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

MEDIAN PRICE -- UP...INVENTORY -- WAY DOWN... SALES VOLUME -- UP

What a month it has been!  It's been chaos if you're a buyer trying to find a property, and a little déjà vu if you are a seller that is getting multiple offers on your property that's for sale.  That being said, however, we are not seeing the double digit appreciation that was present in 2005 and 2006.  That is a good thing, as that was the start of the bubble that burst and caused the subsequent crash and the very slow recovery we are now enjoying.  September numbers brought some interesting news for Southern Californians.  (More specific numbers to follow.)  The median price was up 5.9% versus September a year ago.  There were 23,977 sales and that was up 16.2% from the previous year.  October numbers that are found in the next section, were even better.  But a really interesting fact from the last month of the third quarter was that local zip codes showed improvement in 53 of 83 for the county.  That shows that there isn't a concentration of business or growth in just hard hit areas such as Santa Ana, or south Orange County, where investors are flipping properties.  In fact, sales for October, the last complete month available, show that move up buyers, that elusive quadrant, has finally reemerged and these buyers are entering the market.  Obviously we need more to do so, because of inventory limitations, but it has started.  The upper end of properties over 2 million is moving more robustly than it has since 2006.  Finally, a last bit of good news is that home construction is finally on the rise, seemingly for good, not just a sputter of one or two developments, but begun in earnest by multiple builders.  In fact, 1,700 construction jobs were added as compared to September 2011, according to the Employment Development Department. This is good news, because without that vital addition of new homes, we would really see an inventory bog down in the next 2 years.  

WHAT WERE THE ACTUAL NUMBERS?

According to DataQuick, southern California home sales rose sharply in October as the previously discussed move-up buyers joined investors, shifting the mix of homes selling from the first time buyer, or investor looking for rental scenario.  Foreclosures hit a 5 year low, as short sales continued to move front and center as the primary distressed listing.  Make a note, however, that standard, or equity sales, are making a comeback as non-distressed owners may enter the market in an effort to sell and move up, or exit Orange County to become a retiree and move elsewhere.  The October total was 21,075 homes sold in Los Angeles, Orange, San Bernardino, Riverside, San Diego, and Ventura counties.  That was up a whopping 18% from the 17,859 sold in September.  The median price for the Southland was $315,000 in September and October, and that was up 16.7% from the $270,000 of September 2011.  Short sales made up an estimated 26% of the resale market in the Southland for October.  The total number of sales for Orange County was 3,148, which was up 40% from the same period a year ago.  The total number of resale houses was 2,066 and condominiums had 882 sales. New homes came in at 200.   The median price for all homes was $455,000 and for single-family it was $511,000.  The median price for condos was an even 300. Interestingly, buyers paying with all cash hit a near record 32.1% for southern California.  A final number which is somewhat sobering... 57% of all homes for sale, had multiple offers.

ORANGE COUNTY ECONOMY REBOUNDS IN FORECAST

So read the business section headline of the Orange County Register on October 25th.  Specifically, it was talking about the Cal State Fullerton economic forecast for next year.  They expect a continued rise in home prices, and lots of construction jobs in 2013.  The next highest sector will be professional and business services, followed by leisure and hospitality.  What's really interesting is that earnings of large companies have outpaced their own forecasts, yet no one really seems to feel really good about it.  More jobs were added in September than originally forecast for the nation, and Orange County seems to be holding its own in this parameter.  Interest rates are at a 15 year low, home prices throughout California have risen for 8 straight months, and the job sector is looking positive.  Recovery?  You didn't hear it here, but could it be Orange County's dirty secret?

INVENTORY SLIDES, GEN X AND Y, WANT TO BUY, AND THE SMALL INVESTOR

Los Angeles inventory is down 37.1% and Orange County is about there too.  The city taking national honors for the biggest slide is our own San Diego with 40.7% (according to the national KCM Blog.)  Generation X and Y, in a recent survey, were asked, "what is a fundamental indicator of success?"  A whopping 75% said it was owning a nice home and only 12% said an extravagant vacation.  Home ownership is in America's DNA.  Should the small investor attempt to buy a single-family property as a rental.  Only a discussion with your financial planner can tell you what's right for you, but here are some thoughts... 1) Nationally, rental leasing volumes were up every month for 2 years.  2) Supply of available rentals is down 11% in the same period.  3) Rent growth is expected to increase at a very strong clip in 2013. 

THE TALK OF THE TOWN IS LACK OF INVENTORY...IS HOUSING THE COMEBACK KID?

If any of us paid any attention at all to all the various headlines in Augusts' business sections in any newspaper in southern California, then you noticed a couple of items.  Firstly, we are grossly below seasonal averages for inventory.  In fact, many cities in Orange County are below 2 months.  The city with the largest inventory, not surprising with the high end prices, is Newport Beach, with 5 months.  Some very skeptical economist are wading into the shallow end of opinion, that housing is making a recovery.  Not only is it making a recovery, but in fact it is one of the most solid pillars of the current, albeit weak, economic recovery.  July's housing sales volume jumped 25.7% from year over year 2011 to 2012.  In fact, according to an article in the Los Angeles Times business section, home prices are highest since 2008 and posted a 2% rise in July.  According to research firm Data Quick, the region's median home price hit $306,000, reflecting that 2% rise from June and 8.1% year over year.  Supply and demand will once again factor in the region's prices.  According to Data Quick President John Walsh, "There's growing evidence prices have crept up in areas where more demand has met a shrinking number of homes for sale."  There are many positive factors for housing's comeback besides shrinking inventory.  Also fueling the market is financing, overall stable housing affordability, and pent up demand for many people who have sat out the market for years.  They are coming back in droves.  Don't expect a substantial rise in inventory any time soon.  The time for sellers and buyers to act, may just be right now.

FIVE BIGGEST REAL ESTATE OPPORTUNITIES GOING FORWARD

1) The 6,000,000 25-34 year olds who are still living at home.  This generation scored over 65% on belief in home ownership and a desire to buy.  2) The "green" initiative.  Conserving and changing how we live in our homes will shape the next 20 years.  This is both for new construction, which will be hurrying to catch up once it starts up and also for existing home improvements.  3) The ever increasing Latino population and their belief in home ownership.  4) Baby Boomers rapidly approaching retirement with special housing needs, the need to downsize, and also their financial aid to their children to buy.  5) The new opportunity in short sales.  The banks continue to see its usefulness as a tool to reduce bad loans, and this will continue to create buying opportunities to the patient buyer.