Every now and then, I have a well meaning prospective buyer say to me, “I’m already working with an agent, but if you find a good deal, let me know and I’ll use you.”  Sometimes it’s someone I meet at a social event or someone that inquires from my blog.

I think the buyer’s mentality is understandable.  Their intention is twofold: (1) get the feelers out about what they are looking for in the housing market (2) to let me know that I will be compensated if I find them that coveted ‘good deal’.

My response is the same every time:  (1)”Do you feel you are getting good support from your current agent?”  (2) “If so, I would continue to work with them.”  I won’t be calling with the inside scoop on a new listing.

Why, you ask?  Several reasons:

• Is it reasonable and fair to preempt another agent’s hard work?  As a buyer, if you have an agent that is working diligently and consistently on your behalf, it seems reasonable to reward that agent with your business.
• As agents, we often have access to the same data.  Is it simply a matter of who makes the call, or sends the email, fastest and brings you the ‘great deal’?
• If I’m listing a ‘great deal’, I would still want you to be represented by your agent.  It’s always my preference to have a buyer represented by their own agent.
• Let’s say I did come across a screaming deal before it hit the market – Who would I call first with that ‘good deal’?  The clients that are already committed to working with me in their home search, or the person that may work with me if I find the ‘good deal’?
• As a buyer, you may have signed a Buyer Broker Agreement committing you to utilizing your existing agent.
• And lastly, the agents working in the area, comprise an almost small town-like atmosphere.  Those actively working in the business know one another and complete real estate transactions together – often more than once.  Reputation is crucial and undermining agent/client relationships is a career killer.

And one more quick side-note – if there is a ‘good deal’ to be had today, it WILL have multiple offers.  No one calls me asking for a ‘nice overpriced home’ these days.  Everyone is looking for a deal.  The good news, compared to pricing as far back as 2003, it’s all a good deal.

The best strategy, find a home you love, that fits the needs of you and your family, and your budget.  If an agent calls you with the deal of the century, if it’s not in your budget, and not going to support what you really need in a home, it doesn’t matter what kind of deal it is.

Wagon Wheel

Wagon Wheel is small community in Trabuco Canyon located off Oso Parkway not far from the south gate of Coto de Caza.  The homes were built in the mid 90’s by Kaufman & Broad who subsidized the original mello roos bonds making it known in part, for it’s very reasonable tax rate.

Homes range in size from the condos in the Dakotas (835 to 1,117 square feet) to the gated community of Stonecliff (up to just over 3,000 square feet).

Current market conditions in Wagon Wheel are not dissimilar to Orange County as a whole.  The upper price points remain very slow and the lower price points are plagued by distress inventory.

Market Conditions

Note that there is very little bank owned inventory on the market currently, but given the recent completion of the moratorium on foreclosures, we are seeing Notice of Defaults on the rise again and in the coming months, I expect to see bank owned homes back on the rise in Wagon Wheel and all over Orange County.

The highest sale year to date is in the California Laredo tract at $725,000 in February.  The next closest sale was $600,000.  The poor sale history for the upper price points is  not isolated to Wagon Wheel and is seen across the market due to the lack of available financing and buyer cautiousness.

The highest sale in the last 30 days was in the California Landmark tract, a traditional sale for $556,000.  Between $500,001 and $750,000, there are 5 available properties and 3 in escrow.

Under $500,000 is plagued by distress sales.  Currently 4 out of 5 active listings are short sales, yet the 4 equity sellers currently in escrow reflect the buyer demand – buyers are often reluctant to wait out the lengthy short sale process and opt for a traditional sale.

Questions?

If you are wondering how these statistics and trends impact your buying, or selling process, please don’t hesitate to let me know.  I’m always happy to help.  No pressure and no obligations.  I can be reached at (949) 939-2514 or emailed at linsey@ocrealestatevoice.com.

This information and stats are from SoCalMLS and are deemed reliable but not guaranteed.

One of the things that I constantly talk about on OC Voice, is the need to be an educated buyer or seller.  My goal is always to provide information that helps to educate my readers about what trends we are seeing – without putting you to sleep.  Heck – I still want you to keep reading and I know statistics are boring.

So today – I had an interesting conversation with an agent regarding her philosophy about showing buyers property.  I’ll be honest, I’m a little shocked by the philosophy.  She shared with me that she shows her clients homes that are up to $50,000 outside their budget because of course, ‘in this market, there is room to negotiate.’  Okay, fair enough.  This isn’t the strongest market, but I’m not biting.  Let me explain why….

• In the price range her clients are in, there is very little inventory.  In addition, if they are hoping to avoid a short sale purchase, and want a bank owned home or an equity seller, that accounts for approximately less than half of what is on the market.   There is competition for the quality product.
• The closed sales in the area are selling at 98.65% of list price.  In this instance, the buyer’s agent is hoping to negotiate 17% off list price.  Based on local numbers, I think it’s fair to say that it might not be a realistic method of searching.
• Average time on market in this area, at this price range, is 60 days.  This is a far cry from a buyer’s market.  However, going into the higher price points – then it becomes more of buyer advantage.
• This strategy has nothing to do with value.  What if the home was listed 10% below current market value?  Isn’t that already a good deal?  What if the home were $50,000 overpriced?  That certainly isn’t the good deal that they are hoping for.
• Lastly, why show a buyer a home that is out of their price range?  Long term, this isn’t fun for anyone.

The key is to understand the details of the market you are buying or selling in – not just an overview.  All of Orange County is not the same.  Each city is different and each price range is different.  It is critical to understand the market within the larger market.

Again, the message is to be educated about your market.  Don’t let mass media, your friends, or even your agent be your sole source in your decision making process.  Let the numbers speak to you because without fail, they’re telling you a story.

When you are looking to buy a home in Orange County, or anywhere else for that matter, it is critical to drill down into the numbers for the sector of the market that you are looking at.  Orange County numbers are wonderful benchmarks to know, but our market is made up also of submarkets within the OC.  It’s important to understand Absorption Rates, Average Days on Market, price per square foot, sale price to list price, etc.

For every buyer I’m working with, I try to do an analysis that really tells the story of the market they are hoping to buy in.  This allows them to have a realistic picture of the market and compete effectively for the home they hope to buy.

If you are a seller, these numbers will be important to you too.  Even if you are not a buyer or seller right now, hang in there.  This may seem dry, but I’ll try to make it fun.  There is a story told by the numbers every time! 

Today, I did some research for an investor I am working with in Rancho Santa Margarita.  She is looking for a condo around $250,000 that has at least 2 bedrooms and 1 car garage.  I looked at the numbers for Rancho Santa Margarita between $200,000 and $300,000, with a minimum of 2 bedrooms and 1 garage – Active, In Escrow, and Closed Sales going 90 days back.  (I recently did this analysis for a Mission Viejo buyer and only included sales over the previous 30 days, but in this instance that would have been swayed too heavily by the holidays).  Here’s what I found for this submarket:

Active Inventory – 47 Listings

• 34 Short Sales or 72%
• 9 Bank Owned or 19%
• 4 Traditional Sellers or 9%

In Escrow – 22 Listings

• 9 Short Sales or 41%
• 9 Bank Owned or 41%
• 4 Traditional Sellers or 19%

Closed Sales in the Last 90 Days – 27 Listings

• 10 Short Sales or 37%
• 10 Bank Owned or 37%
• 8 Traditional Sellers or 30%

Analysis of Closed Sales

• Short Sales:  Average Days on Market – 96, Sale Price to List 102.17%, $256.47 price per sq. ft.
• Bank Owned: Average Days on Market – 35, Sale Price to List 98.89%,  $248.17 price per sq. ft.
• Traditional Sellers: Average Days on Market – 33 (there was one outlier here that if removed would have made it 14), Sale Price to List Price 96.43%, $263.35 price per sq. ft.

Hey wake up! This is fun – really!

So what does all this tell us?

I’m a little surprised to see that some short sales are getting done in this price range.  We still have a large swing in the percentage of active inventory versus closed sales within the short sale market, but maybe the banks are starting to pull it together.  I’ll be watching.

It’s also still clear that the traditional seller is able to secure a slightly higher price.  The swing was much greater in the Mission Viejo analysis I did earlier, but it is still there.  Why?  I think buyers still love to have full disclosure from a real seller.  They also tend to be properties in slightly better condition.  And the best part – you submit an offer, and a real live person actually responds in sometimes as soon as 24 hours!  Wow!

Still the best ‘deal’ going is the bank owned home.  Just beware, is it still a ‘deal’ if you have to put in a lot of money after the close?  Maybe yes, maybe no.  Each property will require individual analysis to make sure that one is really getting a good value for the home.

Hope this helps my investor – and you.  If you ever are in need of a little Microscope on the Market – just let me know.  Just make sure you’ve had your coffee first.

Steven Thomas, President of Altera Real Estate recently released his latest Orange County Housing Report and it is definitely worth taking the time to review if you are curious about how the 2008 housing market finished and the possible outlook for 2009. It’s a very comprehensive summary.

I would encourage you to review the charts for Active Listings and Pending Sales. I love the way that it visually lays out the ‘05, ‘06, ‘07, and ‘08 numbers for comparison.

One thing worth noting is that current inventory is way down – 11,842 homes off the March peak of 15,617. Homeowners have definitely taken to heart that selling will not be easy and pricing is critical. If they don’t have to sell, they generally are opting not to.

The biggest facet of our current market is the distressed inventory. As I’ve continued to repeat here, one of the indicators that a recovery is on the horizon is declining numbers in the distressed sector of the market. Right now, Thomas states that 46% of all the current inventory are distressed sales; 76% of those are short sales and 24% are foreclosures.

So where is the demand? Believe it or not, it is a strong seller’s market when it comes to foreclosures and they are selling at 101% of asking price.

Short sales continue to be a frustrating facet of the market because they continue to stay active on the market while a bank approves the offers they have pending. This creates negative and misleading numbers when one analyzes the active inventory. These offers can take weeks, even months, for the bank to approve. The sale to list price on short sales is running at 97%.

If you have questions about how these numbers impact your buying or selling plans, I’m happy to discuss it with you.

This may not be the most politically correct piece that I’ll write but that’s never been my goal here on OC Voice.  So here goes….

One of my clients sent me a link to an article published online on CNBC about ‘Mortgage Re-Defaults Rising with No Sign of Slowing’.  The article states that, “…after 6 months, nearly 37 percent of mortgage loans modified in the first quarter were 60 or more days delinquent,”  and goes on to say that, “after three months, 19 percent were 60 or more days delinquent or in the process of foreclosure.”

There is no question that watching a family lose their home is beyond heartbreaking.  The article did point out a small piece of good news in this fiasco – 9 out of 10 home loans are current.

The article has me thinking about a few things.  Why does someone default?

The rates on the adjustables are actually lower in recent months than they were a year ago.  In addition to that, some of the Interest Only notes have yet to adjust at all.  Payments in many cases are the same, or even less than they were one year ago.

I’ve seen that in some instances, people frankly are not interested in paying $500,000 for a home that is now worth $375,000 and decide to walk away from the property.  Does a loan modification make sense for those owners?

Lending restrictions were way too lenient up until recently.  Some folks were approved for loans that they never would have qualified for under the strict requirements of today’s lending standards.  Does a loan modification make sense for those owners?

Temporarily reducing the interest rate, tacking on the arrears to the back-end of the loan may provide immediate relief but is it only delaying the inevitable?  Do loan modifications like this make sense?

Maybe it’s time to be honest and say that current levels of home ownership are higher than they’ve ever been, and just maybe, that isn’t a good thing.  It’s not good for the homeowners that aren’t really qualified, and it’s not good for the housing market.

Maybe it’s time to really help those homeowners get out from underneath the homes that they cannot sell for what they owe.  Maybe it’s time to let this market run it’s course without trying to fix it with band-aides and superglue.  Maybe it’s time to get a really efficient and effective short sale process to assist these distressed homeowners.

Bailout plans that focus on loan modifications and saving the homes may not necessarily be the answer.  As I’ve said before, where is a Bailout plan that really deals with the heart of the crisis?  Where is a plan that is effectively dealing with the real issues on Mainstreet?   I’m waiting…and not patiently.

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.

There has been much discussion about the big bailout.  But in case anyone with any influence is listening – I have an idea that could make a big contribution to our market recovery.  Just call anytime and I’ll share my insight with you – from the trenches.  I’ll be waiting for your call.

For the rest of you that might be curious about what I have in mind, I’ll share with you some of what happened to me this week.  Brace yourself because I feel a rant coming on….

As I have said countless times on this blog, short sales are a HUGE factor that is driving our market prices and inventory in Orange County.  For example, 64% of the active homes on the market today in Rancho Santa Margarita, under $500,000, are short sales!  In Mission Viejo, 50% of homes active on the market today under $500,000 are short sales. 

These short sales have offers that have been submitted to banks and are just awaiting approval.  They may have multiple offers.  This is buyer demand that is waiting and the last thing we need in this market is pent up buyer demand waiting.

I’d like to share with you a story about one of my short sale listings.  Within 72 hoursof listing the home back in May, I had 4 offers for asking price, and over.  We submitted them to the bank, along with the package from my seller that clearly qualified for a hardship.  The following dialogue is from this week between my short sale coordinator and the the banking institution’s (a very common and well known lender) negotiator.

My Short Sale Coordinator:

“We now had 4 buyer’s who have cancelled, including the last offer we submitted due to the fact that this process has taken almost 6 months.  We just can’t keep buyers around that long and we can’t keep the value the same for that period of time.  Values are dropping.  We do have another offer, but it is lower than any offer we have received.

“At this point we, as long with the seller, are at a loss as to what to do.  Do you have any suggestions, or any time frame that we can tell buyers?”

The Bank Negotiator:

“I will have to cancel this file because the buyers are no longer interested.  I suggest faxing in the new offer.  Because it is a new offer it will be considered a new file.  Anytime you have a new buyer it starts all over.  A short sale can take 4 - 6 months.  When you send in a  new contract the time frame starts all over. ”

The negotiator goes on to say that they are trying to make time frames shorter and the last response time was 30 days.  But in my experience, that response is inconsistent at best and clearly, they aren’t willing to commit to anything better than 4 to 6 months.

So what’s my big idea?  Let’s save a big bailout expense.  Forget giving money to banks with no accountability for how they use it.  Instead, let’s create an efficient, streamlined method of handling the massive number of properties that are in foreclosure and that are short sales. 

In the case of my listing, it may take one year to get a buyer in that property and a closed sale.  In the meantime, values are detrimentally impacted,  inventory remains misleadingly high,  property condition deteriorates, and suffering sellers can’t restart their lives.  If you shorten this process to 90 days, can you imagine the positive impact on our market?  Just think, 6 months ago I had 4 buyers that wanted to pay full or over list price.  Today’s buyers are thinking about 20% less than that.  THAT is a huge reason prices continue to decline in Orange County and in many parts of the country.

Maybe this is too simplistic.  Maybe this addresses only part of the problem.  But, if we are looking at some of the real, on the ground solutions for the much touted ‘Main Street,’ this seems like a great place to start.  Like I said, to those influential individuals and government institutions dying to hear my Bailout alternative, I’ll be standing by waiting for your call.