HAPPY NEW YEAR FOR REAL ESTATE?

Time will tell, as it always does, no one’s crystal ball works perfectly every year. But analysis of current conditions and data would lend one to conclude…more of the same? The answer is sort of, but not really. Yes, inventory will remain tight. This country and California specifically, has a tremendous housing shortage. A recent Wall Street Journal article criticizing the “old, vintage, good bones” theory, surmised that 700,000 new homes would need to be built for at least the next 3 years, to truly take the pressure off the resale market. That being said, inflation is at its highest in years, which has already begun to increase interest rates, and more increases are almost certain. The actual numbers, highlighted in the next section, do indeed reflect a slight cooling in volume, but not in price. That’s the conundrum that buyers and sellers will face, finding the right price. Nothing will slow a market faster than greed and unemployment. We have a bit of both. The Great American walk off may be voluntary, but it’s still unemployment. As far as greed, buyers will say enough, at some point. The pandemic will likely become endemic, but herd immunity is far from certain, with the many variants. So this will continue to be a real time disrupter. Real estate always-continues on because of necessity of housing, making it different from other areas of investment. The adage of doing your homework and seeking competent counsel remains in play for 2022.

WHAT ARE THE ACTUAL NUMBERS?

The latest complete month available is November 2021. All numbers are year over year comparisons to November 2020. The total number of sales was 3,181, a slight decline of 3.5%, however the median price for all sales was $919,000, a 14.9% increase from the previous year. The resale market rose 17.3% to $1,032,000, but sales dipped 3.2% to 1,977. Condos had the greatest appreciation coming in with a median price of $650,000, a 19.5% rise. Sales were also off with a total of 893, a 4.3% drop. New homes were fairly static, the median price $941,000, up 0.2%, and sales off 3.1% with 311. The average monthly payment rose significantly to $3,939 from $3,464, a reflection of both higher rates and prices.

WHERE WILL TECH SHAKE UP THE MARKET?

1) Mortgage approvals will speed up. 2) As a result of #1, appraisals are agonizingly slow as there are not enough appraisers, however technology will continue to streamline virtual or “desktop” appraisals. Fannie Mae and Freddie Mac have already signed on. 3) Cash is king and “rich uncle” companies are stepping in to speed up acceptance times. (Home Ribbon, Unlock, and Better.com to name a few.) Remember nothing is for free, so check their fees and repayment times to obtain your own financing after close of escrow. 4) NO BLOCKCHAIN type products for now—bitcoin and other crypto currencies currently not in use. Digital assets are very different from brick and mortar. Housing continues to be quite unique in that respect. 

HOUSING APPEARS POISED FOR STRONG 2021, REST OF REAL ESTATE A MIXED BAG

 Wow, what amazing finish to one of our most difficult years ever, in terms of worry and hardship; but those who had the nerves to pursue housing were rewarded on both the seller and buyer side. The result were some staggering rebound sales numbers, the second half of 2020, (to be given in the next section), that have set the stage for an equally strong 2021. According to DataQuick/CoreLogic, the first half of 2020 plunged on average 24% in 6 So Cal counties and climbed 51%, the second half which is the greatest turnaround in 33 years. Historically, second half rebounds are a precursor for a strong year following— so far that appears to be the case. According to Jonathan Lasner’s Bubble watch algorithm, a scale of 1-5, 5 being huge bubble, we are currently at a 1. Good news for sellers, but better for buyers afraid of buying at the top of an over inflated market. These types of rebounds generally have a beneficial advantage for purchasing power, the beginning of 2021 giving buyers 2% greater buying power. 

(This according to projections by UCLA’s Allen Matkins/Anderson economists.). On the commercial side, office space is holding even, retail has slipped significantly, and the true bright spots are multiple family units and industrial. Particularly warehouse and manufacturing or assembly and distribution as Californian’s change how they pandemic shop, reflecting a massive shift to online. 

WHAT WERE THE ACTUAL NUMBERS?

Unbelievable numbers! Total number of sales for December, the last complete month numbers available, was 3,611, which is an increase of 17.7% over December 2019. (All numbers reflect year over year for the same month.). Single-family resale reported 2,254, up just over 30 %. Condos came in at 1,021, a very big number for condos, up 26%. New homes, always lagging had 336 sales, the only figure in negative territory, it represented a 36% drop. Resale median price rose 12.5% to $890,000; Condos also increased 3.7% to $544,000; New homes barely noticeable at 1.4% rise to $882,000; Finally the overall median price for all homes was $795,000 up 8.2%. Average monthly payment was virtually unchanged, but it did go down slightly from $3,485 to $3,445.

DON’T EXPECT BIG FORECLOSURE MARKET ANY TIME SOON

The top five cities in OC for notices of default, hardly constitute a worrisome scenario. Number one had an NOD ratio of 1 in 1,261 homes; number 5 was 1 in 5,273. With forbearances still active and COVID relief packages still being actively sought by Congress, most lenders may be reticent to file NOD’s unless a last resort. Realtors are here to help you navigate during this extraordinary time. 

STATE’S OWNERSHIP RATE HITS AN 8-YEAR HIGH...OR...SOUTHERN CALIFORNIA SALES PLUMMET TO 11-YEAR LOW

Are you an optimist or pessimist or realist? How you view things may decide which headline you believe is the most telling of things to come for the SoCal real estate marketplace. CoreLogic released final figures for January and that figure was 12,665 homes and condos changed hands in January 2019 — a 17.1% decline from January a year ago. These figures for Southern California from Ventura down to San Diego. However, 2018 ended with more SoCal citizens owning and living in their own homes than in the past 8 years. Low interest rates compensated for rising prices in the very best of ways, before last year saw rates rise rapidly and often, ending the year with rate hikes left buyers cold. However, if you only read the papers, you are under the impression, no doubt, that rates haven’t budged, because local columnist have been remiss to report that rates have dropped over a point. YES!! INTEREST RATES ARE BACK IN THE 4’S!! (Remember, this column never reports active rates because they can change without notice. This meant to be informational only.) In fact, 56% are owning their abodes here in the sunshine state. Yes, we are still behind many other states in that statistic. However, if you take similar metropolis areas and compare population dense areas, it will be about the same. Shame on newspapers not letting the public know that a little affordability came back with rates dropping. Many economists predict that rates will move little this first six months of2019.

WHAT ARE THE EXACT NUMBERS?

or Orange County, home sales were down 20.3% compared with the same time a year ago. For the month of January, the total number of sales was 1,778; with new homes comprising just 191 of that number, condos had 474 and resale houses totaled 1,113. For the primary ingredient of our market, the resale single-family saw prices rise just 1.5% but volume drop 14.6%. Condos fell in price 7.4% and volume 22.5%. New homes rose in price because of higher priced development releases 19%, but fell in volume, reflecting affordability issues, 39.2%. Median home payments rose to $3,503 from $3,142 a year ago. But that is median, not average. There is a house payment possibility for every buyer. Don’t be dissuaded, try to buy.

THREE GREAT TIPS FOR THOSE TRYING TO BUY

1) Automate your savings for your down payment. Don’t ask yourself every month if you want to save or how much can you put in, as something will always pull at you. Have it go to savings straight from your check. 2) build your credit history and keep it clean. Have several credit cards, use them, and pay them off every month. Stay in control and don’t get into debt. 3) Practice living on a budget. Give up lunches out and Starbucks, even if you can afford it right now. Practice living the way you would have to if you owned your dream starter or move up home. Take that money and add it to savings or for upgrades to your next home.

MILLENNIALS MAY BE TEMPTED TO RENT, BUT ACCORDING TO MILLIONAIRE DAVID BACH — DON’T...

Millionaire David Bach has a message for Millennials, don’t wait to buy. It is nearly impossible to build retirement and personal wealth without home ownership. For example, if one rents a 2 bedroom apartment for the approximate average rate of $1,800 — after 3 years a total of $64,800 will have been spent. Assuming rents aren’t risen until year 4, which is unlikely, but to be generous, let’s say at year 4 it rises to $2,000 a month, after 3 years, the Millennial has just spent another $72,000. But you spend the same or more on a house payment right? Maybe. But you also have a tax deduction, equity buildup and appreciation. When you rent, you make other people wealthy. Food for thought. See you next month.

WHAT WE HAVE KNOWN FOR A LONG TIME IS OFFICIAL...WE HAVE A HOUSING SHORTAGE

It’s all been confirmed with a Sunday headline in the OC Register entitled, “Too many paychecks for not enough housing.” Southern California, and Orange County in particular, will be short around 100,000 housing units by 2025, according to some housing forecasters. What does that mean today? Inventory is officially at its lowest ever, causing buyers to offer over list price, waive appraisal contingencies, and up down payments. Experts predict another 4% appreciation this year, with possibly no end in sight as job hiring remains strong, especially in hospitality and health care. OC Register columnist Jonathan Lansner points out in a recent article that in many parts of the country, a family can expect to buy a home around 3 times their annual incomes. But in heavily demanded areas of major metropolis’ you can expect closer to 6-8 times your annual income, depending on how lofty your ambitions are for your ideal home and neighborhood. It may not all be glum news however...many Baby Boomers will perhaps jump into this amazing seller’s market, to sell the family homestead and move closer to grand kids or resort cities with ideal climates. Perhaps Boomers who originally didn’t plan on moving may change their mind with housing appreciation they cannot resist that makes a dream home possible in another location. Also expect these boomers to help out their Millennial grandchildren, that may not be able to buy any other way. The windfall of profit from the family homestead may make some Boomers a little more generous, which would

WHAT WERE THE ACTUAL NUMBERS?

The complete month of December saw a total of 3,048 homes sold including new homes, condos, and single-family resale. This was down 5.6% for reasons discussed above, lack of inventory. Resale single-family led the way with 1,653 sales, followed by condos with 737 and new homes were 658. Resale prices rose 5.6% year over year compared with last December.

Condos had the biggest jump, typically reflecting the tight inventory and rising prices, they were up 10.3%. New homes rose the least with 3.1%. The medial price is $698,000, also up from a year ago. Average housing payment sailed up to $3,232.58 from $2,986.21. That is not all appreciation however, as interest rates did have 3 hikes last year, to officially leave the 3% range.

BANK APPRAISALS GAP NARROWS TO LOWEST IN 2 YEARS

One of the challenges of a rapidly rising market is the sometime disparity between what houses sell for and what the bank is willing to say it’s worth for the purposes of making that home loan. Many times there is a gap between them, as banks are anxious not to have homeowners get upside down, if there were a downturn in the market. The appraisers are constantly trying to balance demand/supply with true economic reality. And frequently, that line is quite blurred by market pressures. However, right now, the gap is less than 1%, indicating a solid market and true values for home prices. That home price should reflect everything from current market factors, to population, both potential gains and losses, jobs and hiring and incomes, and other driving forces such as interest rates. Southern California is proving some true endurance in the current housing market with no bubble in sight. Borrowers continue to be properly vetted, appraisers are doing their job, and down payments remain strong with conventional loans being predominant, with stated loans no longer available and FHA and VA not the dominating factors they once were.

MILLENIALS DESIRE TO BUY QUITE IN LINE WITH THEIR PERSONALITY

There are many conversations around Millennials and whether they truly have the generational personality to become a home buying generation. If you look at the following 5 reasons to buy, it is actually quite in line with what is important to the generation who wants meaning and freedom in their lives. 1) Have control over living space. No one telling them what to do in their property or limiting their sense of expression. 2) Privacy and security– Having a definite space to return to at night. 3) Live in a nicer home. Bottom line: Thanks to their parents and grandparents, Gen X and Boomers, Millennials like nice things. 4) Engaged in the community. This is very important to Millennials as is the sense that they live in a neighborhood, not just a house or apartment. 5) Flexibility in future decisions...such as moving when they want to and not when a landlord tells them to, and the freedom that equity will bring them to move elsewhere, even out of state.

ORANGE COUNTY MEDIAN HOME PRICE BREASKS $700,000 BARRIER, SETTING RECORD...DON'T PANIC, IT'S NOT WHAT YOU THINK

OMG...What the heck is happening to So Cal living conditions, i.e., housing costs?  Before full blown panic sets in, know this; the median price had a steep rise because of more new home sales, (whose median price is always highest), coupled with fewer condo sales this past month.  Equals?  A seemingly drastic rise.  Don't misunderstand, So Cal has the highest income percentage for housing costs of any major metro area in the US except New York and San Francisco.  But, before you go blasting greedy sellers and over-anxious buyers, too willing to buy anything, place some of that blame on soaring rents.  Yes.  Rent.  Rent versus buying has some disturbing statistics.  The national average of income for housing for buyers is 25.8% and for renters it is 29.2%.  Now So Cal numbers are a bit different, but with rising rents and more executive and luxury apartment complexes hitting central and south orange county, single-family rentals, really anywhere, but especially at the coast, the numbers may be different, but outcome the same.  Buying is the only way to have fixed housing costs for the long term.  There is no other way.  Southern California looks to stay in an inventory tight scenario for at least the next year, with experts on all fronts expecting no major change to the real estate market.  Interest rates, although several increases are expected for next year, historically they will remain unusually low, probably not a factor for next year.  In fact, sales rose month over month 4.6%, in contrast to inventory, showing that home buying is in our national DNA and as Americans and southern Californians, we will find a way to buy.    

WHAT WERE THE ACTUAL NUMBERS?

For the month of September, the latest complete month available, the total number of sales was 3,338.  This was up 4.6% from September of 2016.  There were 1,979 single-family resale transactions, ever reminding us that the resale home always dominates the market.  Condos came in with 859, which was off by 7.5% from a year ago.  New homes were especially strong, driving up that median overall price, with 500 total sales, up a staggering 37.7% from a year ago.  This also reflects the new housing product finally catching up with demand, just a little bit.  As would be expected, the house payment rose to $3,240, up from $2,873 the previous September.  The largest rise in pricing was actually condos with an 11% year over year increase.

LUXURY HOME MARKET STALLS, SO IF THAT'S YOUR MARKET YOU SHOULD...BUY?

Well, yeah.  Let's face it; you have nearly unlimited product, hardly any competition to worry about when you right your offer, interest rates will never let you buy more home for the money than now-- these rates are just meant for the luxury buyer.  Why wouldn't you buy?   Trulia's Market Mismatch Study has chosen right now, as THE time for this special segment buyer.   Take note.