I got an email from a client and friend this morning.  He and I have had some wonderful conversations about the market over the last couple years.  As I was putting together an email for him – I thought this is a great topic for ‘The Voice’.

 

The good news in Orange County…Steven Thomas, Re/Max Real Estate Services’ President, wrote in his May 29th Market Time Report, “Current Orange County houseing demand not only obliterats 2007 levels, but it now has surpassed 2006 levels as well.  Demand has reached a mark not seen in 24 months.” 

 

So what is holding back a real estate recovery in Orange County?

 

?  Short sale inventory- I’ve said it before but it’s worth repeating…this is dramatically impacting the market.  Banking institutions could easily improve this by changing their approach and preapproving a hardship and determining a short sale price before properties hit the market. 

My Dad was a stockbroker and has always said, “Buy on bad news, sell on good news.”  Over the years he’s made great money with that strategy.  As soon as everyone wants to buy – he’s out.

I’m not sure the philosophy ought to be much different in the housing market.  Yet the fear, the challenge in the financial markets, and the negative remarks from friends and family is keeping buyers out of the market.  But how long do you wait on the sidelines?

May 29th, Jonathon Lanser had an interesting article in his blog about the 15.4% decline we’ve seen and that a recovery may not be until 2010.  Clearly not good news. 

The worst of the decline may very well be behind us – but the recovery is not here yet.  Maybe this is the window of opportunity.  Michael Carney, the Cal Poly Pomona professor who heads the Real Estate Research Council of Southern California said, ”Once we get people thinking prices will go back up, we will see a fast turn. There’s a lot of money ready to go.”

It may not make sense to wait for the ‘good news’ that prices are rising again and if Carney is right, how quick can you get in on that ‘fast return’?

This has been a hot topic around the Capo Unified School District (and I’m sure all over the state), but today specifically, I’m bugged.

I was at my 2nd graders Ancestor Day at school (BTW – he fainted during the performance – poor little guy), but I was speaking with his teacher afterwards about the ‘Good News’ that teachers’ jobs have been reinstated.  And yet, it’s not all good news.   Honestly, I expected to hear relief from her and instead, I got a bit wake up call.

According to the June 3rd article in the Orange County Register, “… about 70 percent of the district’s bus routes are slated to be eliminated, and none of the non-classroom classified staff who received layoff notices will be reinstated. A total of 161 classified and management positions will be cut under the plan.”

She shared her knowledge about the way districts are funded.  It varies district to district and the source of the funds will often be dramatically different.  For example, our district, Capo Unified School District, has approximately 70% of funds coming from the state and approximately 30% say from local taxes.  Others may have the opposite ratio.  When government cuts come, our district is dramatically impact, where others may not be.

And we are actually fortunate; the good news for our district is the level of parental involvement.  Parents raised $1 million dollars to keep the teachers we value so much – not every district has the parental volunteers or the financial resources to make that kind of local difference.

What does this mean for those children in other districts? 

What I want to know is – why does the funding for our public schools vary so much from district to district?  For all the rhetoric, and the ‘no child left behind’, I don’t see it at the school level.  Potentially, my daughter heading into 1st grade next year, could have faced at 32 to 1 ratio.   That would have been up from the 20 to 1 ratio!

 And with parents fronting $1 million dollars to save their public schools, there is no pressure to fix this problem at the government level.  California is 47th in the nation in educational funds per student! 

In the last 3 weeks I’ve donated money, volunteered at a fundraising carnival, donated cookies and worked  a bake sale and a book fair.  If we don’t develop a more cohesive and broader scope solution to this problem, the discrepancies amongst children’s education become too large.  That, to me, is a serious statewide problem that can’t be fixed with bake sales.

It was not long ago, lending was easy, too easy. Did you need money?  No.  Did you need assests?  No.  Did you even need to prove you had income?  No.  So why do an FHA loan?  We didn’t.

Times have changed and there are limited options for first time buyers that aren’t coming away with a ton of equity from the sale of their last home.  Fortunately, there is FHA.

The Federal Housing Adminstration, or FHA, provides mortgage insurance on loans utilizing FHA approved lenders.  The buyer must qualify but only needs a limited down payment. The key here is that if the buyer is looking at condos, the complex must also be FHA approved.

I recently took a listing in Rancho Santa Margarita.  It’s a well priced condo by RSM Lake.  A 2 bedroom, 2 bath home with a 1 car garage, it’s one of the few traditional sellers in that price range.  No waiting for the banks – but with no FHA approval currently on the complex, we have cut some of the great first time buyer pool that would be great for this home at $285,000.  In the meantime the Brisa Del Lago is working on getting that approval again.

And therein lies the problem.  Whenever a complex has had a litigation of any kind, they loose their FHA approval and must go through several steps to regain that FHA approval once that litigation is settled and work completed.

Because FHA lending has not been an issue for some time, many complexes not only let their FHA approval lapse, but once the litigation was resolved, many of the homeowners associations never renewed the applications.  No one complained because no one was applying for FHA loans.

The Homeowner Associations owe it to the homeowners to get this issue resolved sooner rather than later to maximize the buying pool for their homeowners.

If you are a buyer or an agent looking for a condo, check to make sure it is approved by FHA.  If they are not approved, hope is not lost.  Find out if your lending can do a ’spot approval’ for that one unit.  More and more lenders are working on this while condo’s are processing the applications for renewed approval with HUD, U.S. Department of Housing and Urban Development.

Orange County condos and homeowner associations are working on this but it will take some time to catch up to the changing buyer pool and lending restrictions.