Tuesday, January 19, 2016


The economy continues to roll with jobs being added at a brisk rate in Orange County and Southern California. The most current stats available are from November 2014 - November 2015 with 39,000 (non farm) jobs being added. Unemployment dropped in November to 4.2% from 4.3% in October, both 2015. Why should this be another solid year? The economy is poised to keep growing, this latest jobs report a 2.5% increase year over year. The Feds did in fact raise the short term rate, the rate charged to banks. However, for most lenders, this increase was factored in a month ago and expect to see very little change in long term rates. This should keep buyers very interested in the current market. Remember that experts have cautioned that the price of money must rise at some point, as soon as inflation is spotted, but economically, that hasn't happened yet. This speculation of when and how much will likely drive true buyers to make a decision to buy sooner rather than later. And sellers need to be aware that they must stay realistic in the pricing of their home, because new inventory will hit and hit hard in January, creating more competition for sellers. Ultimately what could keep a lid on pricing is a rise in interest rates causing borrowers price point to go down as monthly payments rise in response to higher rates. So perhaps, "he who hesitates is lost," is not a bad bit of advice if you plan to buy in 2016.


There was a lot of movement in all sectors of real estate, another sign of a healthy market. By that, please note that there was a giant merger between homebuilders, there was release of an ocean view community, in the works for 40 years; there were many high priced, high profile listings that hit the market, not the least of which was Richard Nixon's Western White House. The median price most currently available at press time is $623,000 with the average for the year at approximately $604,000, up 4% from last year according to Corelogic. This was almost exactly what had been prognosticated by real estate economists, which also gives credence to 2016, as this is nearly the exact growth predicted for 2016. Sales were up regionally and overall, according to real estate analyst Steven Thomas of Reports On Housing, "There was real price appreciation as buyers clamored to take advantage of interest rates before the Fed made their move." But rates have been so low for so long, that it is clear this isn't the strongest or only motivator for buyers. Another factor: housing prices weren't the only thing making news in 2015; rents rose astronomically compared to housing prices. For most millenials entering or re-entering the market, their motivation was simply getting their ducks in a row-- money saved, debt paid down, and in general recovering from the great recession, and many intentionally guided themselves back into the housing market.


These numbers through December 7th: 1) The inventory in OC was 4,972 down from 5,388 just two weeks earlier and down from 5,885 a month ago. 2) Million dollar plus listings equals 34.2% of all listings 3) 182 listings are foreclosure or short sale 4) Total number of sales for the 30 days November 7th - December 7th was 2,992 up 1.6% 5) new homes comprised 337 of those sales, down 4%. 6) Adjustable rate mortgages still comprise a small piece of the lending pie with only 15.3%. 7) 10,664 - Orange County building permits for single and multifamily homes hit the highest level in 15 years.


The typical buyer was 44 years old and had median income of $86,100, and 83% of them bought a detached single-family home. Here are some other interesting stats: A) 87% of buyers bought their home through a real estate agent or broker. B) 32% are first time buyers. C) Buyers expect to stay in their home 14 years (compare this stat with how long the typical seller actually stays.) D) 88% of buyers would use their agent again or recommend their agent to others. TYPICAL SELLER: A) Their age is 54 B) The typical tenure in the home is 9 years. C) The most common reason for selling a home was that it was too small, followed by a job relocation, D) 89% of home sellers worked with a real estate agent to sell their home. E) Only 8% of recent home sales were For Sale By Owner. This is the lowest share recorded since this report started in 1981, further underscoring how complicated a transaction has become, especially in California.

Sunday, October 4, 2015


A lot of people are certainly nervous these days...And yet, still, there is optimism.  Who to believe?  The sky is falling or the sky is the bluest it's ever been!  How about the truth lying between these two extremes.  Certainly our economy continues to do well, our stock market volatile because of world markets, namely China.  Positive: growth is steady as the economy adds 215,000 jobs in July.  Negative: China seems to be slipping.  Positive: instead of seeing this as bad for housing, because of all the cash buyers from China in the last year could evaporate, think positive of all the money in China that will be looking for a safe harbor; exiting their markets and searching for places to park their cash.  Positive:  Housing is the number one need on the horizon, meaning we need to build, a lot.  Negative: trying to find enough workers.  Positive: If you already have a home and you wish to sell it, there is probably a ready and willing buyer or two or three, who would like a chance to buy.  Negative: August just finished the worst month for the stock market in years.  Positive: the Feds may now be unwilling to raise interest rates, which was a certainty two weeks ago.  If you want a sure bet, there is a savings account available with .05% interest available.  The real estate and stock markets may not be for you.  One of those markets just lost 3 trillion in one week on paper, and the other is up 5.3% year over year for the latest month available. (July 2015)  But let's remember some practicalities: 1) You have to live somewhere  2) Interest is deductible  3) there is a homeowner's tax deduction of $7,000 4) every time you make a mortgage payment you build equity  5)no one can make you move but you.  6) decorate any way you wish.  But perhaps the most interesting comment that can be made is that if you own your own home you will undoubtedly retire sooner and in better financial shape.  


They explain, "Homeownership long has been central to Americans' ability to amass wealth; even with the substantial decline in wealth after the housing bust, the net worth of homeowners over time has significantly outpaced that of renters, who tend as a group to accumulate little if any wealth." The Federal  Reserve chimed in with results from their own, "Survey of Consumer Finance." The Federal Reserve found that the average net worth of homeowners the last 2 years was $194,500 which was 36 times greater than the renters net worth of $5,400.  Indeed, the homeowner net worth is expected to climb this year to $218,000 and the renters to rise to $5,500.  The main reason cited for the discrepancy in net worth is the forced savings created by the month mortgage payment and that a portion goes to equity every single month.  That coupled with the tax savings of the monthly interest deduction, presents a compelling reason to buy a home if building wealth is one of your financial objectives.

BMO Harris Bank Home Buying Report issued the following statistics:  52% of Americans are likely to buy in the next 5 years.  Of those looking to buy, here is what they found: 1) 74% will use a Realtor - it's not finding a home that is the issue, it is navigating the contracts and disclosures and price negotiations.  2) 59% will look online  3) 37% will seek recommendations from family and friends  4) 78% plan to get preapproved for their mortgage first.  This is wise since that is one of the primary reasons one offer will win over the other is that financing is already obtained or fully approved over another buyer who has not done their due financing diligence, even if their offer is the better offer.  The Report also gave insight into those who had already bought a property:  1) 75% set a budge and 16% spent less and 13% spent more  2) 63% spent less than 6 months looking for their home  3) 8% bought without a plan to do so because a particular property caught their eye.


For the month ending in July, the last complete month, according to CoreLogic, the median price rose to $615,000.  However, appreciation is off the red hot double digit growth of 2013 and 2014 and is a much more sustainable and healthy 5.3%.  The number of homes listed for sale as of August 13th was 7,167 and that was up from a month ago of 6,935. (MLS)  The median price per square footage also rose to $377.67, up $9.67 from July 2014.  Rents rose 3.6% and was the 59th consecutive month of year-over-year increases.  This is the key to buying and why it makes profound sense.  You buy a home now and get a 30 year fixed rate loan at 3.85% and in 20 years, in that same home, your payment is exactly the same.  No inflation!!  But if you had been renting all those 20 years at approximately 3% inflation... do the math, what you would be paying would be astronomical compared to what you're paying today.  It just doesn't make sense. Referring your family and friends, to help them buy a home is one of the best and truest acts of financial friendship.

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