South Orange County Blog from Bob Phillips

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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3 Reasons Why Setting Your Listing Price is the Most Important Aspect of the Home Sales Process

Three Reasons Why Setting Your Listing Price is the Most Important Aspect of the Home Sales ProcessHave you decided to sell your home, perhaps to make an upgrade to a newer, larger house? Whatever your reasons for selling, you’ll have a number of decisions to make as you craft your listing and begin receiving offers from buyers but few are as important as your initial selling price.

Let’s take a look at three reasons why setting your listing price is the most important factor in your home sale.

Reason #1: You Can Scare Off Potential Buyers With A High Price

You’ll receive the majority of your buyer interest in the first few days and weeks after you place your home up for sale, so it’s critical that your price isn’t set so high that it scares a number of buyers off.

While some sellers believe that it’s better to price high and let buyers submit lower offers, this can actually work against you. It’s better to have your home priced fairly from the beginning as you can always refuse offers that you deem are too low.

Reason #2: Your Price Directly Impacts How Long Your Sale Will Take

If you’re interested in seeing your home sell quickly it’s going to be in your best interest to have it priced competitively. Buyers will be shopping around for similar homes in your community and if there are other listings with lower prices on the market you may find it takes you a while to get your home sold.

Also, if you do find a buyer who is interested they’ll likely try to haggle with you, which can extend the length of the sale by a week or more as you go back and forth to reach an agreement.

Reason #3: A Low Price Means Leaving Money On The Table

While pricing too high can cause issues with your sale, pricing your home too low isn’t going to benefit you either. While you’ll likely find that you receive a high number of offers very quickly, you’ll end up leaving some of your home equity on the table – equity that you could easily have realized as buyers would have been willing to pay the difference. That’s a good reason for choosing a Realtor with an excellent track record of obtaining top dollar sales prices on his or her listings, in the shortest amount of time possible.

In these parts – South Orange County, in Southern California, such a Realtor is Bob Phillips, of Realty One Group. Call Bob today at (949) 887-5305, or email to BobPhillipsRE@gmail.com.

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Separation Anxiety: How to Deal with a Joint Mortgage Loan in the Event of a Divorce

Separation Anxiety: How to Deal with a Joint Mortgage Loan in the Event of a DivorceDuring the course of a marriage, it is common for the couple to acquire property together. This is what is referred to as joint or community property.

When a couple divorces, it is up to the parties involved to determine what happens to this joint property or let a judge use applicable law to determine how property is to be split.

What Happens To The House?

A couple of options are available when deciding what to do with a house where both partners are listed on the mortgage. First, the couple may decide to simply sell the home and split the proceeds from the sale.

Another option would be for one person to give the other person the house as part of the divorce settlement.

Technically, the house is sold or transferred and whoever gets the home is now the sole person listed on the mortgage.

Beware Of The Tax Implications

Typically, the person who gets the house should be the person who is in the lower tax bracket. This is because capital gains taxes may be lower or non-existent for those who are in the 10 or 15 percent tax bracket.

If the house is sold and the proceeds are split, capital gains taxes are exempted on the first $250,000 of profit made on the sale. For a married couple, the exemption is $500,000. Therefore, it may be worthwhile to sell the house before the marriage is over.

What If Children Are Involved?

In the event that the divorcing couple has a child, the best interest of the child must be considered. Typically, a judge will award a principal residence to the parent who will raise the child after the divorce is finalized.

To help the custodial parent afford any payments on the house, the other parent may be asked to help make payments as part of a child support or alimony agreement. This may be beneficial to the noncustodial parent as payments that are considered alimony are tax deductible.

When a couple divorces, they have a lot to think about. As this may be an emotional time, figuring out what to do with a home where both parties are on the mortgage can be difficult. However, those who are divorcing amicably or who want what is best for their children can come to an agreement without a lot of stress or drama.

I Can Help You Sort Out Your Options – Both Of You

For over 38 years I’ve been helping South Orange County people in all facets of their real estate lives, buying, selling, and leasing local property. I would be honored to assist you in your real estate planning.

Bob Phillips,            Realty One Group, South Orange County, CA.         Cell/Text:  (949) 887-5305,               BobPhillipsRE@gmail.com

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Sellers, Beware: Five Reasons You Might Not Get Top Dollar when You Sell Your Home (And How to Avoid Them)

Sellers, Beware: Five Reasons You Might Not Get Top Dollar when You Sell Your Home (And How to Avoid Them)For most people, their home is their largest asset, so they want to maximize that asset by getting top dollar when they sell. Here are a few reasons you might not get top dollar when you sell – and how to avoid them!

Selling At The Wrong Time

From early spring to late summer is home-buying season for most people, especially those with children. Putting your house on the market during this period is when you are likely to get top dollar for it. Early fall is also a good time to list your home. Winter – especially December – is the worst time to list. If you list your home outside of prime selling season, you are likely to get less for it than you could have otherwise.

Not Staging Your Home Properly

Many people think of staging as simply rearranging the furniture or changing curtains, but there is so much more to it, and not doing it properly can mean less money for your home. To stage your home properly, you must declutter, putting knick-knacks and family pictures away. You also want to make sure your home is as clean as possible and that you correct any defects such as holes in the wall or cracked window panes. Another thing you should do as part of your staging routine is to paint your walls in neutral colors and update cabinet hardware and light fixtures that are out of date. These little changes can make a big difference.

Not Paying Attention To Curb Appeal

You can spend all the time and money necessary to spruce up the inside of your home, but if your lawn is a patch of dirt and your gutters are falling down, all that work and money can go for naught. To get top dollar for your home, you need to improve your curb appeal. This includes seeding or sodding bare spots in your lawn, trimming trees and shrubbery and fixing up home-related items such as broken concrete and sagging gutters.

Not Getting The Price Right

You might think that to get the highest price out of your house, you have to price it high. However, that’s not necessarily always the case. If you price your house too high, it can make other similar houses that are priced lower look like better deals. You should make sure to pay close attention to what comparable homes are selling for in the area and price your home accordingly.

Not Working With A Real Estate Agent

Many people think they can save a bundle selling their home by not working with a real estate agent. While you might save on the real estate commission, that is probably not the case, since your potential buyer is wanting to save that same commission.  So, at best you’re likely only saving HALF the commission.  Also, if you’re thinking that the commission is going to be 6%, you’re probably wrong there, as well.  Many agents, like me, are willing to offer a substantial discount to a seller – frequently, as low as 1% to 2% on the seller’s side, ( Depending on the price range.) while offering 2.5% to the buyer’s side of the transaction.  You can quickly lose more than that 3.5% to 4.5% – that the buyer expects at least 2.5% of – by making mistakes in pricing and marketing.

A real estate agent will have access to resources you don’t, such as information on buyers looking in your neighborhood. An agent will market your home, make sure it is priced accordingly and set up showings. It is worth your time and money to call an agent experienced in selling homes in your neighborhood who can give you a free market evaluation.

In South Orange County, that agent is Bob Phillips, with over 38 years of local, professional real estate service.  Why not give me a call or text today, at             949-887-5305, or shoot me an email to BobPhillipsRE@gmail.com.  I’d love to talk with you about your real estate plans.

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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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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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Giving and Getting: Why the Terms of a Home’s Sale Are Frequently More Important Than the Price Paid

Giving and Getting: Why the Terms of a Home's Sale Are Far More Important Than the Price PaidOne of the most significant factors home buyers and sellers focus on when buying real estate is the negotiated sales price in the purchase contract. While the sales price is undeniably important, the reality is that other terms in the sales contract may have more far-reaching and significant effects on the transaction.

In fact, with a closer look at some of the most important terms, you will see why you and your agent should actively negotiate for improved terms rather than a lower sales price.

Closing Costs

Some buyers and sellers will haggle over a few thousand dollars in the sales price without paying attention to the closing costs, but the fact is that the closing costs for a typical transaction may cost the buyer between two to five percent of the sales price on average.

A sales contract may be negotiated so that the seller assumes some or most of the closing costs, and this can result in considerable savings the buyer. Likewise, when a contract is negotiated in the interest of the seller, the seller may save thousands of dollars at closing if the contract states that the buyer is responsible for these costs.

The Appraised Value

In an ideal world, a home would appraise for the contracted sales price, but this is not always the case. A sales contract may be written with terms that allow for the sales price to be renegotiated after the appraised value is confirmed, and this may benefit both parties. Some sales contracts, however, state that the negotiated sales price is final regardless of the appraised value.

The Property Inspection

Many home buyers opt to obtain a property inspection to determine if there are hidden issues with the property structure, foundation, roof, air quality and other components. Some inspections reveal that a home is in fairly good condition, but others may reveal that a property needs thousands or even tens of thousands of dollars’ worth of repairs.

Some sales contracts may be written so that the buyer may back out of a contract within a certain period of time after receiving the property inspection report or so that the terms of the sales contract may be renegotiated once the property inspection report has been completed.

Special Contingencies

A real estate transaction may extend for several weeks or even months while the buyer contracts with a lender, an appraiser, a property inspector and other third parties. During this period of time, many events can occur that may adjust the interest level or even the ability of the buyer and seller to fulfill the contract.

Some sales contracts are written so that the buyer may opt out of the contract within a certain period of time with minimal expense and regardless of other factors related to the appraisal and inspection. ( In California, there is usually an initial 17 day period during which a buyer can withdraw for no stated reason.)

Generally, there are standard terms found in many real estate sales contracts, but these terms can be adjusted by either party to benefit buyers or sellers. Those who are preparing to buy or sell property should actively communicate their needs and desires with their real estate agent so that the contract may be negotiated with terms most favorable to their needs.

In 37+ Years of Local Experience, I have Seen Almost Every Possible Type of Scenario.

Whether you are buying, selling, or leasing, it is important to have an experienced agent negotiating at your side.  You would have to look far and wide to find a more experienced real estate agent in South Orange County.  Give me a call or a text, at (949) 887-5305, or shoot me an email at BobPhillipsRE@gmail.com, and let’s talk about your real estate goals.

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Foreclosure Inventory Continues to Shrink in May

An article by Colin Robins, of DSNews.com  June 24, 2014

foreclosure-signBlack Knight Financial Services released its “First Look” at May Mortgage data, which found that foreclosure inventory declined to its lowest level since July 2008. As a percentage of total inventory, foreclosure pre-sale inventory is 1.91 percent, down 5.56 percent month-over month.

The percentage of total U.S. foreclosure pre-sale inventory is down 37.23 percent year-over-year.

Foreclosure starts, however, are creeping back upwards. Foreclosure starts totaled 86,300 for the month of May, an increase of 9.52 percent from April. Yearly, foreclosure starts remain down by 26.11 percent. Overall delinquency rates remained steady, down a mere 0.01 percent to 5.62 percent in May.

The number of properties that are 30 days or more past due but not yet in foreclosure totaled roughly 2.8 million, an 18,000 property increase from the previous month yet a decline of 204,000 from the previous year.

Properties 90 days or more past due totaled 1.1 million, down monthly and yearly by 18,000 and 166,000 respectively. Properties that are 30 days or more past due or in foreclosure totaled 3.8 million.

The top five states by non-current percentage include: Mississippi (13.75 percent); New Jersey (12.62 percent); Florida (11.28 percent); New York (10.91 percent); and Louisiana (10.66 percent)

The bottom five states by non-current percentage include: North Dakota (2.5 percent); South Dakota (3.61 percent); Colorado (3.82 percent); Montana (3.96 percent); and Alaska (4.06 percent). ( End of Colin’s article.)

From Bob Phillips, regarding just Orange County, California.  Here’s some local information on the subject from my good friend Steven Thomas, who produces a bi-weekly “Orange County Housing Report.”

Distressed BreakdownThe distressed inventory dropped to its lowest level since last August.

The distressed inventory, foreclosures and short sales combined, decreased by 7 homes and now totals 246. 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 6% of all closed sales.

In the past two weeks, the number of active foreclosures increased by 3 homes and now totals 63. Less than 1% of the active inventory is a foreclosure. The expected market time for foreclosures is only 39 days. The short sale inventory decreased by 10 homes in the past two weeks and now totals 183. The expected market time is 38 days. Short sales represent 2.5% of the total active inventory.” ( End of Steven’s excerpt.)

Are YOU ( Or is someone you know.)  having trouble making your mortgage payments?

I have been assisting homeowners having difficulty with their mortgages for the past 5 years, and have both extensive training, ( As a CDPE, Certified Distressed Property Expert.)  and year’s of “in the trenches” experience.  If you, or someone you know, is having difficulty making their mortgage payments, give me a call or text at 949-887-5305, or shoot me an email at BobPhillipsRE@gmail.com.  I have solutions – let’s talk about them.

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What Are The Closing Costs Of Real Estate?

Home_Buyer_Tips_3You’ve found the perfect property and a great mortgage loan with the best interest rate you can find. What’s next in the   home buying experience? Signing the contracts and paying the closing costs. But what exactly are closing costs?

Here Is A List Of The Most Common Closing Costs:

  • Titling Fees – These include the title search and title insurance fees. In California these costs are usually split by the buyer and the seller but can be negotiated to be paid by either.
  • Recording Fees – The government charges a fee to record the change in ownership of the [city] real estate. This can be paid by either the seller or the buyer.
  • Survey Fee – A survey fee can be required by the lender. It is a fee for the survey of the land or lot, and its   structures, to determine that it matches the property description. Such a fee is rare or even non-existent, in tract home communities, which are the majority of houses in South Orange County.
  • Mortgage Application Fees – Occasionally mortgage application fees are included in the closing costs, but usually are paid prior to closing by the buyer.
  • Appraisal And Inspection Fees – Unless it’s a cash transaction, an appraisal is required by the lender to ensure that the value of the property is equal to that of the loan, and to make sure there aren’t any underlying problems that detract from the property value. These fees are usually paid by the buyer.
  • Points – Points are equal to one percent of the principal of the loan. These discount points can be paid by the buyer to the lender to reduce the final interest rate of the loan.
  • Brokerage Commission – The seller pays the listing real estate agent the brokerage commission fee for listing, showing the property, and handling the contract negotiations. The commission is usually a percentage of the sale price of the property, and determined in advance by the seller and the listing real estate agent.
  • Underwriting Fees – The buyer pays underwriting fees to the lender to pay for the costs of determining if the buyer qualifies for the mortgage loan.
  • Property Tax – County property taxes are usually prorated at the time of closing, with the seller paying his share up to the close, and the buyer prepaying his share, from the close of escrow up to the next tax bill coming out.

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Orange County Housing Report: The Market is on Cruise Control

Here is the latest Orange County Housing Report from my friend Steven Thomas:

Orange County Housing Report:  The Market is on Cruise Control  ( June 8th, 2014.)

The Orange County housing market is not changing that much. What you see is what you will get for the rest of the year. 

cruise-controlCruise Control: The inventory is increasing, demand is flat, and foreclosures and short sales are almost nonexistent.

This year’s housing market is remarkably different than the prior two extremely hot years. The market is still really strong; it’s just not out of control crazy like before. 2012 and 2013 were marked by very low inventories and not enough homes to go around, so multiple bids and rampant appreciation were the norm. Home values were rocketing upward, almost too fast. The appreciation that occurred in those two years should have been spread over five years. It just happened overnight, way too fast.

Flash forward to today, and the active inventory has been on the rise the entire year. We have gone from an inventory of 4,733 homes at the start of the year to 7,182 today, a 52% increase. Meanwhile demand has not changed much this spring. In the past month, demand has only increased by 24 homes and totals 2,723, far fewer than last year when it posted 3,144 pending sales. And, short sales and foreclosures only account for 7% of all closed sales thus far in 2014. For those buyers holding out for a foreclosure, they made up only 2% of closed sales. The chances of securing a foreclosure, if that’s what your heart desires, are extremely slim. You can also expect a lot of competition since everybody is sniffing around for a “deal.”

With a rising inventory and flat demand, the expected market time has been rising and appreciation has slowed to a crawl. As a matter of fact, appreciation is starting to bump up against a ceiling. Because values have increased substantially, they are at a point where they cannot continue to increase without taking a giant bite out of home affordability. Buyers do not want to be left holding the bag like they did right before the Great Recession, so they are not allowing the bidding up of prices to continue. They have traded in their exuberant zeal to pay whatever price to obtain a home for a methodical approach to paying the Fair Market Value of a home. That’s because home values were a deal over the past couple of years and now they are priced where they need to be. They are no longer a “deal,” but they are also not overinflated either.

Values are bumping along a ceiling, not really changing much at all from one month to the next. The average sales price for May was $721,000 this year versus $692,000 last year, only a 4% difference and that is year over year. Month to month it is almost negligible.

So, if you are a seller, waiting for values to rise to your overpriced level, or if you are a homeowner waiting for values to increase before you place your home on the market, you are going to be waiting a very long time. Today’s market is going to be tomorrow’s market for some time into the future. What you see is what you get. The Orange County housing market really does feel like it’s on cruise control with no major changes recently nor into the future. Sellers need to get real and price their homes according to the most recent comparable sales. If you are on the market for a while with no offers to date, the market is speaking to you loud and clear, “You are overpriced.”

For buyers, if you are waiting to purchase because you think that home values are going to drop down the road, think again. That is not going to happen anytime soon. If that’s the message that you are reading into this report, you are receiving the wrong message. Memo to all buyers: it is still a seller’s market. Sellers are in control. If they price their home at the Fair Market Value, they will procure plenty of activity and will sell quickly. Sellers are not able to randomly price their homes, but they are still in the driver’s seat. The expected market time would have to rise to 6 months for it to transform into a buyer’s market. Currently, the expected market time is 2.64 months, or 79 days. Not even close to the 180 days needed to tip the scales to a buyer’s market.

It is as if the housing market is on cruise control. The inventory is rising and will continue to through the end of the summer. Demand is not changing much and that will continue through the end of summer as well. Distressed properties, both foreclosures and short sales, will take a backseat in the housing market for the long term. The expected market time will continue to slowly rise, but will not slip into buyer’s market territory anytime soon. This is the Orange County housing market. To expect anything different right now or on the horizon is irrational.

Active Inventory: The active inventory increased by 8% in the past month.
Inventory-6-8-14

The active listing inventory added an additional 162 homes in the past two weeks and now totals 7,182, levels not seen since February 2012, 28 months ago. This year, the inventory has grown unabated and is poised to continue to increase through the end August.

After starting the year at 4,733, the inventory has climbed 2,449 additional homes, a 52% increase. 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 4,133 homes on the market, 3,049 fewer than today.

DemandDemand remained almost unchanged in the past month.

Demand-6-8-14

Demand, the number of new pending sales over the past month, increased by 36 and now totals 2,723. We are about to leave behind the Spring Market and enter into the Summer Market where demand will continue the change of not changing much at all. It will drop a bit in July, but will increase a little in August, one last hoorah before downgrading a bit in the Autumn market when the kids go back to school. 

Distressed Breakdown: Since the end of April, the distressed inventory has only increase by 4 homes.

The distressed inventory, foreclosures and short sales combined, decreased by 6 homes and now totals 253. 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 6% of all closed sales.

In the past two weeks, the number of active foreclosures decreased by 14 homes and now totals 60. There are 144 zip codes in Orange County, so there simply are not enough foreclosures to go around. Less than 1% of the active inventory is a foreclosure. The expected market time for foreclosures is only 31 days and is currently the hottest segment of the housing market. The short sale inventory increased by 8 homes in the past two weeks and now totals 193. The expected market time is 39 days. Short sales represent less than 3% of the total active inventory. ( End of Steven’s report.)

 

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