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.

There has been some sun peaking through the storm clouds of the Orange County real estate market which is bringing rise to the question, ‘When will we see the real estate market recover?’

There is still tremendous volatility in the banking industry and financial markets but there are some bright spots.  We have already begun to see a slowing of the pricing free fall.  Distressed properties, bank owned inventory, and entry level price points are frequently seeing multiple offers all over Orange County.

Steven Thomas of Alterra Real Estate has released his housing report noting that inventory has dropped to its lowest point in 18 months.  Last year at this time, inventory was 27% higher and two years ago it was 16% higher.   Clearly, the message has been heard by would-be sellers and those that don’t have to sell are opting to stay put.

Thomas says, “This is simple Economics 101, as prices fall demand rises and the number of sales increases as a result.  As the United States government fixes the financial system and money starts to flow again, we can expect rates to drop considerably, including in the Jumbo loan arena, homes about $700,000.  Falling rates lowers monthly payments, which is similar to falling prices.  We can expect demand to increase and the number of sales to increase as well.  This may be six months from today, so right now is probably the most opportunistic time to be a buyer.”

Jonathon Lansner quoted the consultants at Real Estate Economics of Irvine as predicting housing rebounding within 18 months.  REE writes, “Though the index has been trending in positive market territory (an over-correction), the severity of the short term impact of price-slashed distressed properties, tightened credit and extremely low market psychology will continue to hinder market conditions for the balance of 2008.  The over correction will eventually serve to restore buyer confidence.”

William Shopoff, CEO of the land-investment firm the Shopoff Group was recent interviewed by Jeff Collins at the Orange County Register.  Shopoff’s prediction, “I would expect a market bottom to occur in the later half of 2009, possibly extending into 2010 for the Inland Empire.  I think the recovery will take some time once we reach bottom.  I would expect the $700 Billion Government package…will provide the needed liquidity to the markets to provide support but the bigger problem is supply/demand imbalance at present.”

What’s the my prediction?  The Planeta Prediction for the last couple years has been Spring ‘09.  I knew that ‘08 would be a tough year because generally speaking, election years tend to slower.  That in addition to the already poor housing conditions heading into ‘08, I was prepared to buckle my seat belt for a long ride.  I didn’t foresee the financial crisis and that may very well push out my prediction.  We will continue to be plagued with distress sales until we absorb foreclosures that continue to hit the market.  But, I do think that we’ll see a much stronger Spring than we have seen the last couple of years.

I find Shopoff’s comment interesting about inventory imbalances in light of the low inventory reported by Steven Thomas.  That is a big factor and I see it playing out in some of the areas that I most frequently work.  Las Flores and Wagon Wheel markets, in Rancho Santa Margarita and Trabuco Canyon respectively, have the lowest inventory that I can recall seeing in years.

So, if you are watching for recovery, or even stabilization, we may be seeing the first glimpses on the horizon.  Don’t get me wrong, clearly we aren’t there yet, but if you are targeting the bottom, keep your eyes peeled.