In late 2011, the valuation metrics in the OC Housing News Report became very bullish. Due to low interest rates and slowly deflating prices, the cost of home ownership relative to rent fell far below historic norms. In other words, it was much cheaper to own than is usually is. Despite the falling prices, the valuations were attractive, and this report began issuing strong buy signals. Those that trusted that advice bought at what appears to be the bottom of the market. Only time will tell if the spring 2012 bottom is durable.
In spring 2012, lenders dramatically slowed their foreclosure processing and disposition in order to create a shortage of properties on the MLS and stop the decline in house prices. They were successful. Inventory is very tight, and many buyers are competing for the few available properties. Many are going into escrow over asking prices but not closing due to borrower qualification and appraisal problems. Backup offers are a good idea.
Rents are firming and beginning to rise slowly in most markets. This is a sign of a tepid economic recovery in Orange County. Historically low interest rates, falling prices, and rising rents have greatly improved payment affordability in Orange County.
Prices are at or below rental parity for buyers using conventional financing putting 20% down. This is a buying opportunity, and demand has picked up slightly for owner-occupants using conforming loan financing. The increased affordability and decreased supply is forming a bottom at the middle tier of the market.
Prices are reaching rental parity in many markets for buyers using FHA financing bringing more first-time homebuyers to the market. Also, private equity hedge funds are actively buying low-end properties and holding them for rental cashflow. This increased activity suggests price stabilization at the low end.
The jumbo market is still moribund, and few transactions are taking place at price points over $900,000. The high end will be subject to volatility as liquidations continue.
The spring rally is ending bit low inventory and flat prices are expected over the fall and winter. Unless we see more inventory, prices will not likely go down this fall and winter as is its customary seasonal pattern.
Despite the many reasons for caution, the current valuations when financed with today’s record low rates make this an excellent buying opportunity. The lack of inventory makes buying difficult, but the valuations make it worth the effort.
Wouldn't you be embarrassed to overpay by $100,000? Only fools buy houses without knowing neighborhood values. Don't be a fool. Don't suffer the pain of an underwater mortgage. The surest way to lose your house is to overpay for it. Our reports identify overvalued and undervalued neighborhoods. Use it to broaden or narrow your search area. Savvy buyers work with us to find bargains. We've saved thousands from financial ruin. Let us save you too. If you want peace of mind while shopping for your next home, sign up for our monthly market newsletter.
Housing Market report presentation, Thursday, November 8, 6:00 at JT Schmids and the District
I want to invite all of you to come out to our special event Thursday evening.
Bullish based on restricted supply?
Ordinarily, prices rise when a product or service is in high demand. An increase in demand causes the supply to drop, and the resulting imbalance forces prices to move higher. The problem right now is that we don’t really have much of an increase in demand. In fact, the owner-occupant demand is still at 1990s levels and showing no signs of improvement at all.
The price increases we currently see in the Orange County housing market — and prices certainly are going up — are a result of a dramatic decrease in supply, largely engineered by the major banks. As you can see below, demand is up somewhat (about 9%), but supply has totally evaporated with a 60% decline.
The same is true in Irvine. Demand is up about 10%, but supply is down 58%!
The problem with a supply-side recovery is what happens when the supply returns. The current levels of supply aren’t caused by any real shortage of available homes. Tens of thousands of delinquent mortgage squatters inhabit properties that could be turned over to a paying mortgage holder. In Orange County, there are currently 3,500 properties in pre-foreclosure, and another 5,005 awaiting auction. These numbers are down dramatically since the beginning of the year, but that’s only because the banks stopped foreclosing. Despite the low number of filings, banks are not out of delinquent mortgage holders to foreclose on.
There is good reason to be cautious about buying. However, the federal reserve has pledged to keep interest rates low for as long as it takes to mop up this mess, and it isn’t likely that the government will suddenly start forcing the banks to foreclose on these people and liquidate the properties. The banks have been playing this game for six years now. They have become good at it.
To hear more, come out to our event Thursday night. I hope to see you there.
She hit the lottery twice
I profiled this house back in June, but it came back on the market recently, and it’s such a good story, it’s worth repeating.
By purchasing a house at the bottom of the last real estate cycle, the former daughter-in-law and ex-wife managed to ride the equity wave of the housing bubble. As a consummate free-loader, she didn’t work and overspent her lottery allowance and turned to her HELOC to indulge her expensive tastes.
- This house was purchased on 1/18/2005. The actual purchase prices is not given, but the seller provided a carry-back loan for $1,403,000. I assume the buyer put 20% down with her first payment from the lottery money as stated in the news article. The purchase prices was likely $1,750,000.
- On 3/11/1998, the paid off the original seller by refinancing with a $1,590,000 first mortgage. She also netted $187,000 for her troubles. I guess that lottery money wasn’t going far enough.
- On 1/27/1999 she refinanced again for $1,725,000 pulling out another $135,000.
- On 4/16/2001 she obtained a $250,000 HELOC.
- On 7/5/2002 she obtained a $500,000 HELOC.
- On 1/7/2004 she refinanced with a $1,614,171 first mortgage.
- On 3/14/2005 she refinanced with a $2,465,000 first mortgage.
- On 2/27/2006 she opened a $100,000 HELOC.
- On 7/21/2006m she refinanced with a $3,850,000 Option ARM.
- Total mortgage equity withdrawal was a whopping $2,447,000 plus negative amortization and three years of squatting.
- She was served a Notice of Default on 9/29/2009 which means at the latest she quit paying in May of 2009. In all likelihood given the slow pace of high-end foreclosures, she was delinquent even before then. She was allowed to squat for nearly three years in this beautiful Coto de Caza mansion.
A crushing fall from entitlement
How will this woman adjust? She only has about two years left on the lottery payout, then she will have nothing. No lottery money. No house. No HELOC money. Nothing.
At 59 years old, she hasn’t worked in nearly 20 years, so it doesn’t seem likely she will start earning $500,000 per year to support her habits. What will she do? Will she pull herself up by her own bootstraps?
Wouldn't you be embarrassed to overpay by $100,000? Only fools buy houses without knowing neighborhood values. Don't be a fool. Don't suffer the pain of an underwater mortgage. The surest way to lose your house is to overpay for it. Our reports identify overvalued and undervalued neighborhoods. Use it to broaden or narrow your search area. Savvy buyers work with us to find bargains. We've saved thousands from financial ruin. Let us save you too. If you want peace of mind while shopping for your next home, sign up for our monthly market newsletter.
We're sorry, but we couldn't find MLS # S716263 in our database. This property may be a new listing or possibly taken off the market. Please check back again.
Proprietary OC Housing News home purchase analysis
22431 AVENA Ln Coto de Caza, CA 92679
$2,812,682 …….. Asking Price
$384,000 ………. Purchase Price
8/24/1992 ………. Purchase Date
$2,428,682 ………. Gross Gain (Loss)
($30,720) ………… Commissions and Costs at 8%
============================================
$2,397,962 ………. Net Gain (Loss)
============================================
632.5% ………. Gross Percent Change
624.5% ………. Net Percent Change
9.9% ………… Annual Appreciation
Cost of Home Ownership
——————————————————————————
$2,812,682 …….. Asking Price
$562,536 ………… 20% Down Conventional
3.95% …………. Mortgage Interest Rate
30 ……………… Number of Years
$2,250,146 …….. Mortgage
$565,301 ………. Income Requirement
$10,678 ………… Monthly Mortgage Payment
$2,438 ………… Property Tax at 1.04%
$0 ………… Mello Roos & Special Taxes
$703 ………… Homeowners Insurance at 0.3%
$0 ………… Private Mortgage Insurance
$785 ………… Homeowners Association Fees
============================================
$14,604 ………. Monthly Cash Outlays
($1,604) ………. Tax Savings
($3,271) ………. Equity Hidden in Payment
$766 ………….. Lost Income to Down Payment
$372 ………….. Maintenance and Replacement Reserves
============================================
$10,866 ………. Monthly Cost of Ownership
Cash Acquisition Demands
——————————————————————————
$29,627 ………… Furnishing and Move In at 1% + $1,500
$29,627 ………… Closing Costs at 1% + $1,500
$22,501 ………… Interest Points
$562,536 ………… Down Payment
============================================
$644,291 ………. Total Cash Costs
$166,500 ………. Emergency Cash Reserves
============================================
$810,791 ………. Total Savings Needed
The property above is available for sale on the MLS.
Contact us for a comparative market analysis, a cost of ownership analysis, or information on how you can make an offer today!
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Nearby Foreclosures
Gain a competitive advantage over other buyers. By locating distressed properties -- before they hit the MLS -- you can discover where tomorrow's REOs and short sales will appear. Most of these properties are not listed on the MLS, but they will be soon. Research properties in advance and get a jump on your competition. Don't miss out on another deal because you couldn't act quickly. Use this tool to your advantage! The red properties are already bank owned. As soon as REO asset managers prepare them for sale, they will be on the MLS. Get ready! The green and blue properties have owners who are not paying their mortgages. They may be offered as short sales, or they may go through foreclosure and become REO. Either way, they will also likely be available on the MLS soon. Find your next home! Be prepared to offer on these properties by researching them in advance or risk losing out to buyers who are have done their homework. Start your research today! To find distressed properties, enter your desired location and press search. Scroll through list by pressing "next."Election Day
Since it is election day, does anyone have any predictions? What will be the biggest surprise today?
23 Responses to “Orange County housing market rising due to restricted inventory”
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Unfortunately, opaque, cheap money, distorted investor speculator driven markets typically lead to market crashes.
I’ve never seen such a strong effort to reflate a Ponzi scheme before. Usually, it’s impossible to reflate a Ponzi scheme, but the government and the federal reserve have pulled out all the stops this time.
Indeed, but what is truly mind-boggling is that even despite their prodigious schemes, total debt monetization vs excess claims remains negative, as credit instruments continue to be massively devalued.
Everyone worries the printing money the fed is doing will ignite inflation. If continued too long, it certainly will, but as long as debt monetization is less than debt destruction, interest rates will fall and deflation will rule.
I think deflation remains the prevailing economic influence until it looks like the monetary ‘status quo’ is going to be sacked, and talk of the big banks being restructured begins to surface. That’ll be the signal to sell some gold and to be prepared (at some point during the corresponding washout) to jump back into the RE sandbox.
What do you make of the premature real estate buy signal caused by the inventory squeeze? It’s hard to argue with the tape, and although your chain of events is the way things should go down, the unprecedented manipulation of conditions by the major banks has caused me to rethink the future.
Hoping the Fed can pull out at the right time is a fool’s errand. Have they not proven time and time again they are idiotic? Printing more/less than credit contracts is a temporary issue concerning prices. Of more importance is our debt load, terms, and how rising interest rates and short term treasuries will consume >100% of tax revenue. Faith will be lost in the dollar. Some say the Fed can solve the problem by buying it all, ‘twisting’ it into 30 year paper. This is a signal that faith is gone. Nations will repatriate the dollar in increasing fashion.
Real estate has less downside than the dollar. Its tangibility and inherent value make it attractive. Plus, the government subsidizes the shit out of it: tax subsidies, loan subsidy corporations Fannie/FHA, interest rate subsidy, etc. My biggest concern is how a looming currency crisis will affect a tenant’s employment and ability to pay rent. Some places will be the next Detroit. OC? Likely not, but we are in unprecedented times and who really knows? We are definitely not out of the woods and seeing everyone wave the Housing Recovery flag screams ‘eye of the storm’.
All IR’s ‘tepid economic recovery’ is fiscal and monetary magic, smoke and mirrors, unsustainable, and a house of cards. He admits it. For an intelligent person, he still is unable to shake the faith that we ALL are bombarded with by our statist culture growing up – the belief that government can backstop failure and provide recovery. It is an illusion and creates an economy of increasing instability. This is no recovery and when the bond bubble bursts, we will all realize it.
I think this is unprecedented. You have to go outside the US to get examples see a central bank trying to inflate prices.
Ryan, always enjoy your prispecteve!Foreclosures and short sales are really a different product and a product that in 4-5 years will likely be very small again. Given that the traditional product is still selling and thus competing with the foreclosure short sale product on value already, then when considering all the homes that are not foreclosures or bank owned, their value is best established by comparing them to the same.Kelly Blue Book reports different values for the same vehicle based on condition and whether it is a private party sale or a retail (dealer) sale. Looking at Median Sales Price across all sales is the same as counting all Ford Explorer prices the same regardless of condition or who sells it under what situation.What you will also find is that in areas where there have been the most foreclosures, Traditional Seller prices have also fallen the furthest so the pricing influence of foreclosures is very strong! Reply
Who will win today?
Special Series: Swing State Housing Analysis Gives Obama the Edge
With the 2012 presidential election now at our front door, each citizen has the opportunity to make his or her voice heard. Many states have long histories of leaning toward either the liberal or conservative lines year-after-year, yet there are a few who dare to peer over the political precipice as they weigh their choices between candidates very carefully. Dubbed the “swing states,” the collection of Colorado, Florida, Iowa, Nevada, New Hampshire, North Carolina, Ohio, Virginia, and Wisconsin keep the campaigns guessing as to which way they will lean come Election Day.
Although there are many important issues that directly affect these states and will factor heavily into their constituents’ decisions this week, housing is one that remains a vital, non-negotiable need that individuals in these territories specifically want addressed by the campaigning nominees. Sadly, the housing and foreclosure crisis facing America wasn’t covered at any length during the presidential debates. Yet seeing how much of a direct, daily life impact the housing downturn has had in these crucial swing states leads many to wonder if it, in fact, will be the deciding factor for those on-the-fence folks as the cast their ballots.
Similar suppositions have been researched recently and RealtyTrac is one company that collected and broke down their data into basic, user-friendly findings that lend themselves to predictions of which candidate will win these crucial swing states in 2012. After conducting a detailed swing state analysis this past week, RealtyTrac projected who would be the winner of each state’s electoral votes—and ultimately the entire election—-by simply concluding whether housing markets in these specific swing states are better off or worse now than they were four years ago. Simple. Concrete. Measurable criteria.
What RealtyTrac’s research ultimately revealed led them to the conclusion that Romney would win the majority of the swing states by a ratio of 5-3, with their electoral votes to be doled out at a ratio of 58-37, yet the ultimate victory, the company says, would belong to Obama after factoring an overall electoral vote count at an estimated 274-264.
Daren Blomquist, VP at RealtyTrac, offers further insight about the company’s study by giving detailed explanations of just what data RealtyTrac weighed to determine who would receive each swing state’s votes. Obama’s acquisition of Ohio, Nevada and Virginia’s electoral votes is addressed first as he reveals, “The housing market is improved compared to four years ago in three of the eight swing states we looked at: Ohio, Virginia, and Nevada.”
Blomquist goes on to note, “In Ohio, the improvement is quite broad, with home prices up from four years ago, while foreclosure inventory, foreclosure starts, and percentage of distressed sales are all down from four years ago. Even the unemployment rate is not a negative—unchanged from four years ago.” RealtyTrac’s study deemed that “such a broad-based improvement in the housing market should favor the incumbent in the election.”
As well as Ohio, Obama is also awarded the electoral votes from Virginia and Nevada in RealtyTrac’s election analysis. “In Virginia and Nevada, the improvement is not quite as broad-based, but in both states the most visible sign of distress in the market-foreclosures—is waning. The foreclosure inventory, foreclosure starts, and share of distressed sales [are] down from four years ago as well, providing some light at the end of the tunnel despite home prices that are still down from four years ago and unemployment rates that are up,” Blomquist explains.
“So our assumption is that the improved housing market in all three of these states favors President Obama, giving him 37 electoral votes in these states along with the 237 electoral votes he already has locked up in non-swing states,” Blomquist says. “That adds up to a grand total of 274 electoral votes, enough to narrowly win the election.”
Although the data ultimately projected Obama to win, Blomquist is quick to point out that the Romney camp presented a palpable and powerful presence in the battle, even procuring the main majority of the overall swing states. “We expect Romney to pick up the remaining five swing states—Colorado, Florida, Iowa, New Hampshire, and Wisconsin—based on housing markets in those states that are still worse off than four years ago, giving him 58 electoral votes among the swing states, which along with the 206 electoral votes he has locked up in non-swing states gives him a grand total of 264 electoral votes, six shy of the 270 needed to win the election.”
Whether you agree with these hypotheses or not, one has to admit that housing is a hot topic of debate, especially among the swing states where so many are struggling under the highest foreclosure rates in the country. Here at DS News, we’d like you to weigh in on how housing markets in these highly prized states are faring and which way they’ll swing. Send your comments to editor@dsnews.com.
One month ago I would have said Obama. Now, I think it will be close race, but I think it will be Romney. If it’s really close we won’t know for a couple of days.
My ability to predict elections is about as good to predict mortgage rates.
I think Obama will eek out a victory. Being an incumbent is usually worth a percentage or two on election day, and I think that will be enough to push the swing states in his favor.
I heard to see where Penn and Ohio goes. If Romney gets Ohio is probably Romney. If Penn goes Romney it’s over. It’s really just down to 3 or 4 states.
CNN just projected Obama will win. They gave him Ohio.
Rent Prices Continue to Rise Faster than Asking Prices
Rent prices are climbing faster than asking prices and are rising in metros where asking prices are falling, according to a report from Trulia.
Year-over-year, nationwide rent prices were up 5.1 percent in October, while asking prices were up 2.9 percent during the same period when including foreclosures.
Out of the top 25 rental markets in the United States, Houston led with a 16.5 percent yearly increase. Miami and Oakland took the next two spots with a 10 percent gain in rent prices, Trulia reported.
Denver was ranked number 4 with a 9.4 percent increase and Seattle fifth for its 8.8 percent improvement.
Chicago, which saw a 5.3 percent yearly dip in asking prices in October, still experienced a 7.7 percent gain in rent prices during the same one-year period.
Asking prices also fell in Albuquerque, dropping 2.2 percent, but rent prices moved up by 3.1 percent.
The trend was reversed in Las Vegas, where asking prices were up 10.9 percent from October 2011, while rent prices moved downward by 1.8 percent. In Memphis, rent prices were also down, falling 0.6 percent, yet asking prices increased 7.1 percent over a one-year period.
Overall, most metros saw rent prices and asking prices increase. Out of the 100 largest metros, 69 took part in the yearly gain in asking prices.
“In markets like Denver, San Francisco, and Oakland, where prices and rents are both rising, higher prices mean higher down payments, but rising rents make it harder to save enough,” said Jed Kolko, Trulia’s chief economist, in a release.
When tracking asking price increases among metros, Phoenix led with a reported 24.9 percent yearly gain. Cape Coral-Fort Myers, Florida ranked second with a 15.7 percent increase, followed by San Jose (12.7 percent); Warren-Troy-Farmington Hills, Michigan (11.8 percent); and West Palm Beach, Florida (11.3 percent).
“Home prices are climbing in most local markets and in eight of the eleven swing states,” Kolko added. “Rising prices have taken pressure off the presidential candidates from having to come up with detailed plans to help the housing market, and that’s a big reason why they haven’t focused on housing in the 2012 campaign,”
Trulia’s findings are based on the for-sale homes and rentals listed by the company.
realtors keep whining about lost commissions…
FHFA Reveals 3rd Winner for REO Initiative, C.A.R. Voices Disapproval
The Federal Housing Finance Agency (FHFA) announced a third bidder scooped up properties in three states for the agency’s REO-to-rental initiative, leaving Atlanta as the sole metro in the program with no winning bidder.
Colony Capital, LLC purchased 970 properties in Los Angeles and Riverside, California; Phoenix, Arizona; and Las Vegas, Nevada, the agency revealed Thursday. Colony Capital is a private real estate investment firm based in California.
The agency’s REO initiative seeks to sell Fannie Mae foreclosures to institutional investors in hard-hit metros. The investors will then convert the foreclosures to rental units.
The 970 properties purchased by Colony Capital include 1,176 units, 752 of which are occupied, according to the transaction summary. Out of the 970 properties, 432 are in California, 328 in Phoenix, and 210 in Las Vegas.
The estimated transaction value to Fannie Mae for the purchase was $176 million, and the third party valuation for the property was $156.8 million, according to the summary.
The purchase price represents 112.3 percent of the value of the properties.
Previously, FHFA announced Pacifica Companies, LLC purchased 699 Fannie Mae properties in Florida, while the Cogsville Group, LLC bought 94 properties in Chicago.
In California, the program was met with opposition by lawmakers and the California Association of Realtors. The groups argued that the program was not necessary in the state to clear out REO inventory.
In a statement Monday, C.A.R. president LeFrancis Arnold didn’t hold back from voicing her opinion on the matter and stated, “Fannie Mae and FHFA’s decision to move forward with the REO bulk sale in California amounts to another gift to Wall Street at the expense of taxpayers.”
Arnold asserted the transaction will not only hurt taxpayers and prospective home buyers, but will also delay a full recovery in the housing market.
The association also called for a change in leadership in the FHFA, stating the “botched execution of the REO bulk sales, and Home Affordable Foreclosure Alternatives (HAFA) and Home Affordable Refinance Program (HARP) under FHFA’s oversight and leadership has demonstrated a lack of understanding of the housing market.”
According to data from C.A.R., the median home price in the Inland Empire, or the Riverside-San Bernardino-Ontario metropolitan area, has risen 15 percent to $198,270 in September from $172,000 in February 2012, while unsold inventory is down to 3.8 months. The median home price in Los Angeles has increased 37 percent to $373,020 in September during the same period, and inventory is down to 3.7 months.
You’re going into a whorehouse to decide between between a blonde or a redhead.
It’s Wall Street Journal subscriber article only. But surprise or not! WSJ is saying their is an November surprise! FHA has big financial hole. I’ll try to post a complete article later.
FHA Said to Set Stage for Treasury Draw as Losses Mount
The Federal Housing Administration, faced with continuing losses from the housing bubble, will issue a financial analysis next week setting the stage for what could be its first draw from the U.S. Treasury in its 78-year history, according to three people briefed on the report.
The government-backed mortgage insurer, which warned in last year’s report that its insurance fund was being drained, has raised premiums and tightened credit standards in an effort to avoid asking for a taxpayer subsidy.
Still, the improved quality of recent FHA-backed loans — now comprising 15 percent of U.S. mortgages for home purchases – - may not offset continuing defaults from loans made from 2005 to 2008, said the people, who spoke on condition of anonymity because the report isn’t yet final.
The annual report to Congress, based on analysis by an outside actuary, could hamper a White House effort to expand FHA’s role as an insurer for borrowers whose homes are worth less than they owe on them. FHA officials and supporters are preparing to counter the downbeat projections by highlighting how the agency helps the economy.
“If FHA alone simply stopped doing business, we would have been propelled down into another double-dip recession,” said John Griffith, an analyst at the Center for American Progress, a research organization aligned with Democrats.
FHA Acting Commissioner Carol Galante is scheduled to appear on a panel at the Urban Institute in Washington on Nov. 8 to discuss a paper stressing the FHA’s importance to single- family housing finance.
[...] County housing market rising due to restricted inventory – OC Housing News ————CoreLogic: House Price Index declined seasonally in September, Up [...]
[...] active in the real estate market today laments the lack of available inventory. Orange County housing market prices are rising due to the restricted inventory. Banks are focus on loan modifications and short sales to resolve their prior bad loans. In the [...]
[...] active in the real estate market today laments the lack of available inventory. Orange County housing market prices are rising due to the restricted inventory. Banks are focus on loan modifications and short sales to resolve their prior bad loans. In the [...]