November 2008 Individual
HOUSING MARKET DRIVEN BY BARGAIN HUNTERS… The question of whether the current housing market is good or bad depends on your perspective and position in the transaction. Clearly, this is a good time to buy, just check out the headlines of the past few weeks: BARGAIN HUNTERS HELP SHRINK HOUSING GLUT (Wall Street Journal), or LOW HOME PRICES LURE MORE BUYERS (LA Times), or FORCLOSURES HELP SEPTEMBER HOME SALES SOAR 65% IN STATE and O.C. HOME DEMAND NEARLY DOUBLE LAST YEAR’S (O.C. Register). But these driving headlines are not the same thing as positive headlines.
Yes, buyers that can buy are loving this market. Soon, investors will enter the fray and they will like it too. But it all has come at a price. The credit crisis has stabbed America in its heart of hearts, the right to the American Dream, i.e. home ownership. Many Americans are forfeiting that right, albeit through their own poor decision making. We all know now, there is no free money. The question many are asking is, “When will the bottom come?”
According to Dataquick, and as quoted in an article by Peter Hong in the LA Times, “the Southland median is 33% less than a year ago.” This includes some sorely troubled areas in the Inland Empire, also in Los Angeles, and a few spots in O.C. such as Santa Ana and south Orange County. The demand for OC housing did double from last year, but pending deals have fallen in the past two weeks, likely seasonal as much as anything else. Projections for 2009 call for another decrease of 5% to 9% (the Kiplinger Editors project 10%) and possibly more properties in the multi-million category as they truly haven’t taken a substantial hit yet. (OC Register)
WHAT WERE THE ACTUAL NUMBERS… California had statewide estimated sales for September (the latest month available) of 40,317 including new and resale houses and condos. That number is up 6.1% from 37,988 in September a year ago. A number that is staying fairly consistent throughout the state and held true for Southern California is that approximately half of all sales are bank owned properties. The overall median price in California dropped to $283,000, down 6% from the previous month and the median for Orange County dropped to $425,000, a drop of 25.4% from a year ago. The total number of sales for O.C. was 2,667, an increase of 62.3%. The break down of those numbers is as follows: 1,732 single family resale, 750 condos, and 185 new homes. Housing construction will not rebound much from the lows of 2008. According to the Kiplinger California Letter, “The latest Construction Industry Research Board report forecasts…work to start on only 74,000 homes, about half of them condos. By contrast, there were 113,034 housing starts in 2007 and 212,960 in 2004.” (Dataquick)
CALIFORNIA MORTAGE DEFAULT FILINGS DROP AMID PROCEDURAL CHANGE… The number of default notices filed against California homeowners fell last quarter for the first time in 3 years. But the good news isn’t good. It’s primarily due to changes made at the state level. But on this note, the Bailout will change the current status quo on foreclosure. Look for many people to opt for loan modifications; if they can qualify, and if not, we may see a rise in short sales, as they may be fast tracked for a quick sale rather than the additional cost to lenders of going all the way to foreclosure. Remember a short sale is when a property sells for less than is owed to the bank, but sells subject to bank approval. If you become involved in such a transaction, make sure you consult your CPA and your lender for all tax consequences and financial liability, if any.
A RAY OF HOPE FOR THE REAL ESTATE MARKET… I have said it before, and I will say it again, real estate always, eventually, appreciates. History has shown us, particularly in Southern California, that prices will always rebound. That doesn’t mean that buying a home isn’t a serious decision in uncertain economic times. But these prices may never come around again, because most economists are calling this a “once in a century” economic travesty. UCLA EXPERTS PREDICT A RECOVERY IN THE HOUSING MARKET WILL SPUR THE ECONOMY. (Register headline Oct. 28)
The article predicts the bottom will hit in summer 2009. They expect a fall of 9% in 2009 and then to rise just 3.5% to 6% over the next 4 years after that. They predict a median rise to $523,563 in 2013. The thing about real estate, unlike other investments, is that it doesn’t go anywhere. That house, or apartment building, or land, is a fixed object, a part of the earth. As Will Rogers once said, “Buy land, God’s not making any more of it.” However, this is a somber time in our history. Decisions are not easy to make. If you have questions on anything from loan modifications, to short sales options, or having home equity and needing to sell in this tumultuous time, I am here to serve you. Please call my office for any questions or concerns regarding your situation.
