The math of Steve Thomas at Re/Max Real Estate Services in Aliso Viejo says demand for O.C. housing continues to grow. As of last Thursday, 2,540 existing homes and condos had been placed into escrow in the past 30 days, a 677 gain vs. a year ago and just 161 homes short of this late April reading in 2006. It’s a strong hint that when these deals-in-the-works are completed in the next two months we’ll see an end of the county’s homebuying losing streak — per DataQuick’s tracking of closed deals — that’s run 31 months back to September 2005.
Also, Thomas calculates a “market time” benchmark tracking 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.
By this logic, it would take 6.08 months for buyers to gobble up all homes for sale at the current pace vs. 6.55 months two weeks earlier and below 8.33 months a year ago.
Thomas notes: “What changed? The answer is quite simple: the significant drop in prices has allowed buyers that have been sitting on the fence to finally afford to buy once again. After being priced out of the market with rampant appreciation earlier this decade, affordability is finally improving and inviting buyers that have been waiting a long time to finally purchase. Properties priced below $500,000 account for 47% of the entire active inventory and 56% of demand.” Here’s a look at the market by key price slices in terms of listings for sale; pending deals made in past 30 days; and market time in months. Note that by Thomas’ math, the “hottest” markets (based on least time to sell) are Aliso Viejo and Mission Viejo.
| Slice | Listings | Pending | Time (mos.) | 2 wks. ago | 1 yr. ago |
|---|---|---|---|---|---|
| All O.C. | 15,437 | 2,540 | 6.08 | 6.55 | 8.33 |
| •$0-$500k | 7,230 | 1431 | 5.05 | 5.59 | 8.17 |
| •$500k-$750k | 3,551 | 675 | 5.26 | 5.62 | 8.35 |
| •$750k-$1m | 1,762 | 229 | 7.69 | 7.90 | 7.65 |
| •$1m-$1.5m | 1,286 | 127 | 10.13 | 10.89 | 7.88 |
| •$1.5m-$2m | 739 | 55 | 13.44 | 13.07 | 8.01 |
| •$2m-4m | 799 | 50 | 15.98 | 15.78 | 12.88 |
| •$4m+ | 306 | 10 | 30.60 | 21.92 | 13.05 |
(Note: k=thousand; m=million)
Related links:
“O.C. home selling price
For 22 business days ending April 14 …
DataQuick’s median: $505,000
Vs. year ago: -19.8%”
…and where is the chart for this?
I recall when housing prices were going up, we had a new chart every week. Now we get one every five or six weeks.
What gives?
This just in lot’s of potential buyers want ponies too.
Desire plus ability to finance equals demand, not just a willingness to plunk down a deposit.
The hot slices are also the least economically savvy demographically. Is this the REIC still up to their predatory tricks?
Geez you guys all remind me of King Fredrick of Norway who thought he could hold back the tide by Royal Decree. He damed near drown and from then on was known as Fredrick the Unready or Unready Freddie. IF things do start to bottom or turn, none of your little talking points will stop it. Get use to it.
What good is this report if the distressed inventory, which appears to be Substantial, is not showing up on the MLS?? This is not a normal market, we have an increasing wave of NOD’s and foreclosures hitting the market right now. The pendings are falling out due to credit constraints and actual home prices are falling. This report is the classic definition of “putting lipstick on a pig”. Those aren’t talking points it’s just the data and facts.
Larry
That pretty much describes your last date too.
“Properties priced below $500,000 account for 47% of the entire active inventory and 56% of demand.” ~ Steve Thomas
Priceless! We still have a major disconnect between buyers and wishful thinking sellers.
Either Steve Thomas is wrong or Dataquick is wrong.
I think I understand how Steve is getting his numbers to do what he’s got them to do, but come on. He’s totally got to hold his nose and bury his head in the sand (making himself totally obilvious to what is really going on around him) to get there.
His “forward thinking numbers” should show a leg up here for March. And they don’t. Therefore, he’s just fooling himself and his clients.
Then again, without Steve, Truthiness would end it all. Did you see that Turtle Rock home on IHB that is a $500,000 loss after one year listed this morning? Seek help girl.
I’m willing to believe there are more transactions, given the seasonality, and recent rapid price capitulations by sellers in the face of a foreclosure onslaught. We’ll see how much of that escrow pipeline actually closes.
That we are in the midst of a selloff doesn’t mean it’s time to buy, though, unless you like knife-catching. Wait for price stabilization.
What do they pay you geeks to hawk Redfin?
Ha! For every wishful “there are some houses missing”, there are two “pending short sales that show as active”.
There’s sooooo much more in the full report, including:
“With steadily increasing demand and a stable active inventory, the expected market time has dropped like a rock.”
“The active listing inventory has remained steady in 2008. In the prior two weeks, the active inventory has dropped by 119 homes to 15,437. We started the year with 14,724 homes, 713 fewer than today, but that was after shedding 1,050 homes in December 2007 with sellers pulling their homes off the market for the holidays. Still, that only represents a 5% increase so far this year compared to a 37% increase in the inventory last year. Two years ago there were 3,481 fewer homes on the market; however, the inventory was growing at an extremely rapid rate in 2006.”
Did anyone promising a deluge of inventory offer to put up real money?
Are you still pinning your hopes on Traverse Drive? The house has been on the market for 8 days, and had a “price reduction” of $120,000 after 5 days. The games people play. The things people believe.
Green arrows and blue skies. Ah yes, the smell of success in the real estate market. Poor bears HATE it when good news comes. The worst is over and it’s time for people to start looking for a home.The bitter renter beats can now put up or shut up about buing a house. But we all they won’t buy, doomed to be renters forever.
THIS is priceless!
lee in irvine Says:
May 5th, 2008 at 6:34 am
“Properties priced below $500,000 account for 47% of the entire active inventory and 56% of demand.” ~ Steve Thomas
“Priceless! We still have a major disconnect between buyers and wishful thinking sellers.”
Talk about wishful thinking! Lee, there is more than one level of home on the MLS. Lee thinks 56% of all homes should be priced under $500,000, ’cause that’s what buyers want. ‘Nuff said.
my friends look in another direction other than RE should you still be looking for gains on your investment. RE is dead for years to come. RE is a home, not a stock. No hurry to buy, prices will remain flat or in a downward trend for at least another year or two or five…look at history to validate this theory..our down cycle started in June of 07, much too short of a period for the real bottom to occur after a 12 yr bull run…the up trend was so long that rookies in this market feel that RE does nothing but move up. OC incomes cannot afford the pricing…so prices will come down
“Pendings” are not closed sales. Transactions stay pending far longer and fall out more often than at any time being compared. Talk about the bottom line Steve; closed sales.
The banks are finally giving in to all those short sales and admitting that prices are going much lower so they are cutting their losses now.
Thoughtless … the only thing that really matters is there are comp killers in every neighborhood in Orange County now … including yours! No one neighborhood is excluded from the greatest ponzi scheme in Orange County history.
And to think, someone actually paid $600,000 for a Costa Mesa box (Traverse Drive) that backed up to the 405 freeway. WTF were they thinking?
Calm Down Says:
May 5th, 2008 at 7:54 am
“Green arrows and blue skies. Ah yes, the smell of success in the real estate market. Poor bears HATE it when good news comes. The worst is over and it’s time for people to start looking for a home.The bitter renter beats can now put up or shut up about buing a house. But we all they won’t buy, doomed to be renters forever.”
Welcome back to Earth, Calm Down. So be sure to update your pre-written monologue: the red arrow means prices are still coming down.
Yes, it is good news when the momentum of prices is slowly but surely moving into the range of first time buyers.
Lee, South Coast Metro is in transition. That area will see massive redevelopment. Stick to something you almost know, like Irvine.
“Green arrows and blue skies. Ah yes, the smell of success in the real estate market”.The arrow is red, pointed straight down, and dropping like a rock. If thats success we don’t want to see failure.
All depends on the location. I work in real estate and have been in the market for a house in the $800-$1mm range in Mission Viejo/Aliso Viejo/Laguna Niguel/Dana Point area for the past year.
After seeing homes languish on the market and prices fall at a steady clip for the better part of that year, the last 3 months I have seen more and more places scooped up within a couple of weeks of being listed at or near their asking prices.
I have been waiting to buy until the market hit bottom, and although I am not sure we are there yet, at least in that price range in those areas, we might be getting close.
UsuallyRight … you’re right about the banks. They are starting to become more flexible. The brokers that sale these REOs are doing everything possible to discount these homes when they submit the BPO to the asset managers.
The PermaBulls in this venue actually believe all these “pent-up home sales” in escrow show demand for wishful sellers who are caught in 2004 or 2005. Those prices are gone … as in toast … Poof!
To all the wishful sellers out there. If you’re serious about being rid of that house, you’re now competing with the banks. You should price the home at 90% of the most recent comps, then drop the price 5-7% every two weeks. You should sale the home within 30-45 days. Think wholesale!
The first time buyer part of the bear army has gone AWOL and joined the ranks of happy homeowners. Such a shame.
Thoughtful Says:
May 5th, 2008 at 8:36 am
“The first time buyer part of the bear army has gone AWOL and joined the ranks of happy homeowners. Such a shame.”
In other words, you think that a downpayment in the neighborhood of $60K is what first time buyers will have to dish out from now on?
II hope Steve is correct. To me it’s not personal I don’t have to be right. I’m an observer of data! Being a homeowner we all want to see things turn somewhere. However Steve is using the current situation like it draws a long-term picture. Markets are made up of consecutive qrts. Appraisers use past comps for that reason. If Short-sales & REO’s continue to close they’ll only lower the comps more. Currently (not addressed by Steve) there are 9900 plus preforclosures & 3000 plus foreclosures (& increasing daily). Anyone who uses median price is discredited in my mind (agenda). You won’t find the term used in any appraisers report (no agenda just facts)…No bottom can be claimed until at least 3 qrts are proving it out…If even then? It’s like turning a charging Elephant
It should not be a surprise that volume is picking up. There are some very good deals on entry level housing in South Orange County, with pricing on some condos at close to 50% off peak. I don’t expect any quick turn around, but I can’t see those prices dropping much further, as mortgage payments and rents are essentially merged, without even considering tax benefits.
I knew it,
Lee you’re a schmuck, you got a big stake in the market falling don’t you? What, you work for a phoney REO company? How do you know about the brokers submitting BPO’s to the Banks? Are you one of those jerks that’s been submitting the phoney 10% a month declines in price to the banks just to hang on to the listing? I hope the market turns big time and runs eh wholes like you outta town.
There are many low down programs available, bad tider. Quit your scare tactics, they OBVIOUSLY aren’t working!
They ALL have a stake! Remember, 90% of these freaks bet their own home on it!
NewToTheArea
Very interesting comments about Countrywide. Since they\\\’re reported to hold 1 of 7 motgages in the US & 50% of Calif mortg. Most of the $22 Bil writedowns mentioned are REO\’s they hold in another Trust name (hiding from CEO qrt reports). When they do come to market, (hopefully not fast) then we may see a bottom. They aren\\\’t alone holding REO Trustee Titles in another name either! Some are held-off-shore!
I think the stress level of the bulls here is going through the roof. Any time a FACT challenges they’re pie in the sky thinking they resort to name calling. Very childish I might add.
The bulls are on an angry rampage this morning.
Are they all that way by coincidence — or are they all one and the same?
Interesting they should all be so ugly at the same time.
Caloshua……nice to see I’m not the only one noticing and offended.
caloshua Says:
May 5th, 2008 at 9:12 am
I think the stress level of the bulls here is going through the roof. Any time a FACT challenges they’re pie in the sky thinking they resort to name calling. Very childish I might add.
Good god! Newsflash: Pending sales are going through the roof! That’s GOOD news! Denial: more than a river in Egypt.
Best not to acknowledge them! One-note sambas. Not credible due to a weird agenda???
Hey Pretty Darn Usless and Cal o Sh#t,
Kizmyaz
Same old posers (uh, posters) here as in another lame housing blog. It’s gonna happen fellas, things will turn around…and you still won’t own property. Please, just keep your opinions to yourself, pay your rent on time and I’ll be happy….all the way to the bank.
LOL,
Thoughtful says pending sales are going through the roof…..
LMAO, OMG……… take a look at historic spring bumps….. this is pathetic….. even when you add in Steve’s fuzzy recycled escrows……..
i don’t blame Steve Thomas, this guy has to rally his troops…….. depressed sales people who are jumping off the roofs of hotels make really bad sales people
Thoughtful Says:
May 5th, 2008 at 8:48 am
“There are many low down programs available, bad tider. Quit your scare tactics, they OBVIOUSLY aren’t working!”
You mean a traditional 20% downpayment is a scare tactic but a ridiculous bubble pricetag of $300K for a starter home is not? I am trying to remain civilized and logical, but you’re getting irritating.
I don’t see housing getting better. My brokerage does a lot of broker price opinions (BPO) all over central/north county O.C. and listing prices are dropping 2-3% a month in Santa Ana, Garden Grove, Anaheim, Fountain Valley, etc. People are walking away from their distressed homes in droves. Short sales now constitute more than 1/2 of my comparables. With new short sales coming to market monthly at ever lower prices.
It shocks me that bank’s don’t realize how much equity prospective buyers lose between the time they open escrow and the time escrow closes 45 days later! Imagine that, buyers put 20% down in April and when they close on the house in May, well, 3% of it is gone. Silly Banks, behind the curve yet again.
realtors are resorting to all kinds of chicanary
to make the market “appear” to be turning….
DONT FALL FOR IT I ride my moutain bike
past for sale sign after for sale sign that has
an “in escrow” sticker on it… the thing is those
signs are still up and the houses are mysteriously
still on the market… months after the in escrow
sticker was put on it… these are nothing more
than cheap tricks to make it appear homes are
“selling” llooolll not to mention all the vacant
houses and foreclosures that arent even being listed
to keep the “inventory” numbers low… this market
aint turning — it cant –its still WAY OVER-PRICED- and
all the perma-realtors on this blog know it shame on you
for trying to mislead …. bad karma is your reward for what
youve done enjoy it
Warren Buffet says we still have two more down years in the real estate market. Who do I beleive, the Oracle of Omaha or an Orange County real estate agent?
I have had an agent call me every 3 months in the last two years saying ” By now- prices are not going down”,” buy now- prices are leveling off “, and of course “buy now- prices area the their best in the last few years”. Sorry guys, I am in the building industry and no one is thinking this is the bottom yet, even in existing homes.
In the real world an executive would be fired and possibly arrested for reporting pending transactions and then pretending that they had anything to do with actual sales.
Of course Orange County real estate is not the real world. Steve Thomas is a broker that is probably running out of money and most likely trying to figure out how to keep is shrinking business open. You would expect him to try and do anything to make things look better than they are.
Maybe Steve should report how many people worked for him in 2005, 2006, 2007. Maybe Steve should report what he will do if we are not at a bottom, what are his plans for 2009 if sales remain bellow 2000 per month for the rest of this year.
I still think it’s funny that Mr. Thomas refuses to sub-divide his “chunks” of pending deals. Fully 40% of the deals listed are in one chunk under $500,000, with the rest distributed above.
More realtor boosterism - Hey Steve, if you don’t show data that doesn’t mean it doesn’t exist!
Sheesh — all of the perma’s on this site on both sides really get their knickers in a twist over Mr. Thomas’s postings. Data is just data. You need to look at it in an objective manner. Everybody that wants to question Mr. Thomas’s numbers — you’re being silly. The accuracy of the numbers isn’t the point — its the TREND that matters! The trend showed major pain and suffering in the market last fall — and the trend forshadowed that pain and suffering last spring.
What is the trend saying now? THINGS ARE LESS BAD than they were last winter. that is not the same as saying that things are good!.
I am ready to admit that even though I was a bear as far back as 2004 — things progressed FAR WORSE than I expected. At some point I expect that many uber-bears will have to admit that things ended LESS BAD than they expected — we’ll have to wait and see. It is bad to be a perma-anything. Look for Peter Schiff to be the Gary Watts of the next decade. Right once and laughed at for years when he misses the change in the tide.
I like any information that pushes the median price lower, and according to Thomas’s report, the median price for homes in escrow is now under $500,000.00. Just in time for the 800 - 1,000 foreclosed homes that will be coming on the market every month through the rest of the year! Keep up the good work! At this pace, we will have the median below $440,000.00 by Christmas!
Don’t let me down now!!
Great post, Roger Rabbit. Good luck with using “the median” to tell you diddly squat, unless you LIKE Santa Ana.
notice the posts that thoughtless calls “great”
always support her view of things you dear
girl have no shame none
Okay, so what do you expert “bulls” say that the median price of a home in OC will be in 2010?
She’s a freak and a geek and a name-caller. Not me though. I don’t resort to such immaturity like that freak.
When do we see the pull through to DQ numbers? It has been awhile for this elevated activity yet no pull through to sales.
Only rant’s (and company) could look at Roger Rabbit’s post and say it wasn’t both balanced and realistic. I rest my case.
Well, heres the problem:
“Properties priced below $500,000 account for 47% of the entire active inventory and 56% of demand.” ~ Steve Thomas”
Is someone insane, properties priced below $500,000 should be 100% of the active inventory and demand….I have a buddy who put his house up for sale $699K..I looked at him and thougth WTF is he doing…Is his realtor honestly working for him!! He’s had several bids for $550K, but guess what, he still lives there……
I think the bulls get upset because only percentage #’s are being given out and there is nothing to compare or correlate them…Kinda like saying, you are 1/2 of the person you were yesterday. Well, many people can take that in different ways…When you talking about the realtors and mortgage bankers, that means they are losing 1/2 less of their bull##$ to feed us……..Happy trails to you!!!!!!!!!!!!!!
It’s been 42 days (March 24th) since the first claim of increased pendings.
The homes that I have observed selling are those with prices that are approaching rental equilibrium, especially in the condo market. If you assume that we are in an inflationary period over the next few years, these deals are starting to make more sense even for investors. This seems to be more prevalent in the <500k range, areas where rents are fairly strong.
And it’s been 31 months since the last increase in closings. A trend may be beginning, but until we see these pendings actually close it’s nothing more than statistical noise.
Don’t tell that to the people who say they can still rent for “half” Aw hell, make it a “quarter”.
Lee you’re a schmuck, you got a big stake in the market falling don’t you?
SeekingAlpha … I’ve been call a lot of names in here, but never a “schmuck”. Of course I have a stake in this ponzi scheme blowing up. I will say this … I am a “bitter renter” by choice. However, I am also a homeowner (more than 1). Think about that! LoL And posting in this venue is my hobby … it’s kinda like sticking my finger in the Realtors eyes.
What, you work for a phoney REO company?
No
How do you know about the brokers submitting BPO’s to the Banks?
Well, I have friends in high places … lots of them. As I’ve said in the past, my business is indirectly associated with the RE business. I know a whole lot of people that work in all parts of the real estate business. Not just retail carnival barkers (RE Agents), who tell people what they want to hear.
I hope the market turns big time and runs eh wholes like you outta town.
Well bozo … I’ve lived in Orange County almost my entire life. This is my home town … I’m not leaving, but I do enjoy watching this ponzi scheme blowing up.
The stock market panic seems to be over. Given that it is a forward looking mechanism, it is healing faster than the economy, and predicting that the economy will heal up. Kind of sounds like the same signal coming from the Thomas data– the elevator may go down some more, but the extreme thrill ride is over. Dare I say it? Rust not bust. Still, the credit markets remain sick, and that is restraining the upper end sales that will someday bring the tortured median up. Volume on the bottom end is good news for stability. And who hates stability?
another day, the usual pathetic spins by thoughtless and her minions regarding this bubble implosion: Exhibit A, the Costa Mesa home that was front page news at 600K in 2005 is now offered up at 439K. Oh, but T-less says that “south coast metro is in transition” so no need to worry, everything is fine in fantasy land.
Lee, BS!!! Some of these flybynight REO Brokers are telling the banks what they want to hear too. You can make as much money cheating people out of their house as you can over pricing them too, a commison is a commision. And don’t give me that “I have friends in High places” routine. I think you and some of the others are doing the dirty work for some of these brokers that they can’t do cause they caught it in the neck from the DRE for misuse of MLS informnation. I think you’re a flat out crook.
I’m glad to see activity picking up especially since that activity is centered around distressed sales and the realistic sellers who have tons of equity but don’t want to have their house sit on the market forever. I have been watching the new listings carefully for months and noticed a dramatic trend in lowering the listing prices to 2004 prices and below. The RE market is not an ON/OFF switch, we will gradually move into more sales seasonally even as the median moves downward. However, there are still many more people who need to sell than there are people willing to pay the WTF prices. The approach to equilibrium will slow during the next 3-4 months (less prices drops) but evitably those prices are coming down to the levels supported by the fundamentals. If you deny that…then you deny that you need air to breathe.
Truthi’s increasing shrillness here is sure insight into her situation: She’s fighting a losing war.
When I bought my first house in 1982 there were no blogs. Real estate hawkers had the only audible voice. If she could bring back those days maybe her posts would sound credible.
Pity the fool who buys LA / SD / OC real estate now, as if the 2009 tidal wave of resets of loans sub-prime / stated income / option ARM / Alt A will have no effect whatsoever on the market. The vast majority of foreclosures we are seeing now are pathetic souls who either couldn’t even afford the teaser rate payments or can’t afford the initial adjustments away from the teaser rates.
RE bubbles NEVER EVER correct so quickly. And those who reaped easy money will be the last to predict the bottom. Guarantee: In the absence of all the nonsense in lending, housing prices will again fall to where wages will support mortgage debt. And those debtors will be paying unheard of prices for household commodities and gasoline too. Speculation is soooo dead in this market for years to come.
Look for last year’s median prices to come back around the year 2025 according to projections from DataQuick based on census bureau data for Irvine. On the other hand, California Association of Reators estimates project the good old days prices to return a few years earlier. (from 4.4% historical appreciation year over year basis of estimate)
BOTTOM LINE 2008-2009: the pain we are seeing this year is NOTHING compared to what is coming in 2009! The fed can’t do anything to stop it.
WHEN TO BUY: There will be a time, probably in 2011 where price correction actually overshoots the basic value of the real estate and homes actually sell for less than the real worth based on GRM estimates. (gross rent multiplier)
IN THE MEAN TIME: have compassion for the poor devils, but don’t listen to them.
Sales have bottomed out so prices will follow. However, that will be two years from now since sales changes lead prices by that much. So we can call the market bottom for 2010.
I said Truthi, I meant Thoughtful; actually they may be the same person.
suckers rally
So there’s an uptick. That doesn’t mean it will continue and it is highly unlikey that prices will quit declining.
Thoughtful said: “It’s been 42 days (March 24th) since the first claim of increased pendings.”
Yes and he was talking about the previous 30 days before that. So median 57 days later.. where’s the beef?
I know you’ve all been waiting for it, so here is Steven Thomas’ latest market report, with continued GOOD news for Orange County real estate:
Market Time Report, May 1, 2008: The First Time Wave is Growing
Compared to last year, demand is stronger, there are fewer homes on the market and the expected market time is much lower. The first time home buyer wave continues to grow and plant the seeds to an eventual recovery.
The reports from the streets of Orange County are unanimous: first time home buyers are fueling a surge in activity that continues to flourish and has been steadily growing since the middle of February. Multiple offers in the lower ranges, homes priced below $500,000, are now quite common throughout Orange County. The numbers illustrate how demand has not only surged past the 2007 level, but is quickly approaching the 2006 level. Until just four weeks ago, year over year demand had not been stronger than the prior year since September 2005, the beginning signs of the current slow cycle. Demand, a snapshot of the prior 30 days of escrow activity, has climbed by an additional 166 escrows in the past two weeks to 2,540. Last year at this time, demand was at 1,863 escrows, 677 fewer than today. Two years ago it was at 2,701, or 161 additional escrows.
The active listing inventory has remained steady in 2008. In the prior two weeks, the active inventory has dropped by 119 homes to 15,437. We started the year with 14,724 homes, 713 fewer than today, but that was after shedding 1,050 homes in December 2007 with sellers pulling their homes off the market for the holidays. Still, that only represents a 5% increase so far this year compared to a 37% increase in the inventory last year. Two years ago there were 3,481 fewer homes on the market; however, the inventory was growing at an extremely rapid rate in 2006. The inventory had already increased by 65% to this point and it continued to grow by another 34% until reaching its peak of 16,006 homes back in August 2006. Today, the active inventory has steadily remained just under 16,000 homes and appears as if it will continue along that path.
With steadily increasing demand and a stable active inventory, the expected market time has dropped like a rock. Starting this year with a market time of 15.6 months, a deep buyers market, the market time has improved to its lowest mark of the year to date at 6.08 months, a 61% drop. Last year the market time was at 8.33 months and climbing at an alarming rate that would spook any buyer considering purchasing. Two years ago the market time was at 4.43 months and climbing. By the end of June 2006, the market time had blossomed to 6.33 months.
So, it is safe to say that the Orange County housing market has definitely changed gears this year. The lower ranges and the flood of first time buyers are entirely responsible for this change. What changed? The answer is quite simple: the significant drop in prices has allowed buyers that have been sitting on the fence to finally afford to buy once again. After being priced out of the market with rampant appreciation earlier this decade, affordability is finally improving and inviting buyers that have been waiting a long time to finally purchase.
Properties priced below $500,000 account for 47% of the entire active inventory and 56% of demand. Last year, this same range accounted for only 26% of the active inventory and demand. Detached homes below $750,000 are actually experiencing a slight sellers market, below the five month mark. The volume of distressed homes in the lower ranges has provided the fuel for the decline in pricing. 77% of all distressed properties are priced below $500,000 and 94% are priced below $750,000. Short sales and foreclosures now make up 36% of the current active inventory versus 35% two weeks ago. There are now 5,576 distressed properties on the market. The overwhelming majority, 81%, are short sales, sellers with loan balances that exceed the current market value and are “subject to lender approval.” For short sales, there are currently 4,504 active listings and demand is at 544 escrows. The expected market time is at 8.28 months, dropping from 9.86 months two weeks ago.
But, this statistic is extremely misleading, just ask a buyer searching for a home. A large portion of the 4,504 active listings already have secured an offer on the property signed by both the buyer and seller, yet they remain active on the market. The reason is that there is also a signed short sale agreement that allows the seller to continue to actively market their home until formal lender approval occurs. This process takes anywhere from a couple of weeks to months. Unfortunately, there is no way of knowing which short sale listings already have an agreed upon offer submitted to the bank other than contacting the listing agent directly for their verbal answer.
So, true demand in Orange County is actually understated. The word on the street is that close to 50% of all active short sale listings already have an agreed upon offer submitted to the lender. If those were to be truly changed to “pending escrow” status, the demand count would increase considerably, the inventory would drop and the market time would drop as well. Unfortunately, not all short sales with offers submitted for lender approval are actually approved. Roughly 1 out of 3 are accepted. Many are rejected because they are priced too far under their true market value. With increased demand comes more realistic pricing of short sales. As this year progresses, expect the lender acceptance rate to grow closer to 1 out of 2.
Where’s the demand in the upper ranges? The financial crunch is still impacting liquidity in the upper ranges. Demand is off by more than 30% compared to last year for all homes priced above $750,000. Remember, the conventional loan limit and FHA loan limit were both just raised to $729,750. However, there are now three tiers of loan rates: the old conventional loan limit up to $417,000, $417,001 up to the new limit of $729,750 and then $729,751 on up. The original intent was to expand the lower interest rates of conventional loans to higher ranges in areas with much higher prices, like Orange County. Historically, major changes in federally backed loan programs were carefully put together for the better part of a year. This time, the financial industry was given about a month to create and implement a significant change.
The credit markets are just now adapting to the new loans. Part of that adaptation is the three tier system. Until the entire secondary market becomes more comfortable with these changes, the discrepancy in interest rates between each tier will be sizeable. There is about a three-quarter point differentiation between each tier. As the market adapts to the new program and liquidity is restored in the financial markets with investors once again purchasing pools of loans, the discrepancy between the tiers will shrink to about a quarter of a point. The experts are predicting that there will be considerable improvement by the end of the third quarter of this year, by the end of the summer. Currently, for loans above $729,750, the interest rates, loan qualifications and down payment requirements are extreme barriers to entry. That does not bode well for homes priced above $800,000, where the rate is approximately 1.5% above the $417,000 rate. This has impacted the upper range dramatically. All ranges above $1 million are experiencing market times above ten months; the higher the range, the higher the expected market time. Not surprisingly, the areas in Orange County that are impacted with market times above ten months are Corona Del Mar, Coto de Caza, Laguna Beach, Newport Beach and Newport Coast. These areas should all improve by the end of the summer with improvements in the financial markets.
With demand off in the upper ranges by more than 30%, do not be surprised when the media reports a significant year over year drop in the median sales price. With the lower ranges hot and the upper ranges not, the median value will be much lower. The average pending sales price a year ago was at $869,000 compared to $605,000 today. This is partially due to the decline in prices, but it also has a lot to do with a major decline in demand in the upper ranges. For the first three quarters of 2007, prior to the beginning of the financial crunch, the number of sales above $1 million in all of California was only off by 3% compared to the prior year. For homes below $1 million, sales were off by almost 30%. A month after the start of the financial crunch, September of 2007, sales above $1 million were down 26% compared to the prior year. The upper ranges have been impacted ever since. As liquidity is restored in the upper ranges, do not be surprised by an increase in demand in the upper ranges and an increase in the median sales price. ( End of report.)
“homes priced below $500,000, are now quite common throughout Orange County” Yeah and what do you get for that????? A condo in Santa Ana? A house? I guess what all this means is that people are “gobbling up” cheap condos. That’s your increase in sales!
Outsider had this amusing question: “Warren Buffet says we still have two more down years in the real estate market. Who do I beleive, the Oracle of Omaha or an Orange County real estate agent?”
Why is it amusing? Because Buffett is the dum-bass who sold his Laguna Beach house a few years ago. It was purchased by 2 LOCAL investors who within a year flipped it for about TWICE what they had paid Buffett for it - without so much as a penny spent in “fixing”.
Buffett is the world’s richest man, but he’s a doofuss when it came to judging the top - or bottom - of the O.C. real estate market.
Exhibit A:
“The average pending sales price a year ago was at $869,000 compared to $605,000 today.”
Ouch to those who didn’t sell then.
Exhibit B:
“This is partially due to the decline in prices, but it also has a lot to do with a major decline in demand in the upper ranges.”
No it doesn’t. The decline in prices in the lower ranges has been even more dramatic per Case-Shiller. Furthermore this is tautological–when prices move into the next tier down that’s what happens, it’s not a distortion.
Where Steve Thomas goes wrong here is that these transactions are clearly accompanied by massive seller price capitulation. There is no sign of a bottom in prices, indeed this quarter had a massive acceleration in the drop. Thomas anticipates this by warning you that the median sales price is about to fall through the floor (remember it’s already down 20% past the peak), but you should ignore this because the high end is freezing and the low-end firesale is where it’s at. Guess what, a lot of those <$500K homes were going for more than $600K a few months ago. Could that be why that category has gone up from 25% to 50% of total inventory?
sighburdud, if we wanted to see the email that got sent to your SPAM folder we would have asked
any good internationally lottery scams today?
sighburbirdbrain– I only have one thing to say
PULEASE… spare us the bottoms here for fiftith time
realtor spin propaganda BS…. this guy doenst know
diddly squat his numbers are phonier than a three
dollar bill
Sighburrdood ,
“Because Buffett is the dum-bass who sold his Laguna Beach house a few years ago.”
Wow! Calling Buffet a dum-bass for selling before the absolute peak. I wonder what you think of the people who bought at the peak.
From the Thomas article:
The significant drop in prices has allowed buyers that have been sitting on the fence to finally afford to buy once again. After being priced out of the market with rampant appreciation earlier this decade, affordability is finally improving and inviting buyers that have been waiting a long time to finally purchase.”
So you see…the failure to communicate has finally been resolved..sellers capitulated and buyers are interested…so to those sellers with WTF price or hoping that they will be saved by gaining back that 20% false equity…keep on hoping but don’t hold your breath.
“Unfortunately, not all short sales with offers submitted for lender approval are actually approved. Roughly 1 out of 3 are accepted. Many are rejected because they are priced too far under their true market value. With increased demand comes more realistic pricing of short sales. As this year progresses, expect the lender acceptance rate to grow closer to 1 out of 2.”
Demand may be out there but closures in the short sales aren’t following (1 out of 3) so what does that mean about the demand side? It means that the buyers are still in the drivers seat, demanding lower prices to jive with the stricter lending standards and thus we will get to that 1 out of 2 when prices are down to 2003 levels.
Price is determined by demand AND supply. What was supply in 2006? What is supply now.? Demand alone does not equate to prices. Prices are going DOWN much further.
I went to Tustin air base this weekend.
One million dollar detached homes in a sea of units….
I wonder what the percentage of units to homes is when its all said and done.
Bottom line……
That is too expensive and too crowded in my oppinion.
I wll try and stick to Aliso if possible.
Mikey asks:
“And who hates stability?”
The same greedy people who want to see innocent people lose their jobs, so that they can steal someone else’s property. Think about THAT!
I’m still waiting for the bears to show some spine and admit they were WRONG on the “exploding inventory” promise.
Rants: I speak for every bull here: your childish antics are completely ignored. Enjoy the rest of your life in small cap land. And chew on this too:
–With demand off in the upper ranges by more than 30%, do not be surprised when the media reports a significant year over year drop in the median sales price. With the lower ranges hot and the upper ranges not, the median value will be much lower. The average pending sales price a year ago was at $869,000 compared to $605,000 today.–
Once your head can absorb that factual statement above, perhaps you will get that the median is the most worthless tool used in the marketplace today.
The right to own at AN APPROPRIATE PRICE entitlement mentality around here is disgusting. Alot of the bears appear to be Jerry Yang waiting for a much better deal in the future. Good luck.
Thoughtful, give the banks some time, they are new to this home ownership thing………… sooo sloooww….
mulli….. that’s what happens when houses that sold for $800K in 2006/7 are now selling for $600K
product mix? or is it pricing mix? or is it both? which is it?
Alot of the bears appear to be Jerry Yang waiting for a much better deal in the future.
Don’t you have that metaphor backwards? Bears here are Steve Ballmer walking away and waiting for Yahoo to crater to $10 before coming back to the table, instead of overpaying now because some Yahoos claim that their asset is worth a lot more than the buyer offered.
Last year, the median drop was blamed on the low-end cratering. This year, it’s being blamed on the high-end cratering. What’s left?
“Alot of the bears appear to be Jerry Yang waiting for a much better deal in the future.”
Ha! You hit the nail on the head. They will see the same result.
One more year of this………
Not a good time to sell……
Sal had this to say: “Wow! Calling Buffet a dum-bass for selling before the absolute peak. I wonder what you think of the people who bought at the peak.”
Sal, you completely missed my point. Buffett knows didly about South O.C.. Some other poster offered him as a more valuable source - for O,C, real estate information - than Steven Thomas - whose data is NOTHING BUT O.C. data. The point WAS Thomas is much more relevant to O.C., than Buffett, Schill, or Case-Schilling. PERIOD.
Last year the low end DID crater. (Remember all the b!tching about the median?) This year the high end DID crater. They were two seperate phenomena. Where’s the beef?
So if we don’t see significant sales increases by May stats (out in Mid June) then what?
Maybe Steve can let us in on how exactly he is generating the stats, what fields on the MLS he is using and whether he does a daily count and sum it up or one query for the month. Because I think it is becoming increasingly clear that what he is showing isn’t bein interpreted correctly.
Well then, I guess Steve Balmer is stupid as all hell if he was going to pay $33 for something “worth $10″. I know Steve Balmer (not really) and YOU ARE NO STEVE BALMER! Yang is a huge putz!
Mulliganville,
“The right to own at AN APPROPRIATE PRICE entitlement mentality around here is disgusting. Alot of the bears appear to be Jerry Yang waiting for a much better deal in the future. Good luck.”
It was the permabulls that had the mentality that they were entitled to the home equity appreciation and the HELOC money. It was the greed of buyers and flippers who felt like the home price appreciation was appropriate and that they were entitled to that money.
At the current rate of the economy and the Housing market we won’t need luck for better deals in the future. Maybe you should direct your “good luck” to the many homeowners near the beach that are receiving NOD and NTS these days. If you have any “good luck” left over, send it to all the ones that want to cash in on their homes near the beach as inventory is going up, listing prices are coming down, and a wave of foreclosure listings is about to hit theses areas between now and the end of the year that will LOWER sales comps and prices. This will also make it harder for people near the coast to refinance, thus again contributing to a further increase in foreclosure activity for homes in this area of the county that til now has been relatively unaffected, compared to other areas.
I don’t feel entitled to anything. But I use my brain when I make financial decisions, something many RE bulls cannot say. I think I speak for many other *current* RE bears with my last paragraph.
On a side note, contrary thinking and investment doesn’t count when those that use the term “contrary investing” are the very same that were bullish for RE in 2005 and 2006. That’s not contrary investing but gives us a clear clue that we are nowhere near the bottom yet.
Thought,
And I’m still waiting to hear what you do for a living that allows you to post here seemingly 24/7. Talk about losing productivity at the workplace.
Your constant avoidance of the question leads me to believe you are directly connected to RE and are thus trying to cheerlead the market.
Sigh,
“Sal, you completely missed my point. Buffett knows didly about South O.C.. ”
But I’m sure Warren Buffet’s knowledge on financial history and the history of financial speculation is sufficient for him to know better than those that *think they know* how fundamentals no longer play a role during the height of a speculative market.
k.o…….keep waiting.
Buffet’s lucky his $1.7 billion cdo loss is coming back to him.
In my zip nvest, foreclosures account for less than 3% of all homes on the market. I am not buying on the coast…that is another market all together.”basic income fundamentals…” It is pretty much non-existent. The market will turn upwards before we get to an “in line with incomes” price chart on the preferable areas of our region. You know it, I know it…admitting it is another thing all together.
Thought,
Thanks for proving my point.
Dear Reader: this blog has been hijacked by desperate unemployed real estate agents who have some resets looming. Please ignore their shrieks, their howls, and their cries as this market implodes.
I’m own a company called Real Data Strategies, you totally busted me.
Still no answer from our blogger about why the Dataquick page isn’t being refreshed as often.
Can we assume that Dataquick is on the edge of going under, too?
Since we’re going to let speculation run rampant here, I guess that might not be out of the question, would it?
I mean, who the heck can afford to pay Dataquick anymore, right?
What is he talking about? Dataquick numbers are updated weekly, and then repeated in various forms at the close of each month.
If a 20% decline in price doesn’t get the spring market moving again then I don’t know what would.
As spring fades, so will interest and prices will resume their fall and those who moved too soon get a little surprise.
Compression in the mid and high end continue to pressure the market resulting in further price declines as the best properties force others to adjust down creating more better quality homes on the low end.
After the biggest housing bubble in our history those who got in last and those that get back in first will be hurt the most.
# Sighburrdood Says:
“Buffett is the world’s richest man, but he’s a doofuss when it came to judging the top - or bottom - of the O.C. real estate market.”
—
Amazing.
He saw it before you did — and I doubt you even yet see it.
You come here claiming to own multiple rentals in a market declining
and call Buffett a “doofuss”?
You”re good…….. good for a laugh and a shoe-in for “Post of the Week”.
Amazing.
This blog makes me think of a great quote on economics:
“Isn’t it interesting that the same people who laugh at science fiction listen to weather forecasts and economists?”
Kelvin Throop III
WOW! An awful lot of emotional and upset people have way too much time on their hands. Folks, take a chill pill and give us all a break. If you don’t have anything productive or useful to add, then find a new hobby.
We all know that anyone can take statistics and make them show what he/she would like them to. Politicians do it on a regular basis and have made it an art form. The only statistics that matter are the statistics for your neighborhood and/or the neighborhood you are looking to buy in.
We are talking about people’s primary homes here. Most people select their primary residence based on a number of criteria, including price, access to work, schools, etc., which means our “market” is much smaller than the statistics we are being provided. While a larger subset of numbers can help show wide reaching trends, they are fairly useless when it comes to practical application or knowledge in an area the size of OC. For example. I live in Mission Viejo and am looking buy a larger house in roughly the same area so we can remain close to our friends, our kid’s friends, etc.
I have absolutely no care whatsoever for what is happening to homes in Anaheim. Could be Topeka, Kansas as far as I am concerned. I have no care for what is happening in Mission Viejo under $700k, or over $1.2mm. Not remotely interested. I suspect that most readers are the same when it comes to where they live or are looking to move.
Tell us what the trends are doing where we live, and where we want to live. It’s not like OC is such a small community that statistics County-wide tell us much of anything. Break them down by each City, and then by size of homes. Most folks in the RE industry use a price per square foot as a base-line indicator. Do that instead of providing us useless combinations of statistics that have no relevance to each other.
For example, show us what is happening in the single family home market in Irvine for places between 2500-3000sf. Are prices still above $300 psf in that subset of the market? Where have those prices been going?
That is useful information that could lead to insightful discussion, as opposed to the dribble that results from espousing a few numbers that are spread over such a wide field that they mean nothing to anyone.
Jon,
Please plaster this headline on the front page of the Register. You’ve been posting a lot of doom and gloom lately (besides that gardening article). Come on, you owe us one. And since people actually believe what they read, it would be a nice boost to your industry. (And the sale of my house).
I know Lee in Irvine. He is an older student that goes to graduate school and missed the last boom and lives in an apartment. His saving money to put down as a down payment to buy a condo next year. He is trying to talk the market down until he’s ready to buy his little condo. Then he will act like a big Real Estate tycoon and talk about how great the R.E future is in OC !!!!! Lee no matter how you cut it, your little condo won’t go up that much anyways !! Just try to concentrate on your school and books !!!
“In my zip nvest, foreclosures account for less than 3% of all homes on the market.”
That is true for areas I follow as well but all of a sudden there is a very significant increase in NOD and NTS activity. Nothing major yet, but all other areas also started with “nothing major”. Add the competitive listing environment to the mix and sales comps will be significantly lower by fall. And that’s when things compound on one another because all of a sudden many speculators are upside down. And yes, you can speculate and live in the house that you are speculating with.
“The market will turn upwards before we get to an “in line with incomes” price chart on the preferable areas of our region. You know it, I know it…admitting it is another thing all together.”
That’s where we disagree. I’m not arguing that the more favorable areas will not come at a premium, that we agree on. But when you have all other areas correcting, that premium spread widens. And there is nothing that supports todays values for the many “average” homes in the $750k - $2.5M range.
It’s ok to disagree.
PeeDoo had this to ask: “You come here claiming to own multiple rentals in a market declining - and call Buffett a “doofuss”?”
Every property I own is STILL worth SUBSTANTIALLY more than I paid for it. I don’t claim to be in Buffett’s league in whatever he does, but I beat his pants off in O.C. real estate investments.
LOL, LMAO, OMG, WTF?
Sighburdud, congratulations real man of genius:
“Every property I own is STILL worth SUBSTANTIALLY more than I paid for it. I don’t claim to be in Buffett’s league in whatever he does, but I beat his pants off in O.C. real estate investments.”
quite possibly the dumbest / most ridiculous comment I have seen on this blog in weeks……… stop staring at the steve thomas poster over your bed and go out there and buy! cybertrump…….. ode to the steve thomas worshiper……….. buffet is waiting for your wisdom passed down from steve thomas LOL
Sighburrdood Says:
May 5th, 2008 at 3:28 pm
“Every property I own is STILL worth SUBSTANTIALLY more than I paid for it. I don’t claim to be in Buffett’s league in whatever he does, but I beat his pants off in O.C. real estate investments.”
Hint: Both you and Buffett invest to make money. At the end of the day, it’s all about the results. At last count, he’s exceedingly better at it than anyone else.
Sighburrhood, I’m sure Mr. Buffet is looking at his porfolio and kicking himself in the #ss for missing the top of the market. His net worth could be almost be an additonal .000001%.
I heard the tech guys ripped him back in 2000 for not knowing anything about tech stocks. RE guys need to be a little humble based on their track record, not Mr. Buffet.
WARREN BUFFET COULD NOT BE WHERE HE IS TODAY IF HE HAD MORALS AND ETHICS…Bill Gates could have been a trillionaire if he had ignored his.
I’ve seen this and other anecdotal evidence to suggest that demand is picking up, but until I see the actual closed transactions rise comparably I’m dubious about a volume correction.
Would be great to see some data about the pending to closed transaction conversion rate for the last couple of months. My suspicion is that is pretty low relative to historical norms.
Sigh,
I am so humbled. I suggested your earlier reply take the “post of the week” award.
You outdid yourself and “mav” is right. Your previous post pales next to this::
—
mav Says:
LOL, LMAO, OMG, WTF?
Sighburdud, congratulations real man of genius:
“Every property I own is STILL worth SUBSTANTIALLY more than I paid for it. I don’t claim to be in Buffett’s league in whatever he does, but I beat his pants off in O.C. real estate investments.”
quite possibly the dumbest / most ridiculous comment I have seen on this blog in weeks………
“That area will see massive redevelopment. ”
what, redevelop many tracts of 50’s and early 60’s ranch homes? how is that possible?
So escrows are up in April 2008 to around 2600. This means closings should be up by about the same amount in May. Let’s look at May closings in differing years. May 1991 : 3,667 May 1992: 2,704. May 1993: 2,372. May 1994: 3,021. These numbers are nearly 1/2 less than peak year closings of 2003-2005. To say that the recovery is near, when we have thousands of additional homes built since 1991 and hundreds of thousands more people living in the county since 1991, proves that Steven Thomas’s numbers do not reflect current reality.
I love Steve Thomas from ReMAX.
[...] helps stop Michael Jackson ranch foreclosureLate April’s homebuying dip smallest since JulyDemand for O.C. homes nears ‘06 levelsIndustrial property still hot in [...]
[...] helps stop Michael Jackson ranch foreclosureLate April’s homebuying dip smallest since JulyDemand for O.C. homes nears ‘06 levelsIndustrial property still hot in [...]
Even MORE good news from another lender friend:
On 6/01/08, Fannie Mae will accept up to 97 percent loan-to-value ratios for conventional, conforming mortgages processed through its Desktop Underwriter® (DU®) automated underwriting system, and 95 percent loan-to-value ratios for loans underwritten outside of DU, in all geographic locations in the United States. The new national down payment requirements of 3 or 5 percent will apply to loans for purchase of single-family, primary residences. Down payment requirements will vary for other occupancy, property and transaction types.
Among the changes in response to market conditions, in December 2007 Fannie Mae adopted a “Maximum Financing in Declining Markets Policy” that restricted the loan-to-value ratios on properties in markets where home prices are declining, essentially requiring higher down payments in these markets. The new single national down payment policy announced today will supersede that policy. Fannie Mae will continue to provide support for homebuyers that need down payment assistance, and will continue to allow loans with Community Seconds® up to a maximum 105 percent combined loan-to-value ratio.
The market is turning, and the bears are scurrying for their dens. Have a nice snooze until the next peak, Smokey.
Here are some good news “snippetts” from a lender friend of mine:
So you’ve heard a lot of mortgage ads on the radio this week. Some offer rates below 5.6 percent (“because we’re nice people too…”) while others “won’t bother” if your rate is above X, no matter if you need cash by the way. Some lenders talk about a “4.5% 30 year fixed refinance strategy” (false) and another one says “you can pay off your loan in 7 years without increasing your current monthly payment (kinda true. LL has this financing product by the way). During the good old days of 2004-2006 when homes sold in hours not months, we saw burped up into this industry the worst loan brokers ever. Sure, you could get a stated, stated 100% financing $1,000,000 loan for a person paid minimum wage, but was it the best for the client? Clearly not, since these loans funded by fly by night operators produced the price suppressed market we’re in today. These opportunists have begun to come back out with mailers, ads, and other gimmicks to again take advantage of your buyers and seller. They whisper fantastic tales of loan rates ultimately too good to be true. To quote The Who*…..“Don’t get fooled again”. Make sure your clients don’t chase rate, but get a program and payment they can live with in the house today, and the one you’re going to sell them when they want to move up.
* you know, the ones whose songs start each of the CSI shows… (the only current cultural reference most will recognize for a band that is as old at the Rolling Stones. But I digress)
Home Buyers, Start Your Engines. By Brett Arends, WSJ On Line. May 15, 2008
If you were thinking of buying a home, start looking. The latest data from the housing market shows that sellers, after months and years in denial, are finally giving in to reality and slashing prices. There is a distance still to go. There may even be a lot to go. But the process, long delayed, is now well underway. The National Association of Realtors on Tuesday released its long-awaited report on prices from the first quarter. The price drops were startling. In many of the former hot spots, from Florida to Nevada to the Californian “Inland Empire,” single-family home prices plunged by 20% to nearly 30% in a year.
Nationwide, the decline from the previous quarter was about 5%, says the NAR. And this, ultimately, is good news. We know prices have to fall. The sooner it happens, the quicker the market can clear. We may not be at that stage known on Wall Street as “capitulation,” but there is more than a whiff of it in the air. Far too many people in the real estate market have spent far too long insisting that denial is just a river in Egypt. They refused to accept there was a bubble on the way up, and refused to admit it even on the way back down. (There’s a few still out there: Last week I got an angry email from a broker who blamed the whole slump on “the media”.) It is simply remarkable how slow this bubble has been to deflate. That, bluntly, is part of the problem. As well…you can imagine what fantasies the sellers were clinging to. “Well, two years ago this home was worth half a million bucks.” The problem: So what? It doesn’t matter what prices were three or two years ago. We were in a bubble. Market psychologists call this “anchoring”, because people anchor their expectations to the past, and it’s a fallacy. Just five years ago, the same home sold for $270,000 and 10 years ago just $200,000. Are those relevant anchor points too? But sellers have at least returned to the bargaining table. If you are in the market for a home, it is time, cautiously, to take a look and, maybe, see if you can play, “Let’s Make A Deal.”
Some good news for a change….. but with important conditions.
Fannie Mae Scraps Declining Markets Policy By Robert Freedman for REALTOR® Magazine.
Fannie Mae will no longer require borrowers to put up an extra 5 percent down payment when purchasing homes in areas deemed “declining markets,” the country’s largest secondary mortgage market company said Friday. Fannie Mae had been hearing concerns from REALTORS® and others for months that its declining-markets policy was bad for the housing market because it discouraged consumers from buying homes in markets hardest-hit by foreclosures. Under the policy change, borrowers can get loans up to 95 percent loan-to-value, even in markets in which prices have been falling. Prior to the change, borrowers could only get loans up to 90 percent to give lenders a 5-percentage-point cushion to protect against possible price declines in the future. The new policy takes effect June First.
Anyone notice what is missing? High Cost Area Jumbo Conforming loans are not part of this policy change. From $1.00 to $417,000 you can get a 95% LTV loan. From $417,000 to $729,600 the maximum is 90%, but lenders will still hit those loans with a 5% reduction in maximum financing so a 90% max is really 85%. The good news is that 95% purchase loans can be had for prices up to $439,900. Anything over a $439,900 price where a buyer wants to put 5% to 10% down will have to close as an FHA purchase. Freddie Mac, Fannie Mae’s competitor in the mortgage market has had this policy in place for about 30 days already.
Rates below assume a 20% down fully documented purchase transaction with a clients FICO score at or above 700. Rate and terms as of 05/16/08 and are subject to change without notice. APR’s have not been calculated.
Conforming 30 Fixed $417,000 and below: 5.625 1.0 point
HCAJ Conforming 30 Fixed $417k to $729k 5.750 1.0 point
Jumbo 30 Fixed $417,000 to $2m 6.875 1.0 point
Standard FHA 30 Fixed $362,000 and below: 5.875 1.0 point
HCAJ FHA 30 Fixed $362k to $729k 6.125 1.0 point
Conforming 5/1 ARM $417,000 and below 4.875 1.0 point
HCAJ Conforming 5/1 ARM $417k to $2m 5.750 1.0 point
( End of report.)
[...] O.C. homes taking harshest price hits 3. Insider Q&A hears next home-price peak 5 years off 4. Demand for O.C. homes nears ‘06 levels 5. Newer O.C. apartments suffer more [...]