Csira Group Blog

Housing Appreciation

Dave — Tue, 15 May 2012 18:11:04 +0000

Few people are talking about home price appreciation at this point, but given the current market dynamics, it appears to be inevitable. Even considering distressed sales and shadow inventory, indications are that prices are going to slowly start rising by the end of the year. Consider the facts, basic economic principles, and the irrefutable data: 1) Below the $500,000 price point, the market is a feeding frenzy. Homes priced at or near their market value are generating an avalanche of multiple offers; 2) Supply has dropped to levels not seen since June 2005; 3) Demand is at levels not seen since June 2005. The average time it takes to sell a home in Orange County is 1.5 months, or just six weeks. It is four weeks for homes priced below $500,000, 22 days for short sales, and 19 days for foreclosures. Remember, part of that time is burned negotiating the contracts between all of the offers generated.

Basic supply and demand laws suggest, when there is too much supply and low demand, prices fall. When the supply is low and demand is high, like today’s market, the pressure is on prices to rise. Throw in the increasing rents, historically rock-bottom interest rates, and an affordability factor not seen in years, and the argument becomes undeniable. It is going to take a while for appreciation to show in the data, as appreciation lags behind increased activity and appraisals present a challenge for homes selling for more than the most recent comparable. Ignore sold data for the sake of this exercise, because it is a reflection of activity a couple of months back. April sales are about to be released this week and the number of closed sales will be a high not seen in years. However, it is likely that the focus will be on the year over year decrease in the median sales price. The median sales price is expected to be higher month-over-month, but it will most likely be lower than April 2011. It is simply a fact that the median is slow to move and appreciation lags. The increased activity and market shift just started in mid-February, only 90-days ago. Back then, there were 1,300 more homes on the market, 29% more than today. Buyers today are seeing fierce competition when making offers. To be successful, they have to bid aggressively and be willing to write clean offers to convince the sellers to pick them over everybody else. This will result in closed sales slightly above the last comparable sale. As time goes on, these slight increases will all add up and translate to higher prices. Of course, there will always be exceptions, but those exceptions will be fewer and fewer as sellers and REALTORS® continue to adjust to the current market.

If you have any questions about real estate or know someone who can use some assistance, please call us and we will be happy to help out.

The Great Thaw

Dave — Mon, 30 Apr 2012 16:40:33 +0000

The Great Housing Bubble paved the way for the Great Recession. The housing market has officially entered the next phase, the Great Spring Thaw. The housing market seems to move from one extreme to another. Back in the early 2000’s, buyers zealously bought homes without regard to someday becoming sellers. Contrast that with the subsequent, unprecedented downturn, the housing market transitioned into a deep six-year hibernation. Now, the sleeping giant, housing, has awakened. The most fascinating aspect of this latest shift in the market is that nobody forecasted this major step in a housing recovery. The current statistics are staggering:

• Listing Inventory is at its lowest point since June 2005;
• Demand is at its highest level since June 2005;
• The expected market time is at its lowest level since June 2005;
• Closed sales have not been this low since October 2006 (May 2010 was at a similar level, but only temporary due to the expiration of the first time home buyer tax credit);
• The distressed property inventory is at lows not seen since September 2007.

Ask any buyer, seller, lender, Realtor® who participated in 2005 and they will recount a very crazy market where homes flew off the market with multiple offers. Buyers were extremely frustrated back then after writing offers on home after home without success. Today is much the same. The only difference between 2005 and 2012 is that values were rapidly rising. Today, with distressed homes still making up 23% of the active listing inventory, appreciation has been a bit restrained. That does not mean that values are not rising; it means that distressed properties are keeping a lid on rapid appreciation. With so few homes on the market, those in the real estate trenches are describing homes that are generating so many offers that the ultimate agreed upon sales price is often above the list price. NOTE TO BUYERS: carry a very sharp pencil when writing an offer to purchase your next potential home. There is tremendous competition in every range below $1.5 million. The best approach to writing an offer to purchase is to meticulously consider all of the comparable pending and closed sales taking into consideration the positives and negatives of each property that will add or subtract to value. NOTE TO SELLERS: do NOT get too carried away and wildly overprice your home. There are still homes that are sitting on the market without success due to being overzealous. It is best to price based upon the current market value of the home in initially approaching the market. The most activity a home receives is in the first few weeks. To waste this short, one-time opportunity is foolish. Carefully arrive at price in order to take advantage of the initial surge of activity.

Whether you are buying or selling real estate, or if you just have a question about the market, please feel free to call us at 949.500.DAVE (3283).

OC Inventory Lowest in 7 Yrs

Dave — Tue, 03 Apr 2012 20:33:57 +0000

The active listing inventory in Orange County dropped to levels not seen since July 2005.
Remarkably, the active listing inventory continues to drop and has shown no signs of letting up thus far. To date in 2012, the inventory has dropped by nearly 1,500 homes. After shedding an additional 328 homes in the past two weeks alone, the inventory now totals 6,615. Compared to 2010, there are 38% fewer homes on the market. There are 26% fewer than 2010. The levels are staggering. The word in the real estate trenches is that everybody has plenty of buyers, but very few homes to show them. In the lower ranges, many buyers are writing offer after offer with no success. Most buyers anticipate a slow, buyer’s market with plenty of homes to see and all of the time in the world to make a decision. That is polar opposite of the true market reality.

OC Housing Demand Takes Off

Dave — Mon, 06 Feb 2012 23:24:39 +0000

Typically Super Bowl Sunday marks the beginning of the Spring Market. This year, it appears that the housing market is experiencing an early spring that started in mid-January. Could it be the warm weather that is stimulating demand? Record low interest rates? Experts declaring that a bottom has been reached? It’s probably a case of “all of the above,” plus a bit of optimism going into a New Year.
Regardless, the housing market has absolutely surged and it is not due to a first time home buyer tax credit or other government program. Sure the Federal Reserve has kept rates at historically low levels, but buyers have proven that they are not motivated by interest rates; motivation is more about the belief that it is the right time to purchase. That belief is starting to break through in today’s housing market. Affordability is currently at a point not seen in well over a decade. Payments for the median sales price home have not been this low since 1999. There are many instances throughout Orange County where even after factoring the mortgage payment, taxes, insurance, and homeowner association dues, the total real payment, it is still cheaper than renting within the same neighborhood. Overall, demand, the number of new pending sales over the prior month, is up 13% compared to 2011, and now totals 3,134 pending sales. In the past two weeks alone, demand increased by 24%. For homes priced below $500,000, demand is up 26% compared to last year and the expected market time is a sizzling 1.9 months. For homes priced above $500,000, demand is actually less than one year ago; however, that is mostly due to a much smaller inventory compared to last year. In looking at the expected market time for various ranges, with the exception of homes priced between $1.5 million and $4 million, the market is stronger today compared to last year.

For questions about the housing market or any other assistance we can provide, please contact the Csira Group at (949) 509-7700.

Fast Start to Housing in 2012

Dave — Tue, 31 Jan 2012 23:44:52 +0000

For homes priced below $500,000, 56% of the market, demand is HOT.

The start to 2012 is extraordinary.
The Orange County housing market is revving its engine and is a strong sign that this year is going to be different than all other years since the beginning of the downturn, the autumn of 2005. Many point to 2007 as the last time things were good for housing, but, in terms of activity, it dates all the way back to 2005, more than six years ago. It makes sense that the lower range is where all the activity is at right now; after all, prices plummeted first in the lower range.

This year’s start is very reminiscent to the start of 2010; however, back then demand was artificially stimulated by the looming expiration of the first time home buyer tax credit. Homes needed to be PENDING by April 30, 2010, to take advantage of the credit. Buyers were itching to find a home before the expiration. After the expiration, demand plummeted. This year is completely different. There is no credit to entice buyers to buy. Instead, home values have dropped 35% from the height and interest rates are at historically low levels that we will never see again during our lifetimes. So, rates and values are stimulating a lot of activity. Throw in many housing analysts exclaiming within the last couple of weeks that a housing bottom has definitely been reached. One of those analysts, Ivy Zelman, who correctly called the housing bust, is emphatic that the bottom has been reached and we are at the early stages of a recovery. Could all of this be a coincidence? It is not just speculation; it is what is occurring right now. Right after we celebrated the dropping of the ball in New York and ushered in a New Year, there were almost instant reports of a lot of home buyer activity in Orange County. Homes generating offers right after being placed on the market, multiple offer situations and selling prices very close to their asking prices is what is taking place on the streets in O.C.

In comparing the beginning of this year to last year, the numbers are staggering. Overall, demand, the number of new pending sales over the prior month, is up 15% compared to 2011, totaling 2,528 pending sales. That’s the market as a whole, though. For homes priced below $500,000, demand is up an astonishing 30%. That’s a lot of momentum considering the housing market hasn’t even hit its stride with the beginning of the Spring Market right after Super Bowl Sunday. This is more than an encouraging start to 2012, it is a real sign of a much different housing market for 2012. The lower ranges dropped first, and it will be the lower ranges that will turn the housing market around. For homes priced between $500,000 and $750,000, demand is unchanged compared to 2011. For homes priced above $750,000, demand is off by 16%. So, it is the lower ranges that are on fire. Below $500,000 represents 72% of all demand. The range from $500,000 to $750,000 represents 17% and above $750,000 represents only 11%. In the past two weeks, demand has increased by 308 homes, up 14%. It will be interesting to see where demand goes from here, but it is a pretty safe bet that it will be considerably up.

2012 OC Housing Forecast

Dave — Tue, 24 Jan 2012 23:26:03 +0000

In Orange County, there are three distinctly different markets. It would be a mistake to make decisions based upon expected pricing for the entire county. So, throw out reports of the median sales price and drill down a little bit deeper. Let’s take a look at the three totally different markets. In the lower ranges, we can expect very little change in pricing. Remember, 76% of the market is below $750,000 and 56% can be found below $500,000. I believe that in some unique areas and neighborhoods, the market could even appreciate slightly. But, distressed properties, 47% of the active inventory in the lower ranges, will keep a lid on any real appreciation. For the middle range, homes priced between $750,000 and $1.5 million, we can expect slight depreciation in prices, less than 5%. Since only 15% of this range is distressed, the pressure on pricing is not as great. In the upper ranges, above $1.5 million, distressed properties do not have as much of an impact, only 5%. Instead, there are just far too many sellers and not enough buyers. Values in the lower ranges dropped over night with a flood of distressed homes, and have subsequently stabilized. The upper ranges have not been inundated with distressed properties; thus, the downward movement in values has been a much slower process. In essence, they are arriving late to the party. Prices are a lot stickier with less distress, but applying simple supply and demand rules, success often comes at the hands of more aggressive pricing. In 2012, prices will be most volatile in the upper ranges just as they were in 2011.

Credit: Steven Thomas, Orange County Housing Report

Foreclosure Timelines Shorten

Dave — Tue, 24 Jan 2012 20:54:10 +0000

Foreclosures are getting faster at JPMorgan Chase and Wells Fargo. The two big banks trimmed their foreclosure timelines by as much as 100 days in the third quarter of 2011, helping to work through major backlogs of foreclosed loans, according to a Moody’s Investors Service report. But while foreclosure sales are getting speedier, the report warns that there’s still a long way to go in working through large inventories of REOs that are continuing to slam the nation’s banks.

Chase averaged 264 days from referral to foreclosure sale in the third quarter for subprime mortgages — a big drop from the 412 days it averaged three months prior to that. Chase boasted the shortest time of any of the big five mortgage servicers. Wells Fargo also greatly reduced its foreclosure timeline to 314 days from 454 days compared to the previous quarter.

Please contact the Csira Group for questions relating to foreclosures and short sales at (949) 509-7700.

Proof that Rates are Low

Dave — Tue, 13 Dec 2011 19:48:04 +0000

Fed Chair, Ben Bernanke, knows a good interest rate when he sees it. The Fed chair has refinanced the mortgage on his three-bedroom, attached town home in Washington, D.C. twice since 2009.

Most recently Bernanke refinanced on his home in September shortly after the Fed announced “Operation Twist,” which was a rare move by the Fed to publicly vow to keep long-term interest rates low for the next two years.

Bernanke lives in a town house near the Capitol in Washington, D.C., for which he paid $839,000 in 2004, according to an article in The Wall Street Journal. The home’s appraised value is about $850,000. Bernanke owes $672,000 on his 30-year mortgage, according to the article.

Meanwhile, mortgage rates continue to hover around record lows. The 30-year fixed-rate mortgage fell under 4 percent once again this past week–30-year rates below 4 percent were unheard of until this year. The 30-year fixed-rate mortgage averaged 3.99 percent for the week ending Dec. 8, according to Freddie Mac’s national mortgage market survey. Low rates, mixed with reduced home prices, are pushing Orange County housing affordability to record highs this year. To be introduced to a great lender, contact the Csira Group at (949) 509-7700.

1 in 5 Mortgages Underwater

Dave — Wed, 07 Dec 2011 15:01:09 +0000

More than one in five American home mortgages are underwater.

An estimated 10.7-million households, or 22.1% of all homes with mortgages, had more debt on the properties than they were worth in the third quarter, according to Santa Ana research firm CoreLogic. This is a slight decline from the 10.9 million properties that were underwater in the second quarter.

“Although slightly down, negative equity remains very high and renders many borrowers vulnerable when negative economic shocks occur, such as job loss or illness,” CoreLogic chief economist Mark Fleming said in a statement. “The nearly $700-billion mortgage debt overhang has touched many corners of the market, and this overhang is holding back the recovery of the housing market and broader economy.”

Nevada had the highest negative-equity percentage with 58% of mortgaged homes underwater, followed by Arizona, 47%; Florida, 44%; Michigan, 35% and Georgia, 30%. This was the first quarter that Georgia made the top five, ousting from the group California, which had been among the top spots since the firm began tracking the data in 2009.

In the Los Angeles Metro area, 353,427 homes, or 23% of all mortgaged properties, were in negative equity at the end of the third quarter, a decline from 356,677. Negative equity can decline when foreclosures increase as the repossession process extinguishes underwater loans.

The Csira Group specializes in assisting homeowners who are having difficulties in meeting their mortgage obligations. For a confidential discussion regarding these matters, please contact us a info@csiragroup.com or call 949.500.3283.

Foreclosure Crisis Far From Over

Dave — Thu, 01 Dec 2011 20:18:39 +0000

“The nation is not even halfway through the foreclosure crisis,” suggests a new report from the Center for Responsible Lending, “Lost Ground, 2011.” In the report, the Center for Responsible Lending analyzed 27 million mortgages issued over a five-year timespan.

Researchers found that at least 2.7 million mortgages issued from 2004 through 2008, or 6.4 percent, have ended in foreclosure as of February 2011. Also during that time period, researchers found that 3.6 million households — or an additional 8.3 percent — are still at immediate or serious risk of losing their homes, according to the study.

The Csira Group specializes in assisting homeowners who have found it difficult to maintain their mortgage commitments. Please contact us if we can provide assistance or counseling along these lines.