Category: Mission Viejo

Microscope on the Market

Today the microscope is on Mission Viejo.

So many of the media numbers focus on Orange County performance, but real estate performance can vary dramatically within our large county and particularly at various price points.

I’m going to spend the next several posts breaking down each of the South Orange County cities to give you an idea of local performance.  Whether you are buying, selling, or just keeping an eye on your local market, these numbers tell the story.

BTW Dear Friends/Readers, if you find this number crunching downright boring – stay tuned.  I always come back to the conversations that are much more fun than this!  :)

Homes Under $500,000

# of Sales Short Sales Bank Owned Equity Sellers
Active 177 66.7% 6.2% 27.1%
In Escrow 126 44.4% 26.2% 29.4%
Closed* 43 27.9% 39.5% 32.6%

I think one of the revealing things about the under $500,000 market is the fact that while nearly 68% of the active inventory are short sales, they make up less than 28% of the homes that closed in the last 30 days. Demand also is high for bank owned product but very little currently exists – only 6.2% in this price range.

Homes $500,000 to $750,000

# of Sales Short Sales Bank Owned Equity Sellers
Active 124 25% 4% 71%
In Escrow 35 45.7% 2.9% 51.4%
Closed* 6 66.6% 33.3% 0

Again, very little inventory in the bank owned market, but significant demand.  There were very few sales in $500,000 to $750,000 market, as well as the $750,000 market as shown below.

It’s important to note where the demand is: of the closed sales in the last 30 days 81.1% have been in the under $500,000 market.

Homes Over $750,001

# of Sales Short Sales Bank Owned Equity Sellers
Active 49 14.3% 2% 83.7%
In Escrow 12 50% 0 50%
Closed* 4 25% 0 75%

Interestingly, there are significantly less short sales in this price point. The bad news – sales are slow and with current buying trends, it would take 12.25 months to exhaust the current inventory of homes if nothing else were to come on the market.

However in the under $500,000 market, it would only take 4.12 months to exhaust all the inventory at the current rate of consumption. As I have mentioned many times here, the short sale listings takes months to close and skew the numbers dramatically. With current inventory, it would only take 1.9 months to consume the equity seller and bank owned listings under $500,000.  This sector of the market is no longer a buyers market.

*Closed Sales are properties that have closed within the last 30 days from the time of this writing.
**All information and statistics are from SoCalMLS and are deemed reliable but not guaranteed.
If you have any questions about market conditions for Mission Viejo, feel free to get in touch with me. I’m happy to help try to make sense of it all.
Microscope on the Market

When you are looking to buy a home in Orange County, or anywhere else for that matter, it is critical to drill down into the numbers for the sector of the market that you are looking at.  Orange County numbers are wonderful benchmarks to know, but our market is made up also of submarkets within the OC.  It’s important to understand Absorption Rates, Average Days on Market, price per square foot, sale price to list price, etc.

For every buyer I’m working with, I try to do an analysis that really tells the story of the market they are hoping to buy in.  This allows them to have a realistic picture of the market and compete effectively for the home they hope to buy.

If you are a seller, these numbers will be important to you too.  Even if you are not a buyer or seller right now, hang in there.  This may seem dry, but I’ll try to make it fun.  There is a story told by the numbers every time!  :)

Today, I did some research for an investor I am working with in Rancho Santa Margarita.  She is looking for a condo around $250,000 that has at least 2 bedrooms and 1 car garage.  I looked at the numbers for Rancho Santa Margarita between $200,000 and $300,000, with a minimum of 2 bedrooms and 1 garage – Active, In Escrow, and Closed Sales going 90 days back.  (I recently did this analysis for a Mission Viejo buyer and only included sales over the previous 30 days, but in this instance that would have been swayed too heavily by the holidays).  Here’s what I found for this submarket:

Active Inventory – 47 Listings

  • 34 Short Sales or 72%
  • 9 Bank Owned or 19%
  • 4 Traditional Sellers or 9%

In Escrow – 22 Listings

  • 9 Short Sales or 41%
  • 9 Bank Owned or 41%
  • 4 Traditional Sellers or 19%

Closed Sales in the Last 90 Days – 27 Listings

  • 10 Short Sales or 37%
  • 10 Bank Owned or 37%
  • 8 Traditional Sellers or 30%

Analysis of Closed Sales

  • Short Sales:  Average Days on Market – 96, Sale Price to List 102.17%, $256.47 price per sq. ft.
  • Bank Owned: Average Days on Market – 35, Sale Price to List 98.89%,  $248.17 price per sq. ft.
  • Traditional Sellers: Average Days on Market – 33 (there was one outlier here that if removed would have made it 14), Sale Price to List Price 96.43%, $263.35 price per sq. ft.

Hey wake up! This is fun – really!

So what does all this tell us?

I’m a little surprised to see that some short sales are getting done in this price range.  We still have a large swing in the percentage of active inventory versus closed sales within the short sale market, but maybe the banks are starting to pull it together.  I’ll be watching.

It’s also still clear that the traditional seller is able to secure a slightly higher price.  The swing was much greater in the Mission Viejo analysis I did earlier, but it is still there.  Why?  I think buyers still love to have full disclosure from a real seller.  They also tend to be properties in slightly better condition.  And the best part – you submit an offer, and a real live person actually responds in sometimes as soon as 24 hours!  Wow!

Still the best ‘deal’ going is the bank owned home.  Just beware, is it still a ‘deal’ if you have to put in a lot of money after the close?  Maybe yes, maybe no.  Each property will require individual analysis to make sure that one is really getting a good value for the home.

Hope this helps my investor – and you.  If you ever are in need of a little Microscope on the Market – just let me know.  Just make sure you’ve had your coffee first.

In the latest Zippy’s Report, Orange County Register’s Jonathon Lansner’s ranking of Orange County zip codes for housing performance, showed that the hardest hit zip codes for the 3rd quarter were some of Orange County’s most affluent zip codes.

Included in the worst performing areas were Newport Coast, Dana Point, Coto de Caza (part of the 92679 zip), and San Clement.  Some of the biggest improvements were areas that have recently had some of the worst performing zip codes including, Mission Viejo, Anaheim, Santa Ana, Costa Mesa.

This may be a case of ‘Trickle Up’ economics.

I did some research for a client tonight and the findings are important to share with readers here.  If you are a serious buyer or seller, this information is telling.  Please stick with the tedium of the stats because the story it tells is meaningful.

This particular buyer is looking in Mission Viejo between $450,000 and $550,000.  He wants a single family residence.  With that criteria, I hit the MLS looking for a picture of where we really are. 

As many of you know, I’m the last person to jump on the ‘Hurry Buy Now’ band wagon.  However, if you are in this price range in South Orange County – this is speaking to you.  What did I find?

There are 40 Active single family residences currently listed in Mission Viejo between $450,000 and $550,000.  How do those breakdown?

  • 19 are short sales (BTW – refer to my posts on shorts sales to understand the challenges with these sales)
  • 4 Bank Owned
  • 17 are supposedly equity sellers.  Upon further reading of the agent remarks in the listings 2 more of these are actually short sales and 1 is bank owned.

So, what does this leave us?  14 Traditional, Equity Sellers?  I should add 5 of these 14 are 55+ communities.  There are really only 9 equity sellers in my client’s search criteria out of 40.

It then becomes important to analyze the recent resale activity.  I pulled sales from the last 30 days with the same criteria - Mission Viejo, single family residences, $450 to $550.  Here are the stats:

  • 21 Sales
  • 6 Bank Owned
  • 3 Short Sales
  • 13 Traditional Sales (one 55+ community sale)

No rocket scientist needed here.  This is out of balance.

If you are not a numbers person, it’s okay, just try to stick with me here – 52.5% of the Active Inventory are short sales, but last month only 14.3% of the sales were short sales.

12.5% of the Active Inventory is bank owned, but last month 28.6% of the sales were bank owned.

And most telling, 22.5% of the Active Inventory are equity sellers (not to include senior communities), yet the sales from the last 30 days indicate that 51.1% were traditional sellers.

I’m actually not a numbers guru.  I love reading.  I love writing.  But, I also love logic and this should speak volumes to you.  The sellers that don’t have to sell have chosen not to; they’ve heard the message.  Buyers that have been fence sitting or have had affordability problems, have found that it is indeed their time.  Demand does exist.  The inventory may actually be lacking.  Do I hear – supply and demand?

Just to temper my enthusiasm, let’s look the sales prices.  No question – these are some other stats to consider from the last 30 days with that same criteria:

Short Sales – Sold at 98.29% of asking price with an average days on market of 143.  The average price per square foot was $253.09

Bank Owned - Sold at 101.55% of asking price with an average of 16 days on the market.  The average price per square foot was $263.06.

Traditional Sellers -Sold at 97.38% of asking price with an average of 34 days on the market.  The average price per square foot was $323.09.

I will suspect that the knee jerk response is that traditional sellers are overpriced on a per square foot basis – but look at the demand.   There’s a reason these are selling.  They are in superior condition (sometimes by a lot) and you can actually submit an offer to a live body, that has real emotion, and a desire to sell.  What’s the value in that?

So, if you think it’s a buyers’ market, think carefully and ask for the stats.  You need more than a cursory overview.  You need to drill down into the makeup of what it means to get a clear picture of the marketplace.

This is one picture of the OC marketplace, but from what I’m seeing, in certain pricepoints, it’s not isolated.  Thoughts?  I’m open to our interpretation of these numbers.

Every now and then you see a headline touting the increase in sales in Orange County.  Less than a week ago, Orange County Register’s Jon Lanser posted ‘1-in-3 O.C. ZIPs See Homebuying Doubling or Better’.   I love good news but it’s important to drill deep into what these statistics are telling us.

Price point is really one of the big players in this discussion.  The movement that is taking place is great if you are a seller in the below $500,000 market.  With the limitations in lending and lower pool of qualified buyers, sellers in the upper price points have to be prepared for a longer selling cycle.

When we talk about Absorption Rate, we are talking about how many months it would take for the existing buying demand to consume the total inventory if no other homes were to come on the market.  I recently calculated the Absorption Rates for some of South Orange County’s cities, but to get the truest picture of each marketplace, I thought it was critical to break it down by price point.

This is how it looks:

Absorbtion Rates

Absorbtion Rates

Notice, for example, Laguna Niguel.  It will take 14.42 months to exhaust the supply of inventory with current demand in the over $750 price range, yet homes in Laguna Niguel under $500,000 will only take 5.7 months to absorb. It’s important to note that Laguna Niguel has one of the lower rates of distressed property rates in the county and have a much higher median sales price overall.

Steven Thomas of Altera Real Estate, reported in his Orange County Housing Report that 69.4% of all the Lake Forest inventory are distressed sales.  Buyers and investors alike are targeting the distressed part of the market as opportunities.  Part of the reason that Lake Forest is enjoying one of the lowest overall absorption rates in our market is the high percentage of distress inventory and the related demand.

If you are considering buying, or selling your home, and want to know more about what these numbers might mean to you, don’t hesitate to let me know.  No arm twisting here – just happy to answer questions.
*These numbers are from SoCal MLS figures in the first week of November and
the closed sales in the proceeding 30 days.

Brainstorming a solutionThere has been much discussion about the big bailout.  But in case anyone with any influence is listening – I have an idea that could make a big contribution to our market recovery.  Just call anytime and I’ll share my insight with you – from the trenches.  I’ll be waiting for your call.

For the rest of you that might be curious about what I have in mind, I’ll share with you some of what happened to me this week.  Brace yourself because I feel a rant coming on….

As I have said countless times on this blog, short sales are a HUGE factor that is driving our market prices and inventory in Orange County.  For example, 64% of the active homes on the market today in Rancho Santa Margarita, under $500,000, are short sales!  In Mission Viejo, 50% of homes active on the market today under $500,000 are short sales. 

These short sales have offers that have been submitted to banks and are just awaiting approval.  They may have multiple offers.  This is buyer demand that is waiting and the last thing we need in this market is pent up buyer demand waiting.

I’d like to share with you a story about one of my short sale listings.  Within 72 hoursof listing the home back in May, I had 4 offers for asking price, and over.  We submitted them to the bank, along with the package from my seller that clearly qualified for a hardship.  The following dialogue is from this week between my short sale coordinator and the the banking institution’s (a very common and well known lender) negotiator.

My Short Sale Coordinator:

“We now had 4 buyer’s who have cancelled, including the last offer we submitted due to the fact that this process has taken almost 6 months.  We just can’t keep buyers around that long and we can’t keep the value the same for that period of time.  Values are dropping.  We do have another offer, but it is lower than any offer we have received.

“At this point we, as long with the seller, are at a loss as to what to do.  Do you have any suggestions, or any time frame that we can tell buyers?”

The Bank Negotiator:

“I will have to cancel this file because the buyers are no longer interested.  I suggest faxing in the new offer.  Because it is a new offer it will be considered a new file.  Anytime you have a new buyer it starts all over.  A short sale can take 4 - 6 months.  When you send in a  new contract the time frame starts all over. ”

The negotiator goes on to say that they are trying to make time frames shorter and the last response time was 30 days.  But in my experience, that response is inconsistent at best and clearly, they aren’t willing to commit to anything better than 4 to 6 months.

So what’s my big idea?  Let’s save a big bailout expense.  Forget giving money to banks with no accountability for how they use it.  Instead, let’s create an efficient, streamlined method of handling the massive number of properties that are in foreclosure and that are short sales. 

In the case of my listing, it may take one year to get a buyer in that property and a closed sale.  In the meantime, values are detrimentally impacted,  inventory remains misleadingly high,  property condition deteriorates, and suffering sellers can’t restart their lives.  If you shorten this process to 90 days, can you imagine the positive impact on our market?  Just think, 6 months ago I had 4 buyers that wanted to pay full or over list price.  Today’s buyers are thinking about 20% less than that.  THAT is a huge reason prices continue to decline in Orange County and in many parts of the country.

Maybe this is too simplistic.  Maybe this addresses only part of the problem.  But, if we are looking at some of the real, on the ground solutions for the much touted ‘Main Street,’ this seems like a great place to start.  Like I said, to those influential individuals and government institutions dying to hear my Bailout alternative, I’ll be standing by waiting for your call.

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