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Gary Watts shared a review of the past year and first quarter of 2011 at the Laguna Niguel office of Prudential CA Realty today. Gary has been a local real estate pundit for decades and has a good grasp on the numbers. He said there were 30,600 recorded sales in O.C. in 2010, the third lowest since Dataquest began tracking this statistic. However, the number is actually much lower because 7,900 of those were foreclosures that did not sell on the courthouse steps, but later came on the market as REO properties, making the actual number of sales 20,700.

Of the 20,700 sales, 24% of buyers used FHA financing, while 28% purchased with all cash. Investors were a big part of the market, making up a whopping 22% of all purchases, suggesting that smart money is entering the market. One of the reasons volume was down year-over-year is because the first-time homebuyers credit from last year stimulated sales and pushed some people into the market who might have otherwise waited.

Prices have come down somewhat to a median price in December of $410,000. From May of 2010 through March of 2011, prices have fallen 7.0% on average. The mix of sellers is also interesting: Bank-owned properties (REOs) currently account for 7% of all listings, Short sales account for 32% of all listings and equity sellers make up the remaining 61%. However, closings change the landscape somewhat with distressed sales making up the majority of closed sales at 51%. It also takes less time on market for distressed inventory to sell, as prices tend to be more attractive to buyers: about five weeks for REO properties; 2.49 months for short sales and; 4.4 months for equity sales.

There is reason for some anxiousness about a full recovery of the market in the near future, as most analysts believe interest rates are going to increase during the second half of 2011. This makes a compelling argument for buyers who are sitting on the fence to act soon, as low rates and reduced prices combine to make one of the most attractive affordability indexes we have ever seen in Orange County. The other reason for concern is that there are about five million Americans who are behind on their mortgage payments, adding to the “shadow inventory” we all hear about. Lawrence Yun, the Chief Economist for the National Association of Realtors (NAR) suggested that it may take as long as five years for all of this inventory to be cleared out.

Finally, Gary made a compelling case for investing in income properties, as the population of the country is increasing by approximately three million people per year, while home ownership is down from 69% to 66% and is forecasted to go down as low as 61%. All of these people need a place to live, and if they don’t buy, they will have to rent.

Please contact the Csira Group to answer any of your real estate questions or if we can ever be of assistance in any way.