Category: Watching for Recovery

Wagon Wheel

Wagon Wheel is small community in Trabuco Canyon located off Oso Parkway not far from the south gate of Coto de Caza.  The homes were built in the mid 90’s by Kaufman & Broad who subsidized the original mello roos bonds making it known in part, for it’s very reasonable tax rate.

Homes range in size from the condos in the Dakotas (835 to 1,117 square feet) to the gated community of Stonecliff (up to just over 3,000 square feet).

Current market conditions in Wagon Wheel are not dissimilar to Orange County as a whole.  The upper price points remain very slow and the lower price points are plagued by distress inventory.

Market Conditions

Note that there is very little bank owned inventory on the market currently, but given the recent completion of the moratorium on foreclosures, we are seeing Notice of Defaults on the rise again and in the coming months, I expect to see bank owned homes back on the rise in Wagon Wheel and all over Orange County.

The highest sale year to date is in the California Laredo tract at $725,000 in February.  The next closest sale was $600,000.  The poor sale history for the upper price points is  not isolated to Wagon Wheel and is seen across the market due to the lack of available financing and buyer cautiousness.

The highest sale in the last 30 days was in the California Landmark tract, a traditional sale for $556,000.  Between $500,001 and $750,000, there are 5 available properties and 3 in escrow.

Under $500,000 is plagued by distress sales.  Currently 4 out of 5 active listings are short sales, yet the 4 equity sellers currently in escrow reflect the buyer demand – buyers are often reluctant to wait out the lengthy short sale process and opt for a traditional sale.


Under $500,000

Wagon Wheel $500,000 to $750,000

Wagon Wheel over $750,000

Questions?

If you are wondering how these statistics and trends impact your buying, or selling process, please don’t hesitate to let me know.  I’m always happy to help.  No pressure and no obligations.  I can be reached at (949) 939-2514 or emailed at [email protected]

This information and stats are from SoCalMLS and are deemed reliable but not guaranteed.

No crystal ball needed here – we are about to see a sharp increase in foreclosures in the coming months.  The foreclosure report for the month of March was recently released by Foreclosure Radar.

During the final months of 2008, many lending institutions participated in a voluntary moratorium on foreclosures.  Notice of Defaults (NOD’s), the first step in the foreclosure process in California, plummeted.   The final days on the moratoriums have just passed.  Fannie Mae and Freddie Mac’s were lifted as of March 31.

And if you’ve been paying attention to my ‘Microscope on the Market’ series, you’ve noticed the drop in bank owned homes on the market – hence the second half of that headline, ‘Foreclosure Sales Drop’.  Without the new NOD’s, there’s been a dramatic reduction in bank owned homes.

Notice the following chart that tracks Notice of Defaults and Foreclosure sales.  The green line represents California’s NOD filings.  Notice the arrows – the dramatic dip in September and the sharp rise as of March ‘09.

March 2009 Foreclosure Report

With the rise in filings, we can expect the foreclosures to rise.  Will Obama’s plan help?  My guess is no for Orange County.  Why?  The loan modifications the banks are offering, by and large, don’t change the significant negative equity that many of these homeowners are facing.  Without a substantial equity reduction, many sellers (who’ve already seen their credit damaged) will opt to walk away from the property.

What does this mean for buyers and sellers?  If we see a large rise in distress inventory, this market may see some downward pressure on pricing – although in some of the lower price points, overall inventory is still low (especially if you remove the difficult short sales).  I would expect that demand for this inventory will remain high – as we have seen in recent months.

One interesting note in the Foreclosure Radar report:

The California Foreclosure Prevention Act, which goes into effect this summer, adds an additional 90 days to the foreclosure process if lenders fail to take certain actions.  It is quite possible that the dramatic rise in foreclosure notices occuring now is an attempt by lenders to process as many foreclosures as possible before this law takes affect.

If you are interested in viewing foreclosure data and bank owned homes don’t hesitate to contact me.

Microscope on the Market

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.

Today’s Microscope on the Market focuses on the Laguna Niguel real estate market.

Homes Under $500,000

# of Sales Short Sales Bank Owned Equity Sellers
Active 119 63.9% 5% 31.1%
In Escrow 71 53.5% 29.6% 16.9%
Closed* 18 27.8% 38.9% 33.3%

In the under $500,000 market, Laguna Niguel does not vary from any of the cities I focused  on in South Orange County with a whopping 63.9% of the active properties in a short sale situation.  Couple of things to note – it would appear that there is significant movement with 71 properties in escrow.  Sadly, 38 of them are short sales and those can sit in escrow for 60 to 180 days and that can skew the perception of significant movement.  Notice only 18 have actually closed escrow in the last 30 days.

I want to also point out the very low number of bank owned inventory.  Pay close attention to this number in the coming months.  It will increase again based on the end of the moratorium on Notice of Defaults.  Filings are back up to levels prior to the moratorium so watch for this number to increase.

Also of note, despite the large supply of short sales, buyers still look to bank owned homes and equity sellers for their purchases by a significant degree in relation to the supply.

Homes $500,001 to $750,000

# of Sales Short Sales Bank Owned Equity Sellers
Active 83 32.5% 3.6% 63.9%
In Escrow 29 65.5% 3.4% 31%
Closed* 15 13.3% 26.7% 60%

Again, despite the large number of short sales, buyers love bank owned inventory and it doesn’t last on the market and their is still a significant demand for reasonable equity sellers.

Homes Over $750,001

# of Sales Short Sales Bank Owned Equity Sellers
Active 147 8.2% 2% 89.8%
In Escrow 30 30% 0 70%
Closed* 12 8.3% 0 91.7%

As I noted in Coto last week, there is just very little in the upper price points that is moving.  At this rate of consumption (12 homes a month), we have a 12.25 month supply of homes.  If nothing else were to list in this price range, it would take us over a year to consume the existing inventory with current buyer demand.

The good news in Laguna Niguel – there is very little bank owned inventory and very few short sale listings.  That can be good news for values in the coming year.  I’m not suggesting any appreciation guys – but even with slow sales, these folks may have the financial strength to hang on.

*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 Laguna Niguel, feel free to get in touch with me. I’m happy to help try to make sense of it all.
Microscope on the Market

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.

Today’s Microscope on the Market focuses on Coto de Caza.

If you aren’t from Orange County – yes this is the home of the infamous Real Housewives of Orange County, although I can’t say that the friends that I have living in Coto are anything like the woman as depicted on that show.  It’s really a beautiful gated community with homes in a wide variety of prices ranges.  But I won’t kid you – some of the highest priced homes in Orange County are behind these gates.

I toyed with varying the breakdown that I usually do (Under $500k, $500 to $750, and over $750), but I’ve decided for a number of reasons to leave them.  More later….

Homes Under $500,000

# of Sales Short Sales Bank Owned Equity Sellers
Active 10 40% 10% 50%
In Escrow 5 40% 60% 0
Closed* 1 0 100% 0

Although clearly, there is not a lot in Coto in the under $500 market, the buying behavior is similar to other parts of the county – all 5 that are in escrow and the 1 closed sale are all either bank owned properties or short sales.

Homes $500,001 to $750,000

# of Sales Short Sales Bank Owned Equity Sellers
Active 24 37.5% 8.3% 54.2%
In Escrow 9 22.2% 11.1% 66.7%
Closed* 3 0 100% 0

This was one of the rare instances where current equity sellers in escrow actually exceeded the active listings that were equity sellers. I’m not ready to ready too much into it – we are only talking about 6 sellers.

Homes Over $750,001

# of Sales Short Sales Bank Owned Equity Sellers
Active 116 9.5% 4.3% 86.2%
In Escrow 10 30% 20% 50%
Closed* 8 12.5% 0 87.5%

Given the wide range of values in the upper end of the market in Coto, I think it’s important to take note of just a few things in the over $750,000 segment:

  • The highest priced home currently in escrow is $1,099,000.
  • The highest sale in the last 30 days is $1.6 million.
  • The highest sale in the last 6 months per SocalMLS was $2.9 million.
  • The only sale over $2.9 in the last 12 months was the record sale on Violeta for $19.5 million.  There have been no sales other sales over $2.9.
  • In the preceding 12 months there were 7 sales over $2.9 million ranging from $3.2 million to as high as $6,643,750.  (Where did that buyer profile go?)
  • Currently, there are 24 homes over $2.9 in Coto de Caza – 16% of the active inventory.

While the residents of Coto de Caza may be used to having a longer time on the market given the price point, there is no question that they are certainly feeling the shift in the market at the higher end as well.  We have seen the high end somewhat insulated until recently, but when you seen see such a significant drop in purchases at the highest end, you know that no one (not even the ‘Real OC Housewives’) is protected.

*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 Coto de Caza, feel free to get in touch with me. I’m happy to help try to make sense of it all.

While many of us have a loose understanding of how the housing and financial markets contributed to our current recession, many of us are unaware of the ways that the accounting method – Mark to Market – contributed to the magnitude of the crisis.

I’ve heard the term ‘Mark to Market’ before, but my understanding was loose at best.  It was a blog post written by Pasadena’s local expert, Irina Netchaev, that really broke it down in a way that was simple enough for me to get my head around.  Understanding this one facet of the crisis is really eye opening and definitely worth taking 5 minutes to read.

The other day, I mentioned my astonishment at the Housing Affordability and Stimulus Plan and how it really leaves California (the most troubled housing markets in the country) out in the cold.istock_000001823153xsmall

Then the announcement came regarding an $8,000 tax credit.  Forgive me, but whoop-dee-do.

While this may be meaningful in the lower price points, we aren’t having trouble there these days.  Market time in the under 500,000 range is running around 4 months, and 30 days if it’s not a short sale.  Clearly, that is a strong seller’s market.

Where do we need help?  The higher price points are hit hard by tight financing, consumer confidence, and high inventory.  And frankly, in those price points, the value of a home could potential fall $8,000 while you are in escrow.  Not to mention, first time buyers that qualify for the tax credit, aren’t generally buying in that price point – so I guess that doesn’t excite me much.

Most recently, plans were announced to cut mortgage deductions for those in the higher income tax bracket.   Now, if you live in Orange County and you are making $208,850 or more, you are living a lifestyle that is a far cry from someone living in the Midwest on the same income.

Example:

You may have purchased a home in 2006 that you are affording (barely because your bonus didn’t come through this year), and you may have lost 30% of the value since you purchased.  Since you are considered part of the ‘wealthy’ in the country, you are now on the verge of loosing some of your mortgage deduction.  You know – the mortgage you’ve been trying to hang onto, even though you owe more than the house is worth….

I’m waiting for the part of this plan that impacts California.  Maybe I wasn’t clear last time I mentioned this – one that impacts California in a positive way.

Recently Jonathon Lansner posted a podcast that he did with Steven Thomas of Altera Real Estate.  Great information whether you are a buyer or seller in Orange County.  Mr. Thomas posts his Market Time Report every two weeks and continues to be an excellent resource for analysis on Orange County real estate.

If you are sizing up a purchase or sale, looking for an opinion on ‘the bottom’, this is worth 13 minutes.

Remember those long car rides that seemed to last forever?  I used to pester my poor parents with the tired question, “Are we there yet?”  As a mother to 3 kids, 10 and under, I’m now on the receiving end of that tired question.

This Orange County real estate market is one of those long car rides where we are all asking the same question about the bottom of this market – “Are we there yet?”  I even have moments where I want to say in my whiniest voice, “How much longer, Mom?”

Did you ever notice that your parents were intentionally vague?  There were no specifics.  Now, as a parent, I understand why.  The answer can vary depending on traffic, bathroom breaks, if we stop to eat, and of course the potential need to pull over to break up a fight.

So if you are wondering how much longer – I’m right there with you.  But it depends.  It depends on how the foreclosure market is impacted by government intervention.  Will it help or just delay the the healing of this market?  How available is money?  Will the strict lending guidelines continue?

But if you keep your eyes peeled, you may see a few roadsigns that will give you some clues.  Watch the percentages of distressed inventory versus traditional sellers.  Watch the lending trends.  Watch the average days on market.  Track absorption rates.  Notice the listing price and the final sale price.  All of these are indicators of where we are on this road trip.

So are we almost there?  The answer just might be, yes.

One of the things that I constantly talk about on OC Voice, is the need to be an educated buyer or seller.  My goal is always to provide information that helps to educate my readers about what trends we are seeing – without putting you to sleep.  Heck – I still want you to keep reading and I know statistics are boring.

So today – I had an interesting conversation with an agent regarding her philosophy about showing buyers property.  I’ll be honest, I’m a little shocked by the philosophy.  She shared with me that she shows her clients homes that are up to $50,000 outside their budget because of course, ‘in this market, there is room to negotiate.’  Okay, fair enough.  This isn’t the strongest market, but I’m not biting.  Let me explain why….

  • In the price range her clients are in, there is very little inventory.  In addition, if they are hoping to avoid a short sale purchase, and want a bank owned home or an equity seller, that accounts for approximately less than half of what is on the market.   There is competition for the quality product.
  • The closed sales in the area are selling at 98.65% of list price.  In this instance, the buyer’s agent is hoping to negotiate 17% off list price.  Based on local numbers, I think it’s fair to say that it might not be a realistic method of searching.
  • Average time on market in this area, at this price range, is 60 days.  This is a far cry from a buyer’s market.  However, going into the higher price points – then it becomes more of buyer advantage.
  • This strategy has nothing to do with value.  What if the home was listed 10% below current market value?  Isn’t that already a good deal?  What if the home were $50,000 overpriced?  That certainly isn’t the good deal that they are hoping for.
  • Lastly, why show a buyer a home that is out of their price range?  Long term, this isn’t fun for anyone.

The key is to understand the details of the market you are buying or selling in – not just an overview.  All of Orange County is not the same.  Each city is different and each price range is different.  It is critical to understand the market within the larger market.

Again, the message is to be educated about your market.  Don’t let mass media, your friends, or even your agent be your sole source in your decision making process.  Let the numbers speak to you because without fail, they’re telling you a story.

The Orange County Register has recently posted a series of predictions about the future of the real estate market in Orange County – Eyeball 2009.  The predictions are from local experts, economists, and Realtors.  If you’re interested in the varies perspectives – take a look at the various links provided below.

Crystal Ball

I’ll share with you the one thing I know for sure:  No one knows for sure.  These may be well educated folks and some I place more value on than others.  At the end of the day, if you are considering buying or selling in this market – educate yourself, analyze your personal goals, assess your personal circumstances in relation to your objectives and make a decision based on that.  Nothing I say, or anyone else, ought to be the sole reason that you do, or do not, decide to buy a new home (or sell one).

Try not to be part of the ‘herd’ mentality.  That kind of thinking is part of the reason so many homeowners are in trouble today.

It’s tough being a buyer today.  Who wants to stand around the water cooler at work and explain purchasing real estate in this economy?  Tough, but if it works for your circumstances, are there great opportunities?  You bet.

It’s really about being able educate yourself and make the decision that works for you.  That being said – let’s hear from the various Orange County voices:

  • Outgoing President of Orange County’s Association of Realtors  -Dick Gaylord
  • Managing Director of Pimco – Scott Simon
  • 2009’s President of Orange County’s Association of Realtors – Mary Jane Cambria
  • The Founder of The Concord Group – a real estate consulting firm – Richard Gollis
  • Economist & Dean of Mihaylo College of Business & Economics at Cal State Fullerton – Anil Puri
  • Housing rights advocate at Fair Housing Council of Orange County – David Levy
  • CEO of Buchanan Street Partners, a commercial real estate management firm – Robert Bruswick
  • Former UCLA economist, now co-founder of Beacon Economics – Christopher Thornburg
  • Advertising executive, president and CEO of Most Agency – John Most
  • President of Prudential California Realty – Rich Cosner
  • CEO of investment adviser Spectrum Asset Manager – Ryan Kelly
  • Owner of JLE Property Management - Jerry L’Ecuyer
  • Division President for California homebuilder Fieldstone – David Greminger
  • UC Irvine’s Merage School of Business’ Director for Real Estate – Kerry Vandell
  • President of Altera Real Estate – Steven Thomas
  • Lender and Owner of Mortgage Accelerator Plus – Norm Bour
  • Mission Viejo Broker and forecaster – Gary Watts

Always open to, and interested in, your feedback.

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