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.