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.