Giving Thanks

It is the time of the year to reflect and give thanks.  Regarding the Orange County housing market, there’s still a lot to be thankful for.

 

Thanksgiving Reflection:  Even though the housing market is extremely frustrating, there is plenty to be thankful for.

 

I am thankful that lenders are approving short sales and that they are closing.

That’s right.  I am thankful that lender approval is eventually bestowed upon some short sales, enabling homeowners to escape the nightmare process of selling their underwater homes.  I think everybody can agree, including the lenders, that they are still falling way below the bar in terms of making a decision in a reasonable amount of time.  There is tremendous room for improvement.  The average number of monthly closed short sales this year is 574.  Yet, there are 3,045 pending short sales.  Most short sales take months for an answer.  And, the more complex the short sale, second liens, unpaid homeowner association dues, unpaid property taxes, and mortgage insurance companies, the longer and more challenging it is to successfully close the sale.   Yet, I am thankful that some short sales are closing.  Lenders are allowing upside down homeowners in dire straits to move on.  In turn, they obtain a home typically in better condition and save a lot more money compared to the alternative, foreclosure.

 

I am thankful that real estate agents are still selling homes despite the tremendous obstacles and frustrations in this market.

Despite misguided public perception, real estate agents in today’s market work ten times harder than any modern era real estate cycle and are paid much less compared to the boom years.  Throw on top of that no change in the agent population locally here in Orange County despite the downturn.  Here are some of the obstacles they face:  tremendous competition, extremely tight credit, short sales that take forever to close, frustrated buyers, sellers in unfortunate situations, and unrealistic expectations of buyers and sellers.  Yes, this market has been extremely frustrating, but real estate agents continue to pick themselves up and take great care of their buyers and sellers.

 

I am thankful that unrealistic sellers are finally figuring it out: if they don’t drop the price, they must pull their home off the market and stop wasting everybody’s time.

 The listing inventory blossomed this year, growing from 7,165 homes at the beginning of the year until it peaked in mid-September at 11,892 homes.  That’s an increase of 4,727 homes, or 65%.  Since peaking, the listing inventory has shed 1,056 homes, or 9%.  Unfortunately many homeowners were extremely unrealistic in their expectations of the housing market.  They heard about year over year increases in the median sales price, buyers competing to buy homes, multiple offers, and sales price at or above their asking prices.  They did not realize that buyers in the most competitive markets were only willing to pay a few thousand dollars above the last asking price, NOT thousands upon thousands of dollars more.  Buyers are spreadsheet buyers, meaning they will pour over comparable and pending sales data to arrive at a comfortable price.  So, many homeowners placed their homes on the market overpriced and waited and waited with no results.  Most homes on the market had to decrease their prices to achieve success.  For those unwilling to reduce their asking prices, pulling their homes off of the market is the only other alternative.  Distressed properties are keeping a lid on any appreciation.  There are still many homeowners that remain on the market at unrealistic levels; however, I am thankful that many of them will be continuing to pull their homes off as the Holiday market progresses. 

                                                   

I am thankful that the market is theoretically a seller’s market, based upon the expected market time.

For a seller’s market, the expected market time must be less than five months.  At its best this year, the expected market time dropped to 2.53 months in mid-May.  It is currently at 4.02 months, still a seller’s market.  But, with so many distressed listings, there is very little appreciation, if any.  As long as Orange County’s expected market time indicates a seller’s market, prices will not depreciate.  And, it looks as if 2011 is poised to be a seller’s market as well, great news for values.

 

Active Listing Inventory:  The listing inventory continued to drop, shedding 3% in just two weeks.

 

The active listing inventory continued its decent, dropping 589 homes over the last month, now totaling 10,836.  That’s a 5% drop in just four weeks.  Many unrealistically priced sellers are starting to realize that throwing in the towel is their best option.  Last year at this time there were 3,181 fewer homes on the active inventory compared to today. 

Foreclosures and Short Sales:  It seems as if the plateau in distressed homes on the market has continued.

The active distressed inventory increased by only 40 homes over the past month and now totals 4,101 foreclosures and short sales.  The distressed home market is not changing much, adding less than 1% in the past month.  It is apparent that the distressed inventory has hit a peak for the year.  The distressed inventory now represents 38% of the current active inventory.  Last year at this time, there were 2,496 distressed homes on the market, 1,605 fewer than today.  The number of foreclosures within the active listing inventory increased by 17 homes in the past two weeks, from 719 to 736.  The expected market time for foreclosures is 1.61 months, an exceptionally HOT seller’s market.   Short sales, where a homeowner attempts to sell a home for less than the total outstanding loans against a home, requiring lender approval, increased by 20 homes over the past two weeks and now total 3,365.  The expected market time for short sales is 3.62 months, not as hot as foreclosures, but better than the Orange County housing market as a whole.

 

 

 


Demand:  Demand continued its trend of not changing


In the past month, demand, the number of new pending sales over the prior month, increased by 21 homes, virtually unchanged.  Last year at this time demand was at 3,038 pending sales, fueled by a first time home buyer tax credit that was expiring at the end of November 2009.  

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