South Orange County Blog from Bob Phillips

Orange County, CA median home prices up 7% in year

Posted in Existing Home Sales, Home buying, Home Values, Housing Analysis, New Home Sales, Pending Home Sales, Real estate by southorangecounty on September 28, 2012

O.C. median home prices up 7% in year

September 28th, 2012,  by Jon Lansner , the Orange County Register

Highlights of DataQuick’s Orange County homebuying report. For the 22 business days ending Sept. 14 – the latest numbers – Orange County’s real estate market saw …
  • Median selling price for all residences of $450,000 – that is up 7.4% vs. a year ago.
  • Total Orange County sales of 3,370 residences closed in the latest period – that is up 27.7% vs. a year ago.
  • Resales of single-family homes were up 28.6% vs. last year; condo sales rose 29.3% vs. year ago. Builders’ new-home sales were 8.6% higher in the same period.
  • Note: 49 of 83 Orange County ZIPs had both rising sales and rising prices in the period.

And more analysis ….

  • $450,000 median selling price is 30% below June 2007′s peak of $645,000.
  • Current price is 0.0% below 2011′s peak (May and July) of $450,000; 13% above end of 2011′s median ($400,000).
  • The most recent median is 22% above the cyclical low hit in January 2009 at $370,000 – so the median has recouped 29% of the $275,000 price drop from the peak.
  • Compared to cyclical low, single-family house median is 24% higher ($418,250 in January 2009); condo median is 17% higher ($252,000 in March 2009). Builder prices for new homes are 43% above June 2009′s $424,000 bottom.
  • The median selling price of a single-family home is 29% less than their peak pricing (June ’07). Condos sell 37% below their peak in March 2006. Builder prices for new homes are 30% below their February ’05 top.
  • Single-family homes were 75% more expensive than condos in this period vs. 77% a year ago. From 1988 to 2011, the average house/condo gap was 58%.
  • Builders’ new homes sales were 5% of all residences sold in the period vs. 6% a year ago. From 1988 to 2011, builders did 14% of the Orange County homeselling.

Here’s the breakdown of recent activity by key category; included is how the latest results compare to the average monthly sales pace from 1988 through 2011:

Slice Price Price vs. year ago Sales Sales vs. year ago Sales vs. ’88-’11 avg.
Houses $517,500 +10.2% 2,253 +28.6% 1.0%
Condos $295,000 +11.3% 953 +29.3% 11.5%
New $606,000 +1.3% 164 +8.6% -67.9%
All O.C. $450,000 +7.4% 3,370 +27.7% -6.3%


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Pending Home Sales Index Continues To Show Strength

Posted in Housing Analysis by southorangecounty on September 28, 2012

Pending Home Sales Index 2009-2012

Nationwide, homes continue to sell briskly.

According to the National Association of REALTORS®, the Pending Home Sales Index read 99.2 for August — the fourth straight month in which the index hovered near its benchmark value of 100.

A “pending home” is a home that is under contract to sell, but has not yet closed. The index measures with fair accuracy the future strength of the U.S. housing market.

For today’s South Orange County home buyers, the August Pending Home Sales Index is relevant for several reasons.

First, the index remains near its highest point since April 2010, the last month of that year’s federal home buyer tax credit. This implies that the current housing market is performing nearly as well as the “stimulated” market of two years ago — except without the accompanying federal stimulus.

The housing market is standing on its own, in other words.

Second, the Pending Home Sales Index suggests that today’s housing market is among the strongest of the last decade. We can make this inference because the Pending Home Sales Index is a relative index, benchmarked to the value of “100” which represents the housing market as it behaved in 2001.

2001 was strong year in housing. With today’s Pending Home Sales Index remaining near 100, it tells us that 2012 is similarly strong.

And, third, the Pending Home Sales Index is relevant because it’s a forward-looking housing metric — one of the few that are regularly published. As compared to the Case-Shiller Index or Existing Home Sales report which both report on how housing fared in the past, the Pending Home Sales Index projects 30-60 days to the future.

Based on August data, therefore, we can expect for home sales volume to remain high as 2012 comes to a close.

If you’re currently shopping for a home, you’ve likely noticed a change in the market. Multiple-offer situations are more common and sellers are regaining negotiation leverage. The longer you wait to buy, therefore, the more you may pay for a home.

Read the complete Pending Home Sales Report on the NAR website

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New Home Supply Remains Firmly In “Seller’s Market” Territory

Posted in Housing Analysis by southorangecounty on September 27, 2012

New Home Supply chartThe market for new construction homes remains strong nationwide.

According to the U.S. Census Bureau, the number of new homes sold slipped 0.3 percent in August 2012 to a seasonally-adjusted, annualized 373,000 units sold — just 1,000 units less than July 2012 and the second-highest reading since April 2010.

April 2010 was the last month of that year’s tax credit which granted home buyers up to $8,000 off of their federal tax bill.

As compared to one year ago, sales of new homes are higher by 28%.

Furthermore, during the same time frame, the median sale price of a new home moved higher by 17 percent. The rising prices, in part, are the result of a shrinking national new home inventory. 

When August ended, there were just 141,000 homes for sale nationwide — a 12% drop from the year prior. This suggests that home builders have stopped building without buyers; that some lessons were learned in last decade’s homebuilding frenzy.

At today’s pace of home sales, the entire stock of new homes nationwide would sell out in 4.5 months. As a comparison point, in January 2009, the new home supply reached 12.1 months.

With home supply below 6.0 months, analysts say, it signifies a “seller’s market” and home supplies have not been north of 6.0 months since October 2011. And, based on recent homebuilder confidence surveys, supply doesn’t appear headed back over 6.0 months anytime soon.

Builders in California and nationwide report that prospective buyer foot traffic is at its highest point in 6 years. Low mortgage rates and affordable housing choices have held demand for new homes strong. Rising rents contribute, too.

For today’s home buyers of new construction, then, shrinking supply amid rising demand portends higher home prices into 2013 and beyond. If you’re a buyer of new construction, therefore, think about moving up your time frame. 

The best deals left in housing may be the ones you grab while the calendar still reads 2012. By January, low prices may be gone, and low rates may be, too.

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Home Price Index Shows Values Rising 3.7% From One Year Ago

Home Price Index from peak to presentTuesday, the Federal Home Finance Agency’s Home Price Index (HPI) showed home values rising 0.2% on a seasonally-adjusted basis between June and July 2012, and moving +3.7% on an annual basis.

Home values have not dropped month-to-month since January of this year — a span of 6 months.

For today’s home buyers and sellers throughout South Orange County , though, it’s important to recognize on what the HPI is actually reporting.

Or, stated differently, on what the HPI is not reporting. The Home Price Index is based on home price changes of some homes, of certain “types”, with specific mortgage financing only.

As such, it excludes a lot of home sales from its results which skews the final product. We don’t know if home values are really up 0.2% this month — we only know that’s true for the home that the HPI chooses to track.

As an example of how certain homes are excluded, because the HPI is published by the Federal Housing Finance Agency and because the FHFA gets its access to home price data from Fannie Mae and Freddie Mac, it’s upon data these two entities upon which the Home Price Index is built.

Home price data from the Federal Housing Administration (FHA), from local credit unions, and from all-cash sales, for example, are excluded from the HPI because the FHFA has no awareness that the transaction ever happened.

In 2006, this may not have been a big deal; the FHA insured just 4 percent of the housing market at the time. Today, however, the FHA is estimated to insure more than 20% of new home purchases. Furthermore, in August, more than 1 in 4 sales were made with cash.

None of these home sales were included in the HPI.

Furthermore, the Home Price Index excludes certain home types from its findings.

Home sales of condominiums, cooperatives, multi-unit homes and planned unit developments (PUD) are not used in the calculation of the HPI. In some cities, including Chicago and New York City, these property types represent a large percentage of the overall market. The HPI ignores them.

Like other home-value trackers, the Home Price Index can well highlight the housing market’s broader, national trends but for specific home price data about a specific home or a ZIP code, it’s better to talk with a real estate agent with local market knowledge.

In South Orange County, California, for the past 35+ years, that has been me.

Since peaking in April 2007, the Home Price Index is off 16.4 percent.

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Existing Home Sales Leap To 2-Year High

Posted in Housing Analysis by southorangecounty on September 25, 2012

Existing Home Sales By Price Tier, August 2012

The home resale market put forth another strong data set last week. Home sales prices are higher nationwide and sales volume has moved to a 2-year high.

According to the National Association of REALTORS®, 4.82 million “existing homes” sold on a seasonally-adjusted, annualized basis in August, representing a near 8 percent improvement from the month prior and a nine percent jump from August 2011.

An existing home is a home which has been previously occupied.

Home sales were unevenly split across price tiers, with more than half of all homes selling for less than $250,000. This suggests that the first-time home buyers and real estate investors continue to be active in today’s market as a foundation for growth is built.

According to the Existing Home Sales data :

  • First-time buyers accounted for 31% of all home sales
  • Real estate investors accounted for 18% of all home sales
  • Other, repeat buyers accounted for 51% of all home sales

Also noteworthy is that “distressed homes” accounted for the smallest percentage of overall home sales since the real estate trade group starting tracking such data.

In August, homes in various stages of foreclosures accounted for 12% of all sales and sold at an average discount of 19 percent below market value. Short sale homes accounted for 10% of all sales and sold at an average discount of 13 percent below market value.

Of all the data in the August Existing Home Sales report, though, perhaps most relevant to today’s buyers is the shrinking national housing supply.

At August’s end, there were 2.47 million homes listed for sale nationwide, a three percent increase from the month prior. However, because the pool of available home buyers is increasing more rapidly than the number of homes for sale, housing supplies fell 0.3 months to 6.1 months.

This means that at the current pace of sales, the entire housing supply would be sold by March 2013.

For today’s home buyers, home affordability appears poised to worsen. Mortgage rates and home prices remain low today, but market conditions like these rarely last long. Talk to your real estate agent about what options you have ahead of you. 2012 is coming to a close.

By 2013, the housing recovery may be fully underway. 

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What’s Ahead For Mortgage Rates This Week : September 24, 2012

Posted in mortgage rates by southorangecounty on September 24, 2012

Existing Home Sales Mortgage markets improved for the second consecutive week last week as demand for U.S. mortgage-backed bonds remained high. A series of economic reports showed strength in housing and a stability in jobs.

Wall Street looked past it, however, to send mortgage rates to their lowest levels in history.

One week into the Federal Reserve’s newest bond-buying program, the stimulus appears to be working.

According to Freddie Mac, the average 30-year fixed rate mortgage rate slipped to 3.49% last week for borrowers willing to pay an accompanying 0.6 discount points at the time of closing. Discount points are a one-time closing costs where 1 discount point is equal to one percent of your loan size.

3.49% marks a new all-time low for the 30-year fixed rate mortgage. 

The 15-year fixed rate mortgage rate fell to a new all-time low last week, too, dropping to 2.77% with the same accompanying 0.6 discount points.

Mortgage rates in California fell despite strong housing data.

  • Housing Starts rose 5.5% to a 2-year high
  • Existing Home Sales rose 7.8% to a 2-year high
  • Building Permits rose 0.2%

Notably, according to the National Association of REALTORS®, the national existing home supply slipped to 6.1 months last month — very close to the 6.0-month marker which separates a “buyer’s market” from a “seller’s market”.

If supplies continue lower, home prices may rise more quickly than expected into 2013. Median home sale prices are already 9.5% higher as compared to one year ago.

This week, more housing data is set for release including the home value-tracking Case-Shiller Index and FHFA Home Price Index. Both are expected to show rising home prices as compared to the last recorded month, and one year ago. In addition, the National Association of REALTORS® releases its Pending Home Sales Index.

Lastly, and likely most important to mortgage rates and home affordability in South Orange County , the government releases its Personal Consumption Expenditures (PCE) report Friday. PCE is the Federal Reserve’s preferred inflation gauge. An unexpected increase is expected to move mortgage rates higher.

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Four things to avoid when your home gets back in the black


Inman News®

<a href="" target=blank>Rising home values</a> image via Shutterstock.
Rising home values image via Shutterstock.

In all the hullabaloo about the (finally!) recovering real estate market, what has gotten less publicity is the fact that millions and millions of homeowners are still languishing with upside-down mortgages.

recent report from CoreLogic, though, serves as one of the first bright lights on this piece of the housing market puzzle. At the end of 2011, 12.1 million homeowners were upside-down, owing more on their homes than they were worth. But by the end of June 2012, only 10.8 million homeowners were underwater; nearly 2 million were within 5 percent of being back in the black.

And this is news that everyone, not just current homebuyers and sellers, can be grateful for.

It begins to paint a more complete picture of a pending market recovery, fleshing out the fact that buyer demand has increased, home inventory supply has decreased, lending has loosened up a bit from the overly strict criteria of the last few years, and interest rates are very, very low.

But my experience has been this: In the exuberance of a victorious moment, our memories can be very short for the traumas of the recent past.

If you are a homeowner who has recently seen your upside-down home mortgage situation right itself due to rising home values, here are a few things not to do, to avoid the errors of the last ascent and peak of the market:

1. Sell just because you can. Many homeowners have felt stuck in their homes because to sell would have meant taking a short-sale hit on their credit, or coming up with the shortfall out of their own pockets.

However, the fact that your home’s value is beginning to right itself doesn’t necessarily mean you should be racing to sell it, just because you can, despite the fact that we’re tempted to take advantage of still (relatively) low prices and (very) low interest rates and get something even bigger and even better while the getting’s good.

One of the most powerful lessons of the recession, in my opinion, has been that many of us need much less — space, luxury, debt and material stuff, generally speaking — than we might have thought, and that a simple life that is easily financially sustainable and allows for us to save, invest and generally experience a life of financial integrity can be a very nice life indeed.

So, if you’ve been staying put in your home due to upside-down values, and you don’t absolutely need to move for work or your household’s evolving space or other needs, consider whether you could continue to improve your financial status if you continue to stay in your current home for the duration — or at least long enough to allow it to appreciate significantly enough to give you a sizable down payment for your next home.

2. Pull cash out. Just don’t do it — unless you’re planning to use the cash for something you’re willing to stake your home on. The “home as ATM machine” belief system was what got millions of American homeowners in trouble when they borrowed cash against their home’s peak equity at the top of the market, then couldn’t keep the revolving debt door spinning when their home’s values plummeted at the bottom.

If you have a home mortgage with a good or great interest rate, a sustainable monthly payment and are paying for your lifestyle in cash, don’t be tempted by fliers in the mail touting that you might be able to get an equity line — unless you plan to make smart home improvements with it and can easily afford the increase in monthly housing payments.

3. Do ill-advised home improvements. There are times it makes sense to upgrade and improve your home, and there are times when the upgrades and improvements are frivolous or overly expensive customizations that might actually make it harder, not easier, to sell your home.

Smart home improvements, in my book, are those that make your home more comfortable and efficient to live in and operate, like shelving and organizational built-ins, dual-paned windows, tankless water heaters and other “green” improvements, or ones that boost its attractiveness and enjoyability to yourself and your family, including needed upgrades to kitchens and baths. Less wise is to pour funds into costly home improvements that tend to turn buyers off, like pools, sports courts and massive garage additions.

4. Try to be a flipper. You might be tempted, as a veteran survivor of a couple of market cycles, to use a little of your newfound equity (or the confidence it may inspire) to try your hand at investing in low-priced distressed homes, fix them up and turn them around at a profit.

Investor beware: The bottom of the market has passed in many cities. In the areas where it hasn’t, there is no certainty that you’ll be able to flip a bargain-priced home at a profit, because buyers are still very wary of hopping off the fence in those markets and neighborhoods.

Flipping homes is a viable business model for a very small number of investors who treat it as a business, and who have ample resources to survive even if one or two flips fall flat. Don’t risk your burgeoning home equity or stake your recovering net worth on a gamble in today’s still-volatile, still-uncertain market.

Tara-Nicholle Nelson is author of “The Savvy Woman’s Homebuying Handbook” and “Trillion Dollar Women: Use Your Power to Make Buying and Remodeling Decisions.” Tara is also the Consumer Ambassador and Educator for real estate listings search site Ask her a real estate question online or visit her website,

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30-Year Fixed Rate Mortgage Drops To 3.49% — An All-Time Low

Posted in mortgage rates by southorangecounty on September 21, 2012

Freddie Mac mortgage rates

For the first time in 9 weeks, mortgage rates have made new lows.

According to Freddie Mac’s weekly Primary Mortgage Market Survey, the average 30-year fixed rate mortgage rate fell 6 basis points to 3.49% this week, tying the all-time low set in late-July. The 15-year fixed rate mortgage also dropped, moving to 2.77%. This, too, marks an all-time low.

The Federal Reserve’s plan to pressure mortgage rates down may be working.

However, depending on where you live, your access to these all-time rates may be limited. This is because the Freddie Mac “published rate” is a national average based on the government-backed group’s survey of more 125 banks.

Mortgage rates can vary by region.

For example, this week, mortgage applicants in the West Region are most likely to get the lowest rates of anyone.

In the West Region, 30-year fixed rate mortgage rates are averaging 3.43 percent with an accompanying 0.6 discount points. By contrast, applicants in the Southeast Region are most likely to get the highest rates with the 30-year fixed rate mortgage is averaging 3.53% with an accompanying 0.7 discount points.

1 discount point is a fee equal to one percent of your loan size. Loans with more accompanying discount points pay higher total closing costs.

This week’s record-low rates are a boon to home affordability and, as compared to last September, mortgage rates are much improved :

  • September 2011 : Average rate of 4.09%
  • September 2012 : Average rate of 3.49% 

Over the past 12 months, this 60-basis point mortgage rate improvement has increased the maximum purchase price of a South Orange County home buyer by roughly 7%. Home prices, however, may soon catch up.

Earlier this week, the Census Bureau reported Housing Starts at a multi-year high and the Existing Home Sales report from the National Association of REALTORS® showed the same. Housing is in recovery and prices are on an upward trajectory.

Take advantage of low mortgage rates while they last. Talk to your loan officer today.

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Housing Starts Move To 2-Year High

Posted in Housing Analysis by southorangecounty on September 20, 2012

Housing Starts chartThe new construction housing market continues to make gains.

Wednesday, the U.S. Census Bureau reported Housing Starts for single-family homes up 5.5 percent in August to a seasonally-adjusted, annualized count of 535,000 units nationwide.

The report marks the fifth month of six that single-family starts increased, and marks the highest starts tally since April 2010 — the last month of that year’s federal homebuyer tax credit program.

A “housing start” is a new home on which construction has started and the steady growth in single-family starts suggests a stronger California housing market into 2013.

All four U.S. regions showed single-family housing start growth on both a monthly basis and on an annual one :

  • Northeast Region : 4.5% monthly growth; 31.4% annual growth
  • Midwest Region : 15.6% monthly growth; 74.5% annual growth
  • South Region : 3.2% monthly growth; 17.2% annual growth
  • Midwest Region : 4.6% monthly growth; 23.9% annual growth

The data is just the latest in a series of signals that today’s South Orange County new construction housing market has put its worst days behind it.

The nation’s home builders appear to agree, as well.

Earlier this week, the National Association of Homebuilders released its Housing Market Index, a monthly metric which measures homebuilder confidence in the new construction market.

The homebuilder trade association put the HMI at 40 — a 6-year high. Builders expect a strong finish to 2012 and for momentum to carry into 2013 and beyond.

The new construction market — like most of housing — has been fueled by a combination of the lowest mortgage rates in history, ample access to low- and no-downpayment mortgages, and an ever-shrinking supply of new homes for sale.

In July there were just 142,000 new homes for sale nationwide, down 14% from the year prior. As supply shrinks, all things equal, new home prices rise.

If you’ve been considering new construction, therefore, talk to builders sooner rather than later. As demand for homes heats up, prices are likely to rise.

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Homebuilder Confidence Rises Again; Tops 40

Posted in Housing Analysis by southorangecounty on September 19, 2012

HMI September 2010 - 2012Home builder confidence continues to make new highs. 

As reported by the National Association of Home Builders, the Housing Market Index, a measure of builder confidence, rose to a reading of 40 in September — its highest mark since June 2006.

The index is now higher through five straight months and 11 of the last 12.

For home buyers in South Orange County , the survey may be signaling higher new home prices ahead; when builders are more confident in housing, they’re may be less likely to make concessions in price, and to “sweeten” deals with free upgrades and/or subsidized mortgage rates.

The Housing Market Index is published monthly, based on responses to a 3-question survey that the NAHB sends to its members. The questions cover three distinct parts of a builder’s business, each requiring a simple, one-word answer.

Builders are asked to respond with “Good”, “Fair” or “Poor”; or, “High”, “Average”, “Low” to the following three comments :

  • Rate market conditions for the sale of new homes today
  • Rate market conditions for the sale of new homes 6 months from today
  • Rate the foot traffic of prospective new home buyers

All three survey components showed an increase from August with buyer foot traffic rating at its highest point in more than 6 years. This is especially noteworthy because as the number of prospective buyers increases, so does competition for homes for sale.

There are currently just 142,000 new homes for sale nationwide, the stock of which will “sell out” in 4.6 months at the current pace of sales.

Not since October 2011 has the national home supply been above six months, the consensus dividing line between bull and bear market. Today’s new construction market favors builders and builders know it.

If you’re planning to buy new construction in California later this year or into early-2013, consider moving up your time frame. Homes may be for sale, but they won’t likely be as inexpensive as they are today.

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