homes on the market, 585 more than today.

Demand, the number of pending sales over the prior month, decreased by 90 pending sales in the past two-weeks, down 4%, and now totals 2,311. Last year, there were 2,055 pending sales, 11% fewer than today.

The Expected Market Time for all of Orange County remained at 86 days, a slight Seller’s Market (between 60 to 90 days). It was at 105 days last year, a much slower market.

For homes priced below $750,000, the market is a hot Seller’s Market (less than 60 days) with an expected market time of 56 days. This range represents 38% of the active inventory and 57% of demand.

For homes priced between $750,000 and $1 million, the expected market time is 75 days, a slight Seller’s Market. This range represents 19% of the active inventory and 22% of demand.

For homes priced between $1 million to $1.25 million, the expected market time is 101 days, a Balanced Market.

For luxury homes priced between $1.25 million and $1.5 million, in the past two weeks, the Expected Market Time decreased from 136 to 121 days. For homes priced between $1.5 million and $2 million, the Expected Market Time increased from 155 to 171 days. For luxury homes priced between $2 million and $4 million, the Expected Market Time increased from 278 to 332 days. For luxury homes priced above $4 million, the Expected Market Time increased from 555 to 557 days.

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

Distressed homes, both short sales and foreclosures combined, made up only 0.8% of all listings and 1.3% of demand. There are only 22 foreclosures and 32 short sales available to purchase today in all of Orange County, 54 total distressed homes on the active market, up one in the past two-weeks. Last year there were 78 total distressed homes on the market, a bit more than today.

There were 2,823 closed residential resales in August, 0.6% more than August 2018’s 2,806 closed sales. August marked a 2% drop compared to July 2019. The sales to list price ratio was 97.2% for all of Orange County. Foreclosures accounted for just 0.2% of all closed sales, and short sales accounted for 0.3%. That means that 99.5% of all sales were good ol’ fashioned sellers with equity.

Article courtesy of Steven Thomas, Quantitative Economics and Decision Sciences

Have a great week,

Roy Hernandez
Realtor
TNG Real Estate Consultants
949.922.3947

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OC Housing Report- It is what it is

August 27, 2019 By Roy Hernandez Leave a Comment

Many buyers and sellers are holding out for a major shift in the market favoring their point of view, but housing is not changing anytime soon.

Status Quo: For the rest of the year, the housing market is not going to change much at all.

There is an old saying, “If it looks like a duck, swims like a duck, and quacks like a duck, then it probably is a duck.” No matter how hard you wish it was something else, it is still a duck at the end of the day.

Today’s housing market is a slight Seller’s Market. That is when homes are not appreciating much at all, but sellers get to call more of the shots during the negotiating process. For buyers and sellers, wishing that the market was different is a complete waste of time.

Many buyers and sellers are holding out and hoping for a change in the market. Buyers want to see housing slow to a crawl like it did in the last four months of 2018 where, for a moment, they were in the driver’s seat. They would love to see prices come down, after all, aren’t values too high?

Sellers expect the housing market to behave like it did from 2012 through 2017. Boy those were HOT years!! They should once again be able to stretch their housing price and get $15 or $20,000 more than the last sale with multiple offers within the first couple of weeks, right?

This kind of thinking is stinking thinking. Neither are correct. What you see in the market today is ultimately what you are going to see for the rest of the year. More simply, it is what it is; what you see is what you get. Values are not going to grow much. The overall pace of housing is not going to change. Housing is going to move along at the same clip. Buyers think that the end of the year is the BEST time of the year to buy. Nope! What you see is what you get. Sellers think that the market is going to suddenly heat up. Nope! What you see is what you get.

Here is how the rest of the year is going to play out. With the kids back in school, it is officially the Autumn Market. The Spring and Summer Markets are now in the past. The busiest time of the year for real estate is in the rearview mirror. From right now, today, the active inventory will drop for the rest of the year. In Orange County, the current active inventory peaked at the end of July with 7,601 homes on the market. It had grown by 29% since then beginning of the year. Yet, in the last month, the inventory has already dropped by 294 homes, or 4%, and now sits at 7,307.

Now that it is the Autumn Market, there will be fewer new homes that enter the fray. Combine that with many unsuccessful sellers throwing in the towel and pulling their homes off the market and you have the recipe for an active inventory that will continuously drop. As the year progresses, there will be fewer and fewer choices for buyers. That is normal. Last year, the inventory grew on the backs of rising rates, which is not normal. Current rates are at a three-year low. The inventory is going to do what it normally does at the end of the year, consistently drop. On average, it drops 37% after reaching a peak during the Summer Market.

At the same time, buyer demand will drop slowly but surely for the remainder of the year. It just is not the most advantageous time for families to move with the kids back in school, so demand continuously drops. It picks up steam in November and December with all the distractions of the holidays. On average, in the last decade, it has dropped by 35% from August through the end of the year.

With both supply and demand dropping at nearly the same rate, the velocity of the market will not change much as well. What you see is what you get. The Expected Market Time, the amount of time it would take from listing a home to placing it in escrow down the road, has increased, on average, by only 2% from August through December during years where housing peaks during the summer. The current Expected Market Time is at 86 days. A 2% change would be an increase to 88 days, nearly unnoticeable for anyone in the real estate trenches.

Buyers and sellers need to be careful with their wild expectations. They need to be based upon the realities of today’s housing market, not what they wish for… what you see is what you get.

Active Inventory: The current active inventory shed 181 homes in the past two-weeks.In the past two-weeks, the active listing inventory dropped by 181 homes, down 2%, and now totals 7,307, the largest drop of the year. The significant drop illustrates the direction that the active listing inventory will be heading for the remainder of the year: DOWN. There are fewer homeowners opting to list their homes during this time of the year and many unsuccessful sellers are throwing in the towel with the best time of the year officially in the rearview mirror.

Last year at this time, there were 7,001 homes on the market, 306 fewer, or 4% less. Two years ago, there were 20% fewer homes on the market compared to today.

Demand: In the past two-weeks, demand decreased by 2%. Demand, the number of new pending sales over the prior month, decreased by 58 pending sales in the past two-weeks, down 2%, and now totals 2,548. With the kids back in school, demand slowly and methodically drops for the rest of the year. It is just not the most advantageous time for families to move. Most families prefer to move when it is easiest on the kids, during the summer months, from June through mid-August while their kids are enjoying their summer break.

Last year at this time, there were 198 fewer pending sales than today. Current demand is still muted, just not as severe as this time last year when interest rates were climbing. Two years ago, it was 11% stronger than today.

In the past two-weeks, the Expected Market Time remained unchanged at 86 days, a slight Seller’s Market (60 to 90 days), where home values do not change much, and sellers get to call more of the shots during the negotiating process. Last year, the Expected Market Time was at 89 days, a little slower than today.

Luxury End: The luxury market continued to improve in the past couple of weeks.In the past two-weeks, demand for homes above $1.25 million increased by 18 pending sales, a 5% increase, and now totals 349, the highest level since June. The luxury home inventory decreased by 46 homes and now totals 2,461, a 2% drop. It too reached a peak four weeks ago and is descending like the rest of the active inventory. The overall Expected Market Time for homes priced above $1.25 million decreased from 227 days to 212 over the past two-weeks, better, but still sluggish.

Year over year, luxury demand is up by 4 pending sales, or 1%, and the active luxury listing inventory is up by an additional 328 homes, or 15%. The expected market time last year was at 185 days, better than today.

For homes priced between $1.25 million and $1.5 million, in the past two-weeks, the Expected Market Time increased from 130 to 149 days. For homes priced between $1.5 million and $2 million, the Expected Market Time decreased from 240 to 162 days. For homes priced between $2 million and $4 million, the Expected Market Time decreased from 280 to 249 days. For homes priced above $4 million, the Expected Market Time increased from 404 to 509 days. At 509 days, a seller would be looking at placing their home into escrow around January 2021.

Orange County Housing Market Summary:

The active listing inventory decreased by 181 homes in the past two-weeks, down 2%, and now totals 7,307. The inventory reached a peak for the year of 7,601 four-weeks ago. Last year, there were 7,001 homes on the market, 306 fewer than today, 4% less. Two years ago, there were 20% fewer homes on the market.
Demand, the number of pending sales over the prior month, decreased by 81 pending sales in the past two-weeks, down 2%, and now totals 2,548. Last year, there were 2,350 pending sales, 8% fewer than today. Two years ago, demand was 11% stronger than today.
The Expected Market Time for all of Orange County remained unchanged at 86 days, a slight Seller’s Market (between 60 to 90 days). It was at 89 days last year.
For homes priced below $750,000, the market is a hot Seller’s Market (less than 60 days) with an expected market time of 57 days. This range represents 38% of the active inventory and 57% of demand.
For homes priced between $750,000 and $1 million, the expected market time is 74 days, a slight Seller’s Market. This range represents 19% of the active inventory and 22% of demand.
For homes priced between $1 million to $1.25 million, the expected market time is 117 days, a Balanced Market.
For luxury homes priced between $1.25 million and $1.5 million, in the past two weeks, the Expected Market Time increased from 130 to 149 days. For homes priced between $1.5 million and $2 million, the Expected Market Time decreased from 244 to 162 days. For luxury homes priced between $2 million and $4 million, the Expected Market Time decreased from 280 to 249 days. For luxury homes priced above $4 million, the Expected Market Time increased from 404 to 509 days.
The luxury end, all homes above $1.25 million, accounts for 34% of the inventory and only 13% of demand.
Distressed homes, both short sales and foreclosures combined, made up only 0.7% of all listings and 1.4% of demand. There are only 20 foreclosures and 32 short sales available to purchase today in all of Orange County, 52 total distressed homes on the active market, down five in the past two-weeks. Last year there were 58 total distressed homes on the market, slightly more than today.
There were 2,871 closed residential resales in July, 5% more than July 2018’s 2,734 closed sales. July marked a 6% increase compared to June 2019. The sales to list price ratio was 98.3% for all of Orange County. Foreclosures accounted for just 0.5% of all closed sales, and short sales accounted for 0.24%. That means that 99.3% of all sales were good ol’ fashioned sellers with equity.

Article courtesy of Steven Thomas, Quantitative Economics and Decisions Sciences

Have a nice week, and a safe Labor Day weekend!

Roy Hernandez
TNG Real Estate Consultants
Realtor@Royalagent.net
Cell/Text 949.922.3947

OC Housing Report- Sluggish

July 17, 2019 By Roy Hernandez Leave a Comment

Hello friend!

Due to fewer pending sales, the overall housing market is not as hot as it used to be.

Pending Activity: Housing has officially been sluggish in Orange County since April 2018 and it is not changing anytime soon.

There are some mountain roads that are extremely steep. In trying to ascend it behind the wheel of a car, often the pedal is all the way to the floorboard. The engine revs loudly and the car sluggishly makes its way to the top. You want your car to zoom up the mountain, but it’s out of your control. It takes time.

Similarly, the housing market has been moving along sluggishly since the spring of last year. In April 2018, demand (the last 30-days of pending sales) was off 11% compared to April 2017. By July 2018, it was off by 13%. As the year continued to unfold, muted demand became the new normal. After hearing how slow the market had become in 2018, many homeowners eagerly waited for 2019’s Spring Market. Yet, muted demand was not just a blip on the housing radar screen in 2018. Instead, sluggish demand had been a trend that continued to this day.

There are many experts and plenty of media reports that are beginning to talk about a robust second half to 2019. They point to the tremendous drop in interest rates as a catalyst to a sharp increase in buyer demand. Their thinking is that rates have dropped more than a full percentage point since last November, which has improved affordability dramatically. They are correct; affordability has improved considerably. The payment for a $650,000 mortgage has dropped from $3,489 per month at 5% back in November, to $3,103 per month at 4% today. That’s a savings of $386 per month or $4,632 per year.

The underlying issue is that mortgage rates have been much lower than last year, after dropping considerably in March, but they have not changed the number of pending deals at all. Demand has been lockstep with last year’s muted demand curve. Even with lower rates that have improved overall affordability, there are not as many buyers in the marketplace.

For years now, everybody has heard that there are not enough homes on the market. Many have stated that if there were more homes with FOR SALE signs in their yards, that there would be even more pending sales, and, ultimately, a lot more closed sales. That was pure speculation. There have been more homes for sale compared to the prior year since May 2018, yet demand has remained muted the entire time, 14 straight months.

For the second half of this year, the issue is going to be that there will be plenty of news stories regarding the numbers being better compared to last year. These stories need to be taken with a grain of salt. They will be comparing this year’s numbers to the second half of 2018, which were considerably muted, and interest rates climbed all the way to 5% by November. In November, year over year demand was down by 23%.

Instead, it is better to compare this year’s active listing inventory, demand, and closed sales numbers to two years ago, when the market was much hotter. It is the market that today’s sellers long for. Current demand is off by 15% compared to July 2017, and nearly identical to last year. The active listing inventory is 26% higher than July 2017, and 15% higher than last year. The Expected Market Time is 92 days, compared to 63 days in July 2017 and 80 days last year. June 2019’s closed sales are down 16% compared to June 2017, and down 6% from last year.

The moral to the real estate trend story is that despite the incredible improvement in affordability due to low mortgage rates, buyer demand remains muted. Lower rates are not igniting a run-up in demand. Instead, there is an underlying theme that nobody is talking about. Homes appreciated handsomely from 2012 through the first couple of months of 2018, rising over 70%. That rise has brought housing to a point where many can no longer afford to purchase, and are sitting on the sidelines. With sluggish demand, for the remainder of 2019, sellers should expect fewer closed sales and a market where pricing is absolutely crucial in order to find success.

Active Inventory: The current active inventory decreased by 39 homes in the past two weeks.

In the past two weeks, the active listing inventory decreased by only 39 homes, down 0.5%, and now totals 7,561. The active listing inventory typically continues to rise until peaking in July or August. However, in the month of June, 12% fewer homes came on the market compared to June 2018. Only time will tell if this trend continues. Fewer homes coming on the market eases competition a bit. This recent phenomenon has not had an impact on the overall market yet. Last year at this time there were 6,579 homes on the market. That means that there are 15% more homes available today. This continues to be the highest level of homes on the market for this time of the year since 2011.

Demand: In the past four weeks, demand dropped significantly by 8% and housing transitioned into a Balanced Market.

Demand, the number of new pending sales over the prior month, dropped by 200 pending sales in the past four weeks, down 8%, and now totals 2,461. Demand continues to drop during the Summer Market, typical for this time of the year. The real story is how demand remains subdued despite the extremely favorable drop in interest rates. The low rates are failing to ignite demand. Demand will drop through the rest of summer and then will downshift when the kids go back to school at the end of August, the beginning of the Autumn Market.

Last year at this time, there were 7 fewer pending sales, nearly identical to today. Two years ago, it was 15% stronger than today.

The current Expected Market Time increased from 89 days to 92 days in the past two weeks, a Balanced Market (90 to 120 days), one that does not favor sellers or buyers. The market has slowed to February levels. Last year, the Expected Market Time was at 80 days, better than today.

Luxury End: The luxury market slowed slightly in the past couple of weeks.

In the past two-weeks, demand for homes above $1.25 million decreased by 7 pending sales, a 2% drop, and now totals 345, its lowest level since February. The luxury home inventory dropped by 27 homes and now totals 2,522, a 1% drop and identical to a month ago. The overall Expected Market Time for homes priced above $1.25 million increased from 217 days to 219 over the past two-weeks, extremely sluggish.

Year over year, luxury demand is up by 15 pending sales, or 5%, and the active luxury listing inventory is up by an additional 328 homes, or 15%. Extra seller competition and continued muted demand compared to 2017 (the last time the luxury range was stronger) is a trend that will persist for the remainder of the year. The expected market time last year was at 199 days, slightly better than today.

For homes priced between $1.25 million and $1.5 million, in the past two-weeks, the Expected Market Time increased from 118 to 143 days. For homes priced between $1.5 million and $2 million, the Expected Market Time decreased from 192 to 189 days. For homes priced between $2 million and $4 million, the Expected Market Time increased from 250 to 262 days. For homes priced above $4 million, the Expected Market Time decreased from 667 to 518 days. At 518 days, a seller would be looking at placing their home into escrow around December 2020.

Orange County Housing Market Summary:

The active listing inventory decreased by 39 homes in the past two weeks, down 1%, and now totals 7,561. In the month of June, 12% fewer homes came on the market compared to June 2018. Last year, there were 6,579 homes on the market, 982 fewer than today. There are 15% more homes than last year.
Demand, the number of pending sales over the prior month, decreased by 87 pending sales in the past two-weeks, down 3%, and now totals 2,461. Last year, there were 2,454 pending sales, similar to today.
The Expected Market Time for all of Orange County increased from 89 days two weeks ago to 92 days today, a Balanced Market (between 90 to 120 days) and the highest level for this time of the year since 2011. It was at 80 days last year.
For homes priced below $750,000, the market is a slight Seller’s Market (between 60 and 90 days) with an expected market time of 64 days. This range represents 39% of the active inventory and 55% of demand.
For homes priced between $750,000 and $1 million, the expected market time is 79 days, a slight Seller’s Market. This range represents 19% of the active inventory and 22% of demand.
For homes priced between $1 million to $1.25 million, the expected market time is 98 days, a Balanced Market.
For luxury homes priced between $1.25 million and $1.5 million, in the past two weeks, the Expected Market Time increased from 137 to 143 days. For homes priced between $1.5 million and $2 million, the Expected Market Time decreased from 192 to 189 days. For luxury homes priced between $2 million and $4 million, the Expected Market Time increased from 250 to 262 days. For luxury homes priced above $4 million, the Expected Market Time decreased from 667 to 518 days.
The luxury end, all homes above $1.25 million, accounts for 35% of the inventory and only 14% of demand.
Distressed homes, both short sales and foreclosures combined, made up only 0.7% of all listings and 1.5% of demand. There are only 20 foreclosures and 35 short sales available to purchase today in all of Orange County, 55 total distressed homes on the active market, identical to the number two-weeks. Last year there were 64 total distressed homes on the market, slightly more than today.
There were 2,715 closed residential resales in June, 6% fewer than June 2018’s 2,879 closed sales. June marked a 7% drop from May 2019. The sales to list price ratio was 97.6% for all of Orange County. Foreclosures accounted for just 0.5% of all closed sales, and short sales accounted for 0.4%. That means that 99.1% of all sales were good ol’ fashioned sellers with equity.

Article courtesy of Steven Thomas Quantitative Economics and Decision Sciences

Sincerely,
Roy Hernandez
TNG Real Estate Consultants
949.922.3947
Realtor@Royalagent.net

Bidding Wars; Legacy of the housing bubble that won’t go away

March 19, 2015 By Roy Hernandez Leave a Comment

The housing bubble brought bidding wars — wars over $500,000 properties that ultimately sold for $600,000, wars over under-listed condos that drew dozens of would-be buyers, wars over starter homes that a few years earlier would have fetched a fraction of the price. This manic bidding was, in effect, a sign of the bubble, as well as a factor that helped inflate it.

But a curious thing has happened since the housing market has returned to something more rational: The bidding wars haven’t gone away.

A practice that was rare in the 1980s and 1990s now seems here to stay in markets like Washington, D.C., a permanent gift of the housing bubble (if you want to look at it that way). Lu Han and William Strange, economists at the University of Toronto’s Rotman School of Management, have concluded as much after looking at data from the National Association of Realtors dating back to the 1980s.

They find, in research published in the journal Real Estate Economics, that only around 3 to 4 percent of homes on the market across the country were selling in bidding wars for years prior to the bubble. Then at the bubble’s peak, nearly 30 percent of homes in metropolitan D.C. were selling this way, the highest share of any metro Han and Strange studied. The same was true of about 22 percent of home sales in Baltimore and Norfolk, 23 percent in Las Vegas and 26 percent in Los Angeles.

Since the housing collapse, these crazy numbers have declined, but not back to their earlier levels. As prices have fallen and the number of home sales has, too, bidding wars haven’t disappeared apace. That means that we’re probably seeing not just a lingering effect of the housing bubble, or even a pure product of high housing demand, but a new strategy for selling homes that was embraced during the bubble.

“The persistence of this suggests that people have decided that this is a good way to think about selling these kinds of goods,” Strange says, “selling housing in a more auction-like way.”

If a list price once meant the seller’s ceiling, for many homes it’s now the buyer’s floor — the number with which the auction can begin. Part of what’s going on here, Strange says, isn’t just that the small supply of homes for sale continues to push up their price in certain markets like D.C. (bidding wars still made up about 12 percent of sales here as of 2010). Real estate agents are also strategically listing homes below their value to createbidding wars.

“One way to see all of this is that housing is this incredibly important good, it’s easily the most important asset in a typical household’s portfolio. As a share of total wealth, housing is huge,” Strange says. “And yet, the way houses are getting marketed, very broadly speaking nowadays, is an awful lot like it was 50 years ago.”

If you’re a buyer or a seller, you sign a contract with a real-estate agent who understands what’s going on a lot better than you do. They negotiate on your behalf and split a commission, typically about 6 percent. The way information is traded — through home visits, negotiations and market comparisons — is more or less how it’s been done for decades. For most of this time, buyers would set an aspirational price, then negotiate down from there.

Good News for Buyers; Lending Standards Easing

March 11, 2015 By Roy Hernandez Leave a Comment

Earlier this year, we saw the return of the 3% down payment – a major step towards the easing of lending standards nationwide after years of progressively tighter rules. While many of these guidelines were established in an effort to prevent another collapse, in many cases they are over cautious, preventing would-be homeowners who fell short of the qualifications from buying a home. Now, the standards are easing again – good news for both buyers and the real estate community in whole.

According to the latest credit availability index from the Mortgage Bankers Association, January saw improvements in all four of the reports loan categories. The changes reflected a positive response from lenders towards government efforts to improve affordability through easing regulations.

One major factor playing into this change was the return of conventional mortgage with a 3% down payment – a policy which Fannie Mae adopted earlier in the year but has been gaining traction with other lenders as well. Freddie Mac, for example, plans to begin a similar 3% down loan on mortgages which closed on or after March 23.

While Fannie and Freddie are two of the bigger players in lending, the 3% down program doesn’t end here. According to index, nearly 40% of investors have already adopted a similar 3% down policy.

The Federal Housing Administration has also played a hand in improving affordability with their reduction of upfront mortgage insurance premiums. It’s estimated that this change could move thousands of potential buyers into eligibility, as virtually every lender working with the FHA program has reduced these costs.

With all the recent changes, many lenders are gaining confidence in lending to a wider range of borrowers, many of whom are below previously set limitations such as credit scores and cash for a large down payment. Wells Fargo, for example, previously had a minimum FICO score of 660, but now no longer has a hard limit set. Instead, the lender is willing to give you a chance if Fannie Mae or Freddie Mac’s automated underwriting systems accepts your application.

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Telltale Signs That You’re Ready to Sell

February 23, 2015 By Roy Hernandez Leave a Comment

It doesn’t matter how the decision comes about to sell your home; when you’re ready, you’re ready.

Knowing when to move on from a relationship is an essential life skill. I’m not talking about romance, but an even deeper relationship: the one you have with your humble abode.

Selling your home is just as big an undertaking as buying one — in many cases, even more so! You’ve made memories in your home, and that can make it hard to see the proverbial writing on the wall.

So how do you spot the telltale signs of an impending property breakup?

You browse your heart out

Surfing real estate listings online has become a favorite pastime. Real estate photos these days are as Pinterest-worthy as any magazine spread, and it’s easy to scroll away the hours looking at pretty pictures of houses.

If you find that your search filters have become more detailed, that you’ve signed up for a Trulia account, and that you’re bookmarking houses with abandon … you may be doing a bit more than just dreaming.

Sometimes the decision to sell your home isn’t a conscious one; it simply becomes apparent through your actions.

Brandon Wilson, a recent home seller in Dallas, found himself in this exact situation.

“I was spending so much time online looking at houses, it practically became my job. Even though I felt happy with the home I had, I finally realized that all the amenities I wanted in my current home could actually be mine if I just moved; I listed my house for sale the next week.”

You obsess over every for-sale sign

Most of us know a real estate professional in our neighborhood. It’s natural to ask about the market in general terms — we all want to know what our house is worth, don’t we?

Even if you aren’t ready to sell your current home, looking at homes for sale can be a fun way to spend a Saturday.

However, if you find yourself cornering the local real estate pro at every neighborhood get-together to discuss market valuations, then you may be more serious about moving than you think.

The same can be said for spending every waking hour driving around to open houses. It’s natural to be curious occasionally about homes for sale in your neighborhood, but if you’re starting to feel like you should have your own HGTV show, then it’s time to move on.

You’re desperate to “right-size” your home

Everyone says time flies, and this is definitely true in real estate. We often find ourselves in a situation that was perfect five years ago but just isn’t filling the bill now.

Maybe you’ve added a family member or two or the kids have all moved out; whatever the change, the outcome is the same — it’s time to “right-size” your home.

If you fantasize about the free time and road trips you could take if you didn’t have 3,000 square feet to maintain, or if every morning you long for a bathroom you didn’t have to share with three kids and a dog, it’s time to list and make your dreams come true.

The first step? Get clear on the reasons that your house is no longer the one for you. Then you can embrace the process and start implementing a plan to make your fantasy home a reality.

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Mortgage Lenders Set to Relax Standards

December 3, 2014 By Roy Hernandez Leave a Comment

Agreement With Fannie, Freddie Potentially Paves Way for More Applicants to Qualify for Loans

Lenders also are expected to widen the scope of the types of borrowers they will accept by reducing credit-score requirements and giving greater leeway to consumers whose credit history suffered because of one-time events, such as a job loss or big medical bill.

Economists have long maintained that tight credit could be holding back the housing recovery and damping economic growth. On Tuesday, the S&P/Case-Shiller Index showed that U.S. home prices grew 4.8% in the 12 months ending in September, their slowest pace in two years.

After the financial crisis, Fannie and Freddie made banks repurchase tens of billions of dollars in loans that the companies said didn’t meet their standards. In turn, many lenders stopped making loans to all but the most pristine of borrowers.

In many cases, they required borrowers to have substantially higher credit scores and put in place other measures—so-called credit overlays—that were more stringent than what Fannie and Freddie required.

With the new agreement, “I’ve been told with absolute confidence that some lenders are lifting almost all of their overlays,” said David Stevens, president of the Mortgage Bankers Association.

Wells Fargo, the nation’s largest mortgage lender, lifted its credit-score overlay earlier this year, which the bank said was in anticipation of the agreement with Fannie and Freddie. Now it says borrowers can expect a smoother process of getting a loan with less “excessive” paperwork.

“It’s providing greater certainty for all the parties so that you can lend more confidently and make the whole judgment process much easier and more clear cut,” said Mike Heid, president of Wells Fargo Home Mortgage.

For example, under the previous system, Mr. Heid said a borrower who had a late payment on an auto loan might have been asked to write a memo describing what happened, even if such a mistake wasn’t critical to the decision to make a loan or not. That was because Wells couldn’t be certain what would trigger a repurchase demand from Fannie or Freddie, he said.

Now, they are less likely to be required to ask for such documentation, he said, which should speed the process of securing a loan.

Jerome Lienhard, CEO of SunTrust Mortgage, said the new guidelines likely would allow the company to lift its overlays by “a pretty meaningful amount.” He said the bank is still analyzing which overlays to remove, but he is confident many will be eliminated. “This is real. This is substantive,” he said.

Before the new rules were put in place, Mason-McDuffie Mortgage Corp. in San Ramon, Calif., typically wouldn’t make a loan to a borrower with a credit score below 660, said Bill Godfrey, the company’s executive vice president of capital markets. Now, he said he believes the company will lend down to 620, the limit for loans backed by Fannie and Freddie.

“We will be able to be looser and open up the net wider,” said Mr. Godfrey.

Not all lenders are poised to relax their underwriting rules. On an earnings call a few days after the agreement was announced, U.S. Bank Chief Executive Richard Davis called it “a good sound bite” and indicated that his bank wasn’t prepared to make changes.

“Unless we are convinced that the rules are going to be permanent and there is not going to be a look back or a reach back in future times…we are simply going to stay on the sidelines in the concerns of both compliance risks and other uncertainties,” said Mr. Davis.

“You won’t see us start to expand our criteria much past what we’ve done,” said Bank of America Chief Executive Brian Moynihan at an investor conference this month.

Isaac Boltansky, an analyst at Compass Point Research & Trading, said some lenders are still too “shellshocked due to litigation and the shifting regulatory environment” to ease credit conditions soon.

Still, overall, Fannie Mae CEO Timothy J. Mayopoulos this month said lenders were “reacting positively to those developments. I do think that lenders are nonetheless concerned about other factors in the environment that we do not control.”

By JOE LIGHT, WSJ

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O.C. home prices jump more than 10% in October

November 17, 2014 By Roy Hernandez Leave a Comment

Orange County home prices showed uncharacteristic strength for an October, with double-digit gains for the first time in four months, new housing figures released Wednesday show.

The median price of an Orange County home – or the price at the midpoint of all sales – was $595,000 last month, up 10.2 percent from a year ago and up $10,000 from September’s median, CoreLogic DataQuick reported.

Typically, prices drop from September to October as part of a seasonal slowdown, rising in only nine of the past 27 years.

Last month’s price gain was the biggest price appreciation rate in the region and the only double-digit gain among six Southern California counties DataQuick tracks. And it was the highest median home price for an October since 2006.

Countywide, home sales remained well below October averages, however, with transactions falling to the slowest pace for the month in three years. DataQuick reported that 2,849 homes changed hands last month, down 4.6 percent from the same month’s sales pace last year.

The market here matched trends throughout Southern California. Regionwide, the median home price increased 6.8 percent to $410,000, while sales fell 4.4 percent to 19,271 transactions.

All six Southern California counties that DataQuick tracks showed year-over-year price gains of 6.3 percent or better, while sales dipped throughout the region.

posted by Jeff Collins, OC Register

OC Halloween Events

October 1, 2014 By Roy Hernandez Leave a Comment

Orange County
Halloween Celebrations
Halloween parties, Fall Festivals and seasonal parades!

** Due to possible last minute changes to times & locations to the events below, we encourage you to click on the link of the event holder to get the most updated information.

Aliso Viejo

Anaheim

Brea

Buena Park

Costa Mesa

Cypress

Dana Point

Fullerton

Garden Grove

Huntington Beach

Irvine

Laguna Hills

Laguna Niguel

La Habra

Lake Forest

La Palma

Los Alamitos

Newport Beach

Orange

San Juan Capistrano

Santa Ana

Stanton

Silverado / Trabuco Canyon

Tustin

Villa Park

Westminster

– Related Sections –

Costume Rentals

Halloween Party Planning

ALISO VIEJOHalloween Fair and Haunted HouseSoka University will have booths for children, haunted house for young teens, games, activities and performances for all to enjoy!

The Haunted House will be held on the first floor crypt of the SUA Recreation Center and the entrancing fee will be $5 at the doomsday door. The suggested age for this dark journey with moving monsters is 10 years old and up. Proceeds benefit the student clubs at Soka University.

LOCATION:
Soka University, Recreation Center
1 University Drive, Aliso Viejo

INFORMATION:
949.480.4000