When Will this Orange County Real Estate Market Improve?

Isn’t this the million dollar question! People talk about it, speculate over it, study it, and try to make buying and selling decisions based on all of it. So when will the Orange County real estate market improve?

I thought we’d be in this condition at least until Spring of ‘09, because historically election years are not strong real estate years. Even summer of ‘04 was a tough patch in our market. With the financial crisis, energy crisis, inflation pressure, and overall economic state, combined with the bizarre election year, I have begun to wonder if Spring ‘09 was even too optimistic.

When a client and friend asked me the question recently, I discussed some of this with him and thought ‘this is a great blog topic!’

The one thing I am sure of is that until our short sale, foreclosure, and bank owned inventory is absorbed, the market will not begin to recover. The traditional sellers are forced to compete with these listings and this continues to drag prices down.

I wondered how much of this inventory made up our existing market. One of my listings is a condo in Rancho Santa Margarita for $285,000 with 2 bedrooms. There are currently 36 listings with 2 bedrooms under $300,000 in Rancho Santa Margarita but of those only 9 are NOT short sales!

So how much of the current market is in ‘distress’? I should have paid more attention in my Excel class because I would love to chart this (add Excel to my list of technology skills to work on). The following breaks it down a bit for just some of our local cities as of 5/21/08 (please note that distress sales are all things bank owned, short pays, probate, foreclosure, etc. and all information was gathered from stats on SoCalMLS and deemed reliable but not guaranteed):

Rancho Santa Margarita Canyon Areas

Active Listings 383 Active Listings 177

Distress Sales 152 or 40% Distress Sales 66 or 37%

Laguna Niguel Laguna Hills

Active Listings 446 Active Listings 205

Distress Sales 152 or 34% Distress Sales 80 or 39%

Mission Viejo Coto de Caza

Active Listings 450 Active Listings 166

Distress Sales 185 or 41% Distress Sales 33 or 20%

Aliso Viejo Ladera Ranch

Active Listings 301 Active Listings 310

Distress 133 or 44% Distress Sales 103 or 33%

If you were to look at some of the coastal communities the numbers are significantly lower:

Newport Coast and Newport Beach 6%

Laguna Beach 7%

Dana Point 12 %

Currently, higher price posts are less impacted than properties like my $285,000 condo in RSM but according to the May 20th artcile in the LA Times, luxury homes prices are beginning to feel the impact.

I’ll continue to watch and post these numbers. As the # of distress sales begin to decline, that is a likely indicator that the market is beginning a true recovery.