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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First time buyers were the driving force behind the improved sales volume, since they didn’t have to unload a previous property in order to buy.  FHA loans with 3.5% down payment were the favorite financing method used in the majority of these sales.  Condos accounted for 61% of the sales.

The “average” condo sold for $231,587, after 59 days on the market with the range running from $110,000 up to $385,000.  Of the 38 condos sold, 12 went for more than the list price.  Most of those were bank-owned and were aggressively  priced well below average @ $185/sqft versus the overall average of $206/sqft. 

Single family homes ranged from a low of $335,000 up to $724,900, and averaged $268/sqft after 61 days on the market.   Of the 7 homes that sold for over list price, 5 of them were bank-owned and sold quickly for an average of $272/sqft and spent only 28 days on the market!

There are currently 218 properties in the “active” status on the MLS, split exactly down the middle with 109 condos starting at $114,000 and 109 single family homes ranging from $335,000 up to $1.650 million.   With single family pricing starting at $335,000, it’s very difficult to get any attention for the townhomes above the $390,000 mark, no matter how large or nice they are! 

The good news at this time is that gas prices are affordable again, interest rates are approaching historic lows, and pricing is getting much closer to “fundamentals” where the cost of owning is only slightly higher than the cost of renting a similar property.  I expect after the first of the year, and particularly after the new administration takes office, that volume will pick up substantially in the lower end of the price range and a lot of renters will become buyers!

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The total number of bank-owned homes in Lake Forest today is 45, and they have an average price of $326,000 at $232/square foot.   

Total active homes on the MLS in Lake Forest is currently 287, with only 97 of them available as traditional “non-distressed” sales with a seller who can answer an offer without having to wait for a bank to approve the price.  Of those, there are 30 condos and 67 single family homes.  Prices of the single family homes begin at $459,000 and go up to $1,695,000.  

For buyers who are hoping to pick up a “deal” on a foreclosure property, it is critical to be fully pre-approved in advance and to be educated about the values.  Many of the foreclosure listings are coming on the market priced very low compared to other properties.  They may be in almost any condition, ranging from totally dirty and damaged to pretty nice “move-in” condition.  Alert agents and buyers are finding them and making offers almost immediately.  I have had several experiences where my buyer submitted an offer the first day on the market, then, after waiting for 3 or more days, the bank’s agent asked all the buyers to re-write their offers at their “highest and best” price.  This strategy has created an “auction-fever” environment that leads to the home selling for substantially more than the original list price.  If you plan to make an offer on one of these undervalued properties, you need to carefully review the comps, and make your best offer based on your perception of what it will really cost you to make the home comfortable for you!

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This is an illustration of the pricing of an actual home that was first put on the market in October 2006, but due to being out-of-synch with the market, didn’t close until 13 months later .

Sellers need to learn to be more careful than ever about pricing, because in the current market, the carrying costs of mortgage, taxes, insurance, property taxes and homeowner association dues can put a substantial dent in the final net proceeds.  This particular listing had a very low tax basis, and a low interest rate on a small mortgage, but taking over a year to sell this property ultimately cost the seller an extra $10,000 in lost proceeds!

My guess (it was not my listing) is that if it had been originally listed at $549,900, it would have had multiple offers almost immediately and closed in 45 to 60 days at a higher price!

I’m often amazed at the number of price changes that some homes go through prior to selling.  There was a house on the market recently that changed price every day for 7 weeks!  Not big changes – the house was “variable range priced” and started at $779,500 to $814,900.  The price changes made daily would reduce the lower range number one day, then reduce the high number next day – but only by $100!  Changing the price gets the house back on the hot sheet, so it can be an effective way to draw attention to a listing, but this is not the way to do it!

Small price reductions always reminds me of what my grandpa used to say (he was also a real estate broker.)  “You must treat price adjustments like surgery…..If you don’t need it, don’t do it, but if you do really need to amputate someone’s leg, do the whole thing at once and don’t cut off one toe at a time!”

Try it yourself!

Let me know what you thought by leaving a comment here.

So what is that “magic number?”  It takes a bit of analysis to find the right one, but you need to start by looking at all the homes that are available up to the price where yours has failed to sell, and also within a reasonable distance of that property.  If your home is in Lake Forest, for instance, I would take a look at all the homes in Lake Forest, and our neighboring communities of Foothill Ranch, Portola Hills, Mission Viejo, Rancho Santa Margarita, and Laguna Hills because these areas may also be considered by the buyer who might want your home.  If you have 4 bedrooms and 2400 square feet, I would look at the total number of homes that have at least 4 bedrooms and 2000 square feet (everybody wants more square feet, but many buyers look more closely at room counts, and general layout.) 

The first factor to look at is the number of homes that have sold in the last 90 days.  Then look to see how many are currently in escrow, and finally,  look at how many are currently available on the active market.  The active market is your real competition – the ones in escrow or recent closings are the ones that successfully attracted a buyer and got out of the way. 

I ran a sample of this type research just now for a hypothetical home that is 2400 sq ft, and not selling at $715,000.  Today there are 148 homes for a buyer to choose from that have 2000 square feet or more.  In the last 90 days, 52 properties have sold, there are currently 12 in escrow, and 27 have expired, unsold.  Based on the closed sales of about 4 per week, if all properties are equally desireable, and the pace of sales continues, and no new listings come on the market, the 148 homes will take about 8.5 months to sell.  It looks even worse, when you look at the rate of current escrows of about 2.4 per week, assuming 5 weeks average escrow period.  That calculates out to 62 weeks, or about 14 months to sell them all!  Of course, all 148 properties are not equally desireable, so the list of actual properties needs to be reviewed to determine how many are really in the competition.  Some will be in terrible condition, or have incureable flaws and locational challenges, so they will be easily eliminated by buyers.  But there will still be intense competition among the rest of them, and only the best will sell!

If you live in the home, what is your patience for being on the market – constantly keeping it ready to show on a moment’s notice?  If your home is vacant, how long can you keep spending the monthly carrying cost? ($PITI + $HOA + $utilities)

Our market is very soft right now, and the few real buyers around are extra picky and looking for a home with a price that they can feel good about! Sellers have to let go of their hopes for getting the sales prices that their neighbors got 2 years ago, and just be realistic.  If you don’t have to sell, please take your home off the market right now.  If you do need to sell, get it priced right and move on with your life!

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If you have any questions, comments or need more details on any post I’ve written, please leave your comment here, or send me an email.

The basic idea is that after a property has failed to sell, a buyer comes in and offers to pay above asking price, and the seller will rebate the difference back to the buyer.  Read the details of how this works, and be careful that you don’t fall for it!

I realize that some of these are a bit of a stretch, or maybe even sarcastic, but I’m only trying to help the sellers figure out which reason is most likely to produce their special buyer?

Then if the sellers can identify the reason that they think someone will want to overpay, the listing agent will be able to focus all their marketing on finding the buyer with that particular quirk!

I think everyone likes lists of “10 Ways to …” (whatever) but I could only think up 9!  Please help me out, by adding on to this list :

1. The house has unique features that can’t be added to another property that doesn’t have it. (Usually has to do with the location or lot configuration.)
2. The house is next door to the parents/sibling/best friend of the buyer and they will pay anything to live that close.
3. The buyers just missed out in a multiple-offer situation of a very similar home.  (not likely today!)
4. The home offers special financing that’s not readily available on other properties (seller carry back, lease option, etc.)
5. The buyers are sick and tired of looking at homes and told their agent they will “just buy the next one they see.”
6. The buyer’s currency is not the US Dollar, and can’t figure out the conversion factor.
7. The buyer’s agent is too lazy to show enough homes for buyers to get a feel for the value.
8. The buyer has too much money and is feeling charitable.
9. The buyer has more money than sense!

Which reason works for you?  Or please add to my list!