That was the headline of the Orange County Register on Tuesday, May 20th 2008. The accompanying photo was a very crowded entry to an open house. What's happening? The bottom of this market is approaching, that's what. This is exactly what was reported in this newsletter last month. Prices have gone down so far, so fast, that it's hard for waiting buyers to resist. We saw an upward trend in open escrows as mentioned last issue, but the main ingredient is the upward swing of the affordability index which is growing every month to a higher percentage of people who can now buy a home. This correction in the market was not only inevitable, it was necessary. When the market topped out in 2006, we were down to 11% affordability. When only 11 people out of 100 can afford to buy a home, that market is in trouble. According to Dataquick sales were still off 19% from the same period last year, but that is a lot better than 36% off the mark. But still, there is a long recovery period ahead.
The OC Register reported, using Dataquick numbers, that April (the latest complete month stats available), was 46% below the average April since 1988. According to the article, "Sales for the January through April period were down 57% compared with the 20 year average." But the upward trend is significant. Both investors and homebuyers are on the hunt for the perfect deal. Certainly the raise in FHA loan limits has helped significantly as well as FNMA interest rates remaining at their near historic lows. Should you buy?
That's up to each individual to decide according to their need. But it should be mentioned that THE TODAY SHOW aired a segment on real estate the last week in May. Their conclusion: DON'T WAIT! BUY A HOUSE! This is the same morning show, viewed by millions that 2 years ago proclaimed, "Whatever you do, don't buy a house right now." So the fact that they are on board with a bottoming market, is at the very least, interesting.
FORECLOSURES ARE UP AND BANK OWNED PROPERTIES ARE HERE FOR A WHILE... The total number of foreclosures for April, the latest complete month available was 898, including houses and condominiums. That number was up 29% from March and 284% from a year ago. Now obviously all those homes did not hit the market for sale all at once. They must be processed, sometimes rehabbed, and gotten ready for sale by the asset management company. In fact, the bank owned properties are staggered into the market.
There are several ways to buy bank owned properties. One method is auctions and you have probably seen the advertisements for these. The other way is to buy a traditional listing from a listing agent where the property happens to be bank owned but otherwise you process through the transaction with a normal escrow period. You definitely need to give me a call if you are thinking of purchasing a home. You should not try to buy a bank owned, especially a short sale listing (you could be tied up for months with no foreseeable conclusion) or even a traditional sale, without representation. Today's transactions are just too complicated. It looks like foreclosures will be around a little longer as the Notices of Default; the first leg of a foreclosure hit a record in April, totaling 2,598. According to Dataquick, nearly 3 out of 10 sales in April was a bank owned property.
ACTUAL NUMBERS... The total number of sales - 2,166 for all properties including single- family resale, condominiums and new Single Family Homes. Median price $500,000 and the median price for a condo $390,000.
The Sales count - (549) sales under $400,000, $400,000 to $500,000 - (424). $600,000 to $700,000 (194) and (518) over $700,000. Not a large number for the over $700,000 which also includes coastal parts of the county. The positive on these numbers is that there will be a birth from the soon to arrive "normal" real estate market. All these entry level buyers will become move up buyers in the next Real Estate Market.