In the latest Zippy’s Report, Orange County Register’s Jonathon Lansner’s ranking of Orange County zip codes for housing performance, showed that the hardest hit zip codes for the 3rd quarter were some of Orange County’s most affluent zip codes.

Included in the worst performing areas were Newport Coast, Dana Point, Coto de Caza (part of the 92679 zip), and San Clement.  Some of the biggest improvements were areas that have recently had some of the worst performing zip codes including, Mission Viejo, Anaheim, Santa Ana, Costa Mesa.

This may be a case of ‘Trickle Up’ economics.

I did some research for a client tonight and the findings are important to share with readers here.  If you are a serious buyer or seller, this information is telling.  Please stick with the tedium of the stats because the story it tells is meaningful.

This particular buyer is looking in Mission Viejo between $450,000 and $550,000.  He wants a single family residence.  With that criteria, I hit the MLS looking for a picture of where we really are. 

As many of you know, I’m the last person to jump on the ‘Hurry Buy Now’ band wagon.  However, if you are in this price range in South Orange County – this is speaking to you.  What did I find?

There are 40 Active single family residences currently listed in Mission Viejo between $450,000 and $550,000.  How do those breakdown?

• 19 are short sales (BTW – refer to my posts on shorts sales to understand the challenges with these sales)
• 4 Bank Owned
• 17 are supposedly equity sellers.  Upon further reading of the agent remarks in the listings 2 more of these are actually short sales and 1 is bank owned.

So, what does this leave us?  14 Traditional, Equity Sellers?  I should add 5 of these 14 are 55+ communities.  There are really only 9 equity sellers in my client’s search criteria out of 40.

It then becomes important to analyze the recent resale activity.  I pulled sales from the last 30 days with the same criteria - Mission Viejo, single family residences, $450 to $550.  Here are the stats:

• 21 Sales
• 6 Bank Owned
• 3 Short Sales
• 13 Traditional Sales (one 55+ community sale)

No rocket scientist needed here.  This is out of balance.

If you are not a numbers person, it’s okay, just try to stick with me here – 52.5% of the Active Inventory are short sales, but last month only 14.3% of the sales were short sales.

12.5% of the Active Inventory is bank owned, but last month 28.6% of the sales were bank owned.

And most telling, 22.5% of the Active Inventory are equity sellers (not to include senior communities), yet the sales from the last 30 days indicate that 51.1% were traditional sellers.

I’m actually not a numbers guru.  I love reading.  I love writing.  But, I also love logic and this should speak volumes to you.  The sellers that don’t have to sell have chosen not to; they’ve heard the message.  Buyers that have been fence sitting or have had affordability problems, have found that it is indeed their time.  Demand does exist.  The inventory may actually be lacking.  Do I hear – supply and demand?

Just to temper my enthusiasm, let’s look the sales prices.  No question – these are some other stats to consider from the last 30 days with that same criteria:

Short Sales – Sold at 98.29% of asking price with an average days on market of 143.  The average price per square foot was $253.09

Bank Owned - Sold at 101.55% of asking price with an average of 16 days on the market.  The average price per square foot was $263.06.

Traditional Sellers -Sold at 97.38% of asking price with an average of 34 days on the market.  The average price per square foot was $323.09.

I will suspect that the knee jerk response is that traditional sellers are overpriced on a per square foot basis – but look at the demand.   There’s a reason these are selling.  They are in superior condition (sometimes by a lot) and you can actually submit an offer to a live body, that has real emotion, and a desire to sell.  What’s the value in that?

So, if you think it’s a buyers’ market, think carefully and ask for the stats.  You need more than a cursory overview.  You need to drill down into the makeup of what it means to get a clear picture of the marketplace.

This is one picture of the OC marketplace, but from what I’m seeing, in certain pricepoints, it’s not isolated.  Thoughts?  I’m open to our interpretation of these numbers.

Last weekend, I went into an Open House with one of my buyers that is really struggling with the ‘Rent versus Buy’ decision.  The listing agent handed us an article by Orange County Register’s Jonathon Lanser that shared the good news that home sales was up nearly 60% from a year ago.  In the words of the listing agent, ‘things are turning around’.

As I’ve said before on OC Voice, I’m not convinced that this is necessarily  the turnaround I’m looking for.  Most of this increase in sales is in the most distressed parts of our market.  In addition, 60% increase in sales over the historic lows of 2007 is good,  but clearly not great.  We are still about 50% off in sales volume from 2003 numbers and we are back to 2003 pricing.

Do I think we are approaching a bottom?  I do.  Am I ready to tell my buyers, ‘Hurry, before it’s too late?’  Not necessarily.  I think it may be time for some buyers to take the leap, however there are a lot of factors that go into that decision (stay tuned for my post about renting versus buying in today’s market).

But, I find it insulting when my colleagues reprint articles with a glimmer of hope, so that they may spread them far and wide with a ‘Hurry and Buy Now’ approach.  Consumers are smart.  Information is everywhere.  My clients understand that sales may be up, but prices are down.  My clients all have been watching the market, local trends, and values.  To suggest that if they don’t pull the trigger today, they’ll ‘miss the boat’ insults their intelligence and frankly, it continues to diminish the level of professionalism of the industry as a whole.

Every now and then you see a headline touting the increase in sales in Orange County.  Less than a week ago, Orange County Register’s Jon Lanser posted ‘1-in-3 O.C. ZIPs See Homebuying Doubling or Better’.   I love good news but it’s important to drill deep into what these statistics are telling us.

Price point is really one of the big players in this discussion.  The movement that is taking place is great if you are a seller in the below $500,000 market.  With the limitations in lending and lower pool of qualified buyers, sellers in the upper price points have to be prepared for a longer selling cycle.

When we talk about Absorption Rate, we are talking about how many months it would take for the existing buying demand to consume the total inventory if no other homes were to come on the market.  I recently calculated the Absorption Rates for some of South Orange County’s cities, but to get the truest picture of each marketplace, I thought it was critical to break it down by price point.

This is how it looks:

Notice, for example, Laguna Niguel.  It will take 14.42 months to exhaust the supply of inventory with current demand in the over $750 price range, yet homes in Laguna Niguel under $500,000 will only take 5.7 months to absorb. It’s important to note that Laguna Niguel has one of the lower rates of distressed property rates in the county and have a much higher median sales price overall.

Steven Thomas of Altera Real Estate, reported in his Orange County Housing Report that 69.4% of all the Lake Forest inventory are distressed sales.  Buyers and investors alike are targeting the distressed part of the market as opportunities.  Part of the reason that Lake Forest is enjoying one of the lowest overall absorption rates in our market is the high percentage of distress inventory and the related demand.

If you are considering buying, or selling your home, and want to know more about what these numbers might mean to you, don’t hesitate to let me know.  No arm twisting here – just happy to answer questions.
*These numbers are from SoCal MLS figures in the first week of November and
the closed sales in the proceeding 30 days.

Maybe.

I remember in the early stages of the boom, there were whispers of a ‘bubble‘.  By 2005, it had turned into a dull roar.  In 2006, economists were shouting at us while many of us were turning a deaf ear, convinced that this market was an exception.  I know – not you - just the rest of us.

Today, I’m hearing whispers of a different sort.  There are signs (albeit very small ones) that there is a light at the end of the tunnel.   The Wall Street Journal reported today that a CNBC ‘talking head’ announced that “Real estate – it’s back.”  This remark came on the heels of the Dow Jones Equity All REIT Index’s rally which ended up 12% today.

These are interesting indicators to be watching, but I’m not suggesting we throw a party by any stretch.  The REIT index is still down 42% for the year.  And as WSJ’s author Aton Troianovski points out, the commercial market is exceptionally slow.  Local Orange County is no exception and commercial brokers are checking their ring tones to make sure phones are still in good working order (I know – been there – 4th quarter ‘07).

Today there are whispers of a bottom, small rays of sun poking through the dark clouds.  It will be interesting to see how long it will take for these whispers to result in a true shift.

The National Association or Realtors (NAR) recently posted this excellent map. Zoom into a metro area for the most recent quarterly median home price for the market you’re interested in, and its percentage change from the previous quarter.

NAR has also published the 2nd quarter numbers for median home price nationwide and broken down by single family residences and condos in PDF and Excel files.

 
View Larger Map

Thanks  to Jay Thompson at Phoenix Real Estate Guy for the tip.

I had this conversation on Twitter today and had to share it as further evidence of the common problems we see in the marketplace when it comes to the handling of Short Sales.  In case you are not familiar with Twitter, it’s a social media and micro-blogging platform.

The banks aren’t improving things for the local housing market, their other local assets, or the housing recovery itself with this methodology.  But, this conversation serves to continue to illustrate my point about the short sale crisis and its impact on the overall health and stability of our marketplace.  Love to hear your thoughts.

It’s always best to get the bad news out of the way first, don’t you think?

In September, I posted  ‘Why Orange County’s Median Price May Fall Under $400,000′.  At that time, all of the exciting appreciation we’d seen in our housing boom had slipped away to January ‘04 levels.  Mere days later, I revised that to November ‘03 levels, which was a median sales price of $435,000.

Time for the update; according to Jonathon Lansner’s recent article for the Orange County Register, Dataquick reported that the median sale price in Orange County as of October 13th is $420,000.  Where does that put us in the calendar of the boom?  July 2003, folks.  We’re almost back to the early days of the Orange County housing boom.  Just to twist the knife, that’s 35% off the peak of June 2007’s $645,000.

Okay, it’s bad.  That’s definitely not good.  But, I promised some good news and here it:

Lansner reported ‘Shoppers for the 22 business days ended October 13 were relatively busy.  They bought 2,770 O.C. homes in this latest period, +56% vs. year ago buying activity.  October looks to be the fourth straight month sales beat year-ago buying, a nice change after 33 straight months of year-over-year drops.’

There’s no doubt that buying activity is a great sign.  It may indicate that at some price points, a bottom may be in sight.  But, let’s not be pollyanna about this good news.  It’s important to analyze the buying trends to understand it what it means.  A disproportionate portion of this purchasing is made up of distress sales and foreclosures in the lowest price points of the market while much of the higher price points continue to be painfully slow.

Stay tuned. The next post will analyze the buying trends and how they compare to buying trends for the same period in ‘03 (our current market value match).