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September 2006 newsletter – OCBuyersMarket.com
HOME SALES SLOW TO 9 YEAR LOW… WELL THEY COULDN’T STAY UP FOREVER… Only the most unwitting or naïve would or could believe that we could have a housing market stay red hot permanently. Then why is everybody getting so bent out of shape over our return to a “normal market?” Yes, you heard right, a normal market. This adjustment was necessary. But beware the headlines which use words such as tumble, slip, collapse, and freefall because they don’t tell the truth. Sellers, who had previously received 150% to 175% appreciation on a home they have owned for 5 to 8 years, may now realize only 140% to 160% appreciation as prices soften. This is no reason to wear black and mourn the passing of the boom. We are going to see an adjustment of prices and inventory. What is happening now is an artificial gap between seller and buyer while the seller adjusts, financially and emotionally, to the changed market. Part of what is also happening is increased competition of homes, i.e. more homes for sale. However, many of these homes were thrown on the market at ridiculously high prices, with no intent of adjusting downward. Those listings will expire and not re-enter the market. When that happens during the 3rd and 4th quarter of this year, look for inventory to tighten a little. It’s already happening. Fewer homes are coming on the market than even a month ago. Realtor city caravans that a month ago had 15 homes for preview are already dwindling to 8 or less. Read on as to why this slow down is healthy and why not to worry.
CAN YOU SPELL J-O-B-S AND I-N-T-E-R-E-S-T R-A-T-E-S?... As stated before and to quote Chris Thornburg of UCLA, “real estate never collapses, it deflates. Jobs collapse, but not real estate.” This is the stark contrast between the 90’s depression when 750,000 jobs were erased virtually overnight and today’s market when the Orange County Register reports, “O.C. job growth creeps up to 1 percent.” The article goes onto report that unemployment remains below last year’s rate. The Kiplinger Report concurs adding that, “the commercial real estate market will remain solid for years. The steady flow of capital shows no sign of letting up. U.S. and Asian investors still have plenty of money to spend. But it’ll be harder to find workers as the jobless rate declines.” Our scenario for 2006 could not be more different than the last housing slowdown. The overall prediction? Look for housing to flatten out, remain busy for those who need to buy and sell and then a steady upward climb. How long? Who knows? But I do know one thing; over a 7 year cycle, real estate in California has never gone down. As for interest rates, the Fed quit raising them after 16 straight increases and all indications are that they will stay down through possibly mid-year of next year. As long as the nation’s economy sputters and consumer confidence wanes, interest rates should remain low. They reached an 8 month low at the end of August and are fairly stable. (LA Times and OC Register)
WHAT WERE THE ACTUAL NUMBERS… The total number of sales for July (the most current available) was 2,779. That was off 23% from June and off 36% from July of ’05. There were 1,733 single-family resale, by far the largest segment of the market, 711 condos resale and 335 new homes. The breakdown in pricing is fairly even until you get to the over $700,000 category. They are as follows: a) under $400,000 = 328 b) $400,000 to 500,000 = 332 c) $500,000 to $600,000 = 432 d) $600,000 to $700,000 = 560 and d) over $700,000 = 1,104. Notices of Default were slightly lower in July than June but up 86% from a year ago. But remember, they had nowhere to go but up. Actual foreclosures numbered less than 50. When you compare that to the over 600,000 properties in the greater Orange County area, this is a non-event.
ALL FACTORS TO BE CONSIDERED WHEN SELLING OR BUYING…The time to just throw your property on the market and see what happens has passed. Price is paramount to success and because of competition; condition and location are much more important and will figure strongly in a home’s value. When buying, you will have more selection and negotiations become the most important thing for the buyer. Terms and conditions are back on the table. Now more than ever a Realtor makes sense. My goal is to represent you with integrity, ingenuity, enthusiasm and professionalism. I do hope you will call me to answer questions and provide information to you or anyone you refer. Thank you for the opportunity to serve you.
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