HEADING INTO THE 4TH QUARTER 2016...WHAT TO THINK...WHO TO BELIEVE?

It is long understood by all that anyone can get any numbers to vouch for their economic prognostications of where they believe the real estate market will be heading in the foreseeable future, i.e. 2017. In researching how to best fairly depict the possible outlook, this column ran into conflicting numbers and opinions. So, as fairly as possible, that you might have the best information, as unbiased as possible, here goes...The OC Register had 2 articles, one day apart, with conflicting reports: 1) Headline #1 - WITH INVENTORY LOW, PENDING HOME SALES SLUMP IN AUGUST 2) Headline #2 - OC HOME PRICES UP AS SALES BOOM IN AUGUST. What was the primary difference in these headlines? Geographics. The first headline was reported with the National Association of Realtors (NAR) numbers for the country, and the second headline was for Orange County. Is this then good news? Appearances would proclaim more neutrality. There has been no doubt that strong job growth, low interest rates and low inventory have fuelled a recovering market for So Cal in general and Orange County specifically. End of summer has also always signaled the end of moving before the holiday season. Perhaps some last good deals drove it also. But more than speculation is the fact that more inventory entered the market and stayed longer. This can signify more realistic pricing and offer/counter offer scenarios. Home buying, in fact, soared 14.5% year over year to 3,633 transactions. This, according to CoreLogic, is the highest number of transactions for an August in 11 years. However, when one looks at pending sales, or contracts written, the number softens and takes us from a seller dominated market, in terms of inventory, and back towards a more neutral market. According to Leslie Appleton-Young, the longtime CAR economist (California Association of Realtors), home prices in California may be near their peak. Although 2016 is projected to have a 6.2% rise in the median home price, that is a far cry from the peak of 2013 which came in at 27.5%. Clearly this stabilization has been most necessary for the market, even though many then call it part of a sluggish recovery. This column disagrees that the housing recovery has been sluggish. Numbers aren't the only indicator. You must also track activity, inventory, and actual demand, which has been quite strong. More on the numbers will appear in the next section, but the slower gains, and modest increase in actual number of sales, (probably a better barometer than median price), would indicate a "slow squeeze than a big drop," according to Appleton-Young, barring a catastrophe, natural or manmade, or a seismic and fast rise in interest rates. Summing up, it would appear that 2017 will be about the same as 2016, with possibly slower sales and more inventory, which could trigger a price slowdown. However, a pricing slowdown could bring back buyers on the fence, so in other words, no crystal ball here.

WHAT WERE THE ACTUAL NUMBERS?

Sales were actually pretty flat both nationally and regionally for 2016 (projected). According to NAR, 2016 has averaged 14,603 sales per day for the country. Prices are up 5.1% and inventory was down 10.1%; sales were up less than 1% at 0.8%. California projects 407,300 sales, down 0.4% over 2015's 408,800, and the median price of $503,900 up 6.2% over 2015. Sales of existing single-family homes, which make up 68% of the overall market will actually increase 1.4% in 2017 to 413,000 (forecast). If inventory creeps up, which it likely will, and new construction keeps on its torrid pace (more jobs added in OC than any other sector), sales next year could surprise us all in Orange County. Affordability remains the biggest challenge with that number dipping to just 22% for the median priced home by mid-23016, although other counties such as Riverside were considerably higher at 41% to 56% (San Bernardino). Inventory has actually thinned at 6,786 properties for sale as of September 22nd, down from 7,040 of two weeks earlier, but this is more likely a seasonal drop, happening every year as the school year returns. There are approximately 120 foreclosure/short sale properties on the market currently.

6 REASONS TO BUY THIS FALL AFTER SCHOOL STARTS

Ok, here we go, in no particular order... 1) Prices will continue to go up. Previously reported in this newsletter and confirmed with Keeping Current Matters National Real Estate Blog, NAR, Mortgage Bankers Association, Freddie Mac and Fannie Mae, are all projecting home sales will increase nationally 6% - 6.5%, and with scarcity of inventory that means pricing will rise as well. 2) Interest rates remain most compelling, particularly for the move up buyer. Why would you not sell now and buy more home for the money with that low rate? 3) Less competition - fewer buyers and fewer multiple offers. If ever you were to get a break on pricing and get something at fair market or slightly below, a motivated seller at the holidays, that is getting no offers, whose home is sitting on the market, is probably a move up buyers best bet. 4) Either way, you pay for where you live, so live where you want and move before the holidays. Everyone likes being settled at the holidays. 5) Flexibility on terms - If you do need a seller carry back or if you have a lower down payment, you are more likely to get accepted when you are the only offer. 6) Mover on with your life - constantly looking at property, looking online, spending you weekends going through open houses, starts to take a toll on you and your family. Sort of looking can keep you from committing to a home that is perfect for your needs.

IS THIS FINALLY THE YEAR (2017) THAT THE U.S. HOUSING MARKET MOVES INTO THE BUYER MARKET TERRITORY?

Maybe elsewhere in the country it is possible, but it is unlikely in the Southland.  A widely regarded economic index, the BH&J states, "Housing remains a sound investment."  It tracks 23 urban centers and So Cal remains strongly positioned.  This newsletter is meant to be informative only, you should always consult experts in any financial area, but hopefully it serves as food for thought about the powerful wealth building tool of real estate investment, as you purchase or sell your single largest asset...your home.

HOW WILL "BREXIT" IMPACT THE REAL ESTATE MARKET...LONG TERM?

This is the $64,000 question for which everyone would like an answer.  The short answer is, it probably won't affect it long term.  Why?  First of all, 4 million citizens of the UK have already signed a petition for a revote.  So who knows whether Brexit will actually occur and if it does experts predict about 28-36 months for it to happen.  Secondly, the true impact has already been felt as investors panic and seek solace in Treasuries.  As the Washington Post reported, "Brexit has spawned the recent bout of volatility in global financial markets.  That has anxious investors scurrying  for safety--and few assets are safer than US Treasury bonds.  High demand for government debt pulls down interest rates."  Having reported this, however, it is unlikely they will stay down permanently because of Brexit.  In fact, we are seeing the markets settle already.   Much larger issues loom for Southern Californians than Brexit; namely affordability, scarcity of inventory in general, and affordable housing in particular.  The rental market has also never been tighter than it is right now, as the median price hits its 2007 boom price point; more on that later.  What Brexit does do, is keep the lid on interest rates, and focus on real estate as a safer bet than financial markets, particularly the world financials since most investments are heavily blended at this point.  Many investors will like the closeness of the real estate investment and the solid nature of a fixed commodity with ability to leverage the investment dollar.  These attractive attributes are always present in real estate, and exist for the common homeowner, with a tax deduction for interest, as well as the seasoned investor.  Long term impact will no doubt play out, and frankly, we have other mitigating factors affecting the market as well, chiefly the presidential contest.  National elections always spur some waffling over the unknown but the 2016 campaign may cause more worry than most.  What does bode well is the general health of the So Cal economy and the jobs being added.  Workers are working longer and maybe pay raises are long in coming (this being the weakness economically, is wages pacing appreciation), but overall read on to find out why there is reason for optimism...

IT'S OK TO CHEER THE RECOVERY

This was the headline in the Sunday OC Register on a recent Sunday morning, written by Jonathan Lansner.  He reports that the OC is in the midst of the sixth year of a recovery, and reminds us that we are recovering from an event no less catastrophic than the great depression.  Although the article reported that 3 separate reports detailed issues ranging from: 1) Elite workers make too much  2)Many workers aren't paid enough  3) We don't have enough elite jobs-- we still need to have some gratitude for where we are today.  Southern California is a unique blend of industries.  Perhaps in some ways this has slowed our recovery because we don't have a "boom" industry.  We have tourism, manufacturing, service labor (malls and entertainment), Hollywood, technology, marketing, etc.  One drags, and there is a drag on the local economy.  However, given where we started, and considering all homeowners have been fully qualified and vetted for their home loans, expect a price adjustment next year...maybe.  There is no bubble.  There is only a reason to be optimistic about where OC and So Cal are headed.

WHAT WERE THE ACTUAL NUMBERS?

Home prices nationally, according to the National Association of Realtors (NAR) and Freddie Mac, rose to $239,700.  Sales also rose 1.8% month over month, and 4.5% year over year for May, the last complete month.  There is a 4.7 month supply and that is down 5.7% year over year.  Sales for existing homes have hit their highest in 9 years with 5.29 million (May 2015 -May 2016).  Here in the OC home prices hit pre-crash highs as was reported last month.  But Southern California isn't alone in this as 4 different markets established the same trend:  1) San Jose  2) Denver  3)Dallas  4) Portland.  The median home price for May, 2016 is $651,500 (CoreLogic).  As of June 7th, inventory for OC was 6,868, and that number is actually climbing.  If inventory continues to rise, this will give buyers more choices and sellers more competition, which could create that price adjustment mentioned in the previous section of this newsletter.  Median price per square foot actually went down to $374.47, but reflects that larger homes are selling.  Distressed sales have been hovering between 130 and 140 per month and comprise a small percentage of the total sales for the month.

HOW TO SOLVE THE REGION'S HOUSING CRISIS

This is another recent headline whose article makes a valid point.  Southern California and in particular Orange County, must stop thinking of itself as a suburb of Los Angeles and start thinking of itself as the metropolis it is.  Wonderfully situated between 4 counties, this helps supplement and diversify where people may be working.  But in order for people to continue to live in Orange County, high density housing, just as you see in every major city and metropolis, will no doubt have to occur.  In fact, Governor Brown has presented a plan to fast-track construction of apartments and condos if the developments will also include affordable and mixed housing.  Between the need for housing and what is most likely a permanent drought for the foreseeable future, Southern Californians will have to bid adieu to the sprawling ranch style homes and the green lawns that accompanied them.  If you are lucky enough to live in one of those, hopefully you will embrace native plant landscaping and for millenials and boomers alike, there is a new home prototype...efficient housing.  

HOUSING PRICES NEAR ALL TIME HIGH-- OC CITIES AMONG FASTEST GROWING IN THE STATE--THERE IS NO BUBBLE

When many people see the way prices have climbed the past 3 years, it's easy for the untrained analyst to think there is a bubble.  But the truth is there is not a bubble.  Prices have not been propped up by straw buyers, stated income loans, or under qualified borrowers.  Today's borrowers have been vetted and re-vetted to ensure that they qualify for their loan.  These underwriters of loans are checking employment, source of funds, how seasoned the funds are and confirming that the income the borrower is showing on everything from paystubs to W2's,  is real income  and that that income is going to continue past the year of the application.  And today's buyers  have a down payment.  Yes there is some 3% and 5% down products out there, but by and large we are looking at 10%, 20% or more as a down payment.  Prices have climbed because of the cheap money, something this column has mentioned on several occasions.  In fact, the opposite of a bubble should occur on this economic watch as people's loans are frozen at three and a half percent interest rates, guaranteeing them low housing costs for as long as they reside in that property.  Orange County continues its strong growth, with Lake Forest and Irvine coming in as 2 of the top 10 fastest growing cities.  If you have noticed the development in Brea and new businesses in Fullerton, north Orange County is also anchored in solid growth.  Just in the last 30 days has inventory started to climb a little bit, giving buyers more choices.  More sellers have joined the spring marketing season, creating competition and perhaps giving buyers a respite from upwardly spiraling prices.  It would still be wise to contemplate buying a property now, as interest rates can't stay this low forever.  The Fed has tried on several occasions to raise short term rates, and has been forced back after a week or two.  This has made the cry to buy a home while rates are low, sound a little like the boy who called wolf, but rates will go up.  An election is looming, so who knows?  If you can, you should.  

WHAT WERE THE ACTUAL NUMBERS?

The numbers for March, the last complete month, are available.  The median price in OC was $625,000, third highest since the recession. The all time high was $645,000 in June of 2007.  If appreciation goes up 4% through June, we could see a median price of $653,640.  The total number of sales for March was 3,181, the highest number of sales in the last 6 months and the best March since 2006.  Orange County saw 430 new homes close escrow and that was up 26.5% from March of 2015.  Single-family and condo resale numbers hit 2,751.  Days needed on the market to sell if you were listed at $750,000 or less was just 37 days.  Monthly mortgage payment averages hit $2,962.  As of mid-April, apartment rents hit an average of $1,753; obviously single-family homes and condos traditionally rent much above that number depending on bedrooms and lot sizes etc. 

SETTING A SALES PRICE CAN BE TRICKY

There are many factors to consider when pricing a home.  If a homeowner over values the improvements, or puts more value on a view or location, they can easily overprice the home and thus discourage not only offers, but even showings of the property by agents representing their buyer clients.  If a seller is too anxious to move or doesn't understand the value of a new kitchen or bathroom, two very in demand improvements, they could undersell their property and leave thousands of dollars on the table.  This is why a real estate expert is so important.  Not only are they impartial about value, but they see things the owner cannot.  Of course recent sales must also be accounted for and considered.  But it is very important to understand that comparable sale and why it might have been higher or lower than your subject property so it can be properly explained to an appraiser when the time comes.  The first 30 days a property hits the market is its best time to generate excitement, showings, and previews.  Making sure your property is correctly perceived is more crucial than ever.  Professional photography, including drone coverage when applicable on a larger, more exclusive property, will show off your home to all those internet shoppers mentioned in an earlier paragraph.  We are a global housing market and a house has to dress the part.  

WELCOME TO 1036 UNDERHILL IN PLACENTIA

FURTHER PROOF THIS ISN'T A HOUSING BUBBLE...SHORT INVENTORY HERE TO STAY

Many people, understandably, are worried about a housing bubble.  After seeing the median price climb month over month for 48 straight months (CoreLogic), it's understandable, that to the untrained eye, it could seem that way.  But this column, and the Keeping Current Matters National Blog, have both pointed out that the appreciation is simple economics of supply and demand, coupled with cheap money, i.e., low interest rates.  Consider the following quote from Lawrence Yun, the Chief Economist at the National Association of Realtors, as read in Forbes, "Even though home prices are climbing far above people's income, exceptionally low mortgage rates have permitted people to buy a home without overstretching their budget.  For someone making a 20% down payment, the monthly mortgage payment at today's mortgage rates would take up 15% of a person's gross income.  During the bubble years, it was reaching 25% of income.  The long-term historical average is around 20%.  Therefore, a middle-income household does not need to overstretch their budget much if at all to buy a typical home."   (Bear in mind also, this quote doesn't address the fact of all the "stated income" loans, during the housing crisis, where the monthly payment approached 40% after the "teaser" year).    In fact if you look up the chart, recently published, from the Joint Center for Housing Studies, of Harvard University, you would see that the median payment for the US through 2015 was $858 as compared to the top of the market in 2006, when it hit $1,305.  For those So Cal citizens that would love a payment of that size, (think California prices), remember our median income is much higher.  The bottom line is interest rates have continued to fuel demand for housing.  That demand has caused increases in prices.  However, after torrid years of appreciation in 2013 and 2014, last year slowed to about 6% overall and 2016 is predicted to hover between 5% and 6%.  Housing should stay solid for the remainder of this year.  What happens post national election, is always a bit of an unknown. 

PERHAPS THE MOST COMPELLING EVIDENCE OF NO BUBBLE LIES IN EQUITY

It is hard to have a collapse in prices that dictates a bubble burst without a collapse of jobs and over encumbered real estate to go with it.  In fact, 91.5% of homes in the U.S. have equity according to CoreLogic.  To add to that amazing figure is this one:  2016 will either restore or add an additional 850,000 homes to equity based on just a 5% appreciation rate for the rest of the year, which seems highly likely.

6 REASONS TO SELL NOW

There are some very persuasive reasons for a home to hit the market.  Here are a few... 1) Less competition - Whether your home is in a perfect location or not, perfect condition or not, it can never hurt to have less competition to be able to dictate your price and terms.  2) Multiple Offers - It is always a boon for your agent to be able to tell the other agents representing their buyers, that there are multiple offers.  This brings a highest and best offer much more quickly and cuts down on haggling.  3) More qualified buyers - Simply more people means more options for all cash buyers or well qualified and probably no contingency for sale of another home first.  4) Low interest rates - Better for you if you are moving up, better for qualification of the buyers that you have.  5) Buyers with added purchasing power.  Those lower rates can make it easier to pump up the sales price because the money is so cheap.   In other words, adding more to your sales price doesn't raise the monthly payment all that much.  6) More exposure for your home - Fewer properties advertised in the paper, on FaceBook, Zillow, Trulia, and anywhere else you can think of.  More people will see your home, because there aren't that many homes to see.

WELCOME TO 1036 UNDERHILL DRIVE IN PLACENTIA

Gorgeous front yard features new landscaping with drip system and slate walkway. Upon entering you will see an inlaid stain glass door which leads you to this stunning custom built in office with dovetail joint file drawers and cabinets. Home also features hickory hardwood flooring and imported Italian tile throughout the downstairs. All windows have been tinted and windows and doors have casings. Raised baseboards and crown molding throughout as well as rod iron on staircase. Home also features plantation shutters and a gorgeous precast fireplace mantle. Family room boasts a beautiful built in entertainment center and is pre wired for surround sound. Kitchen features upgraded stainless steel appliances, granite, and reverse osmosis water system. Master has a private balcony overlooking the 11th fairway and has Hunter Douglas sheer blinds. Master bath features Italian ceramic tiles, upgraded counter tops and jacuzzi tub. Master closet boasts custom island, racks and shelves. Upstairs also features a large loft, secondary bedrooms with built in shelving in closets. Garage has epoxy sealed floors, 75 gal. hot water tank, custom cabinets and workbench as well as water softener. Backyard features stainless BBQ, New Umbrellas and upgraded drip system. 

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WELCOME TO 1037 FUCHSIA CIRCLE IN PLACENTIA

GORGEOUS turnkey upgraded home. This amazing home features a gourmet kitchen with custom cabinets, self closing drawers, and granite counters. Beautiful slider off the kitchen leads to a very private and covered patio. The home has hardwood floors and brand new carpeting in the living room. The house has been freshly painted inside and out with a very neutral palet making it fit for many years to come. The house was upgraded with brand new bathrooms that feature travertine showers, beautiful granite counters and custom lighting. There are also custom built in closets and drawers in each of the secondary bedrooms. The master bedroom features a walk in closet and a secondary closet, a slider going out the the backyard and a private ensuite bath with stunning lighting and frameless shower door. This home is also outfitted with solar panels to keep those electric bills next to nothing. Home has upgraded roof and cement roof tiles put on with solar within the last year. Home also features a water softener and outdoor pantry for more storage. The furnace, air conditioner, water softener and water heater have all been replaced in the last few years. There is RV parking on both sides of the home for RV or boat. Owners show so much pride in their home and just had the  front yard completely redone and landscaped with gorgeous plants, trees, grass, malibu lighting and a very comfortable, quiet new patio. There are white shutters and newer windows throughout. The backyard is so serene with the utmost privacy. There is a really nice patio cover with warm lighting to enhance the mood and relaxation. The backyard also features a jacuzzi for fun summer nights. 

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WELCOME TO 530 BROWER AVENUE

Gorgeous upgraded home in a the most desired area of North Placentia. This home is an entertainers dream with it's grand entrance and circular staircase and large formal living room with 9ft. ceilings throughout. In the family room you are greeted with marble fireplace and an executive office with over 30K in upgraded built in bookshelves. Family room has surround sound. Marble flooring throughout the main floor. A downstairs bedroom with full bath. Upgraded kitchen with granite and stainless steel appliances with a walk in pantry. Upstairs boasts a large loft and 4 bedrooms, each with their own private bathrooms. The princess bedroom has a very large step up bathroom and additional closet space. The Master features a very large master bath with marble throughout including the tub and counters, walk in wrap around closet and separate soaker tub and shower. This home has an active home security system. This is one of the largest most prestigious homes in Placentia. North facing it is one of the best lots as well with no neighbors behind to peak in while you entertain. Backyard fountains to enhance the ambiance and little to no maintenance. NO Mello Roos or HOA. Come see what you are missing. 

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NATIONALLY AND LOCALLY, EXISTING HOMES BOUNCE BACK DESPITE LOW INVENTORY

Resale housing saw an increase of 14.7% comparing month over month (November 2015, the most current, complete month available), and 7.7% year over year for 2014 compared to 2015.  According to the National  Association of Realtors (NAR), these increases were in spite of historically low inventory.  As stated before in this column, a 6 month supply of housing inventory is deemed a "normal" market.  Currently the country is at 3.9% and the Southland here is a bit lower.  In fact, the country is down 12.3% from a year ago (We currently have approximately 4,300 homes for sale).  The current sales trend, which has huge traction when you consider we have now gone 46 consecutive months with gains, comparing each month with the same month the previous year, continues to show a strong economy and still burgeoning demand.  The national median home price is $224,100, which is probably enough to make a Southern California homebuyer cry just a little.   However, to ease the blow, let's remember when you buy that property for $200,000 in Kansas, you're still in Kansas when escrow closes.  Just a little real estate humor, making the point that, So Cal offers a lifestyle and weather that is pretty hard to beat.  Not only are homes selling, but they're not taking very long to do so; case in point is the national average of "days on market" is 58 days, but 32% sell in less than a month.  Nationally distressed homes comprised only 8% of total escrows, a number that continues to decline monthly.  Certainly there are things happening globally right now with China's economy and the absorption of Syrian refugees into European economies that will have some local impact economically.  Whether housing will be one of those, or will stay as resilient as it has been, remains to be seen.  Fortunately, population increases and new households continue to fuel demand and with money remaining cheap, and likely to stay that way (in the 4% range, hard to say that would be a buyer's concern), consumer confidence is likely to be key.  How good are people feeling about their prospects?  As was written on a blackboard of a 1990's political campaign office..."it's the economy, stupid."

WHAT WERE THE ACTUAL NUMBERS?

The median home price for December rose to $630,000.  That is only 2.3% behind the pre-recession high of $645,000 which we hit in early 2007 before the big crash.  Don't expect that crash now as homeowners were properly vetted and qualified for their home loans and for the most part, these homeowners enjoy interest rates in the 3's, mostly fixed rates and no negative amortized loans eating away at their equity as they make a minimum payment.  For the last 8 years, over 85% of all loans have been a fixed rate loan, either 30, 15, or 10 years.  This bump up in the median price probably has as much to do with pricier homes selling, hence driving up the median price, but still very perky demand has kept prices close to and sometimes exceeding the asking price.  The January median price per square foot is $362.67, which does reflect desirability of a home and its location, as much as simple demand might indicate those as being unnecessary.  In fact, location and condition will always drive prices up or down.

THE FED'S THINKING ON RATES AND THEIR SUBSEQUENT HIKES, SHOULDN'T INFLUENCE YOUR THINKING

What exactly is meant by that?  Simply put, what the Fed does, is all about short term rates and the target that the Fed sets for overnight bank lending rates and how  it buys and sells securities to keep market rates at that level.    This has some impact on long term rates, but has more to do with the global economy, the fluidity of world- wide cash, what is happening with inflation, oil, gas, futures.  In other words, their agenda has nothing to do with your agenda.  Neil Irwin of the New York Times states in a recent article, "You should make your borrowing decisions based on current market rates and whether they make a given home purchases or refinancing decision affordable.  Assume that neither you, your mortgage broker, nor your Uncle Ned, who watches a lot of Wall Street sharpies on CNBC, has any predictive capacity to know whether rates will be higher or lower a month from now.  Mortgages are usually based on long-term interest rates, not short-term interest rates, and the Fed is not on some preordained path; rather, its policy will adjust depending on how the economy evolves."  When it is time for you to buy and you have found the right property, you will want to go forward because it is part of your economic strategy for your circumstances.

PREPARE YOURSELF FOR THE BOOMERANG BUYER...WHY LISTING NOW MAKES SENSE

It is a mystery to those of us who have our career and education in the real estate market, as to why there has always seemed to be a "spring selling season."  Anytime of the year truly represents its own challenges and rewards and it may be that no time is better or worse than any other.  For example, yes the holidays due slow down,  but homes show the best when dressed for Christmas and buyers who are in the market during that time are deadly serious about finding a home and likely to pay top dollar.  So now we find ourselves with sellers getting ready to go on the market; wanting to wait for the "spring season".  That could cost you money, because everyone is doing the same thing.  The result?  The market goes from (national numbers) 1,860,000 homes for sale -- to 2,280,000.  What does it mean?  You have more competition.  You have fewer offers.  Buyers have more choices.  Not necessarily the best scenario for a seller.  If you need to sell... why wait.  List now before your competition does.  And you needn't worry about buyers, at least probably not this year.  According to NAR, 1.5 million "boomerang buyers" are re-entering the market, having now recovered their credit from their previous foreclosures and/or bankruptcy.  Add in the millenials setting up their households and aging baby boomers who decided to work 5 more years, and now 5 years  is up and they are retiring, you have an interesting mix for our upcoming spring/summer markets.  

HAPPY NEW YEAR!! 2016 PROMISES TO BE ANOTHER SOLID YEAR FOR REAL ESTATE

The economy continues to roll with jobs being added at a brisk rate in Orange County and Southern California. The most current stats available are from November 2014 - November 2015 with 39,000 (non farm) jobs being added. Unemployment dropped in November to 4.2% from 4.3% in October, both 2015. Why should this be another solid year? The economy is poised to keep growing, this latest jobs report a 2.5% increase year over year. The Feds did in fact raise the short term rate, the rate charged to banks. However, for most lenders, this increase was factored in a month ago and expect to see very little change in long term rates. This should keep buyers very interested in the current market. Remember that experts have cautioned that the price of money must rise at some point, as soon as inflation is spotted, but economically, that hasn't happened yet. This speculation of when and how much will likely drive true buyers to make a decision to buy sooner rather than later. And sellers need to be aware that they must stay realistic in the pricing of their home, because new inventory will hit and hit hard in January, creating more competition for sellers. Ultimately what could keep a lid on pricing is a rise in interest rates causing borrowers price point to go down as monthly payments rise in response to higher rates. So perhaps, "he who hesitates is lost," is not a bad bit of advice if you plan to buy in 2016.

WHAT EXACTLY HAPPENED IN 2015?

There was a lot of movement in all sectors of real estate, another sign of a healthy market. By that, please note that there was a giant merger between homebuilders, there was release of an ocean view community, in the works for 40 years; there were many high priced, high profile listings that hit the market, not the least of which was Richard Nixon's Western White House. The median price most currently available at press time is $623,000 with the average for the year at approximately $604,000, up 4% from last year according to Corelogic. This was almost exactly what had been prognosticated by real estate economists, which also gives credence to 2016, as this is nearly the exact growth predicted for 2016. Sales were up regionally and overall, according to real estate analyst Steven Thomas of Reports On Housing, "There was real price appreciation as buyers clamored to take advantage of interest rates before the Fed made their move." But rates have been so low for so long, that it is clear this isn't the strongest or only motivator for buyers. Another factor: housing prices weren't the only thing making news in 2015; rents rose astronomically compared to housing prices. For most millenials entering or re-entering the market, their motivation was simply getting their ducks in a row-- money saved, debt paid down, and in general recovering from the great recession, and many intentionally guided themselves back into the housing market.

WHAT ARE THE ACTUAL NUMBERS?

These numbers through December 7th: 1) The inventory in OC was 4,972 down from 5,388 just two weeks earlier and down from 5,885 a month ago. 2) Million dollar plus listings equals 34.2% of all listings 3) 182 listings are foreclosure or short sale 4) Total number of sales for the 30 days November 7th - December 7th was 2,992 up 1.6% 5) new homes comprised 337 of those sales, down 4%. 6) Adjustable rate mortgages still comprise a small piece of the lending pie with only 15.3%. 7) 10,664 - Orange County building permits for single and multifamily homes hit the highest level in 15 years.

WHAT DID THE AVERAGE 2015 BUYER AND SELLER LOOK LIKE, ACCORDING TO THE NATIONAL ASSOCIATION OF REALTORS?

The typical buyer was 44 years old and had median income of $86,100, and 83% of them bought a detached single-family home. Here are some other interesting stats: A) 87% of buyers bought their home through a real estate agent or broker. B) 32% are first time buyers. C) Buyers expect to stay in their home 14 years (compare this stat with how long the typical seller actually stays.) D) 88% of buyers would use their agent again or recommend their agent to others. TYPICAL SELLER: A) Their age is 54 B) The typical tenure in the home is 9 years. C) The most common reason for selling a home was that it was too small, followed by a job relocation, D) 89% of home sellers worked with a real estate agent to sell their home. E) Only 8% of recent home sales were For Sale By Owner. This is the lowest share recorded since this report started in 1981, further underscoring how complicated a transaction has become, especially in California.