Today, there are a total of 11,577 homes for sale in Orange County.   Of those, 4783 (42%) are labeled as either bank owned or short sales.  Of the 4363 that are currently in escrow, 2925 (68%) are distressed.  In the last 30 days, 1018 (61%), of the 1653 closings were distressed.

Buyers are looking for the best values that they can find, and the best priced homes are usually bank owned.  Short sales are closing more often than in the past, but it is still frustrating for a buyer to make an offer, then have to wait weeks or months to get an answer from the lender.  It will be interesting to see what effect, if any, the President’s new stimulus plan will have.  

The latest foreclosure listings are now posted for selected cities or areas in South Orange County.  If you are looking in an area that I haven’t included, please let me know and I’ll run the list just for you!

Other posts like this:

2008 End of Year Report 
2008 Orange County Mid-Year Report
2007 Orange County Sales Report

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Some things I got right :

The volume increased, (but not as much as I hoped.)  As of today, there have been 24,237 closings in the MLS since 1/1/2008 in Orange County.  It is about 20% above the 2007 volume of 20,000, but I had predicted it to come out between 25,000 and 30,000.  Since there may be some more closings tomorrow, and many of the recently closed sales won’t get reported until the listing agent remembers to update the MLS, it is still possible to hit my “25,000″ mark, but it won’t go much higher than that.  I’ll admit that I was  optimistic.

Prices decreased - even more and faster than I thought they would!  The median price for a single family resale home now stands at $430,000 (off 34.4% from November 2007) and the median for a condo is $260,500 (off 38%).  See the DQ News Chart

There were a lot of foreclosures, and there will be more to come.  The big bailout, and help for homeowners has been a bust.  Very few delinquent borrowers have been able to modify their loans and keep their homes.  The foreclosures have slowed, but that is probably only due to the new California law that lenders have to document that they have worked with the borrowers prior to foreclosing.  There will probably be a big flood of new foreclosures that will hit the market around March.

A lot of real estate agents have left the business.  Final numbers won’t be available until late January, but I know many agents who have found other jobs and will not be renewing their local Association of Realtor®s  memberships.

The Real Estate Industry has become more “transparent.”   Let’s face it – there are too many places for consumers to do their research and credibility means a lot!   If you aren’t honest and open with your advice and opinions, buyers and sellers  will find someone else who will be.  

Nobody is going to buy a house simply because they see an ad that says “Now is a good time to buy or sell!”  DUH!   Actually, I have gritted my teeth recently when I saw a full page newspaper ad that declared “Work with a Realtor® because they know your market!”  The truth is, some do and many don’t!  To become a Realtor®, you need to have a license and pay dues of $115 per year.  You also agree to abide by the Code of Ethics, but there is no required education or additional testing to maintain your membership.  I am a dues paying member of the National Association of Realtors, and I abide by the Code of Ethics and enjoy some benefits like access to research reports, and publications, but membership alone does not give me any knowledge or authority, and I hate that they waste my dues paying for ads like that!  ( End of rant.)

The parts I got wrong: 

The mortgage market has still not settled down completely.  The FHA loans have made a big come-back, after being close-to-obsolete in California for the last few years, but they have also tightened up on their qualifications for many borrowers, and won’t approve a loan for a property that has changed ownership in the last 90 days.  This puts investors in a riskier position if they want to buy a foreclosure, fix it and put it right back on the market.  Loans of over $417,000 are difficult to approve, and the interest rates are substantially higher.  This is causing problems for buyers (with good credit and documented income)  to buy homes in the higher price ranges.

The lenders are pricing their inventory to get rid of it.  I never would have guessed that they would take this agressive approach.  I’ve been seeing REO properties come on the market at 10% below the most recent comps.  This has created a frenzy for buyers who can’t resist what appears to be a real bargain.  Multiple offers have become the norm for many of the REOs, and buyers have been bidding them up to an average of 102% above original list price.  The REOs and short sales, especially at the lower end of the price ranges, have made up 42% of all sales for 2008.

Overall, my predictions weren’t too far off, so I’ll give myself a B+ for getting close.   In the next few days, I will make my new predictions for 2009 and this time I will be more specific and try to get closer to actuals.

The Volume of Sales will increase above the level of 2007.  (Wrong!)

• For the period of Jan 1 through June 30 2007 : 11,532 properties closed
• For the period of Jan 1 through June 30 2008 :  9,732 properties closed

Year-to-date volume is down by almost 16%.  Much of this is the result of the lack of financing due to so many major lenders dropping lending programs, or going out of business. 

Lending standards have also continued to tighten even for solid borrowers.  Appraisals are routinely questioned, or the values discounted (even though the appraiser already discounted from the last comp) and borrowers are burdened with much more documentation that we have seen for a long time. 

Prices will decrease – both listing price and sale price (Correct!)

The average price for homes sold fell from $768,931 to $632,638, a decline of 18%.   (Some price ranges are down by 30% and some are off by only 2%.)  I will review the average price declines by price range in another post in the near future  

The mortgage market will settle down.  (Wrong!)

Fannie Mae & Freddie Mac need to be bailed out, IndyMac just tanked this week, BofA took over Countrywide, many other institutions are hanging on by a thread.  Underwriting standards are tightening, or overtightened in some cases, appraisals are being reduced due to “declining market” conditions even though the appraiser already included that fact in his calculations!  Congress has not yet approved the final FHA reform bill, or extended the increased loan limits that are currently set to expire on 12/31/08.  We have a long way to go before the mortgage market will be stable! 

A lot of real estate agents will leave the business.  (True!)

The actual statistics won’t show until next year when annual dues get collected, but there are a lot of agents getting 2nd jobs, or leaving the business altogether now. 

The real estate industry will continue to become more “transparent.”  (True)

(“Transparent” is a current buzz word!  I interpret it to really mean “open and honest”.)  Consumers are more knowledgeable and demanding the answers to lots of the “hard questions.”   There is more information available every day for buyers and sellers to do their own research of listings, including pricing history, past sales, average values, advice about buying, selling, financing, staging and the merits of different marketing programs.  Delivering notepads, refrigerator magnets and calendars is no longer the way for agents to market themselves to consumers.  They need to prove that they have something of value to provide to their clients, instead of pointing to a “I’m #1 Agent of the WeekTrophy”

Conclusion : Ok, so I already said my crystal ball is cracked.  I am an optomist, or I couldn’t stay in this business.  I believe that there are a lot of very cautious people who would really like to buy a home, but they keep getting mixed signals.  We have come a long way in a short time compared to the market declines of the 1990′s.  There is no doubt that prices got totally out-of-control and unreasonables due to the easy financing of recent years, but once we get back to something resembling fundamental values (for California!), we should begin to see pricing stabilize.  It may take some more time to get there, but I believe that it will happen.

If you have any questions, or need any help with real estate decisions, please call me (or choose a button below!)

When evaluating the overall market in Orange County, I look at all cities, and residential (not multi-unit complexes or mobile homes) properties priced from a low of $75,000 to a high of $1.5 million.  The $75K lower limit eliminates the erroneous leases, time shares and mobile homes.  The $1.5million upper limit is to keep the mansions and estates from effecting the average $ per square foot values. 

Here’s the snapshot of that market today (in units):

Active : 13,182
In Escrow : 3,908
Closed during May : 1,886

Assuming an average escrow time of 6 weeks, if that same pace continues, the absorption rate is now a little less than 4 months.

Of course, the activity level is not spread evenly over the entire market.  I like to carve it up and take a look at the troubled homes separately from the ones that just need a seller to agree to a price and close date.

The foreclosed market (“REOs” or “Bank Owned”) is moving especially quickly now.  Many banks are now pricing aggressively right from the start,  so we are seeing multiple offers again! 

Active : 966
In Escrow : 886
Closed in May : 357
The absorption rate for REOs is currently less than 2 months!

Short sales continue to be a drag on the market.  The MLS rules require that listing agents put the house in the “back-up” category when offers are submitted to the bank, but there is no way of knowing when a decision will be made to either go forward or cancel the sale.  Many buyers find a different property and just buy it before getting an answer from the lender so the true “in escrow” number for short sales is highly suspicious!

Active : 4387
In escrow : 935
Sold in May : 240
The absorption rate for Short sales is impossible to estimate!

For many buyers who don’t have the money or time to invest in repairs & upgrades, REOs are too much trouble.  For buyers who need an answer about where they are going to live, short sales are close to impossible.  If you remove both REOs and short sales from the market, we now have the following statistics:

Active :  7812
In escrow : 2091
Sold in May : 1287
The overall non-troubled market inventory is just about 5 months today, but many price ranges are very limited and the inventory level is substantially lower. 

There are a lot of qualified buyers that are actively seeking a home, but they are very conservative.  These buyers are the ones who sat in the corner, paying their bills, and did not get caught up in the buying frenzy of 2004 -2006.  They are not going to pay those inflated prices today. 

Note to sellers – if you put your home on the market today, it shouldn’t take long to determine if it is priced properly or not.  If you don’t get showings quickly in this market, you are priced too high.  If you get showings but no offers, talk to your agent about how it shows – it may need to be decluttered or staged, or you may have to take another look at the price!