What Do Economists Think ?

HOW DID WE GET HERE? WHAT DO ECONOMISTS THINK?... Well, we got here in a variety of ways. First and foremost the way was paved with cheap and available money. The blame for this goes all the way to Greenspan, Wall Street and the White House. Without getting into the fray, let it be known that the Associated Press reported on June 19th that more than 400 real estate industry players have been indicted since March, in a Justice Department sting dubbed, “Operation Malicious Mortgage.” It is believed that mortgage mishandling, at best, and fraud at worst, is responsible for most of the nation’s housing crisis.
Economists’ views seem to be two-fold. First off is the belief that housing prices had to fall because they ran up so much faster than income. Obviously incomes were left in the dust, particularly in Southern California. Economist Chris Thornberg has said, “Southern California home prices likely will continue falling until mid-to-late 2009… The reason prices are falling is because of gravity. The run-up in home prices over the past decade was ludicrous and wasn’t accompanied by a comparable increase in income.”
Thornberg’s estimate of a 50% decline was different than that of the Chapman economists who predict 16% in ’08 and then another 9% in ’09. Many industry insiders blame the stark decline in prices on foreclosures. Well yeah. But you cannot exclude them from the housing mix to create a different percentile. That would be voo doo math. Excluding the foreclosures from any statistic is like saying if you hadn’t gone swimming, you wouldn’t be wet.
Bottom Line: No one can predict the bottom of the market. But the edict BUY LOW would seem to be in operation here. Just make sure you consult your own advisors as to what is best for you.

REO and FHA Loans

BUYING BANK OWNED, FHA LOANS AND THE WHOLE ENCHILADA… There is a lot of conflicting information out there. Have foreclosures peaked? Maybe not everywhere, but Orange County is getting close. The banks took possession of 698 properties in March, down 4% from February and down 13% from January. (Source:Dataquick) They could spike again, slightly, over the next few months but indications would be that the number is stabilizing. Some reasons are that more and more lenders are developing work out programs, loan modifications and loan relief. Short sales are still out there but frankly they are the riskiest bet for a buyer. You could be tied up for weeks waiting for a response from a lender, unlike a bank owned which is listed for a set price and is ready to go. Remember, however, that most bank owned properties are sold “as is” and “buyer beware.” They will need work and patience. Don’t expect to lowball these properties either as multiple offers are starting to make an appearance on these already price adjusted homes. We want to say a word about FHA loans. The loan limit on this product has risen to $729,000 in Orange County. It allows for a 3% down payment or 5% if it’s a “jumbo lite.” The money can be gifted and need not be seasoned. It is available for refinance up to 97% loan to value for rate and term. This is a viable option for refinances if some of your equity has been lost. Please call us for any questions on any real estate matter. We are your experts on “the whole enchilada!” See you next month!

P.S. For a look at how the county shapes up with foreclosures by city, give us a call and we will send you the map which appeared in the OC Register.

HOME SALES are UP

PRICES ARE DOWN, BUT SALES ARE UP… The next paragraph will have the exact numbers of sales which will still be down from the previous year, but up from the previous month. The fact is sales are way up from February. March sales (the latest month available) in Los Angeles, Orange, Ventura, San Bernardino, Riverside and San Diego counties were up 18.8% from February. According once again to Dataquick, that’s still not great as the average increase from February to March for the previous 20 years has been 38%. Yet I think it’s a number worth looking at. Why? Because most brokers reported their highest monthly sales in 15 months, which means this March was a heck of a lot better than March of ’07. The current inventory levels have not only stabilized, but they have hit a neutral plateau meaning they don’t really favor sellers or buyers. According to the OC Register (April) supply is hovering at about 6.77 months, meaning if not another house was listed it would take 6.77 months to sell every home currently listed to reach 0% inventory. This is not a bad number considering the affordability index is rising monthly. In fact, it’s risen from a low of 11% at the height of the market to around 30%. That’s the number of people that can afford to buy a home at current prices. Even though the emotions of the market favor buyers and because of that supply favors buyers, activity is slowly growing. Are we out of the woods? No, let’s be realistic and truthful. But, investors are sneaking back in and there are some great deals out there. If you need to buy, you need to call us. There are not a lot of great reasons to wait because the single factor that should sway you is interest rates and they are still at near historic lows.

FHA

WHAT WERE THE EXACT NUMBERS AND WHAT SHOULD YOU DO?... There were 1,471 sales in February ‘08, the latest statistics available. That is 14.4% up from December ’07. That breaks down to 975 single-family resale, 345 condos, and 151 new homes. The sales were evenly divided by price range which reflects the lowering prices because people could buy more house with less money. There were 1,739 Notice of Default filed but far fewer actual foreclosures at 732. WHAT SHOULD YOU DO? If we haven’t had an opportunity to visit with you about your real estate aspirations, now might be a good time. The Wall Street Journal had an awesome article in its Personal Finance section entitled, “PLAYING THE HOUSING SLUMP: IS IT TIME TO MAKE YOUR MOVE?” Although we won’t recapitulate the whole article here, it makes some excellent points about trading up, doubling down, and helping hand. The latter is a reference to helping your kids buy a home. RIGHT NOW WITH THE NEW FHA LOAN LIMITS, it is again an exciting time in real estate. FHA has a 3% down program. Although it is a fully documented loan, it does allow that 3% to be a gift. Fannie Mae also has raised loan limits based on median price for your area. To find out more about the limits you can visit http://www.efanniemae.com/. With the median prices coming down, you can get a lot of house for the money right now. It is something to seriously consider for your kids or yourself. THESE LOAN LIMITS MAY ONLY BE WITH US FOR A YEAR! Don’t miss out! Please call us and let’s talk about short sales, foreclosures, or many other opportunities.