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August 2006 newsletter – OCBuyersMarket.com HOLD OFF ON THAT PANIC ATTACK… “THE MARKET IS JUST RETURNING TO NORMAL.” This was the headline and sub-headline of an article in the July 23rd Sunday LA Times. It’s “good news for buyers, but not that bad for sellers either.” We truly are returning to a normal market. The problem is that we’ve had a 10 year boom, possibly the longest since the end of WWII, and only the most seasoned real estate veteran can remember a normal market. Many people have entered the market, whether as professionals, investors or homeowner within the last 10 years and don’t know anything but “the boom” as “normal.” So the normal of now seems abnormal, if you follow the gist of this. “Industry analysts say the tumbling prices, glut of houses and 8% to 10% interest rates that marked the recession of the early 1990s are nowhere in sight now.” The article goes on to point towards our strong and diverse economy along with job strength as being major factors for optimism. It does point out, however, that we may see adjustments of perhaps 7% in prices. But to keep this in perspective, you’ve made more than 100%, in some housing tracts 150% in the last 5 years alone. Let’s keep things in perspective. If you would like a copy of the Times article, give me a call.
PROPERTY IN THEIR PORTFOLIOS… This was another great article in the OC Register that had new data showing investors’ growing clout in OC housing. This is worth mentioning because it isn’t talking about “flippers” or speculators. It’s talking about people who are buying and holding property right now in this softer market. Why? It’s because they have a strong belief in California real estate. The article featured an investor who was buying a condominium for his daughter who was finishing college out of state. He worries that when she returns she will be unable to enter the housing market, so he bought the property now. This investor is a financial consultant and is aware of current market conditions. Many investors are aware that there are good deals to be had right now. (This article is also available.)
WHAT WERE THE ACTUAL NUMBERS… The total number of sales for June (July is not available yet) was 3,608. There were 2,218 single-family resale, 968 condominiums and 422 new homes. The median price was up overall just 1.7% from last month and 7.1% from the same month of the previous year. One thing to remember on the median price is that 2,142 homes sold over $600,000 and only 1,408 sold under $600,000. In other words, more homes sold higher, but it doesn’t mean they sold full price. They may have actually sold at an adjusted price perhaps 92% to 96% of list price. What that means is that numbers are deceiving in regards to median price. It’s easy to think you should list your home for way over the last comparable sale because prices are rising. In actuality, many homes listed are getting price reductions because they started out listed unrealistically. Sales volume was up 15.9% overall from the previous month but off 26.3% from a year ago. But remember, last year and 2004 were banner years.
REFINANCE COULD PROVE COSTLY IN FORECLOSURE… This is going to become a hot topic. Because of slowing appreciation, people that refinanced and fall behind on their mortgage could find themselves in a “short sale” situation. If the loan had been a purchase money loan, (money used to purchase the loan), the lender is entitled only to the property. However, if a homeowner placed an equity line or refinanced the entire first and cannot sell for what they owe, they could find the bank able to go after personal assets including stocks, savings and their paycheck. Even if that doesn’t happen, the homeowner could face a tax bill from the IRS and the state Franchise Tax Board for any shortfall between what the bank gets for the sale and the original value of the loan. There are tips for overextended homeowners including: a) talk to the lender, b) get financial counseling and c) consider selling. (OC Register. Article available on request)
TROUBLE SPOTS INDICATE A SOFT MARKET, SO CALL ME FOR THE FACTS… There are all the indications of a softening market. But remember, softening is relative to the red hot market we’ve had. One sign is Notices of Default are on the rise nearly doubling in June to 639 and foreclosures went to 35. But remember, compared to over 600,000 properties in Orange County, these are ridiculously low numbers. It just indicates a slowing. I have an article available from “Money” magazine entitled, “6 Keys to Success in a Soft Market” and also “Where Home Prices Are Headed in 100 Top Markets.” Homes are not just selling themselves. They must be marketed properly and priced correctly. Sellers do need to be realistic and may face some challenges because of competition and aggressive buyers. That’s why your Realtor is so important. My job is to serve you and the people you refer to me with honesty, integrity and ingenuity. I look forward to hearing from you should you have any real estate needs.
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