South Orange County Blog from Bob Phillips

Sales volume in priciest O.C. ZIP codes up 16 percent in September

From Jonathan Lansner, O.C. Register Staff Columnist, 10/22/2015

Illuminated House With Pond In Foreground

Orange County housing’s upper crust finished the summer in style.

In September, home sales in the county’s 27 priciest ZIP codes – neighborhoods where the median sales price run from $722,500 to $3.65 million – were up 16.3 percent compared to a year ago, according to CoreLogic data.

Countywide, 3,282 Orange County residences sold, up 15 percent from a year ago. Orange County’s median selling price for all residences was $615,000 in the period, up 5.3 percent compared to a year ago.

In the nine Orange County ZIP codes with median selling prices above $1 million, sales totaled 222 homes, up 20 percent compared to a year ago. The most expensive ZIP codes were Newport Coast 92657 and Newport Beach 92661 at $3.65 million.

Other noteworthy trends in CoreLogic’s September report:

• Gains were not universal. Prices were up in 55 of 83 Orange County ZIP codes compared to the previous year. Sales volume rose in 63 of the 83 ZIPs.

• The latest countywide median price is 4.7 percent below the all-time high monthly price of $645,000 set in June 2007.

• Median selling price for resales of single family homes was $679,750 – up 4.6 percent from a year ago and 7.4 percent below the all-time high monthly price of $734,000 set in June 2007.

• Resale condos’ median selling price was $430,000 – up 7.9 percent from a year ago, yet 8.5 percent below the all-time high monthly price of $470,000 set in March 2007.

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What’s Ahead For Mortgage Rates This Week – September 28, 2015

Whats Ahead For Mortgage Rates This Week September 28 2015Last week’s scheduled economic news included reports on new and existing home sales, the FHFA House Price Index, weekly reports on mortgage rates, and new jobless claims. The week finished with a report on consumer sentiment.

Existing Home Sales Fall as New Homes Sales and Home Prices Rise

The National Association of Realtors reported that home sales for pre-owned homes fell in August. Analysts expected sales of existing homes to reach a reading of 5.52 million sales on an annual basis, but the actual reading was 5.31 million existing homes sold as compared to July’s reading of 5.58 million pre-owned homes sold. Rising home prices were cited as a primary reason for the drop in sales.

FHFA’s House Price Index for July reflected the trend of rising home prices; July’s reading was 0.60 percent as compared to June’s reading of a 0.20 percent increase in home prices associated with homes with mortgages owned by Fannie Mae or Freddie Mac.

Sales of newly built homes reached the highest level since early 2008 in August, evidence that demand for housing is strengthening heading into the fall. Home builder sentiment is at its highest level in nearly a decade according to a survey earlier this month from the National Association of Home Builders

Mortgage Rates Fall

Freddie Mac reported that average mortgage rates fell on Thursday; the rate for a 30-year fixed rate mortgage was 3.86 percent; the average rate for a 15-year mortgage was 3.08 percent and the rate for a 5/1 adjustable rate mortgage  dropped by one basis point to 2.91 percent. Discount points were 0.70, 0.60 and 0.50 percent respectively.

Jobless Claims Also Rise As Consumer Sentiment Fell.

The number of Americans seeking unemployment benefits rose slightly last week yet remained at a low level consistent with solid job growth. The Labor Department says weekly applications for jobless aid rose 3,000 to a seasonally adjusted 267,000. The four-week average fell to a 15-year low last month.

The University of Michigan says consumers lost confidence for the third straight month in September, worried about bad news about the global economy. Consumer sentiment index fell to 87.2 this month, lowest since October 2014 and down from 91.9 in August. Richard Curtin, Chief Economist for the survey, said consumers are worried about signs of weakness in the Chinese economy and continued stresses on Europe’s economies.

What’s Ahead

This week’s economic reports include Pending Home Sales, the Case-Shiller Home Price Index, Core Inflation, ADP Employment and the government’s Non- farm Payrolls report. The national unemployment rate and Consumer Confidence Index for September are also slated for release this week.

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Orange County Housing Report: Here We Grow Again!

Part of the normal summer housing cycle, the active inventory continues to grow without pause.

Increase of inventoryA Growing Inventory: the active inventory has grown by 42% since the beginning of the year.

Quietly, one house at a time, the active inventory has been growing. In order for the inventory to rise, homes have to come on the market faster than they are coming off. Homes come off the market for one of two reasons: either they are placed into escrow or a seller opts to pull their home off of the market. So, in order for the inventory to blossom from 5,000 homes at the beginning of 2015 to 7,116 homes today, homes have to sit on the market without success.

But how can that occur when we have heard so much about the extremely hot market this year? Quite simply, too many overzealous homeowners inaccurately priced their homes outside of reality and sat on the market until they came to their senses. It’s no wonder that 10% of the housing inventory in Orange County reduces their asking price each and every week.

Don’t get me wrong; the market is a lot stronger this year compared to last year. There were a similar number of homes placed on the market so far this year compared to last year, but the active inventory last year was 6% higher. The inventory was higher because demand was not as strong during the Spring Market. When fewer homes are placed into escrow, the inventory rises.

In spite of the robust market, the inventory is still rising. A hotter market is not a free pass to price a home wherever a seller wishes. Those sellers realize the error in their ways after sitting on the market without reviewing a single offer. Now that summer is almost over, the Orange County housing market is beginning its annual transition into the Autumn Market. Have you seen more Open House directional arrows at busy cross streets? That’s a definitive sign that there are fewer buyers in the marketplace, that homes are not selling as quickly, and that too many homes are not priced accurately.

April 9th of this year was the absolute peak of the spring selling season.  The expected market time was at 1.81 months, or 54 days. The market was a very hot seller’s market and prices were rising, homes were flying off of the market, and offers were coming in above the listing price. Since then, the inventory has grown by 27%, 1,792 homes, and demand has dropped by 13%, or 409 pending sales. When supply rises and demand drops in housing, the expected market time that it would take for the average home to be placed into escrow rises, the higher the expected market time, the slower the overall market. It has climbed to 2.64 months, or 79 days, moving from a deep seller’s market to a slight seller’s market.

The expected market time is marching its way to three months. When it is between three and four months, it is a balanced market, one that does not favor a buyer or seller. At its current level, sellers are able to call the shots, but appreciation has slowed to a crawl. Without appreciation, proper pricing is vital in order to succeed. At this point, sellers wishing to stretch the price will simply sit on the market until they finally wake up to the reality that they are overpriced and will attract no offers.

Success today can be achieved a lot swifter with the sound strategy of pricing a home as close to its Fair Market Value. This cannot be determined by any online tool or valuation calculator, as they can be off by 20%, or even more. Instead, it is best to utilize the expertise of a seasoned REALTOR®, an expert who is able to take into consideration location, condition, upgrades and amenities, carefully comparing a home to the most recent pending and closed sales activity to determine the price.

The bottom line: price is the determining factor in successfully selling and stretching the price is a strategy that will not work for the remainder of 2015.

Active InventoryThe inventory increased by 7% in the last month.

The active inventory increased by 469 homes in the past month and now totals 7,116. October of 2014 was the last time the inventory was above the 7,000 home mark. Last year at this time the inventory totaled 8,057 homes, 941 more than today, with an expected market time of 3.16 months, or 95 days. That’s 16 additional days compared to today.

From here we can expect the listing inventory to continue to grow through the end of the summer before turning lower in September as fewer homes come on the market and sellers start to throw in the towel with both the Spring and Summer Markets in the rearview mirror.

DemandDemand decreased by 9% in the past month.

Demand, the number of new pending sales over the prior month, decreased by 271 homes in the past month and now totals 2,698 homes, its lowest level since February. Demand will remain at these levels for the remainder of summer before it downshifts again after the kids go back to school.

Last year at this time there were 149 fewer pending sales, totaling 2,549. The year over year difference has diminished substantially. On July 2nd there were 492 more pending sales compared to 2014, 20% more. The current difference is the smallest since February, just 5%. 

Distressed Breakdown: The distressed inventory increased by 12 home in the past couple of weeks.

The distressed inventory, foreclosures and short sales combined, increased by 12 homes in the past two weeks, but for the month it is actually down by nine. Year over year, there are 31% fewer distressed homes today. With a sharp turnaround in prices in the past few years the number of distressed homes has fallen appreciably. Only a few percent of all mortgaged homes are upside down. During the Great Recession, the number was as high as 25% of all mortgage homes. The distressed market has been reduced to an asterisk of the current Orange County housing scene.

In the past two weeks, the foreclosure inventory increased by 10 homes and now totals 68. Less than 1% of the inventory is a foreclosure. The expected market time for foreclosures is 51 days. The short sale inventory increased by 1 homes in the past two weeks and now totals 139. The expected market time is 48 days. Short sales represent just 2% of the total active inventory. ( End of Report.)

This report is from my longtime friend, Steven Thomas, Orange County’s own real estate market guru, and the above is his latest “Orange County Housing Report” which can be found at ReportsOnHousing.com

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What’s Ahead For Mortgage Rates This Week – August 3, 2015

Whats-Ahead-Mortgage-RatestLast week’s scheduled economic reports included the Case-Shiller 20 and 20-City Index reports, pending home sales data released by the National Association of Realtors® and the scheduled post-meeting statement of the Federal Reserve’s  Federal Open Market Committee.

Case-Shiller: Home Prices Growing at Normal Pace

The Case-Shiller 20-City Home Price index for May reported that year-over-year home prices grew by 4.40 percent year-over-year. S & P Index Committee Chair David M Blitzer said that home prices are increasing gradually by four to five  percent a year as compared to double-digit percentages seen in 2013. Mr. Blitzer said that home price growth is expected to slow in the next couple of years as home prices have been growing at approximately twice the rate of wage growth and inflation, a situation that is not seen as sustainable.

Denver, Colorado led the cities included in the 20-City Index with a 10 percent year-over-year growth rate for home prices. San Francisco, California followed closely with a year-over-year gain of 9.70 percent and Dallas Texas posted a year-over-year gain of 8.40 percent.

Fastest month-to-month home price growth in May was tied by Boston, Massachusetts, Cleveland, Ohio and Las Vegas, Nevada with each posting a monthly gain of 1.50 percent. May home prices remain about 13 percent below a 2006 housing bubble peak.

Pending Home Sales Down From Nine-Year Peak

According to the National Association of Realtors®, pending home sales dropped by 1.80 percent in June as compared to May’s reading. The index reading for June home sales was 110.3 as compared to May’s index reading of 112.3. This indicates that upcoming closings could slow; June’s reading represented the first decrease in pending home sales in six months. Lawrence Yun, chief economist for the National Association of Realtors®, cited would-be buyers’ decisions about whether to hold out for more homes available or to buy sooner than later will affect future readings for pending home sales.

Fed Not Ready to Raise Rates, Mortgage Rates Fall

The Fed’s FOMC statement at the conclusion of its meeting on Wednesday clearly indicated that Fed policymakers remain concerned about economic conditions and are not prepared to raise the federal funds rate yet. The FOMC statement did not provide any prospective dates for raising the target federal funds rate, which is currently at 0.00 to 0.25 percent, but the Fed continues to watch employment figures and the inflation rate.

Freddie Mac reported that mortgage rates fell last week, likely on news of the Fed’s decision not to raise rates. Average mortgage rates fell across the board with the rate for a 30-year fixed rate mortgage dropping by six basis points to 3.98 percent; the rate for a 15-year fixed rate mortgage dropped by four basis points to 3.17 percent and the average rate for a 5/1 adjustable rate mortgage fell by two basis points to 2.95 percent. Average discount points remained the same for fixed rate mortgages at 0.60 percent and fell from 0.50 percent to 0.40 percent for 5/1 adjustable rate mortgages.

What’s Ahead

This week’s economic calendar includes reports on consumer spending, core inflation and consumer spending. July readings on Non-Farm Payrolls and the national unemployment rate will also be released along with regularly scheduled weekly reports on new jobless claims and mortgage rates.

 

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Last Week’s Economic News in Review

Existing home sales outpaced expectations to hit an eight-year high, while new home sales were at a seven-month low. Meanwhile, lay-offs shrank to their smallest rate in more than 40 years.

Existing Home Sales

Sales of existing single-family homes, townhomes, condominiums and co-ops, increased 3.2 percent to an annual rate of 5.49 million in June, according to last week’s report from the National Association of Realtors. This was not only well ahead of the market expectation for a 5.4 million-unit pace, but marked the highest level in more than eight years.

“Buyers have come back in force, leading to the strongest past two months in sales since early 2007,“ NAR Chief Economist Lawrence Yun said. “This wave of demand is being fueled by a year-plus of steady job growth and an improving economy that’s giving more households the financial wherewithal and incentive to buy.“

Looking at price, the median existing-home price for all housing types in June rose to $236,400, which is 6.5 percent higher than June 2014’s and surpassed July 2006’s peak median sales price of $230,400. Looking at inventory, the supply of existing homes at the end of June grew 0.9 percent to 2.3 million units available for sale. This put the inventory of existing homes available for sale at five months.

“Limited inventory amidst strong demand continues to push home prices higher, leading to declining affordability for prospective buyers,“ Yun noted. “Local officials in recent years have rightly authorized permits for new apartment construction, but more needs to be done for condominiums and single-family homes.“

New Home Sales

While existing home sales skyrocketed, sales of new, single-family homes fell to an annual rate of 482,000 in June, according to last week’s report from the Census Bureau and the Department of Housing and Urban Development. This was 6.8 percent below May’s revised rate of 517,000, and marked a seven-month low.

However, compared on an annual basis, June’s sales pace was 18.1 percent higher than June 2014’s estimate of 408,000. If anything, the experts advised against reading too much into new home sales, when other real estate activity — such as existing homes sales — was performing so much better.

“We should not get too worried about the signal from the new home sales data at this point,“ JPMorgan Economist Daniel Silver told the Reuters news service.

In terms of prices, the median sales price of new homes sold in June was $281,800, and the average sales price was $328,700. Looking at inventory, the estimated number of new homes for sale at the end of June was 215,000, which represented a 5.4-month supply at June’s sales rate.

Initial Jobless Claims

First-time claims for unemployment insurance benefits filed by recently unemployed individuals plummeted to a 40-year low. Initial jobless claims filed during the week ending July 18, dropped to 255,000, a tumble of 26,000 claims from the previous week’s total of 281,000, the Employment and Training Administration reported last week.

The news marked the lowest point for lay-offs since November 24, 1973’s total of 233,000 claims. The big driver for the substantial drop was likely lay-offs due to restructuring in the car industry, but there was no denying that lay-offs were in retreat.

“This week’s claims reading may have been exaggerated on the low side but there is certainly no sign of the labor market losing momentum,“ High Frequency Economics’ Jim O’Sullivan told the Wall Street Journal. “The message: Employment growth remains more than strong enough to keep the unemployment rate declining.“

The four-week moving average — considered a more stable measure of lay-off activity — fell to 278,500, a decrease of 4,000 from the previous week’s unrevised average of 282,500. This was still well below the 300,000-claim mark that indicates a healthy job market.

This week we can expect:

  • Monday — Durable goods orders for June from the Census Bureau.
  • Tuesday — Consumer confidence for July from The Conference Board.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; advanced second quarter GDP estimate from the Bureau of Economic Analysis.
  • Friday — Consumer sentiment for July from the University of Michigan and Thompson-Reuters Survey of Consumers.

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What’s Your Outlook on the Real Estate Market?

An article by Colin Robertson, of TheTruthAboutMortgage.com, 7/23/2015

crystalball-610x250

So here’s a true story. Yesterday, a good friend of mine asked the following question via text message: “What’s your outlook on the real estate market…we are looking to buy a place soon.”

That’s the exact message he sent over last night; there weren’t any emoticons by the way, sadly.

I saw the message but did my best to avoid answering it for about half an hour. Then I finally cracked and responded with the following:

“In a word, overpriced. But if you really want to buy a home that’s your deal. It’s not always about the investment.”

Now in the past I may have just left it at “overpriced,” but I’ve learned that such remarks are often met with resistance. I also don’t want to ruin anyone’s grand plans.

And it’s true, buying a home isn’t just about the investment. It’s not simply about timing the market and making a killer profit, that is, unless you’re a real estate investor.

For most people it’s a home. It’s a place to live. There are reasons to buy other than turning a profit.

So my outlook has changed, or perhaps broadened, to include benefits beyond making money.

But my point was basically that it’s not an ideal time to buy in terms of investment, but it could be a great time to buy a home if there’s one you really like and want to own.

At the end of the day, if he gets the home he wants, he’ll probably be happy, even if it doesn’t double in value in five years. Even if it flat lines or drops, he’ll probably still be happy if he truly loves the home.

And over time, he’ll surely build equity and come out ahead as home prices reach new heights.

National Median Sales Price Reaches All-Time High

Yesterday, the National Association of Realtors reported that the national median sales price reached an all-time high.

The price of a median existing home climbed to $236,400 in June, a 6.5% increase from a year earlier, enough to surpass the previous peak median sales price reached in July 2006 ($230,400).

For the record, the median sales price has increased year-over-year for 40 consecutive months, so yes, home prices have been on a tear.

Home sales have also been white-hot, with existing sales hitting their highest level in over eight years (February 2007).

Properties are also being scooped up faster than ever, with the average time on market only 34 days in June, down from 40 days in May, making it the shortest amount of time since NAR began tracking in 2011.

I also got word from a real estate agent friend that new home sales are picking up again. Recently, builders were offering discounts, but now that inventory is so low, they’re increasing prices and slashing discounts.

This is basically a testament to the supply/demand imbalance that is causing home prices to keep rising, and making bidding wars a common situation.

It’s for these reasons that I don’t love the current market as a buyer. At the same time, selling isn’t ideal either because there’s a good chance home prices will continue to increase.

In fact, if you look at real prices adjusted for inflation, home prices aren’t really at new all-time highs. In today’s dollars, the median would have to be closer to $260,000.

So buying because you love a home still makes sense today, as it always will. And you’ll probably do just fine if you can afford the home and stay in it for several years.

But if I had to take a side, I’d say that home prices are bloated and the competition is fierce. That certainly makes it a lot less attractive to buy today than in the very recent past. I’m taking a wait and see approach. ( End of Colin’s article.)

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What’s Ahead For Mortgage Rates This Week – June 29, 2015

What's Ahead For Mortgage Rates This Week - June 29, 2015Last week’s economic news was largely positive as both new and existing home sales beat expectations. FHFA reported that home price growth held steady in May, while weekly jobless claims edged up, but were lower than expected.

New and Existing Home Sales Exceed Expectations

According to the Commerce Department, new home sales reached 546,000 on an annual basis for May. This surpassed expectations for 525,000 new homes sold and April’s revised reading of 534,000 new homes sold. Expectations were based on the original reading of 517,000 new homes sold in April.

Existing home sales rose by 5.10 percent in May to a seasonally-adjusted annual reading of 5.35 million sales and hit their highest level in five and a half years. The National Association of Realtors reported that this was the fastest pace of sales for previously-owned homes since November 2009. Expectations were based on an April’s original reading of 5.04 million sales, which was later revised to 5.09 million existing homes sold.

With wages and hiring picking up, more first-time buyers are expected to enter the market. Economists said there are signs that mortgage credit is becoming more available as lenders gain confidence in stronger economic conditions. A larger supply of available homes was also cited as driving sales of previously owned homes higher.

FHFA: Home Prices Show Steady Growth in May; Mortgage Rates Mixed

The Federal Finance Housing Agency (FHFA), the agency that oversees Fannie Mae and Freddie Mac, reported that home prices related to mortgages owned by Fannie Mae and Freddie Mac held steady with a growth rate of 5.30 percent year-over-year reported in May. This was the same year-over-year home price growth rate that the agency posted in April.

Freddie Mac reported mixed developments for mortgage rates. The average rate for a 30-year fixed rate mortgage rose by two basis points to 4.02 percent; the average rate for a 15-year fixed rate mortgage fell by two basis points to 3.21 percent and the average rate for a 5/1 adjustable rate mortgage also fell by two basis points to 2.98 percent. Average discount points were 0.70, 0.60 and 0.40 percent respectively.

Last week’s economic reports ended on a high note with June’s Consumer Sentiment Index reporting a reading of 96.1 as compared to expectations of 94.6 and May’s reading of 94.6. All in all, last week’s economic news provided further indications of stronger economic conditions that should provide the confidence to ease mortgage credit requirements and enable more first-time buyers to purchase homes.

What’s Ahead

This week’s economic reports include date on pending home sales, Case-Shiller’s Home Price Index reports and construction spending. The Bureau of Labor Statistics will also release the monthly Non-Farm Payrolls report and National Unemployment reports. No economic news is scheduled for Friday, July 3 due to the Independence Day holiday.

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Orange County’s median home price inches higher to a 7-year peak

An article from Jon Lansner of the Orange County Register. June 18th, 2015

Home-Values-RisingHave Orange County house shoppers stopped paying up?

Orange County’s median selling price was $610,000 last month, CoreLogic reported Wednesday. And though that’s the highest price in seven-plus years, it’s up just 2.5 percent in a year.

The economic fundamentals of housing – local job growth, mortgage rates and availability – look solid. Those factors plus slower home price appreciation helped draw buyers. Orange County sales totaled 3,458 units – up 7.4 percent compared  with a year ago.

But Orange County’s price tag pressures loom large when when you look at the regional housing picture. That 2.5 percent year-over-year median price gain in Orange County was the smallest among Southern California’s six counties, though our local market is still the priciest in the region.

Ventura County had the region’s biggest annual gain. Its median selling price of $500,000 was up 8.7 percent compared with a year ago. Southern California’s median selling price for May was $426,000 – up 2.2 percent compared with a year ago.

Although that’s the slowest regional price growth in three years, it’s mainly due to a changing mix of sales throughout the region. Simply put, more people are buying inexpensive houses in Riverside and fewer people are buying pricey ones in L.A.

When it came to homebuying, Orange County’s 7.4 percent sales increase easily topped the region’s collective 4.9 percent annual gain. But note that Southern California’s sales hot spot, Ventura, was up 15.1 percent compared with a year ago. That high demand likely explains Ventura’s major price hikes.

To see how price tag pressure is playing out in Orange County, look at the performance of local builders, who typically sell the costliest homes.

New homes in Orange County had a median selling price in May of $861,000 – up 6.8 percent compared with a year ago. That’s darn expensive when you look at the resale home median of $667,500 – up 3.5 percent from a year ago – and the resale condo median of $415,000, up 2.3 percent compared with a year ago.

To my eye, too many builders have bet on Orange County’s high end, perhaps missing a chance to excite shoppers in more modest income ranges with their newly constructed offerings. If builders offered more $600,000 homes, they probably would go like hotcakes.

Orange County developers sold 278 new residences in May, down 24.7 percent compared with a year ago. That dip contrasts sharply with how quickly existing homes are selling. Resale house sales totaled 2,163 – up 8 percent compared with a year ago. Condo resales were 1,017 – up 20.1 percent.

Similar patterns were seen across Southern California. New-home sales were up only in the Inland Empire, where developers sell relatively inexpensive housing.

Riverside County’s builders sold 421 new homes in May, up 36 percent in a year. The median selling price was $384,000 – less than half of Orange County’s median even after rising 10.8 percent in a year. San Bernardino developers sold 186 homes, up 14 percent from May 2014. The median selling price was $417,250, off 1.6 percent in a year.

Sales of new homes were lower in the region’s three other counties. In Los Angeles (median price of $548,000), sales fell 16 percent compared with a year ago. In San Diego (median price of $539,000), sales were off 10 percent. In Ventura (median price of $477,500), sales were down 26.3 percent.

So who is balking in Orange County? I see one very curious pattern inside May’s sales data: the lack of homebuying growth in the midpriced communities.

I divided Orange County’s sales results by three price ranges, using the median selling price for 83 local ZIP codes. My trusty spreadsheet tells me that last month’s sales in the cheapest third – ZIP codes with median home prices up to $521,500 – were up 9 percent compared with May 2014. In the upper third – where prices start at $689,000 – May sales were up 13 percent compared with a year ago.

But I’m puzzled why homebuying in the ZIPs priced in between ran flat.

Certainly we know if a home is “affordable” for Orange County it sells quickly. That explains buying enthusiasm among the lower third. And the upper-crust house hunter typically does not feel the impact of economic cycles as much those with leaner finances.

But what of the middle? Are people not seeing enough choice? Inventory data suggest that supply shortages may be turning off some shoppers. (Note to builders: Free market research right here!)

Or is this middle group’s skittishness another example of the home-affordability stress felt particularly by the local middle class – and an explanation of why home price appreciation has stalled?

Orange County home prices moved slowly higher in May with the smallest year-over-year gain among Southern California’s six counties.

CoreLogic reported Wednesday that Orange County’s median selling price for May was $610,000 – up 2.5 percent compared to a year ago.

Ventura County had the region’s biggest annual gain. Its median selling price $500,000 – up 8.7 percent compared to a year ago. San Diego County had the smallest gain after Orange County with its median at $459,000, up only 3.1 percent compared to a year ago.

Andrew LePage, a research analyst with CoreLogic, said: “It’s slow going, but in many ways, the housing market continues to edge back toward normalcy with fewer distressed property sales and fewer investor and cash purchases. While home sales remain sub-par, they’ve been trending closer to long-term averages.

“Job growth and other factors suggest we should see solid housing demand. But in the wake of the Great Recession and years of weak income growth, many would-be home buyers are struggling with affordability and credit hurdles,” he said.

Perhaps slower home appreciation drew buyers into Orange County as sales totaled 3,458 units – up 7.4 percent compared to a year ago. That was a swifter sales increase than the regional trend. SoCal sales totaled 21,644 – up 4.9 percent compared to a year ago.

Southern California’s homebuying hot spot was Ventura, which likely explains the county’s May price surge. Ventura sales totaled 977 – up 15.1 percent compared to a year ago.

A changing mix of sales throughout the region led to a curious move in the six-county median sales price. Southern California’s median selling price for May was $426,000 – up 2.2 percent compared to a year ago.

How can the regional sales gain be lower that any one county’s increase? Look to sales in Riverside County – the region’s second-most active and second-cheapest county – which surged 9.9 percent, twice the regional growth rate. ( End of Jon’s article.)

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Orange County Real Estate Update for 6/9/2015

Orange County Housing Report:  Data Can Lie   

June 7, 2015  From Steven Thomas, of Reports On Housing

Truth = liesSometimes we rely on data that just does not paint the correct picture.

Housing Data: so many people rely on the “Days on Market” statistic and “Sold Data Indices” even though they often misrepresent what is truly going on in the marketplace today.

The average days on market for the current active inventory in all of Orange County is 79 days. For homes below $250,000 it is 80 days, over 11 weeks. Who in their right mind would sit down with a potential seller today and set an expectation of selling in 11 weeks for homes priced below $250,000? Clearly, any sound strategy to market a home will not include Average Days on Market.

The true expected Market Time for Orange County as a whole is 62 days. For homes priced below $250,000 it is 48 days. That is more like it. Sitting down with that same seller and outlining expectations between a sign in the ground to entering escrow of less than 7 weeks is a market reality. So, what’s with the huge disparity between the Market Time and Average Days on Market?

First, let’s take a closer look at how we arrive at Market Time. Market time answers how many months it will take to exhaust the current supply of active, listed homes based upon demand, the past month’s pending activity. For example, Gotham City has 100 homes currently on the market and 25 were placed into escrow within the prior 30 days. To ascertain the market time, divide 100 by 25, which is 4. So, given the most recent activity, the market time for Gotham City is 4 months.

The market can and will change and so will the Market Time; but, it is a pretty precise barometer for what everybody is experiencing in the real estate trenches today. This chart is like taking a pulse of the market. If there were suddenly a flood of listings and demand remained the same, the Market Time would increase. When demand increases, Market Time drops. However, Average Days on Market does not move as quickly and cannot accurately identify market changes and new trends.

6-8-15-A

For homes priced above $1 million, the Expected Market Time tells a completely different story compared to the Average Days on Market. The higher the price range, the larger the discrepancy. Often, luxury sellers read how the housing market is hot and mistakenly expect their home to fly off the market too. They may be encouraged by the Average Days on Market, but that is far from a market reality. For example, homes priced between $2 million and $4 million have an expected market time of nearly 7 months, not even close to the average days on market of only 85 days.

The argument against emphasizing pending sales is that many homes fall out of escrow. It happens, but not an alarming rate. Even though some pending sales do not go together, the Expected Market Time is extremely accurate and a powerful gauge of the current market. Yet, sold data is not a reliable gauge of demand TODAY. Sold data is tracked by most widely publicized housing indices, but it tells us a story of what happened about 45 to 60 days back. The market does not adhere to following what happened in the past. Instead, it does whatever it pleases today. Using pending sales over the prior month tells us what buyers are willing to do right now.

As the market slows a bit during the summer months, pending sales are going to drop slightly and the inventory will climb. As a result, the Expected Market Time will climb throughout the summer, slowing any appreciation considerably. Relying on this data is like looking out the windshield of your car, the best way to determine where you are headed. Yet, during the summer months Sold Data Indices will be elevated and indicate rising values; but, remember, this data will be a reflection of late spring, a completely different market compared to the summer. Relying on this data is like driving a car while looking out the rearview mirror.

Days on Market and Sold Data Indices often does not paint an accurate picture of what is truly going on in the housing market right NOW. Alternatively, the Expected Market Time encompasses the twists and turns as real estate evolves from season to season or responds to changes in the economy, interest rate changes, or local and global events.

Active InventoryThe inventory increased by 3% in the past two weeks.

The active inventory increased by 172 homes in the past two weeks and now totals 6,276, a 3% gain. Since the end of March, the inventory has continued to increase without pause. It looks like that trend will continue through the end of summer. The expected market time is on the rise and is currently at 62 days.

6-8-15-inventory

End of Steven’s report for 6/7/2015

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What’s Ahead For Mortgage Rates This Week – June 8, 2015

Whats-Ahead-Mortgage-Rates-5Last week’s economic news included reports on construction spending, Freddie Mac’s mortgage rates survey and several employment related reports. The details:

Construction Spending Jumps

The Commerce Department reported that construction spending reached its fastest annual pace since November 2008. Most  of the momentum was caused by construction of apartments, commercial projects and roads, and construction of single  family homes. Builders spent 2.20 percent more in April than they did in March, which equated to an annual outlay of $1.01 trillion for all types of construction spending. Analysts said that increased spending in construction indicated that the    housing sector could see improvement as construction provides more jobs.

Mortgage Rates Mixed

Freddie Mac’s weekly survey of mortgage rates reported that average mortgage rates were mixed last week. Average rates were reported as follows: 30-year fixed rates were unchanged at 3.87 percent with discount points also unchanged at 0.60 percent. The average rate for a 15-year fixed rate mortgage fell from 3.11 percent to 3.08 percent with discount points unchanged at an average of 0.50 percent. The average rate for a 5/1 adjustable rate mortgage rose by six basis points to 2.96 percent with discount points unchanged at 0.50 percent.

Employment Reports Suggest Stronger Labor Market

Several labor-related reports released last week suggest that job markets are gaining strength as they continue to improve. ADP, a private-sector payrolls company, reported 201,000 new jobs in May against April’s reading of 165,000 new jobs. The Labor Department released its Nonfarm Payrolls report for May and reported 280,000 new jobs against expectations of 210,000 new jobs and April’s reading of 221,000 new jobs.

Average hourly wages rose by 0.30 percent and surpassed expectations of a 0.20 percent increase and April’s reading of 0.10 percent. Although incremental, this suggests that labor markets are strengthening to a point where employers are comfortable with increasing wages.

Weekly Jobless claims were reported at 276,000 new claims filed as compared to expectations of 278,000 new claims and the prior week’s reading of 284,000 new jobless claims filed. The national unemployment rate for May ticked up to 5.50 percent from the prior month’s reading of 5.40 percent, but this reading remains below the Federal Reserve’s original benchmark of 6.50 percent for potentially raising the target federal funds rate. The Fed has not moved to change the rate, but analysts expect that this could occur by Fall if economic conditions hold steady.

What’s Ahead

Next week’s scheduled economic reports include job openings, retail sales, consumer sentiment along with the usual weekly reports on mortgage rates and weekly jobless claims.

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