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March 2006 newsletter – OCBuyersMarket.com MANY BELIEVE THE REAL ESTATE MARKET HAS PEAKED, BUT STATISTICS AND TRENDS SHOW THIS MAY NOT BE SO… One thing is for sure and that is that real estate has everyone’s attention. Many economists are once again telling us that the sky is falling and the bubble is bursting. Gary Watts, an oft quoted Orange County economist thinks that notion falls far from reality. Gary Watts spoke at a local seminar on February 22nd and here is just a little of what he had to say: 1.) In the next 10 to 15 years 3.5 million more people will reside in southern California. 2.) The current housing boom has lasted 14 to 16 years. In 1990, 2.9 million existing homes were sold in the U.S. and existing home sales for 2005 reached a record 7.1 million. Every year can’t be banner, but estimates for this year are 6.84 million. Hardly a bubble bursting 3.) More and more people are investing in real estate. There are 3 waves. The first is the baby boomers modifying their living arrangements as they are not ready to fully retire. The second wave is the first-time homebuyer and the third are the move up buyers. Those purchasing upscale properties have a median age of 45. Population is far exceeding homes available. If you track the numbers, housing needs will require that an average of 2 million units per year are built, but records for building are 1.12 million a year. Adding more pressures to the already strained housing market are the new players in home ownership; namely women and minorities, both at around a 30% increase. In the past 20 years, Orange County developers built 260,000 homes, condos, and apartments. In the next 20 years, they will build 56,000 units and then all the land will be gone. There are currently 34 high-rise condominium towers under construction or in various stages of pre-development in Orange County.
THESE ISSUES ARE CREATING A STATE OF PERMANENTLY HIGHER PRICES… All that being said we did see a return to a more normal market so far in 2006. It’s just that most people don’t remember what a normal market looks like. Inventory is at 12 weeks, probably the highest in the last 6 years. However, for a housing recession it would take at least 26 weeks of inventory and a massive loss of jobs, neither of which looks likely as sales have picked up already at the writing of this newsletter. It always seems things pick up after the Super Bowl, believe it or not!
WHAT WERE THE ACTUAL NUMBERS… The total number of sales was 2,594. That is a 32.2% drop from December and a 10% drop from January of ’05. The median price was $582,000 which is a 6.3% drop from December but up 9% from January of ’05. Remember, numbers are just a gage. One of the main reasons this number went down is a flood of condos into the market, both resale and conversions. As I stated above, the first-time homebuyer is a huge market segment and they often start with a condominium. The number of sales by price was more evenly distributed and goes as follows: under $400,000 – 402; the $400,000 to $500,000 – 422; the $500,000 to $600,000 – 448; the $600,000 to $700,000 – 451; and over $700,000 – 855.
OTHER MARKET INDICATORS FAVORABLE FOR ACTION… Loans are looking good as there is no real reason for rates to climb. The 30 year bond is back so look for more 40 year fixed-rate loans, and more than likely, a 50 year fixed-rate loan will come on the market. This will open up another segment of buyers to the market. Jobs are strong as well with over 56,000 added at year end. According to Gary Watts there are over 10 million people employed, plus another 1.5 million that are self-employed. Most importantly, in southern California, 95% of companies employ fewer than 50 people. This diversification virtually ends the boom-bust cycle and its massive layoffs which is what really causes home prices to tumble. IMPORTANT: TRUST YOUR LARGEST ASSET TO SOMEONE WHO REALLY KNOWS THE MARKET. I make it a habit to study the conditions and trends of real estate. Please give me a call for a confidential review and market analysis of your home.
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