South Orange County Blog from Bob Phillips

The Latest Orange County Housing Report

Below is the latest Orange County Housing Report from my friend, Steven Thomas.

Window of OpportunityOrange County Housing Report:  The Window of Opportunity is Closing

Summer is flying by and so is the second best time of the year to sell a house 

Window of Opportunity: The second best time of the year to sell will come to an end as soon as the kids go back to school and housing transitions into the Autumn Market.

This year, the transition from the Summer Market to the Autumn Market is a bit more significant because the expected market time is moving away from a seller’s market to one that is balanced, favoring neither the seller   nor the buyer. It is also important to note that the best time of the year to sell is already behind us, the Spring Market. Summer is mistakenly viewed as the best, but the higher sales numbers are actually a reflection of  pending sales that were negotiated during the spring, but did not close until the summer. As a result of a lot of publicity that is circulated about closed sales, many are duped into thinking that right now is the best time to sell; unfortunately, they are wrong.

Back to school means that fewer buyers are yearning to make an immediate move. Buyers with children factor the displacement of their children and the strain on their family in moving during a school year. As a result, many buyers simply opt to wait until the following spring to start the process of isolating their next home.

As housing transitions into the Autumn Market, the window of opportunity in taking advantage of the summer will come to an end. That does not mean that sellers will not be successful; however, it is going to take a bit more patience and accurately pricing will be fundamental in luring a willing and able buyer. Sellers will absolutely NOT get away with overpricing a home. Ironically, most sellers initially list their homes outside of the realm of reality and arbitrarily price based upon what they want rather than what buyers are willing to pay. Today’s buyers are looking to pay very close to a home’s Fair Market Value, a value based upon the most recent comparable sales activity.

Appreciation has already slowed to a crawl, but it is going to slow further, from 1% to 0%, a flat line. Pricing a home in hopes that the market will appreciate enough to come up to an overpriced level is a fruitless strategy only resulting in a decision to make: reduce the asking price or throw in the towel.

The proverbial “window of opportunity” is closing further because the Orange County housing market is marching its way towards a balanced market, leaving behind the seller’s market of the past 2½ years. This may not occur in all price ranges or cities, but, at the very least, will slow across the board, affecting every community and every price across the county. This will require patience and accurate pricing to succeed. Today’s seller’s market means sellers can call the shots, but does NOT mean that they will get away with arbitrarily overpricing their homes. That will be true for any remaining seller’s markets for the rest of the year. The higher price ranges, above $750,000, will be much slower. This range accounts for 43% of the active listing inventory and 29% of total demand. As is always true, there are fewer buyers, as a percentage, in the upper ranges compared to the lower ranges. It is purely an affordability issue. Thus, it makes sense that this range has many more challenges in selling.

The higher the price, the more challenging it becomes to sell. In many cases throughout the year, the ultra-luxury ranges, homes priced above $2 million, slip into a lethargic market with expected market times ballooning to above one or even two years. This market does not respond with quick price reductions; instead, they must patiently wait for either the market to evolve on its own or carefully analyze any changes that need to be addressed. It also marches to the beat of its own drum and does not change as radically as the rest of the housing market.

Currently, Newport Coast, Laguna Beach, Corona del Mar, Coto De Caza, Ladera Ranch, and all homes above $1.5 million, are experiencing a balanced market with an expected market time of at least five months. Expect the number of cities and price ranges in this select group to increase during the Autumn and Holiday Markets. It is incumbent upon sellers to know their specific market and price range as it continues to evolve.

The lower ranges are slowing too. For homes priced below $750,000, the expected market time is at 2.5 months compared to 1.5 months one year ago. This range will not be an exception, as it too will slow during the Autumn and Holidays, just not as profound as the upper ranges. It will still require a very careful approach and accurate pricing. There are simply fewer buyers in the market, so not every seller will be successful. Properly pricing homes NOW is the best strategy and approach.

The bottom line, the window of opportunity in taking advantage of the second best time of the year, the Summer Market, as well as a more favorable expected market time, is coming to a close. Benefit from proper pricing now before a different, more patient strategy will be required.

o.c.housing.chart.7.20.14

Active Inventory: The active inventory increased by 4% in the past two weeks.

The active listing inventory added an additional 276 homes in the past two weeks and now totals 7,811. Thus far in 2014 the inventory has grown without pause, adding an additional 3,093, a 65% increase, and is poised to continue to increase through the end August. Keep in mind, in order for the active inventory to grow, more home need to be placed on the market than are coming off as pending sales. Last year at this time there were 5,340 homes on the market, 2,486 fewer than today.

o.c.inventory.7.20.14

DemandDemand increased by 1% in the past two weeks.

Demand, the number of new pending sales over the past month, increased by 24 and now totals 2,501. After an initial small dip in demand in July, it will slightly rise in August. Last year at this time demand was at 2,663, 162 additional pending sales compared to today. 

Distressed Breakdown: The distressed inventory increased by 6% in the past two weeks.

The distressed inventory, foreclosures and short sales combined, increased by 17 homes and now totals 281. In 2014, the distressed inventory has not changed much, starting the year at 271. The long term trend is for it to remain at a very low level. Last month, they represented only 5% of all closed sales.

In the past two weeks, the number of active foreclosures increased by 7 homes and now totals 76. 1% of the active inventory is a foreclosure. The expected market time for foreclosures is 69 days. The short sale inventory increased by 10 homes in the past two weeks and now totals 205. The expected market time is 46 days and remains one of the hottest segments of the Orange County market. Short sales represent 2.6% of the total active inventory.

Steven Thomas, Quantitative Economics and Decision Sciences

What’s Ahead For Mortgage Rates This Week – July 21, 2014

Mythbusters: 5 Reasons Why Diet Sodas Might Not Be as Healthy as You ThinkLast week’s economic news offered a variety of indications that the economic recovery continues, but some readings missed their expected levels. The Philadelphia and New York branches of the Federal Reserve Bank reported higher than anticipated manufacturing for their respective regions and new jobless claims were lower than expected.

Fed Chair’s Senate Testimony Hints at Coming Interest Rate Hike

Federal Reserve Chair Janet Yellen testified that the Fed might have to raise interest rates sooner than expected if the economy continues to outperform the Fed’s projections. Ms. Yellen said that the central bank presently estimates that the first rate increases will take place approximately one year from now.

The Federal Open Market Committee (FOMC) of the Fed has repeatedly stated that members will continue to review data and economic conditions changing monetary policy. Ms. Yellen said in last week’s remarks that this holds true whether economic conditions improve or decline.

In other Fed-related news, the Philadelphia Fed released its manufacturing index for July with higher than expected results. The Philly Fed’s reading for July was 23.90 as compared to expectations of 16.50 and June’s reading of 17.80.

The New York Fed reported a similar trend for July with a reading of 25.60 as compared to an estimated reading of 17.50 and June’s reading of 19.30. This is good news after the Northeast’s economy was slammed by severe weather last winter. Weather conditions stalled area housing and labor markets.

Weekly jobless claims were lower at 303,000 than expectations of 310,000 new jobless claims and the prior week’s reading of 305,000 new jobless claims.

Home Builders Post Positive Confidence Reading for July

The National Association of Home Builders posted its highest builder confidence reading in six months for July with a reading of 53 against the expected reading of 50 and June’s reading of 49. Numbers above 50 indicate that more builders surveyed have a positive outlook than not.

Housing Starts for June were reported lower than expected at an annual level of 893,000 against an expected reading of 1.02 million and May’s reading of 985,000 housing starts.

Mortgage Rates Lower

According to Freddie Mac’s weekly survey, average mortgage rates were slightly lower last week. The average rate for a 30-year fixed rate mortgage fell by two basis points to 4.13 percent. Discount points were 0.60 as compared to the prior week’s reading of 0.70 percent. The average rate for a 15-year fixed rate mortgage was 3.23 percent as compared to the previous reading of 3.24 percent.

Discount points for a 15-year mortgage averaged 0.50 percent against the prior week’s reading of 0.50 percent. The average rate for a 5/1 adjustable rate mortgage dropped by two basis points to 2.87 percent with discount points unchanged at 0.40 percent.

The University of Michigan’s Consumer Sentiment Index for July fell just short of expectations at 81.3. Analysts expected a reading of 83.0, based on June’s reading of 82.50. Analysts said that although labor markets are improving, consumers continue to face rising costs for gasoline and food, which likely explained the dip in confidence for July.

What’s Ahead

This week’s economic news releases include Existing Home sales from the National Association of REALTORS®, New Home Sales from the Department of Commerce and the FHFA House Price Index. The Chicago Fed is set to release its National Activity Index. Freddie Mac mortgage rates and New Jobless Claims will be released Thursday as usual.

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Buying a Resale House? Why the Home Inspection Process is One You Won’t Want to Skimp On

Buying a House or Condo? Why the Home Inspection Process is One You Won't Want to Skimp OnOnce you have found that perfect home with the right price and every little feature you were hoping for, it’s important to keep in mind that the home has been presented in a way that accentuates its highlights and shadows any flaws. For this reason, it is crucial that you get a home inspection before completing a purchase.

Many sellers also have inspectors investigate the home in order to determine its sale value. As such, they should be aware that a prospective buyer will probably want to request their own inspection to verify the findings.

Reasons For Home Inspections

If you are the one purchasing the home, getting an inspection is likely to be the most important investigation you need to perform to ensure you are getting the best value. It can also help to know what reasons each party has for requiring a home inspection.

Buyers, for example, feel peace of mind knowing the home in question is safe. They also gain the ability to negotiate in the event a problem arises from inspection, or they can request repairs first. They can also opt out if the problems that arise are too overwhelming to deal with prior to or after the purchase. Finally, buyers can learn about the kind of maintenance and upkeep be required for the home in the long run.

Sellers, on the other hand, want to make the transaction as smooth of a process as possible to prevent issues that could slow down the sale. They can also learn about any problems they need to repair before putting the house on the market, and they can determine the sale price for the transaction. Lastly, this allows the seller to prove their transparency by having an inspection report available, even though he or she should expect that the buyer should be requesting an independent home inspection regardless.

It should be evident, having an inspection conducted is vital for buyers and sellers alike; though the price might seem costly at first, it is merely a small fee that is well worth the effort to solidify a home purchase.

Finding A Home Inspector

The first thing to keep in mind is that many states lack a licensing process for those who inspect homes. California DOES have such a system.

It is very important not to take a seller’s inspection report at face value, no matter what kind of reputation they may have as a person. You might not even want to accept an inspector that someone else hires since they may have a vested interest that can influence the report.

Keep in mind that a general inspector is not typically licensed to check for specific issues like mold or pests. As such, you may need to seek an additional person who is licensed for a mold inspection, especially in high risk situations.  Most transactions in California will include a termite/pest inspection, as that is usually a requirement if there’s a new mortgage involved.

I have multiple recommendations I can make for every just about any type of inspection you might want.

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An Insider’s Guide to Reducing Your Remaining Mortgage Years Through a Smart Refinance

Reasons_Why_You_Should_Consider_Refinancing_Your_MortgageIs it always the best idea to pay off a mortgage over 30 years? While it may help a homeowner lower his or her monthly payment, it can mean paying more in interest and waiting several more years to build sufficient equity in the home.

The question is…how can a homeowner reduce the amount of time it takes to pay off a mortgage by refinancing his or her loan? A few methods for reducing your mortgage term are explained below.

Refinance From A 30-Year Mortgage To A 15-Year Mortgage

For those who don’t want to wait any longer than necessary to pay off their home loan, it may be possible to refinance to a shorter-term mortgage. Instead of taking 30 years to pay off the loan, a homeowner can opt to pay off the loan in 10 years or 15 years. The shorter the term, the less interest will be paid on the loan.

Get A Lower Interest Rate With A Shorter-Term Mortgage

Another good reason to shorten a mortgage term is because it could lower the loan’s interest rate. Instead of paying 4.5 percent over 30 years, it may be possible to pay 4 percent over 15 years. This gives the mortgage holder the chance to build equity in the home faster as they are paying more of the principal balance with each payment. While a mortgage holder can pay more than the minimum amount on a longer-term mortgage each month, it could still end up costing more overall due to the terms of the loan. Be sure to ask your mortgage professional about your options here.

Stop Paying Mortgage Insurance

Those who are paying mortgage insurance could be paying $200 or more per month for nothing more than the right to protect the lender against default. Homeowners who could qualify for a conventional loan should attempt to refinance to a conventional loan if possible to avoid making this payment. Instead of going toward mortgage insurance, put that money toward the principal balance on the loan. There are, of course, risks involved with this approach so be sure to fully discuss them with a professional.

How Can Someone Refinance A Loan?

Now that you know how to pay off your mortgage faster through a refinance, how can someone go about refinancing a home loan? Fortunately, refinancing is similar to the process of securing the home’s first loan. All a borrower will need to do is find a lender that he or she wants to work with, find an offer that works for that borrower and then close on the deal. Although there may be closing costs associated with the new loan, some lenders may be willing to waive some or all of them on a refinance.

Paying off a mortgage as soon as possible can help a borrower save money while building equity in the home at a faster pace. This gives a homeowner financial strength as well as the flexibility to sell the house in the future without worrying about losing money in the deal. To find out more about refinancing options, talk to a mortgage lender.  I have a few excellent local choices, if you need a recommendation for one.

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Default Rate Falls to Historically Low Levels in Large Metros

An article by Derek Templeton, of DSNews.com, July 15th, 2014

As the unemployment rate and other economic measures continue to improve, American consumers appear to be gaining a greater ability to meet their credit obligations.

foreclosure notice

As the unemployment rate and other economic measures continue to improve, American consumers appear  to be gaining a greater ability to meet their credit obligations.

A report released Tuesday by S&P Dow Jones Indices and Experian showed a decline in default rates among five of the largest cities in the nation to historically low levels.

The national composite for all types of credit default posted 1.02% in June, its lowest reading since the organization began collecting the data ten years ago.

Consistent with recent reports that payment priorities may be shifting among Americans back to pre- downturn norms, mortgages lead the way with first mortgages clocking in at just 0.89 percent default. The default rate at second mortgages was even lower at 0.57 percent.

“Consumer credit default rates continue to drift lower and have reached a historical low,” says David M. Blitzer, Managing Director and Chairman of the Index Committee for S&P Dow Jones Indices.

“Recent economic reports are encouraging with the unemployment rate now at a six year low and strong job creation in recent months. The continued declines in consumer default rates confirm other indicators of an improving economy. Credit standards for mortgage loans continue to be somewhat restrictive and may be contributing to low first mortgage default rates”.

Of the large metropolitan areas surveyed, Dallas, Texas was the only city to actually see a rise in default levels. However, the slight increase comes on the heels of the city’s lowest rate of default recorded in the history of the survey the previous month.

Concerns about the direction of the economy and the effect that is has on the credit market are not unfounded but even as the housing recovery slows, the lack of significant default in the market can only be seen as a positive indicator.

What’s Ahead For Mortgage Rates This Week – July 14, 2014

What's Ahead For Mortgage Rates This Week July 14 2014Last week brought news from the Fed as two Federal Reserve Bank Presidents made speeches and the Federal Open Market Committee (FOMC) of the Fed released the minutes of its last meeting. The minutes reveal the Fed’s intention to wrap up its bond-buying program in October with a final purchase of $15 billion in mortgage-backed securities (MBS) and Treasury bonds. No economic news was issued Monday following of the 4th of July holiday.

Further indications of a strengthening labor market were seen. May job openings reached their highest level since June 2007, and quits and layoffs fell from April’s reading of 4.55 million to 4.50 million. Weekly jobless claims fell to 304,000 against expectations of 320,000 new jobless claims and the prior week’s reading of 315,000 new jobless claims.

Fed Speeches Address Inflation, Banks Too Big to Fail

Tuesday’s speech by Minneapolis Fed Bank president Narayana Kocherlakota calmed concerns over inflation; Mr. Kocherlakota said that the Fed expects inflation to remain below its target rate of two percent for several more years. He tied low inflation to the unemployment rate and said that the nation’s workforce is not fully utilized in times of low inflation, and cautioned that June’s national unemployment rate of 6.10 percent “could well overstate the degree of improvement of the U.S. labor market.”

Stanley Fischer, the Fed’s new vice-chairman, spoke before the National Bureau of Economic Research last Thursday. Mr. Fischer addressed the issue of breaking up the nation’s largest banks to eliminate the government’s exposure to banks too big to fail. He said that it wasn’t clear that breaking up the largest banks would end federal bailouts of banks considered too big to fail. Mr. Fisher also said that breaking up the biggest banks would be “a complex task with an uncertain payoff.”

Mr. Fischer also said that any efforts to prevent a housing bubble should focus on the supply side and cautioned that “measures aimed at reducing the demand for housing are likely to be politically sensitive.”

FOMC Minutes Reveal End Date for Bond Purchases

The minutes of the Fed’s last FOMC meeting indicate that the Fed plans to continue bond purchases at the rate of $10 billion per month with a final purchase of $15 billion in October. FOMC members re-asserted their oft-stated position that the Fed’s target interest rate of 0.00 to 0.25 percent will not change for a considerable time after the bond purchase program ends.

Mortgage Rates Rise

Average mortgage rates rose across the board last week. The average rate for a 30-year fixed rate mortgage increased by three basis points to 4.15 percent; discount points were also higher at 0.70 percent. The average rate for a 15-year fixed rate mortgage rose by two basis points to 3.24 percent with discount points higher at 0.60 percent. The average rate for a 5/1 adjustable rate mortgage rose by one basis point to 2.99 percent with discount points unchanged at 0.40 percent.

What’s Ahead

This week’s scheduled economic news includes retail sales and retail sales without the auto sector, Fed Chair Janet Yellen’s testimony, the Fed’s Beige Book report and the NAHB Homebuilder’s Market Index. Housing Starts, Consumer Sentiment and Leading Economic Indicators round out the week’s economic reports.

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Orange County Real Estate Market Report – Mid Year Edition

Here is the latest real estate market report from my favorite local economist, Steven Thomas:

Calendar pagesOrange County Housing Report:  OC Housing – Mid Year Update 

July 6, 2014

The first two quarters of 2014 are in the rearview mirror and this year is

unquestionably different from prior years. 

Mid-Year Update: This year’s market is marching to the beat of its own drum.

From 2007 through 2011, the Great Recession brought housing to its knees. The market was dictated by lenders and their new strict guidelines; plus, they controlled the market with the unbelievable numbers of foreclosures and short sales. Distressed properties were the norm. However, by mid-2011, housing began to mend. It was undetectable to anybody participating in the market, at first, but slowly but surely, the active listing inventory began to drop as fewer homes were placed on the market, including foreclosures and shorts sales.

In 2012 the green light was switched and, initially, investors flooded the market. They were quickly followed by a relentless stream of normal buyers. The inventory continued to drop as demand grew. Multiple offers were generated and cash was king. Homes flew off the market at prices that beat the socks off of the most recent comparable sales. Appreciation was rampant.

The first half of 2013 was nothing short of crazy. The inventory dropped to a ridiculous, anemic level. There were not enough homes coming on the market as most homeowners sat back and watched their homes appreciate, restoring just about all of the losses from the Great Recession. Buyers and investors wanted to take advantage of the incredible values and historically low interest rates; they were willing to pay any price for a home, even if that meant paying thousands more than the most recent closed sales. The uncontrollable appreciation slowed by the midpoint of 2013. Suddenly, homeowners no longer got away with overpricing their homes and they began to sit. By August, buyers were unwilling to pay extra for a home; instead, they wanted to pay as close to the Fair Market Value as possible. The inventory climbed from mid-March through October on the backs of overpriced sellers.

The second half of 2013 paved the way for 2014, a year that has been marked thus far with a relentless increase in the active inventory. Let’s take a closer look at the major changes in 2014 that have differentiated itself as a unique year:

  • Active Inventory – after starting the year at 4,733, the active listing inventory has increased by 60% and now sits at 7,550 and is still climbing. The long term average for Orange County is about 8,500 homes and within site. Even if that level is not reached this year, the added inventory has created quite a bit of breathing room for buyers. So many homes are overpriced, that buyers’ sense of urgency has just about vanished, unless a home is properly priced. The vast majority of sellers learn the hard way that overpricing is a front row ticket to sitting on the market without success.
  • Demand – there is demand for housing, but there just are not enough realistically priced homes on the market thus far this year. As a result, demand, the number of new pending sales over the prior month, has been noticeably lower than the past couple of years. Currently, demand is running about 15% less than last year at this time.
  • Expected Market Time – with an increasing inventory and less demand, the expected market time has been much higher than the last couple of years. Currently it is at 90 days. Compare that to last year’s 49 days and the overall feel in the streets is palpably different. At three months, it is still a seller’s market, but not like 2012 and 2013. Double digit year over year appreciation has been replaced with 3-5% annual appreciation, meaning that any appreciation from month to month is almost undetectable. In other words, sellers can no longer get away with arbitrarily and overzealously pricing their homes. It’s a seller’s market where they get to call all of the shots and may get a few thousand dollars more than the last comparable sale IF AND ONLY IF they price their homes realistically.
  • Distressed Properties – for the first two quarters of 2014, there have been 69% fewer foreclosures and short sales. There were only 242 closed foreclosures in the first six months of the year compared to 698 last year and 2,249 in 2012. There were only 624 closed short sales thus far in 2014 compared to 2,091 last year and 3,810 in 2012. With the dramatic rise in values, fewer homeowners are underwater, negating the need for a short sale. Slowly but surely, the distressed market’s grip on Orange County housing has loosened and no longer has an influence on the overall market.
  • Equity Sellers – last year was marked by the return of the equity seller. It was up 42% from 2012 to 2013. In comparing 2014 to 2013, the number of equity sellers is pretty similar, just 2% more so far this year. There are a lot more equity sellers that are actively listed right now, but many are unsuccessful because they just are not approaching the market realistically. The difference from year to year would be much greater if sellers would just price their homes closer to their Fair Market Value. Unfortunately, by the time most sellers will realize the error in their approach, both the Spring and Summer markets will be in the past, the best time of the year to sell.

From here, we can expect more of the same, an increasing inventory through the end of summer, an increase in the expected market time, and a slow move away from a seller’s market to a balanced market.

YoY-1st-half-2014

Active Inventory: The active inventory increased by 3% in the past two weeks.

The active listing inventory added an additional 187 homes in the past two weeks and now totals 7,550. Keep in mind, in order for the active inventory to grow, more home need to be placed on the market than are coming off as pending sales. Last year at this time there were 4,727 homes on the market, 2,823 fewer than today.

inventory-1st-half-2014

DemandDemand dropped by 10% in the past two weeks.

Demand, the number of new pending sales over the past month, decreased by 276 and now totals 2,477. It typically drops considerable at the start of July, which includes the slowing due to the end of the school year, graduations, and the beginning of summer vacations, all of which distract buyers from pulling the trigger and looking at homes. Demand will improve in August prior to dropping for the Autumn and Holiday Markets.

Last year at this time there were 2,909 pending sales, 432 more than today. 

Distressed Breakdown: The distressed inventory increased by 7% in the past two weeks.

The distressed inventory, foreclosures and short sales combined, increased by 18 homes in the past two weeks and now totals 264. In 2014, the distressed inventory started the year at 271 and really has not changed much at all. The long term trend is for it to remain at a very low level. Last month, they represented less than 6% of all closed sales.

In the past two weeks, the number of active foreclosures increased by 6 homes and now totals 69. Less than 1% of the active inventory is a foreclosure. The expected market time for foreclosures is 58 days. The short sale inventory increased by 12 homes in the past two weeks and now totals 195. The expected market time is 40 days. Short sales represent less than 3% of the total active inventory. ( End of Steven’s report.)

Steven Thomas,  Quantitative Economics and Decision Sciences

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What’s Ahead For Mortgage Rates This Week – July 7, 2014

What's Ahead For Mortgage Rates This Week July 7 2014

Last week’s economic news was mixed, but economic reports for Non-Farm Payrolls and the National Unemployment rate suggest a strengthening labor sector. Pending Home Sales surpassed expectations in May and conversely, construction spending was lower than expected. Here are the details.

Pending Home Sales Reach Highest Level in Eight Months

The National Association of REALTORS® reported that pending home sales in May rose by 6.10 percent over April’s reading. May’s reading was 5.20 percent lower than for May 2013. The index reading for May reached 103.9 as compared to April’s index reading of 97.9. Results for all regions were positive for May:

- Northeast: 8.80%

- West 7.60%

- Midwest 6.30%

- South 4.40%

An index reading of 100 for pending home sales is equal to average contract activity in 2001; pending home sales are a gauge of upcoming closings and mortgage activity.

CoreLogic Home Price Index Reflects Slower Price Gains

National home prices rose by 1.40 percent in May and 10 states posted new month-to-month highs, while year-over-year reading slipped from 10.00 percent in April to 8.80 percent in May. Home prices remain about 13.50 percent lower than their 2006 peak.

The overall rate of construction spending slowed in May to an increase of 0.10 percent from April’s reading of 0.80 percent and against expectations of 0.70 percent. Residential construction spending dropped by 1.50 percent in May.

Freddie Mac’s weekly survey of average mortgage rates brought good news as the rate for a 30-year fixed rate mortgage dropped by two basis points to 4.12 percent. The average rate for a 15-year fixed rate mortgage was unchanged at 3.22 percent, as was the average rate for a 5/1 adjustable rate mortgage at 2.98 percent. Discount points were unchanged at 0.50 percent for a 30-year fixed rate mortgage and 15-year fixed rate mortgages. Discount rates rose from 0.30 to 0.40 percent for 5/1 adjustable rate mortgages.

Jobs Up, Unemployment Rate Lower

ADP payrolls, which measures private-sector job growth, reported 281,000 new jobs in June as compared to a reading of 179,000 new private-sector jobs in May. The Bureau of Labor Statistics’ Non-Farm Payrolls report for June surpassed expectations of 215,000 jobs added with an increase of 288,000 jobs against May’s reading of 224,000 jobs added.

The national unemployment rate fell to 6.10 percent against predictions of 6.30 percent and May’s reading of 6.30 percent.

No news was released on Friday, which was a national holiday.

What’s Ahead

This week’s scheduled economic is lean with no events set for Monday. Job Openings, the minutes from the most recent FOMC meeting, along with regularly scheduled weekly reports on mortgage rates and new jobless claims round out the week’s economic news.

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Southern California housing market settles to a stable pace

An article by Tim Logan, of the Los Angeles Times. ( From June 11th, 2014.)

sold-homeAfter several topsy-turvy years, Southern California’s housing market is starting to look almost normal.

Home prices grew again in May, but not at the frenzied pace seen last spring. Sales are down, but mostly because there are fewer foreclosures to buy. More home sellers are testing the market. But big bidding wars are so last year.

All of it signals a housing market that’s settling to a more stable, even healthy, pattern, which analysts say is a  notable change from the big ups and downs of the bubble and its aftermath.

“The market’s not bad,” said Leslie Appleton-Young, chief economist for the California Assn. of Realtors, who sees prices going up but competition easing. “The urgency’s gone. I think that’s a positive thing. I really do.”

The slowdown has been underway for months, but it showed up anew in home sales numbers out Wednesday for May, a big month for the key spring real estate season.

The median price of a home sold in the six-county Southland was $410,000, according to San Diego-based DataQuick. That’s up 11.4% from the same month last year, the slowest annual gain since August of 2012, and just 1.5% above the median price recorded in April.

More and more, the market hinges on regular people buying houses with normal mortgages, and with lending standards still tight and the economy still feeling soft, there’s only so much those people will pay.

“We’re bumping along a ceiling. I really can’t see values going up much more,” said Steven Thomas, of ReportsOnHousing.com, which analyzes Southern California housing markets. “Buyers are homing in on trying to pay a fair value. A year ago, everyone was willing to pay extra. Now that bidding up is not happening.”

That’s good news for would-be home buyers, said John Venti, a real estate agent with Redfin who focuses on the San Fernando and San Gabriel valleys. This time last year, he said, his clients regularly got beat out by all-cash, above-asking-price offers. That’s far less common now.

“It definitely has softened up a little bit,” he said. “Instead of competing with 20 other offers, you’re competing with four or five.”

That’s an unpleasant surprise for some sellers, especially those who were finally lured into the spring market by tales of bidding wars and double-digit price hikes, and then valued their homes accordingly. Mona Cohen, an agent with Rodeo Realty in Brentwood, finds herself more often having to play the bad guy with sellers who think their home is worth more than the market will bear.

“They still think they’re in that little bubble of 2013, where you’d put it on the market and have 15 offers,” she said. “That still happens in pockets. But buyers have become a lot more savvy.”

Indeed, Cohen and other market watchers say they’re starting to see more price reductions as sellers lower their sights to compete.

Still, no one is expecting home prices to go down overall. There’s still more demand than supply, and well-priced homes are still selling quickly. Many experts just think the market will keep muddling along through summer.

FNC Inc., a real estate data firm based in Oxford, Miss., projects price gains in metro Los Angeles of six-tenths to eight-tenths of a point each month through October — positive, but roughly half of last year’s pace.

In a recent note to clients, Thomas described a market on “cruise control” and said it would take a sharp improvement in the broader economy for home prices to pick up again.

“Jobs and everything else,” Thomas said. “There needs to be a lot of healthy growth.”

And in a region like Los Angeles, where the median-priced house costs seven times the median household income and housing affordability is a growing challenge, having a market that moves in tune with the fundamentals of the economy isn’t such a bad thing, said Appleton-Young, even if it’s growing a bit more slowly than it has been the last few years.

“Whatever normal means,” she said, “I agree.” ( End of Tim’s article.)

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Buying or Selling, Here Are Three Traits You’ll Want in Your Real Estate Agent

AddressFor both buyers and sellers, choosing the right real estate agent is an important and difficult decision, but making   the right selection is critical. Consider the following essential characteristics for a real estate agent before signing a contract:

#1.) Experience

An agent must understand the real estate market as well as the practices and processes of buying and selling. While a new agent may have energy and desire, experienced agents will be able to offer insights and experiences which are likely to give their clients the edge in their deal. Experience also indicates negotiating skill.

Of course an agent must be licensed, but they must also be knowledgeable about the specific neighborhoods and types of property their clients are interested in buying or selling.

#2.) Creativity

Since a variety of problems can happen at any point in a real estate deal, a real estate agent should be able to solve problems creatively. An agent who helps their clients think through problems, offers reasonable alternatives or finds a way to overcome obstacles is invaluable to both buyers and sellers.

Marketing is essential in the real estate world, so an agent who knows how to creatively use technology to entice buyers or to locate homes is a benefit. Buyers usually start their search online, so an appealing, user-friendly and updated website is essential.  This is just one of today’s many technological real estate tools, so an agent who knows how to use them has a better chance of making an effective deal for their clients.

#3.) Honesty

Home sellers need someone who will be realistic with them about the value of their home, no matter what other homes in the neighborhood are selling for or what the sellers think their home is worth. Home buyers need an agent who will tell them, for example, that consistently under-bidding in order to get more home for their money is not a viable strategy. These conversations are difficult, but an honest agent will have them in order to achieve a successful result.

Another aspect of honesty is maintaining consistent communication in whatever form suits their clients. Even if there is nothing new to discuss, a quick update to say that nothing is happening is essential to maintaining trust. Silence is a sign of denial or worse, so an agent who communicates regularly is being honest with their clients.

Finally, an agent should be honest enough to put their client’s interest ahead of their own, showing the client every house that fits the criteria and not just those that will get the agent the biggest commission. An effective seller’s agent will give their clients the feedback they receive from potential buyers, even if the news is discouraging. Keeping problem areas from a seller may keep the relationship friendly, but it does not put the seller’s interest above the agent’s.

      Bob Phillips, 37+ years serving South Orange County clients & friends.                (949) 887-5305                   BobPhillipsRE@gmail.com

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