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realtors call the bottom in Orange County… again…

Posted: 26 Oct 2011 03:30 AM PDT

Economists from the California Association of realtors are projecting increasing prices in Orange County next year. What a surprise... not.

Irvine Home Address ... 10 LAKEVIEW #79 Irvine, CA 92604
Resale Home Price ......  $465,000


Any way you want it
That's the way you need it
Any way you want it
She said, Any way you want it
That's the way you need it
Any way you want it

Journey -- Any Way You Want It

Any way you want it, that's the way they'll say it, any way you want it. realtor associations exist to tell buyers what realtors believe buyers want to hear. realtors cannot conceive reasons buyers may want to buy if prices are drifting lower, so realtors continually tell people prices have bottomed. realtors are unconcerned wether or not this is the truth, they only care that their statements motivate people to buy.

Will O.C. home prices go up in 2012?

September 24th, 2011, 1:00 am -- Jeff Collins

If things go as expected, the typical California house will see its value rise $5,000 next year. In Orange County, the price at the midpoint of all sales could go up by $10,000 to $15,000.

That’s the forecast unveiled this month by California Association of Realtors economists Leslie Appleton-Young and Robert Kleinhenz, who forecast that home sales and prices will go up in 2012, but not by much.

Appleton-Young and Kleinhenz took reporters’ questions during a conference call about their forecast, as well as some direct questions from us. Here’s what they said  …

Us: What’s the outlook for the Orange County housing market in 2012?

Robert: Right now, Orange County is behind last year’s sales by 6.7% on a year-to-date basis (through August), but the market will reduce or eliminate that deficit by year end.

Why? What would make sales volumes increase at the end of the year. There is one possible answer: falling prices. Realistically, the only way volume goes up is if prices go down.

The local economy is doing somewhat better than elsewhere in the state and this should carry into next year, and the share of distressed sales is among the lowest in the state at 32% in July compared to 35% a year earlier, so county home sales should improve by a bigger margin than the 1% gain for the state.

Are they joking? Lenders manage the percentage of distressed sales to within a few percentage points as they liquidate their inventory. If 32% is the lowest in the state, then we are nowhere near the end of problems with distressed inventory. The percentage distressed will remain between 32% and 35% for the next several years. I am shocked they even mentioned this.

The county median price should do better than the projected 1.7% increase for the state.

Us: If I’m a homeowner who’s been waiting for a recovery to sell, should I continue to wait or list my home now?

Robert: At this point, we are near the end of the peak market season for 2011, so the best chance of selling before the end of 2011 is probably in the next few weeks.

If our forecast is correct, selling in 2012 may mean that the home will fetch a slightly higher selling price.

Their forecast is not correct. With BofA and other banks increasing their foreclosure filings, the 2012 selling season will be greeted with an abundance of bank-owned inventory. If prices go up, it will only be because banks managed to limit their release of product. Given their pressures to raise cash, it's more likely lender liquidations will push prices down 2% to 5%.

The fact that mortgage rates are likely to stay low into 2012 makes it less urgent for would-be buyers.

I am surprised they admit that.

Beyond that, it depends on the individual homeowner’s circumstances (reason for selling, amount of equity in home or not, whether the individual will sell this home and buy another, etc.).

Us: Lenders recently ramped up the filing of default notices. Do you expect them to really ramp up the number of foreclosures now? And how much longer until foreclosures drop to more moderate levels?

Leslie: Let me take your second question first. It depends on the area, but I would say three to five years.

That's a surprisingly candid and accurate assessment.

Three (years) in areas where (foreclosures) haven’t been the majority of the market, closer to five in the inland areas, where I don’t think we’ve seen a lot of the supply that’s going to come through (yet) come through because you’ve got shadow inventory/negative equity homeowners that are still kind of in a holding pattern.

In terms of banks, Bank of America has switched gears a little bit,

A little bit? LOL! Bank of America foreclosure notices increase 116%.

and we saw a big increase in properties that are starting the process and we’ll likely see those coming through the pipeline – what is it? Six to nine months from now, something like that. Over 300 days. In terms of the other lenders, it’s kind of hard to say.

Robert: It is noteworthy that we’ve heard in the news that BofA was a major contributor to that uptick in the foreclosure filings for the month of August. Even with that uptick, compared to recent history, it’s still below last year’s level for August last year and well below the level for default filings (and) foreclosure filings that took place back in 2009 when California was clearly at the front end of this whole cycle.

The one and only reason foreclosure filings are below 2009 or 2010 levels is because lenders learned the level of foreclosure activity they believe the market can absorb. It certainly is not because they are out of people to foreclose on.

CAR’s 2012 Forecast for Calif. / Numbers are in the thousands; f=forecast
  2005 2006 2007 2008 2009 2010 2011f 2012f
Existing houses 625.0 477.5 346.9 441.8 546.9 491.5 491.1 496.2
% Change 0.03% -23.6% -27.3% 27.3% 23.8% -10.1% -0.1% 1.0
Median Price $522.7 $556.4 $560.3 $348.5 $275.0 $303.1 $291.0 $296.0
% Change 16.0% 6.5% 0.7% -37.8% -21.1% 10.2% -4.0% 1.7
30-Yr Fixed 5.9% 6.4% 6.3% 6.0% 5.1% 4.7% 4.5% 4.7
1-Yr ARM 4.5% 5.5% 5.6% 5.2% 4.7% 3.5% 3.0% 3.1

Us: You said there are wildcards out there that could change your forecast for California in 2012. Which ones do you fear the most? What’s the Perfect Storm that would sink the economy and the housing market next year?

Robert: Wild cards are, by definition, unexpected events. That said, my biggest concerns are another recurrence of the European sovereign debt problem that creates uncertainty and economic paralysis, even though it also leads to a flight to safety in the form of U.S. Treasuries.

The election in 2012 is also a big wild card, and the lead up to November could also add to uncertainty and result in another lost year in terms of economic progress.

I am less concerned by a Perfect Storm per se, but more concerned that more mixed signals on the economy and politically will prompt both consumers and businesses to sit on their hands until they sense that the direction of the economy has become clearer.

Again, they miss the obvious. The wildcard out there is the desperation of banks for capital. If BofA feels they need to liquidate more than the market can handle to get their cash, then prices could really crater. If the desperation of BofA prompts other lenders to escalate their foreclosures as well, the cartel could collapse, and we could have a race to the bottom. That's the wildcard, just as it has been for the last several years.

Us: What’s the outlook for areas that got really hammered by the boom and bust cycle, such as the Inland Empire and the High Desert region?

Robert: The thing about the Inland Empire markets, and to some extent the Central Valley markets, you continue to have a lot of distressed properties in those markets. But the supply is constrained by the rate at which the lenders are processing these properties and moving them through the foreclosure pipeline.

Consequently, the amount of inventory in those markets tends to be lean. Prices may be down on a year-over-year basis, but I think as we move through this year, you’re probably going to see more price stability in those areas than in some of the other markets where you might have a higher concentration of equity sales. We still see some prices adjusting down with the equity sales, so you might be pleasantly surprised.

I fully expect to be pleasantly surprised as prices continue to drift lower. I would be shocked if they didn't.

The flip side, though, on the demand side is that you need some economic activity, and huge numbers of jobs were lost in the Inland Empire that were construction and real estate-related jobs, and those aren’t coming back anytime soon.

That's true enough. I still keep a toe in the water of the land development industry, and many developers are starting to prepare to deliver product again. Many of these developers are anticipating a resurgent new home market... in 2015.

So I think to Leslie’s point, we’re to continue to see distressed properties as significant part of the (market).

Us: The limit on loans that qualify for purchase by Fannie Mae and Freddie Mac is due to drop from  $729,750 in Orange County to $625,500 on Oct. 1. In some counties, it will drop as low as $417,000. Above those amounts, borrowers will have to use higher-cost “jumbo” loans. Any chance Congress will act to extend the higher limits for lower-cost “conforming loans?”

Leslie: We’ve pretty much accepted the (Oct. 1) expiration as we looked at our forecast. Politically, over the last couple months it’s become clear that there just isn’t any consensus of action possible that would make an extension possible.

Obviously, we’ve been working quite hard to see if we could delay it in some way and it just doesn’t seem to be possible.

Hallelujah! Cool heads do prevail sometimes.

In cities and in counties where you’re looking at median home prices between $400,000 and $500,000, this is going to hit the market. I think that we will likely see evidence of people in that category rushing to get transactions closed by the end of September. There are reports that some of the lenders have already stopped lending at those categories already.

I think that we will definitely see it when we look at our data on closings in September and October. Clearly for that kind of jumbo and jumbo-light categories, it’s going to make financing more expensive. So the aggregate impact, I don’t know. But the marginal impact, it’s going to raise the cost of financing … and put a dent in those markets.

They got that one right too. Lenders stop conforming loans above $625,000 in July, home sale fall. Prices will fall, particularly at the price points where the conforming limit will impact the cost of financing.

She withdrew too much

The owner of today's featured property was not a routine HELOC abuser, but she did make a financially fatal mistake. She purchased the property for $265,000 on 5/12/2000 using a $225,200 first mortgage and a $40,000 down payment. She refinanced on 5/12/2000 with a $265,000 first mortgage and "liberated" her down payment. On 8/31/2006 she refinanced with a $487,500 first mortgage taking out $222,500 in the process. I guess she needed some money.

This property is available for sale via the MLS.
Please contact Shevy Akason, #01836707 

Irvine House Address ...  10 LAKEVIEW #79 Irvine, CA 92604
Resale House Price ......  $465,000

Beds:  3
Baths:  2
Sq. Ft.:  1659
Property Type: Residential, Condominium
Style: One Level
View: Peek-A-Boo
Year Built:  1977
Community:  Woodbridge
County:  Orange
MLS#:  P800421
Source:  SoCalMLS
On Redfin:  1 day
Perfect opportunity for the patient buyer. Live in the wonderful private, gated community of Arborlake. Enjoy the amenities of a gorgeous sand beach, clubhouse and recreational facilities. You'll feel like you're on vacation walking or boating around the lake. Inside your home, you'll love the remodeled, kitchen, engineered wood floors, dual pane windows, cam lighting, large patio yard and open floor plan. 
Proprietary IHB commentary and analysis 

Resale Home Price ......  $465,000
House Purchase Price … $265,000
House Purchase Date .... 5/12/2000

Net Gain (Loss) .......... $172,100
Percent Change .......... 64.9%
Annual Appreciation … 4.9%

Cost of Home Ownership
$465,000 .......... Asking Price
$16,275 .......... 3.5% Down FHA Financing
4.18% ............... Mortgage Interest Rate
$448,725 .......... 30-Year Mortgage
$142,917 .......... Income Requirement 

$2,189 .......... Monthly Mortgage Payment 
$403 .......... Property Tax (@1.04%)
$0 .......... Special Taxes and Levies (Mello Roos)
$97 .......... Homeowners Insurance (@ 0.25%)
$516 .......... Private Mortgage Insurance
$487 .......... Homeowners Association Fees
$3,692 .......... Monthly Cash Outlays

-$492 .......... Tax Savings (% of Interest and Property Tax)
-$626 .......... Equity Hidden in Payment (Amortization)
$24 .......... Lost Income to Down Payment (net of taxes)
$78 .......... Maintenance and Replacement Reserves
$2,677 .......... Monthly Cost of Ownership 

Cash Acquisition Demands
$4,650 .......... Furnishing and Move In @1%
$4,650 .......... Closing Costs @1%
$4,487 ............ Interest Points @1% of Loan
$16,275 .......... Down Payment
$30,062 .......... Total Cash Costs
$41,000 ............ Emergency Cash Reserves
$71,062 .......... Total Savings Needed

real estate home sales

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