Distressed properties 12% of O.C. housing supply

October 8th, 2007, 6:17 am · 58 Comments · posted by Jon Lansner

Chart corrected 10 p.m., 10/22

Market watcher Steve Thomas at Re/Max Real Estate Services in Aliso Viejo notes the impact of distressed properties in his biweekly summary of housing supply …

After finding a new way to search for short sales and foreclosures on the market and in escrow, the new findings are disconcerting. Currently, short sales and foreclosures in Orange County account for 12% of the active inventory and 15% of all escrows opened within the prior month.

Thomas also calculates “market time,” a benchmark of how many months it theoretically takes to sell all the inventory in the local MLS for-sale listings at the current pace of pending deals being made. This index shows the inventory-to-selling ratio continuing to erode. By this Thomas logic, it would take 15.17 months for buyers to gobble up all homes listed for sale at the current pace of deals vs. 14.73 months two weeks earlier and vs. 7.10 months a year ago. Here’s Thomas data by the slice as of Oct. 4 for homes listed on market; pending deals, Thomas’ market time, in months; and market time two weeks ago and a year ago:

Slice	Listed	Deals	Mos.	2 wks.	Yr. ago
All O.C.	17,759	1,113	15.96	15.17	7.78
•$0-$500k	5,721	419	13.65	13.33	6.77
•$500-750k	6,459	413	15.64	15.62	6.52
•$750k-1m	2,478	156	15.88	14.65	9.38
•$1-1.5m	1,624	72	22.56	17.93	9.13
•$1.5-2m	764	43	17.77	18.71	14.22
•$2-4m	860	33	26.06	21.18	13.39
•$4m+	263	11	23.91	18.79	45.80

(Note: k=thousand; m=million)

Posted in: Inventory

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rants says:

October 8, 2007 at 8 am

15% of sales are reo’s or foreclosures DAMN cant wait to see
how ROC “I buy at the top” to spin this one llooll @ribsplitter
spin away mr trump wannabe

Carlos says:

House price in Orange County has to be around $600,000 or above to be reasonable living.

1 30 years old house in a nice neighbor.

1 bedroom flat like a nice hotel room in tower.

1 townhome or condo with nice parking.

OC is too expensive

sunsetbeachguy says:

Hey Jon did you check in with Gary Watts on this number.

Gary’s math shows the distress at just .12% of inventory.

Those pesky decimal places and percentiles!

Greg says:

October 8, 2007 at 9 am

Can someone please tell me the why their is such a disparity from these months on market numbers to the numbers Pat Veling is posting? Is Pat using absorption numbers from the boom?

Tom M says:

October 8, 2007 at 10 am

Jon,

This is the same chart that was in posted 2 weeks ago. Is this an error?

ROC says:

“rants Says:
October 8th, 2007 at 8:02 am
15% of sales are reo’s or foreclosures DAMN cant wait to see
how ROC “I buy at the top” to spin this one llooll @ribsplitter
spin away mr trump wannabe”

Rants,

In the another thread you dismissed me as a liar when I said I bought at under $300 per sq. ft.

Have you been looking at new construction in the past year?

I will guarantee you that new construction can be had in that range (yes, in late 2006 too). If you insist, I will find you some examples when I have the time.

I have always bought with an emphasis on price per square foot. If you look at the homes with the steepest declines right now, you will find that, almost universally, they were bought at very high price per square foot numbers.

Maybe your definition of a premium area is more stringent than mine. I consider Irvine, Tustin, San Juan Capistrano, San Clemente, Mission Viejo, etc. to be premium enough.

I have no aspirations to be a “Trump wannabe”. I own a home for the purpose of shelter and the enjoyment of my family and friends.

Maybe it’s you who is a snob?

crispy&cole says:

Pat is using TIC numbers from this Taco Stand!

Scott says:

Distressed properties:
I think this 12% figure will grow in 2008.
Did anyone check out MSN.COM / Sinking feelings artical?

K-Bee home slashes new homes to liquify excess supply.
Vegas, Like the OC market is also ground Zero for the overleveraged.

I just got back from Vegas this weekend, the Builders are going under.

I have posted several times:
Builders did not cut the supply lines soon enough.

The effect on people who bought next door the year before is devastating. They are now upsidown on there mortgages.

Existing homes for sale will rot on the market,
Because builders are begging to sell and doing everything under the sun to entice you. This includes upgraded kitchens, floors, pools and even closing costs and loan discounts.

Fast forward to 2008:
Tustin air base, El toro air base, Marblehead, telega, Ladara etc.
Over 30,000 new homes hitting the oc market by 2010.

If you bought a home in 2005 / 06 07 on a neg am, IO, 2/28 Arm,
or any other exotic mortgage set to reset in this time,
You are FUC%#!
You wont be able to refinance, because you are now upsidown.

If you have an existing home you need to sell,
It will rot on the market like my wifes produce,
that we left in the fridge after our trip to LV.

We are thinking about a vacation home in henderson,
After 500 a night a the Venitian,
$250,00 for a brand new home sounds great.
It would be a great vacation rental as well however, that market will be in the crapper till at least 2010, so it doesnt make sense to hold that long. I like the idea though.

We will just stick it out in the condo till we can swing the bat.
Just got to keep saving for our house. We hope in december 2010

Roger Herrick says:

50% Less Loans Possible (The Menu is Shorter)
50% Less Jobs in Industry (Fewer Waiters)
2X Timeline to Sell (Much Longer Wait to Be Served)

Some stagering statistics. How do we get through this and when will the lenders come back into the market?

http://www.contactherrick.com

Marcia says:

I think the “seasonally adjusted” inventory is averaging the last 12 months, which is why it stands at 9 months instead of 15 months. Just like the stock market has the 90 day and 270 day moving average, can someone create a “Steve Thomas” and “Pat Veling” moving average line? When they cross again would be the signal to buy.

October 8, 2007 at 11 am

Graphix:

Were u at? I need a players advise…

Gold holding 730

Do you think it will fall back to 700 or is 720′ a bullish play??

Sorry bloggers for the side note: Stacking chips for a downpayment

This is the same chart as 9/24.

NanoWest says:

As the real estate market continues to prepare for the slowdown that will ultimately cause massive price reductions, it is hard to figure out how there are even 1,180 deals in the works. At this point everyone knows that there will be massive price reductions, why would they buy?

Roc:
Per your post,
Was holding 3,000,000 in assets,
Sold everything but the primary, and the loan on that around 800,000

You are very intelegent:
to sell off on the investments,
and to hold the primmary residence.

Most could not afford to hold a primmary residence of that cost.
That is why the bears on this blogg rip you for buying at the peak.
You must have done very well for your self selling the props.

Your LTV on your loan if you made a big down is at least 80/20.
That leaves you with one 30 year fixed loan and you should be fine.

I have a different approach to RE invisting: Here it goes.
The hardest thing in RE is holding through the down, as you know.

We are holding $2,000,000 right now, = Four props=no joke.
We live in a condo = cheep living costs, and rent out 3 homes.
I bought the homes right and prior to 2002. We are long term RE.
We are renting the homes out next to the college and to the kids.
All the leases are secured by parents and running smoothly.
Austin TX has the largest population of college students in the US.
I would like to go out there and buy a 4-plex next time around.

My wife would kill me if I even mentioned buying,
anywere exept In Aliso Viejo. We are sacrificing living in a box,
and we hope to purchase our house in 2010. Till then I play gold.

Your thoughts and or Ideas for your text play…player!!

mortgagemaker says:

This number is even worse than it appears, as many bank owned properties dont even list on the MLS.

Scott,

Thanks.

I don’t have a mortage anywhere near $800,000 - I put down a large downpayment. It is a simple home that keeps the rain off my head.

I sold at the top and bought something much, much more affordable.
I never said I disagreed that prices were too high and that affordability was not a concern.

Actions speak louder than words.

My points here are generally in reply to extreme statements.

lee in irvine says:

October 8, 2007 at 12 pm

Hey Scott,

My wife and I are headed to Vegas this weekend. We’re at the Venetian too … but not at $500 a night. Why so much? Did you guys get the super-duper suite?

Oh well, we’re going to play golf and my wife wants to see Celine Dion (yuck).

Patricio says:

October 8, 2007 at 1 pm

Ouch Roc, don’t move!

The saving grace of the liar loans are the 100% no risk, if you get stuck you can just walk away and only be out the money spent on the house ie rent. Putting a ton of cash into a house at the top of the market is a tough spot, but you love it here and wont move for another 20 years I am sure.

Foreclosure » Distressed properties 12% of OC housing supply says:

[...] Patch Tuesday wrote an interesting post today onHere’s a quick excerptAfter finding a new way to search for short sales and foreclosures on the market and in escrow, the new findings are disconcerting. Currently, short sales and foreclosures in Orange County account for 12% of the active inventory and 15% … [...]

Patricio,

I think I’ll give it to my kid one day.

Maybe he’ll rent it to you.

With a big deposit.

October 8, 2007 at 2 pm

Roc,

I think you are losing it…slowly I fear by next Spring you might just be institutionalized.

Lee:
My wife was out there for business wed - sunday for the Vision Expo
The expensive nights were for friday and saturday..
Check out the Toa club at night, and also Toa beach, by the pool, fun!!
3 Hr wait for Toa sat night, But rolled to the front vip,
Damn its nice to have a hot wife with the hook up!!

Roc:
What do you think about being Long term RE = landlord VS. Flips?
What do you think about Austin TX and/or the college rental model?

You are right to buy and hold the primarry, never sell,
Put it in a living trust and when it makes sense, buy #2.
Rent #1 to Patricio, or Rants. Then when you kick the bucket,
Pass to your heirs, they will be rich because of your forsight.

I am investing outside of real estate right now.

I think there are deals to be had, but real estate investing is a JOB.

I don’t have time for it (blogging notwithstanding)!

I would not invest anywhere I cannot drive to within two hours. Unless, of course, you turn it over to a good property manager, but even then it’s a pain.

My sister has properties in three states, and is always on the road.

October 8, 2007 at 3 pm

Exactly Lee, we definitely will need houses, and hopefully his health holds, the economy holds, his investments hold, and he never has to sell. Then there is no problems buying at the peak of a market, I mean who cares what could possibly go wrong? Did you know most BKs are medical related?

RentinSoCal says:

I call Baloney !

“I am investing outside of real estate right now.

I think there are deals to be had, but real estate investing is a JOB.”

No-one and I repeat NO-ONE spends as much time on these blogs as you. You are an upside down flipper, and a liar trying to singlehandedly, and I mean SINGLE handedly trying to prop up the real estate market.

Let us know when your bankruptcy proceeding is so I can talk to your lender about when you are getting booted to the curb. Maybe I will buy your house for half of what you paid.

Hey Patricio,

Market “tops” or “bottoms” are broad terms, that have no meaning to smart investors.

Smart investors do well in all types of markets, because they understand the meaning of the word “value”.

If you are waiting for a “bottom”, I hope you are handy with power tools.

james says:

“House price in Orange County has to be around $600,000 or above to be reasonable living.
1 30 years old house in a nice neighbor.
OR
1 bedroom flat like a nice hotel room in tower.
OR
1 townhome or condo with nice parking.”

What are you talking about Carlos.? You haven’t been looking around much lately, have you?

October 8, 2007 at 4 pm

Roc

Re: median income of residents.

Doesn’t have to match, just has to stay in historic parameters. It is nowhere close to any level in the 90’s or 80’s for that matter considering the 16% rates of the early 80’s

sal says:

October 8, 2007 at 5 pm

I agree with Greg regarding the “median income of residents” comment.

I want to add that one way to argue that the ratio of median home price to median income rose so highly compared to historical averages is that renter to homeowner ratio is higher that historical averages. I don’t believe that is the case since we recently were at homeowner all time highs (due to easy lending).

Greg,

You are correct about the interest rate differential - that has a huge impact on affordability.

Principal & interest on $500,000 @ 16% = $6,723
Principal & Interest on $500,000 @ 7% = $3,326

You can buy twice the house at 7%.

The renter argument is that you cannot take the median income of the poplulation as a whole. and compare it to the median home price. The reasons being, income is skewed by a large rental pool, and homeowners have more downpayment/equity to work with.

Historical relationship is a valid way to look at it.

I, however, am not one who agrees that Orange County is no more desireable than in 1980 or 1990.

Sure, we have traffic, but it is far more cosmopolitan than it was back then.

I know many will disagree, but to each his own.

Bill says:

October 8, 2007 at 7 pm

ROC Says:
October 8th, 2007 at 2:54 pm

I am investing outside of real estate right now.
I think there are deals to be had, but real estate investing is a JOB.
I don’t have time for it

ROC Says:
October 8th, 2007 at 11:49 am
ROC Says:
October 8th, 2007 at 1:16 pm
ROC Says:
October 8th, 2007 at 1:17 pm
ROC Says:
October 8th, 2007 at 2:54 pm
ROC Says:
October 8th, 2007 at 3:25 pm
ROC Says:
October 8th, 2007 at 3:40 pm
ROC Says:
October 8th, 2007 at 5:22 pm
ROC Says:
October 8th, 2007 at 5:36 pm

Buying at the top of the real estate market…………$800,000

Loosing your job as a loan broker…………………$75,000

Investing outside of real estate but spending the whole day in a real estate blog………………………Priceless!!!!

Good point Sal.

With the fog the mirror method of qualifying, ownership would (was or soon won’t) be at all time high. Here is the historic norm: (Depending upon down payment obviously)

Amortized loans, non teaser rate should be no more than 125% of comparable rent. Every time this gets out of whack a correction has happened. Also, an interesting note, 2000 and 2001 this number got as low as 108%. Many smart investors jumped in. They saw the value and are sitting on tidy profits. Once it got out of fundamentals, and people continued to buy, these are the people that will be hurt or hopefully they hang on until the numbers come back in line.

Bill,

Before, you said I was a realtor here to scam someone.

Please stop with your smear campaign. It’s wrong.

And I am quite comfortable with all of my real estate decisions.

Why are you so obsessed with me?

Is that helping your cause?

October 8, 2007 at 8 pm

Thank you for answering.

Look, I have an opinion that’s a bit different than yours. That doesn’t make me evil.

Let people decide for themselves who, or better yet, what they believe.

Buying property is not new to me. I have sold everything except the house I live in. It is very affordable for me. It is a new home, and it can be had today new from the builder at the same incredibly good price I got in December 2006 – which is hardly the top of the bubble.

I also have a company (that is not involved in housing at all) which is why I can do as I please during the day.

Let’s agree to disagree and lighten up. OK?

October 8, 2007 at 9 pm

Jeeze….Roc this is just the start, pace yourself or you are going to blow a gasket at this rate.

ROC,

Just when I was about to break out the olive branch you had to go and post:

“incredibly good price I got in December 2006 – which is hardly the top of the bubble”

I would be soiling my pants, breaking out the razor blades and would be heavily sedated if I bought real estate in that time frame.

It just blows my mind that anyone could actually believe that statement.

I’m sorry, but that type of thinking doesn’t make any sense at all.

Devil's Advocate says:

October 9, 2007 at 12 am

Take it easy. Whatever your opinion of ROC, it just isn’t true that people like ROC are preying on millions of innocent people, proclaiming that the market is robust and that they need to jump in with both feet or they will be priced out of the market forever.

I can understand being angry with realtors and all the industry participants who hyped the market over the past several years. Like everyone, I was subjected to it at cocktail parties and even had to put up with some of it from my own relatives who were realtors. It always annoyed me too. But it’s a totally different story today.

I rarely hear anyone these days saying anything that resembles hype and no one that is renting is afraid of getting left behind by a hot market. Even if someone was somehow talked into buying more house than they should, they would have a hard time getting approval.

If anyone can be charged with playing on people’s fears, it is those who are advising sellers to cut their prices by 10% every week until their home sells, then suggesting they rent for 3 years. This is just as self-serving, immoral and damaging as those who hyped the market on the way up. I suspect you know this but don’t care. I’m not a real estate pro, but my advice to both buyers and sellers would be wait it out as long as you can. Don’t do anything in this market unless you have to.

October 9, 2007 at 6 am

Telling a person to lower their asking price is immoral? Then telling them to rent in a market in a free fall is bad?

Umm….wow!

Beachchic says:

October 9, 2007 at 9 am

Are you the one posting the Ron Paul signs in NB?

I didn’t say that telling people to lower their asking price is immoral. I don’t believe that at all. I also didn’t say renting was bad. In fact, I said the opposite: I said that I would advise renters to hold out for as long as possible. I think that my views on where prices are headed for housing over the short run and long run are very mainstream. I’m not sure why you feel the need to twist my words to make a point. Why don’t you pick on Jimmy or someone who is actually saying the market is still going up?

How is it any different to incite panic among sellers in today’s market than it is to ask buyers to step up to the plate and ratchet up their expectations in 2004/05? As I said before, I believe the best advice for both sellers and buyers is to wait it out. This blog has gotten so extreme it is just ridiculous.

pdu says:

October 9, 2007 at 11 am

You practicing ad copy in the kitchen today?
—–
“It is a new home, and it can be had today new from the builder at the same incredibly good price I got in December 2006 – which is hardly the top of the bubble.”
——

I nominate that line for “The hoot of the day award”.

You bet it can be had for the same price - and less……
Oh, you aren’t counting the free upgrades, closing costs, interest buydown, ETC.

Come on man, you’re not preaching to the choir here. Most of us knew better than to buy at the top, and December 2006 was near the top, or closer to it than you want to know.

Trying to defend that decision here makes as much sense as advising people to wait as long as they can, not to lower their prices to sell now.

October 9, 2007 at 12 pm

pdu,

I know I shouldn’t dignify your comments, but I will repeat:

A home purchased at $300 per sq. ft. is priced aggressively. It means nothing to me that you think differently. You cannot rent a home like mine for less than my outlay.

I have no desire to rent from the Irvine Company at $3000+ for. at best, 1,500 sq. ft. Nor do I want to rent a little townhome for the same amount.

No amount of preaching by you, or anyone else, will change my mind one iota.

I suggest you save your time.

“I don’t think the board is out of control, nor do I think that people are antagonistic or for that reason malevolent ”

Holy crap!

And pdu,

Yes, I count all incentives.

I got a $50,000 incentive, today it is $25,000.

“Patricio Says:
October 8th, 2007 at 3:04 pm
Exactly Lee, we definitely will need houses, and hopefully his health holds, the economy holds, his investments hold, and he never has to sell. Then there is no problems buying at the peak of a market, I mean who cares what could possibly go wrong? Did you know most BKs are medical related?”

No malevolence here folks, move along.

Wishing someone gets ill enough to go bankrupt,

What a dignified human being you are.

I have somewhere to go, I will get you all the proof you need when I get back.

If you are not out there, you don’t know.

I replied to you earlier, but it got delayed - here is a reprint:

“Rants,

Maybe it’s you who is a snob?”

October 9, 2007 at 2 pm

It’s official Roc, you have lost it, or your selective logic is now invaded your ability to read the words in front of your nose.

hopefully his health holds, the economy holds, his investments hold, and he never has to sell.

Yeah I wish for everything for you to go good, and you say I wish you ill health, you are certifiable now this housing pressure and buying at the peak has made your head crack.

Then I comment on the most common way that BKs happen….medical and to show that most people don’t expect to go BK. I can connect the dots for you, and it seems we will all have to do a bunch of hand holding for you in the coming months to guide you you through the logic in the posts. I am truly scared for you know Roc to lose it like this prior to the bigger coming melt down, I think you should take a rest you are going to freak out…even worse.

October 9, 2007 at 6 pm

Please stop lying.

“Yes, I count all incentives.
I got a $50,000 incentive, today it is $25,000”.

The fire sales “Mission Impossible’s” didn’t even start until the credit crunch shocked everybody including the lenders a month ago.

You didn’t see builder’s incentives this huge in December.

You really are losing it; maybe you should lay off the “roc” for a while and let your head clear.

Straight Digs » Blog Archive » Real buyers trying to buy distressed Orange County homes says:

October 18, 2007 at 10 am

[...] versus foreclosures as a percentage of the whole market in Orange County. Lansner recently reported on this percentage to his [...]

Slice	Price	Ch.	Sold	Ch.
House	$500,000	+18%	1,833	+11%
Condo	$290,000	+7%	881	+22%
New	$617,500	+24%	171	-17%
All OC	$435,000	+10%	2,885	+12%

Orange County Register