Steven Thomas, President of Altera Real Estate recently released his latest Orange County Housing Report and it is definitely worth taking the time to review if you are curious about how the 2008 housing market finished and the possible outlook for 2009. It’s a very comprehensive summary.

I would encourage you to review the charts for Active Listings and Pending Sales. I love the way that it visually lays out the ’05, ’06, ’07, and ’08 numbers for comparison.

One thing worth noting is that current inventory is way down – 11,842 homes off the March peak of 15,617. Homeowners have definitely taken to heart that selling will not be easy and pricing is critical. If they don’t have to sell, they generally are opting not to.

The biggest facet of our current market is the distressed inventory. As I’ve continued to repeat here, one of the indicators that a recovery is on the horizon is declining numbers in the distressed sector of the market. Right now, Thomas states that 46% of all the current inventory are distressed sales; 76% of those are short sales and 24% are foreclosures.

So where is the demand? Believe it or not, it is a strong seller’s market when it comes to foreclosures and they are selling at 101% of asking price.

Short sales continue to be a frustrating facet of the market because they continue to stay active on the market while a bank approves the offers they have pending. This creates negative and misleading numbers when one analyzes the active inventory. These offers can take weeks, even months, for the bank to approve. The sale to list price on short sales is running at 97%.

If you have questions about how these numbers impact your buying or selling plans, I’m happy to discuss it with you.

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Sean Egan, considered to be one of 6 Wall Street experts that ‘predicted the fall of the financial giants’ says that the housing market is incapable of a recovery until we ‘clear out the garbage’.  I couldn’t agree more – and this point always takes me back to the same frustration.  If there were real solutions in how banks were processing the glut of short sale inventory, we could expedite the cleanup and expedite the recovery.  Unfortunately, that is not happening.

One portion of the ’60 Minutes’ piece that had me roll my eyes just a bit was the acupuncturist – turned real estate investor that was supposedly clueless about those Option ARM loans she used on her multiple investments.  She was putting 20% down, but didn’t ask questions about the loans she was using.  Why?  She was busy. “Busy looking at properties.  All day.  All the time.” Give me a break.

The arguments were a bit one sided and accomplished what the media loves to do – speak to people’s fears.  Consumer confidence is a facet of recovery and  pieces like this don’t help.

That being said, there is no denying another wave is coming.  If the Alt-A and Option ARMs are with folks like our acupuncturist friend, then clearly there is reason for concern, but I believe that there are a good deal of folks who understood their loans and investments.  Maybe I’m wrong.  Time will tell. I also think there are a good deal of these folks who will likely refinance these notes given the current low interest rates.

Mr. Egan cites the NAR stats of record supply.  That’s a statistic that you must evaluate locally.  Steven Thomas, President of Altera Properties, noted recently on his blog that demand in ’07 was ’51% less than it is today’.  Mr. Thomas goes on to state, “Last year the inventory was at 16,128 homes, 3,740 additional homes compared to today, 30% higher.  Two years ago the inventory was at 12,661, 273 additional homes compared to today.”

As we have mentioned here, in the lower price points we are seeing significant movement and dramatically less inventory.  The upper price points are not enjoying those bits of good news.