DON'T BELIEVE EVERYTHING YOU READ

Newspaper accounts would have you believe that housing prices have gone up even as fewer homebuyers are willing to pay more.  That's because, as covered before in this column, year over year prices are still slightly rising because of the influence of the 2013 numbers in the median configuration of pricing.  In fact, prices are stable and low interest rates are having a "yawn" effect on would be buyers.  But if you can get in now, you should.  Every poll taken recently, regarding the Millennial Generation, indicates strong belief in home ownership.  They poll even higher than did the Boomer Generation and they've driven real estate prices for 30 years.  But the M generation will not go into extreme debt for home ownership.  Just like the Great Depression shaped that generation, so has the Great Recession shaped the M generation.  They are savers; practical in nearly every way.  Look for them to save and save and then...buy.  So why get in now?  Because sometime in the next 2-3 years, supply and demand will take over and prices will rise again.  The next 24 months may be some of the most reasonable months of housing appreciation that So Cal will see for the next decade.  Other reasons for modest growth?  Just as the stock market cannot forever climb just because of cheap money, and without earnings by those companies, real estate cannot sustain long term appreciation without affordability and that comes from payroll earnings.  Salaries and incomes must catch up and then saddle up side by side for the most successful and sustainable market.  Are we on our way towards this?  Yes, unmistakably we are, and it cannot hurt for all who can find their ideal home or investment, to do so before increased competition limits your choices. Prices will not come down significantly, in fact, probably only based on condition, location, and competition.  A good recovering market is in the works.

WHAT WERE THE ACTUAL NUMBERS?

The total number of sales for the month of July, (the last complete month available), was 3,255.  That breaks down to 2,008 single-family resale, 894 resale condos, and 353 new homes.  The only increase in sales was for new homes which rose 53%. Since there has been so little product for so long during the recession, it isn't a big surprise to see that jump as new home inventory makes a come back.  Resale single-family and condos were both off about 15%.  All numbers compare this July with the same month 2013.  The median price rose for both single-family and condos, but has cooled to a much healthier 5.6% and 5.1% respectfully.  These numbers represent a 3 year low for volume, dating back to 2011.  Supply certainly isn't back where it should be and buyers will continue to struggle with pricing.

WHAT ARE THE WORLD RANKINGS FOR "LIVABILITY"

Melbourne ranked number 1, Vancouver a not surprising number 3...clean air, safe streets, natural beauty etc.  but actually, rankings were done by The Economist, and the editors were looking for other factors, such as worker safety, economic sustainability; in other words, the way a multinational corporation might look at a region.  The U.S. doesn't pop up until # 26 - Honolulu.  Pittsburgh was #30, Miami #36.  There are other cities such as Boston and Seattle also ranked, and Los Angeles (one might stretch this to thinking So Cal, as this is a macro approach) # 42, incredibly ahead of San Francisco at # 52, undoubtedly because of housing affordability.

EXPECT CHEAP MONEY TO STAY AROUND

Fed chief Janet Yellen is staying committed to keeping interest rates low until job growth is completely recovered. Lenders are talking about a mini refinance boom this coming year.  If you plan to purchase be sure to get prequalified, and if you are selling, demand that all prospective buyers already be screened and qualified to make an offer on your home.  

A "SUSTAINABLE RECOVERY", LOW FORECLOSURES, RENTS AT THEIR HIGHEST, INVENTORY STRUGGLES...A MIXED BAG FOR THE SUMMER HOUSING MARKET

Last month was "the" discussion on slumping prices.  Really, what's happened is the large gains from 2013, which are always used in the month over month comparisons, are finally weakening the pricing "stew", as more months of 2014 are thrown into the mix.  Simply put, 2013 saw double digit gains, and 2014 has been flat to maybe 4%.  Hey, that's not necessarily a bad thing, as 2013's gains were not sustainable and in fact, another year like it would have seriously hurt the long term real estate market.  The main reason for the hot market last year, lots of investor flips, willing buyers, and cheap money, have not entirely disappeared.   However, buyers are being more discerning, inventory constrictions are being keenly felt, and cheap money is no longer a motivating factor.  But what we all want is a sustainable recovery and we are on our way.  Foreclosures are at their lowest level since 2006.  There are two main reasons for this; a growing economy, more job stability, and rising home prices which are allowing distressed owners who have been under water to exit those properties either breaking even or a small portion of equity.  On the other side of the "prices are too high" argument, are the quickly rising rents.  In fact, the Orange County Register reported that O.C.'s biggest complexes hit $1,729 for its average asking rental price.  That's barely $100 less than San Francisco.  Potential buyers that have never done a "Rent vs. Own" comparison, or who think spending nearly $2,000 a month on rent, (figure $2,400 to 3,500 for a house), receiving neither a tax break or equity build is financially prudent, really should reconsider.  The direction rents are traveling, purchasing may make the most sense.  At least until interest rates rise considerably.  Inventory has definitely grown consistently the last 2 months.  Nationally, according to the National Association of Realtors, it has hit 5.5 months, the first time in 2 years.  Locally, we are at about half that, but much better than the first quarter of 2014.  In no way is this market a snap to figure out.  The question you ask yourself should be a personal one:  "What are my financial goals and my personal desire for my housing needs?"  Answer that one and take action, before the market becomes even more unpredictable.

WHAT WERE THE ACTUAL NUMBERS?

Orange County saw its median price for ALL homes rise to $600,000, up 10% from the same month of 2013.  (All figures are from June of 2014, the last complete month available.)  The resale median was $650,000, up 6.6% and condo price was $400,000, up just 4.2%.  The total number of sales was 3,309, just barely off the 2013 pace (1.2%), showing a strong second quarter gain in volume.  The break down was as follows:  1) Resale - 1,963  2) Condos - 893 3) New Homes - 453.  Note that the increase in the median price for a condo was substantially less than single-family.  

MORE HOMES SELLING FOR 1 MILLION-PLUS

The shift was noticeable--- million dollar sales have been booming relative to the rest of the market.  This partially explains the rise in the median price of homes.  Remember, median is not the average, but rather half--half the homes sold above this mark and half sold below it.  A higher number of homes over a million, will raise that mark.  It's important to understand this distinguishment because it dispels the myth that we are in another bubble.  We are not in another bubble.  Already established by many economists is the belief that this slow down in the number of sales, coupled with growing inventory is a more "normal" market.  But conversely, million dollar sales have sped up.  In fact, sales of homes for $1 million and up rose 11.5% year over year in O.C.  This at a time when overall sales have declined over 8%.  This offers an explanation into numbers that seem contrary to what market analysts proclaim.

OWNER OCCUPIED VERSUS INVESTMENT--HOW IT BREAKS DOWN

It is interesting to note when people buy to own and when they buy to invest.  It does follow economic times to a tee.  from 2003 through 2007, the range of people who owned to occupy was between 60% to 67%.  When the housing bust came along and financing tightened, and prices plummeted, that occupied statistic rose to 73% from 2008 through 20112.  Investors from 2003 to 2007 were at a high of 21% to 28%.  Likewise with the bubble burst the investor purchase from 2008 to 2010 dropped to 17%.  Currently, 2013 saw the owner occupied stat at 67% and the investor hovering from 20% to 27%.  It is an encouraging footnote that despite any market turbulence, there remains a strong foothold for real estate investment as a pathway to building wealth.  Good luck to you all this next month in charting your financial and real estate course for the future.

A SUSTAINABLE RECOVERY WITH A FEW HICCUPS ALONG THE WAY

No economic recovery is perfect, in any sector; jobs, manufacturing, import/export, tourism, restaurants/services, and housing. There will be recovery and sputter, ebb and flow. Let’s concentrate on housing. There has been much positive news that relates to housing, primarily jobs and construction. New homes are still off a full 50% from a “normal” market, but the housing projects and construction starts by America’s biggest builders are definitely making a comeback. In fact, they are the highest they’ve been since 2008. In fact, new home sales jumped 18.6% last month, even as sales for single-family resale slowed. The volume of sales for existing homes fell for 8 consecutive months. Before anyone starts screaming that the sky is falling again, must remember that we are reporting a decline in sales for 2014 compared with 2013, which had been the hottest year since 2006 with double digit appreciation. For the volume to flatten out and prices to stabilize, southern California needed inventory. It appears that at last this is happening. The problem now...watch out sellers. You cannot simply tack on an extra fifty or one hundred thousand to your sales price, because that’s what your neighbor did last year. Prices have softened, you have more competition, and buyers are taking their time. With interest rates staying so low, there is no real outer motivating factor to drive a rapid market. Classic economics would tell you we are far from a neutral market, we still don’t have enough inventory. But it certainly feels that way, as buyers peruse through open houses and are reluctant to make offers. If you are a seller who has a location or floor plan and no competition, you no doubt may still field multiple offers. But don’t expect necessarily an all out bidding war. Part of the reason is that more of the buyers are now millenials. They won’t overspend to get exactly what they want, as the baby boomers did when they were the driving force behind the market. Millenials are pickier, they are conservative about their debt, and a deal must make sense for them. Plus, many have been living in multi-generational family situations, and they are in no hurry to move.

MORE ON MILLENIALS, THE BETTER YOU UNDERSTAND THEM

The big statistic is that 3 of 4, or roughly 75%, plan on buying a home in the next 5 years. As far as student debt goes, it’s not as bad as you think; 58% owe $10,000 or less and 18% owe between $10,000 and $20,000. The biggest mitigating factor will be what the Fed does with interest rates in 2015 through 2016. By 2017, one would fully expect interest rates to be floating in an organic economic system once again. We’ll see.

WHAT WERE THE ACTUAL NUMBERS?

The total number of homes sold, all categories, was 2,981. (This for May, the last complete month available.) That was off 18.3% compared with May of 2013. Resale homes hit 1,855. a decline of 21%. Condos sold at a pace of 786 and lost 22.4% year over year. New homes hit that high of 340 and rose in volume by 18.1%. The median price of all types blended was $595,000 and that was up 10% year over year. Prices are definitely diving back down. Appreciation overall is expected to stay around 4% to 6% for 2014. Single-family resale rose 8.3% and condos 11%. Foreclosures continue to hover near an 8 year low. All of So Cal had 10,010 Notices of Default, or NOD’s, for the first quarter of 2014. Orange County had a paltry 1,244 NOD’s.

IF WE PUT REAL ESTATE AND MUTUAL FUNDS SIDE BY SIDE, HOW DOES IT LOOK?

Looking at real estate as an investment, putting aside the considerations that it also provides shelter, and a tax write off, here is the breakdown of return on in vestment, by age group: 1) 18-29 Real Estate - 25% / Mutual Funds - 21% 2) 30-49 RE - 34% / MF 23% 3) 50-64 RE - 30% / MF 28% 4) Over 65 RE - 31% / MF - 28% Hopefully, you have found some good information with which to evaluate your own situation in regards to the real estate market.

HOME PRICES ARE SLOWING, INVENTORY DOWN, GREAT TIME TO SELL?

There is a perception, perhaps a misconception, that the time to sell, must be when everyone else is... After all, the market is hot, right? Everyone is doing it. The fact is, the great investors and money makers of our time, generally speaking, are taking action that is counter intuitive to what is happening in the financial and societal trends of the current moment. Inventory is in fact, at time of publication, at 1.9 months, traditionally by definition, a seller's market. (six months inventory is considered a neutral market, for your information). And yet, seller's are hardly laughing all the way to the bank. The Case-Shiller Index indicates prices may dip slightly. So what gives? Here is the true story that the newspapers won't or can't give you because of lack of understanding of real estate. Right now there is 1.9 months of inventory, not because houses are flying off the shelves as quickly as owners list them, but because owners are listing their properties for sale. There is a hesitation. Perhaps one reason is that the people who regained massive or respectable equity positions, did in fact sell and those that remain are waiting for the rest of their equity to return. Being still 24% down from our high of 2006, -- coupled with the prediction that appreciation this year will be 6% to 8%, not the 20% we luckily (and scarily) achieved last year, -- they may be waiting for a while. Buyers on the other hand, have watched that 20% rise, and are determined not to over pay for their property. They too have read the headlines that prices are slowing, and are mistakenly thinking there is a bubble that will burst and are waiting for that to happen. They too, will have a long wait. There is no bubble. Prices rose quickly but the money and qualification process was real and people have skin in the game. Foreclosures are at an 8 year low (more on that later). Hence, we are in the midst of a learning curve. A period or lull in the market when everyone adjusts to the latest adjustment. It will happen. But no one will be happy. That is the point of this article, accept the fact that whether you are a seller or a buyer, you probably will not love either position right now, even though there is nothing wrong with either position. Sellers need to accept the fact that they are not going to make a killing this year. They cannot list $50,000 about the last comparable sale, just because it worked last year. It isn't going to work this year, save unique properties. Buyers need to accept the fact that they aren't going to get a steal. Not this year, or next year either. But what they will get, is an opportunity to come into the California real estate market, and achieve a greater return on a10 year average than any other investment they could make. Let's remember however, that home ownership should be more than the investment. It is where you raise your family and create your memories. And by the time you realize the tax breaks, and that you are building equity rather than throwing away rent, it is a pretty sweet deal. There are plenty of sellers and buyers out there, that must act regardless of market conditions. To them it is prudent to say, "Go to it, before you have more competition. Because Spring is coming and with it everyone else..." 

HAVE YOU SERVED OUR COUNTRY? SOME MYTHS ABOUT VA LOANS

Don't believe everything you hear. If you wish to use your VA loan eligibility, here's some information: 1) You can only use it one time. Not true. You have one eligibility, but since properties are bought and sold and rarely kept until the loan is paid in full, you may have many different VA loans on properties. 2) It will expire if not used. Not true. 3) You can only have 1 loan at a time. Not true. Talk to an experienced loan officer but it is possible to have multiple properties with loans. 4) If you have a short sale or foreclosure, you cannot get another VA loan. Also untrue. Adjustments are made to your entitlements. 

HAPPY NEW YEAR...WHAT TO EXPECT IN 2014

Most key analysts expect a slightly better market in 2014 than we had in 2013.  There are several reasons for this; improved employment, better and easier financing, a stabilizing economy with growth in the right direction and finally, a larger and improved inventory.  There is a certain unknown quotient in a changing Fed Chairman, but by all accounts, Janet Yellen's direction of the Fed aims to keep monetary policy, "highly accommodative."  In fact, it appears that Yellen gets the fact that real estate drives the economy, and most experts expect her, "to continue on Beranke's path," so stated Karl Case, co-founder of the S&P/Case-Shiller home price index.  Any projections of doom, are very tempered, the only one found at press from economist Essie Adibi from Chapman University, who said the probability for housing doom was "low."  It would have to come, according to him, from high inflation and low productivity, both of which are very long shots.  In fact, inflation has not even been a blip on the economic screen and is not projected to occur in 2014.  John Karevoll of DataQuick foresees, "the welcome decline into deserved obscurity of real estate naysayers and their canned think-tank narratives...the naysayers will become irrelevant as they doubt the housing's continued march to more normal, positive conditions.  Good riddance to them."  Rather strongly worded, but isn't it about time we stop doubting a shred of positive news and rather, embrace our economy for what it is and settle our lives around it, which includes buying homes for our families and our lives.

WHAT WERE THE TRENDS FOR SO CAL AND THE O.C.?

The housing numbers were off in November, the last full month available, but there are several good reasons.  First and foremost, inventory slipped as demand outbid sellers entering the market.  Secondly, investor transactions slowed down, and that is actually is a good thing, for the owner occupied integrity of neighborhoods and for the bidding wars to stop both run ups in pricing and frustration for bona fide purchasers.  Finally, distressed properties really dropped off the radar, dropping what had been a huge segment of the purchase market.  The frosting on the cake was the usual housing slow down at the holidays.  Expect a big engine to start humming early, as many sellers waited for 2014 to put homes on the markets.  Financing may become easier, and even though we've had some slight rises to interest rates, expect them to stay under 5% for at least the first 2 quarters of 2014.  But buyers will come to the market place early to avoid higher rates.  So Cal, comprised of L.A., Ventura, O.C., Riverside, San Bernardino, and San Diego had a total of 17,283 new and resale houses and condos.  That was down 14.2% from October.  The typical seasonal decline between the 2 months is 7.6%.  The median price for all So Cal was up 19.9% from November 2012 and has risen for 20 straight months.  To keep things in perspective, this rise is still 23.8% below the highest high of spring/summer 2007.

WHAT WERE THE ACTUAL NUMBERS?

The total number of homes sold in Orange County for November, (the last full month available), was 2,632.  This was down 8.6% from November of 2012.  The overall median price was $560,000, which is up 24.4% from November 2012.  There were 1,591 single-family resale, and 668 condo sales.  New homes came in at 373, up 78% and clearly illustrates a rebounding new home market.

NATIONAL ASSOCIATION OF REALTORS WEIGHS IN WITH NEW STATISTICS

The following figures are from data gathered 12/19/2013 with prior year comparisons and are national.  Sales were down 1.2% from a year ago and prices were up 9.4%, indicating a rebounding and stabilizing market.  Perhaps the most important stat is that inventory has risen 5% and experts expect more in 2014.  Distressed sales are currently 14% of sales as compared with 22% previously.  The million dollar home market rose drastically nationwide, with the smallest rise here in the west at 25.4%.  A paltry increase when compared with the northeast market which rose 45.3%.

SOME THOUGHTS FOR AN OPTIMISTIC OUTLOOK

Real Estate experts at the Keeping Current Matters Real Estate Blog, strongly believe home sales will skyrocket 105 to 15% in volume in 2014.  They have good reason to be confident.  They are usually right.  Check out their blog at www.kcmblog.com.  A second reason for optimism, touched on in a previous paragraph is the Jumbo loan.  They are up 34% which means there are secondary lending sources making them.  This creates more avenues for people to get where they need to go in housing.  Jumbo loans means the seller of that middle level move up home, can get financing to go to his/her next home, probably close to the $800,000 to $1,000,000 plus.  Being able to move them up, means the lower end can move up.  And so goes the real estate hokey pokey.