Price! Price! Price! buy Right Now or Wait!

March 2008 newsletter – individual FINALLY SOME REALISTIC (AND YES POSITIVE) HEADLINES ABOUT SO CAL REAL ESTATE… The news varied from a positive “negative headline” such as “O.C. homebuilder’s woes may reach bottom in ‘08” (OC Register, Lansner), to a downright positive headline such as “Ignore the Headlines! Except this one.  Sure housing’s in a hole.  But there’s a potent case for buying now, whether it’s real estate or stocks.” (Time Magazine, Keadlec).  What is the reason for the sudden optimism within the broader pessimism?  The answer to that question is a multitude of factors that this newsletter has been drumming into you for the past few months; factors such as low interest rates, selection, seller concessions, lack of competition and ultimately, more bang for your buck.  Both of the articles mentioned above really hinge on mortgage rates as key.  Jeff Meyers, the founder of the Meyers Builder Advisors consultancy in Corona Del Mar notes the loan limit changes as bringing liquidity to the market.  He states, “…2008 will be the bottom year for builders in Orange County.”  The time magazine article says if you are, “emotionally ready to be a homeowner, you have good credit, plan to stay put for five years and have been waiting for the perfect entry point… It’s time to get serious— before an inevitable rise in interest rates wipes out your advantage.”  There may be some plausible arguments to waiting for prices to finish falling in other parts of the country where appreciation isn’t the foregone conclusion to this story.  But it’s tough to sit out in California.  Housing prices have not fallen as fast as the doomsayers predicted.  It has been a correction, just as this newsletter stated over a year ago.  Will prices continue to come down?  Yes, there is probably some air left in the balloon.  But if you’re not careful rising interest rates will be buoying up that balloon that you want to see fall.  Prices aren’t everything.  Leverage is.  (For copies of these articles, give me a call) WHAT’S UP WITH THE NEW CONFORMING LOAN LIMITS… There are more questions than there are answers at this point.  We, the industry, know they are coming.  We know the limits will be 125% of the median price home, so the limits will vary from county to county.  We know FICO score requirements have already ticked up for FNMA.  What we don’t know is exactly when the new limits will begin and how tight requirements may go.  We don’t know if it is purchase only or if it will include rate and term refinances.  Cash out refinances are probably off the table.  Stay tuned to this newsletter for more information as it becomes available. PRICE, PRICE, PRICE!  GET IT RIGHT OR WAIT… Some sellers desire to test the market.  Perhaps their motivation for selling is not the greatest or they simply have some time before their drop dead move date.  At any rate, price is generating a lot of buzz.  The Wall Street Journal had a great article, “PRICE FIXING: IN THIS MARKET, SELLING A HOME REQUIRES SAVVY.”  The article points out three distinct philosophies of price.  “Round numbers signal prestige, while precise numbers suggest a bargain.  Buyers anchor off the first digit, so $3,999 seems cheaper than $4,000.”  Finally, “if you cut your asking price, make it easy to calculate the discount.” HOME AFFORDABILITY NUDGES UP IN ORANGE COUNTY… This was the OC Register headline on February 24^th.  Hopefully by the time you read this it will have nudged up even more.  What makes for a real estate market recovery is pent up demand, and that is reliant on several factors aligning; incomes rising (3.5% the last 2 years and projected about the same for this year), prices coming down (check), and interest rates (stimulus package anyone?)  The California Association of Realtors reported that 28% of Orange County residents can afford a started home as of fourth quarter 2007.  That’s up from the all time low of 13% we saw in 2006. WHAT ARE THE ACTUAL NUMBERS… The total number of sales for January (the latest month available) is 1,286 and that is a 46% decline over January 2007.  There were 806 resale houses, 327 condos sold and 153 new homes.  Orange County had 4,276 Notices of Default (not foreclosures) for the fourth quarter of 2007, compared with 1,983 for the same time period 2006.  That is a 115.6% upswing.  Actual foreclosures have been running about 1 in 4 of total defaults.  Inland Empire and Los Angeles fared far worse with Defaults over 17,000 for each county respectively. PLEASE RELY ON ME TO HELP YOU NAVIGATE IN TODAY’S MARKET…  I always have lots of information for you that I can’t get in this newsletter.  For example, there are 6 major lenders that are all offering breaks to borrowers through either a loan modification or payment plans for distressed borrowers.  The banks are; B of A, Citigroup, JPMorgan Chase & Co, Wells Fargo, Washington Mutual and Countrywide.  Also, there was an excellent article in the Wall Street Journal about the pitfalls of buying a home at a foreclosure auction.  It is not my intent to steer anyone in any given direction about how or when to buy property. Ultimately, that’s a personal decision.  However, there are problems with foreclosures.  You must make sure that all the liens have been wiped out, and that none were missed by the trustee or title companies, which are “senior” to the foreclosing lender.  Also, many investors who know far more about the property and the area may be there to take over a sale.  Other bidders can bid up a property to beyond its bargain value and you may not know that price threshold.  Many of these properties are sold “as is” and people think they can fix them up and don’t realize how deteriorated they can be.  If you are looking to buy or sell, please call me first.  Let’s tailor a plan just for you that meets your objectives and keeps you safe.  I always love your referrals as well.  Have a great month!

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