THE ECONOMY MAY BE SPUTTERING, BUT THAT'S GOOD FOR REAL ESTATE

Here is the real scoop on what's happening in the real estate market.  First of all, don't just stand there...BUY!!  The whole reason the median price of a single-family property increased so rapidly the past 60 days, (more on prices in the next paragraph), is because interest rates jumped more than a full percentage point.  Between that increase and sellers demanding greater increases than the market could bear, sales slacked off in the price ranges most susceptible to interest rate increases, namely $250,000 to $750,000.  Without the volume of those sales to temper the million plus purchases, the median price shot up.  Many families were forced to the sidelines with the interest bump.  Now, they can return, because in case you didn't hear... rates are back down, low...really low.  Also, during the past 60 days, more property has hit the market, inventory levels are much healthier, creating more competition for sellers.  This will naturally keep prices in check to a normal appreciating market.  Don't miss out on the great rates again.  Go out and find your dream home!  The Federal Reserve has made it clear in recent articles and blogs that the U.S. economy still needs support from its low interest-rate policies, because it is growing only moderately.  After its policy meeting, the Fed also announced that it will continue buying bonds to the tune of 85 billion a month to keep those rates low and encourage borrowing and spending.  The question is:  does that mean through first quarter next year?  Or possibly second quarter?  If buying a family home, to raise your family, spend your quality time, now may be your time.

WHAT WERE THE EXACT NUMBERS?

According to all sources, including,  the LA Times, the OC Register and DataQuick, the So Cal area's home price gains for August and September are the highest since '05.  Before we get too excited, let's remember what we discussed in the last section of this newsletter.  The sheer number of deals in the upper price range and cash transactions in the multi-million dollar range had a lot to do with the increase.  Lack of inventory also drove up prices.  Expect them to soften somewhat because of the increased inventory we wrote about.  The number of sales in Orange County for September (the last complete month available) is 2,916.  That number was up 8.9% from the previous month year over year.  The median price for all properties was $550,000 up 22.2%.  However, the median price for a single-family was $612,000 and that is a 20% increase from the same month of 2012.  The median price for a condo was $380,000 and that was up 24.6%.  The volume for the number of sales for single-family was flat with 1,807 sales, but condos rose 16% in volume to 836.  The median price was highest for new homes at $696,000 but the sales were a paltry 273.

WATCH OUT FOR REAL ESTATE SCAMS ON VACANT PROPERTIES

A recent article in the OC Register reported a 5 year prison sentence for a man forging deeds on vacant properties and then renting them and collecting those rents.  The unfortunate part of this scenario is for the homeowner who may have moved out of a distressed property or simply moved and had not yet disposed of the existing property and now have to deal with tenant's rights, as well as a forged deed.  Fortunately, the ALTA Residential title policy protects against after close of escrow forgery.  Not all title companies issue this policy or do so automatically without Western Region Exceptions, but Fidelity National Title does.  Always check to make sure you receive this superior title policy when you are purchasing a home.

A LITTLE TENDER, LOVING, CARE GOES ALONG WAYS TO INCREASE YOU SALES PRICE

There are many cheap, easy (ok maybe a little effort involved), ways to help buoy your asking price when you sell your home.  Here are a few.  (For even more info, go to www.kcmblog.com)  First off, we are mainly talking about curb appeal, and a few cosmetic things inside your home.  Curb appeal is huge, because buyers always look at homes initially based on their visual, emotional, reaction to the home.  Make sure your roof is repaired and will pass for a one year roof certificate.  Gutters should be cleaned and repaired.  Invest a small amount of cash in really cool numbers for your address on your home's facade.  Windows and trim should look newer, with no cracked paint.  Wash your home's face, get the dirt and grime off it and add $10,000 to your sales price!  Upgrade your front door to a snappy color or etched glass or trim.  Replace old light fixtures for a more modern, with it look.  Brush up your landscaping with a few new plants or flowers.  Inside, think about replacing carpet with tile (if time or money), otherwise get your carpets cleaned.  These types of changes require mainly, time, a little money, but could result in better and more offers for you.  

AS MORE INVENTORY HITS THE MARKET, JULY SALES JUMP

Southern California home sales surged in July, rising to an eight-year high for that particular month, as there were more properties for sale.  Prices did not increase significantly from the previous month, but for July, year over year, there was a 26% increase in pricing.  This is the seventh month in a row, according to DataQuick, that prices have risen 20% in year over year comparisons.  That being said, housing is just at the 2004 levels, far below the high of 2007, just prior to the pricing crash and housing slump.  What is interesting is that people have already forgotten these encouraging numbers and were noticing the significant slowing of new sales for August.  Let this column be the first to encourage the consumer not to be discouraged.  August has always been notoriously slow compared to the spring season.  June is slow because of the advent of summer; graduations, weddings, early vacationers.  August is slow with heavy vacationing, the coming school year, and families getting ready for one or the other, or both.  Exacerbated this year, by many school districts staggering their start dates, August appeared to be one long back to school month.  Having said that, look for September to be stronger than usual, because so many schools did start earlier, allowing people to return to routine and start to think about the fall selling period.  There are many advantages to selling in the fall.  Less competition for buyers, so they have more selection, and because of the tight inventory this year, sellers should also find themselves in decent position.   There is frequently more flexibility on close of escrow time frames and an easier time getting to see those properties.  Buyers and move up sellers should not wait too long, read on for what may be in store for interest rates...

A COMMON QUESTION CURRENTLY ASKED IS, "WHAT IS HAPPENING WITH INTEREST RATES?...This question is asked and followed immediately with the comment, "maybe I should wait for them to come back down."  The fact that interest rates have been at historic lows for so long, may cause some to forget that they have been held there artificially.  One mustn't be lulled into the common myth that after a quick hike, they will settle back down.  Although rates will remain fantastic, all agree for at least another year, 3 1/2% is likely not coming back unless you get a 10 year fixed rate loan, or buy it down through escrow.  In fact the following entities all agree rates will rise: 1)The Mortgage Bankers Association  2)Fannie Mae  3)Freddie Mac  4)National Association of Realtors.  How much?  Read on...

FANNIE MAE PUTS TOGETHER SOME PROJECTIONS FOR SALES,PRICE, AND INTEREST RATES (NATIONAL OUTLOOK)...

The following projections are for 4th quarter 2013 versus 2nd quarter 2014.

Housing Sales -- 2013 - (in thousands) 5,592     --    2014 - (in thousands) 5,794

Prices -- 2013 - $189,000     --    2014 - $213,000

30 Year Mortgage -- 2013 - 4.6%     --     2014 - 4.8%

WHAT WERE THE ACTUAL NUMBERS?

Orange County saw a total number of sales of 4,402; this includes resale single-family, condos, and new homes.  That was a change of 42.6% upward from the previous July (the most recent complete month available).  There were 2,851 single-family resale homes, 1,283 condos, and 268 new homes.  The median price for all of Orange County, for all housing types combined was $539,500 and that is an increase of 19.9% from July 2012.  Resale single-family median price was $611,000, with condos coming in at $380,000 and new home median price was $706,000. All of So Cal (Ventura, Los Angeles, OC, San Bernardino, Riverside, and San Diego counties) had sales totaling 25,419 which was up in volume 23.50% and the median price for So Cal was $385,000, up 25.80%, both comparing July 2013 with July 2012.

5 ESSENTIALS A REALTOR MUST HAVE FOR THEIR CLIENT

1) Tell the client the truth about price.  Whether buying or selling, it is wise to know what the market will bear, and what price reveals about motive on both sides of the transaction.  2) Understand the family's timeline.  When and how are very important in serving the client.  3) Remove Challenges - There are many during the course of a transaction, and all must be explained and overcome.  4) Help with Relocation.  Whether across town or across the country, every available resource will be made available to assist the client.  5) Get the home sold.  This is what a real estate agent does.  Never lose sight with all the hype of search engines, the Internet, social media, etc.  Get the home sold.  For the best price possible with the least amount of hassle.  Done.  See you next month.

WAIT UNTIL YOU HEAR THIS STATISTIC...IT'S A DOOZY

It goes without saying that there is always an advantage to selling or buying in almost any market, depending on personal need and motivation.  But right now??  A staggering 96% of Americans currently looking in today's market, say home ownership is "very important."  It is particularly high for women and Gen X and Gen Y.  Another 74% of those polled said, "interest rates are at historic lows and now is a great time to buy."  But let's look beyond the hype of those who are enthusiastic, to see if there are other signs that So Cal is in an upward trend and that the recovery is more than momentary.  We don't have to look far.  The end of April and beginning of May have given us lots of ammunition.  First off, nationally, solid job gains have eased apprehension about the recovery.  The U.S. economy added a solid 165,000 jobs in April.  Unemployment scooted down to a four-year low of 7.5%.  Does anyone else remember when it was double digits?  Not only that, but the job gains were higher in February and March than originally thought, and the gains came despite a global slowdown.  The Orange County Register noted that if you track the three major moving companies, collectively the van lines fell 9% in moves out of California, comparing 2011 with 2012, the first drop since 2009.  Plus in 2012, the state added 296,000 jobs, the nation's biggest job boost, by the way, and unemployment in the state fell to 10.5% from 11.8%.  All in all, this means not only are people feeling better about their financial situation, they are better.  This paints a rosy picture that explains tight inventory and so many buyers out there.  Add three other factors: 1) low interest rates.  2) Pent up demand.  3) back to the survey, 46% of prospective sellers feel the need to find another house first, creating a big blockage of homes and 43% are waiting to make bigger profit.  There is definitely some buyer gridlock happening on the housing front.   Good ways to avoid this are be ready to buy and be prepared to offer your highest and best because you will most likely have stiff competition.  Sellers will be able to peruse through the offers.  Writing a letter to the seller, explaining why you want the house and what it means to you and your family is another great tool.  It isn't always just about the money, believe it or not.  Finally, some people still feel some skepticism over the recovery.  Is it too much, too fast?  Let's remember, prices may have risen sharply compared with the last 6 years, but this is real money this time, real loan qualifications, real down payments, real appraisals.  Prices could level off, if interest rates rise, or if more supply hits the streets.  But the people who already bought, could afford it, and will be sitting with a home whose price may have fallen, but are making a fixed payment at 3% interest.  They are not going to default and they are not going anywhere.

HOW WERE THE NUMBERS FOR THE FIRST QUARTER 2013?

The overall median price for the first quarter was $485,000, a 22% gain.  Resale homes came in higher at $540,000, an upward tick of 18.7%.  Condominiums median was $325,000, a 27.5% rise.  New homes, although much lower in volume were higher in price at $667,500, climbing 20.4%.  The total volume of all homes sold was 7,746.  There were 5,018 single-family resale, 2,203 condos and 525 new homes.  All numbers were higher than 2012.  Specifically for the month of March, there were only 108 homes that made it to a trustee sale auction/foreclosure, and only 574 Notices of Default recorded.  Indeed, CoreLogic reports that Orange County's foreclosure rate fell to less than1% in February.  Those that are 90 days or more delinquent dropped to 3.3%.

WHY DO PEOPLE BUY HOMES?

The real estate blog Keeping Current Matters wondered about that and reported some recent reasons from a Gallup Poll.  Not all the reasons are financial.  In fact, below are the 5 most compelling reasons to buy, financial/non-financial.  First let's look at financial: 1) See owning as an investment  2) Chance to build equity and credit  3) Smarter than renting  4) More cost effective (3% interest and leveraging money)  5) Financial security/stability.  And now, non-financial:  1) Belief in home ownership  2) Don't want to rent  3) Better for family  4) Ability to do what you want with the property  5) Pride of ownership.  Gallup went on to give results that 8 of  10 of all people own or plan on owning property.  Here is their own quote regarding their results; "Our data on home ownership provide strong support for the idea that the American Dream of owning a home continues to be alive and well."  Finally, people were asked, regionally, where they thought prices were headed.  The results for the West?  62% said prices were going up.  25% said they would stay the same.  12% said they would go down.   What do you think?  Historically? Always up.  For more interest on Gallup polls, visit their website, www.gallup.com.  

THE HOUSING MARKET HEATS UP

Let’s start with a quote from a veteran real estate analyst of Southern California, G.U. Krueger, “If home prices and jobs are an indication, prosperity may be re-emerging in California”. In fact, according to analysts with Clear Capital, home prices in February this year grew by double digit rates from a year ago in nearly every metropolitan area deemed important for statistical reasons. Probably some of the best news was that inland areas, hard hit by the foreclosure and short sale wave, also showed serious growth and promise. This is significant because jobs in these regions are more about growth stability, workers and manufacturing as opposed to high tech and Internet or stock market; job divisions sometimes seen as leading vocations along the coast.

UCLA also posted predictions that Orange County would see strong gains and continuing job growth. Their current prediction is that OC should return to pre recession job levels around 2016. Unemployment is expected to drop to 6.8% this year compared with 7.6% a year ago and level off at 4.6%. In 2016.

No doubt everyone has read about or personally experienced the tight inventory, yes a serious lack of homes for sale. Not only is the desire to buy right now so high because of the low prices, signaling the bottom of the market that we hit last year; but also, more importantly, is the historically low interest rates. These rates are allowing the buying public to get up to as much as 30% more house for their money with no fear of a bubble. WHY?...Because these are real loans for people who have been strenuously qualified. If you have gotten a home loan recently, you know that this is true. That is real qualification and the loans being fixed versus ridiculous stated loans and interest only 3 year adjustables, which have gone by the wayside, thankfully. Now is the time to try and find and buy your dream home.

FEWER FORECLOSURES DOT THE HOUSING LANDSCAPE

The number of OC homes facing foreclosure fell 55% over the previous 9 months ending in February, a decrease of nearly 5,000 properties that were previously in some form of foreclosure, according to CoreLogic. Another data provider, DataQuick, had a similar report. Southern California, comprised of Ventura, LA, San Bernardino, Riverside, Orange, and San Diego counties, reported 20,879 Notices of Default for 4th quarter 2012 as compared with 34,013 for the same period 2011. Orange county went from 4,297 to 2,169 and that is how the 55% decline is figured. Part of the decline is in response to new foreclosure laws which require an additional 30 day warning period in writing before the NOD can be placed on a property. Lenders are preferring to have properties go through a short sale. Thankfully, lenders are catching up with the learning curve and most now have procedures in place which actually can expedited the short sale process.

WHAT WERE THE ACTUAL NUMBERS

The total number of sales in Southern California was 15,945. The overall median price was $320,000 which is up 20% from the $264,750 of a year ago for the same month. (February is the latest full month available for statistics). Orange County had total sales of 2,252 which was up in sales volume by 6.7%. However pricing was up overall 22.3% with the median overall hitting $477,000. Part of the reason for the large gain, however, is lost when you just look at statistics. Last year, 2012 saw mainly investors flipping houses and cashes buyers buying distressed properties to flip. The market was largely devoid of the upper end seller or buyer. They are now back in force and so some of the price hike should not be seen as a worrisome bubble, but rather a welcome addition to the real estate market of 2013. Every county posted sales volume gains of around 5% except the Inland Empire, which lost a little ground. Every So Cal county posted double-digit pricing gains.

CALIFORNIA IS FOR SALE...SORT OF

Let’s put it this way, California hasn’t looked this good to buyers in 8 years. All of us who live in the Golden State, and who own or have owned property, have borne the brunt of a grueling recovery. Actually, it was a market in free fall, that caused all kinds of pain, wrecked havoc not just in our fair state, but the shot heard round the world. But a lot has changed in the last 8 years. Part of the pain of a recession is that there seems no way out but to just grind it out. Time, stamina, and determination have been local themes to Californians and in fact citizens of real estate everywhere. Now we find builders are back in a big way, inventories are at historic lows (and by low, try less than half of the top of the 2006 market), money is cheap, and our state especially, is drawing buyers from all over, particularly cash buyers. In fact, according to DataQuick, one in three Orange County buyers in 2012 paid cash. Not surprisingly, the number of deals-- greater than 10,000, was the highest since California’s last down market of 1992, twenty years ago exactly. Why this insistence on history repeating itself? Some would say it is because real estate is cyclical. Others would say it is because people never learn that what goes up must come down. Cycles do happen in real estate, and the cause for each generation’s ups and downs do differ. But germane to the process is a bubble, expanding for that economy’s purpose, driven by that unique component of that expanding market. But purely speaking, it is supply and demand driven. The fuel to the fire this last time around was free loaded lending, irresponsible at best, and many would argue borderline illegal at worst. Recovering from that has been painful and difficult for not only sellers and buyers, but the professionals left behind to deal with the cleanup of the heyday. It is safe to say that we have today, a much healthier housing market, real lending standards, and the current pace of selling is based on legitimate pent up demand, from both move up buyers, first time buyers, and investors who still recognize the bottom of a market, although quickly rising. They are coming in with cash from all over the world, some to stay in the market, holding properties as rentals, some still trying to “flip” properties to the many buyers out there, and some buying luxury second homes. Read on and you’ll learn some interesting information on current numbers, sales, foreclosures, and tips on buying and selling, and why the perfect time to do both is right now!

FIVE REASONS TO LIST YOUR HOME NOW

The first reasons to list now jump out at you... 1) Demand is high--everyone has been waiting for this moment, so perfect a combination is low interest rates, and a bottomed out market. 2) Supply is low--just not enough to go around. Your home has a multiple audience, and that’s a good thing. 3) New construction is just under way. Your home has a head start in the fact that it’s ready to go now. A resale home in competition with a shiny, bright, brand new home, will frequently lose out. List now, while that competition is still low. 4) Interest rates--Does anything else have to be said about 3.5% ??? It won’t last forever. The higher interest rates go, the more buyers are priced out of your homes price range-- that means less competition and fewer multiple offers and that means less $$ for your home. 5) Timelines are shorter--the pipeline is not as full this time of year. Shorter escrows mean less time for things to go wrong. And that’s a good thing.

FIVE REASONS TO BUY NOW

1) Prices are on the rise. The Home Price Expectation Survey polls 100 economists, investment strategists and housing market analysts. All report to expect rising prices for the next 5 years. 2) Mortgage rates will increase. They are being kept artificially low to keep our economy moving. Inflation is a concern and is hovering nearby. They can’t stay low forever. 3) Rents are continuing to skyrocket. And you can’t deduct your rent. Interest deduction on your primary home remains one of the very best write-offs for the average tax payer. 4) New Mortgage Regulations to be announced--6 regulators, including the Dept. of Housing and Urban Development, the Office of Comptroller of the Currency, and the SEC are currently drafting the new Qualified Residential Mortgage (QRM) rule. It will concern minimum down payments and minimum FICO scores. Buying could get a lot tougher. 5) Timelines will be shorter.

WHAT ARE THE ACTUAL NUMBERS?

The last full month of numbers available is December. The total number of sales was 3,070. That number is up 19.4% from December of 2011. The median price of homes rose in Orange County 9.2%, which outpaced the country’s uptick of 5.5%. There were 2,010 total single-family resale transactions, 796 condominiums and 264 new homes that closed escrow in December. The rise in new homes was 31% from the same period a year ago, and watch for that number to expand rapidly over the next 5 years. The total number of Notices of Default for all of So Cal for the fourth quarter was 20,879. Compare that to the same quarter of 2011 and that number jumps to 34,013. Orange County’s number plummeted 49.5% from 4,297(fourth quarter 2011) to 2,169 for 2012. A point of interest: million dollar home buying reached a 5 year high in 2012.

MORE YEAR-OVER-YEAR GAINS FOR SOUTHLAND HOME SALES AND PRICES

Southern California has continued its gradual recovery in housing, stymied only by sluggish jobs and lack of inventory.  This newsletter's last edition of 2012 made mention of the less than 3 months inventory in most cities.  A neutral market is considered 6 months of inventory, that is a market that favors neither seller nor buyer.  So it could be said that as we start out 2013 we have a seller's market.   That being said, other aspects of the economy, such as sluggish job growth, coupled with amazingly low interest rates, still favor the strong buyer.  Perhaps it is a more even market after all, and that is not such a bad thing.  A total of 19,285 new and resale houses and condos sold in the Southland counties from Ventura down to San Diego.  That is the highest monthly total since November 2006.  That number is up 14% from November of 2011.  Activity rose the sharpest in the mid to upper range of houses, a range typical of "move up" buyers, and would account for the pent up demand of that market segment.  In fact, sales in that range, $300,000 to $800,000 jumped 34% year over year.  Short sales, where properties sell for less than what is owed against them, still accounted for 26% of the market share in November.  (The last complete monthly stats available.)  When looking at the increase in sales volume year over year, of the Southland counties,  Orange County leads the way at 25% followed by San Diego with 23%.  San Bernardino actually declined by 3% performing the worst of all counties.  More properties should hit the market as the new year gets underway, typical for the first quarter as many sellers sit out the holidays.  This should bode well for both seller and buyer, by allowing more choices for the buyer, a little more competition for the seller, to keep pricing increases in check.  Expect to see a healthier housing market this year, with growth that can be sustained by economic reality rather than the financing fancies of years gone by.

CHAPMAN REPORT PREDICTS SLOW JOB, HOUSING GROWTH

In a nutshell, 26,000 new jobs, 6.8% increase in home values, and 10% rebound in construction spending.  Is this accurate?  Are you a half empty or half full type of person.  Tax hikes and uncertainty of the national debt and ceiling are certainly reasonable concerns.  Construction seems likely to make a bigger comeback than that forecast.  However, jobs does remain a concern.  Rumor on the street is that there are companies out there with cash on the sidelines, and jobs in the pipeline.  This column will weigh in with a "half full" vote, that housing will be stronger than last year and the distressed property continuing to be absorbed and outpaced by equity sellers.

WHAT WERE THE ACTUAL NUMBERS?

The total number of units sold for November in Orange County was 2,879.  This number includes 1,841 resale houses, 829 condos, and 209 new homes.  The median price for all homes was $450,000 and that is a change of 12.5% from a year ago.  The median resale price was %525,000, and condos came in at $307,500 and new homes topped out at $606,250.  Foreclosed homes across the nation plunged 23% and although California wasn't in the group of the 5 states with the lowest number of foreclosures, it also is no longer in the group of the top 5 states.  Good news for California.

GET READY FOR THE MORTGAGE MARKET OF 2013

Bankrate.com had some awesome tips to consider for getting the best deal on mortgage rates this year whether you're buying or refinancing.  Here's the top 5:  1) Stop procrastinating and refinance!  If you're paying more than 3.75 to 4 percent, it's time.  These rates won't be here forever.  2) Ensure that your credit is golden.  Credit standards remain tight, but there are things you can do to take care of old dings on your credit.  Pay off a low balance credit card and watch your credit score go up 30 points.  3) Underwater refinancers...don't take no for an answer.  HARP, the :home affordable Refinance Program, is here to help you.  Go online to find information.  4) Compare FHA versus conventional loans.  FHA requires a much smaller down payment.  5) Approved for a mortgage?  If yes, then don't buy anything!!  Don't apply for credit anywhere else during your loan process.  Once you're approved, lenders don't want to know you're out borrowing and getting into more debt.

HOUSING: YEAR END REPORTS REVEAL MARKET COMING BACK

Every year-end housing report revealed that the real estate market is recovering quite nicely. Here is a quick synopsis of each:

Existing Home Sales Report

• Total existing-home sales rose 5.9 percent in November over last month
• Sales are 14.5 percent higherthan November 2011
• Sales are at the highest level since November 2009
• The national median existing-home price was $180,600 in November, up 10.1 percent from November 2011
• Total housing inventory at the end of November fell to a 4.8-month supply; it was 5.3 months in October, and is the lowest housing supply since September of 2005 when it was 4.6 months

Pending Sales Report

• Pending home sales increased in November for the third straight month and reached the highest level in two-and-a-half years
• The index is at the highest level since April 2010 when buyers were rushing to beat the deadline for the home buyer tax credit
• With the exception of several months affected by tax stimulus, the last time there was a higher reading was in February 2007
• On a year-over-year basis, pending home sales have risen for 19 consecutive months

New Home Sales Report

• Sales of new homes rose 4.4% in November to a two-and-a-half-year high
• This is the highest level since April 2010, when a temporary tax credit boosted demand.
• Sales are now 15.3% higher compared to one year ago

Case Shiller Home Price Index

• Home prices rose 4.3% in the 12 months ending in October
• In nineteen of the 20 cities covered, annual returns in October were higher than September