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.