So Cal Real Estate News

Earlier today we discussed the stats that showed median prices in Southern California as a whole were down 19% last month from their peak in July of 2007, also touching on our projections for the rest of this year (”So Cal Price Update”).

Frankly, in our primary market areas of West Orange County and Greater Long Beach, we believe prices actually peaked in the summer of 2006, based on comparable homes. DataQuick’s 7 county numbers were skewed by the huge foreclosure problems in the Inland Empire, as well as inherent flaws in their median pricing system. The Orange County Register’s Real Estate Blog has a good summary and explanation of 8 different indexes & their most recent reports for Orange County. DataQuick showed the greatest year-over-year decline (16% in O.C.), while the other indexes ranged from 15% to 6% drops.

Basically, we still believe we’re in uncharted territory & nobody knows what’s next, as we wrote back in November (”How Low Will Prices Go?”).

Our recommendation for Los Angeles and Orange County buyers and sellers is still to focus primarily on where you are in life, not where the market is. Since nobody really knows what’s next, don’t get too obsessed with what the future holds.

If selling makes sense, why roll the dice & wait up to six years (or more?) for prices possibly to just get back where they are now?

As for buying, if you can buy a home that works for you with a 30 year fixed loan, why gamble on rates or prices going up, or waste several years of your life gambling things will get worse before they get better. (see “What to Do When Nobody Knows What’s Next.”)

We’re not saying it’s time to buy for speculative reasons, and we certainly wouldn’t be trying to “flip” right now unless I got an extraordinarily good buy (and that does happen in market’s like this). I’m certainly not saying we’ve hit bottom.

We’re saying nobody really knows, because we’ve never seen anything like this. For example–we think the Fed caught just about everybody by surprise this week with their creative moves to enhance liquidity.

Who know what might come next? If some lenders were smart, they’d just shave $100,000 off the loan if needed to avoid foreclosure. They’d certainly drop interest rates or eliminate the obscene resets they have coming. (Of course, if they were smart, they wouldn’t have made 100% loans to subprime borrowers without income verifications when the market was obviously peaking, but maybe they can learn. . . .)

We’re saying nobody knows what the future holds, especially this time. So if you’ve always dreamed of a home on a lake in Lake Forest & find one that works for you with 30 year fixed financing, & if you’ve got a stable job & aren’t moving, why not make an offer & start living your dream? If it works, maybe you should let your life determine decisions, not speculation. Here’s a novel thought: think of it as a home, not a piggy bank!

Ditto to sellers. Forget what your neighbor got 2 years ago. Prices on your next home are down too, and so are interest rates. Maybe you can’t get the triple garage, but maybe you never would. If everything else works, give it a shot. You’re not getting any younger!

We’ve watched the market and buyers and sellers for 30 years, and we see some unique opportunities right now that may not last. And we see too many people making decisions based on ego or gambling in stead of getting on with their lives.

Feel free to call 562 822 SOLD or simply comment if you want specific input on your situation.

Reporting from the front lines of the real estate battles here in Los Angeles and Orange Counties, we can now definitely say that sales activity and even prices are bouncing back from the record lows of November - January.
We think this provides local sellers with a window of opportunity, but it’s a window that will most likely be closing in a matter of months. . . or weeks.

Want evidence? We discussed our own increase in sales activity in our 2/29 Market Update post–3 listings sold in an average of about 8 days each. Then Blair noticed that our office “board” of new escrows was full for the first time in about a year, another major increase in activity. Then last night I ran into Ken, our termite expert from Coastline Termite, at the Anaheim Ducks game, and he reported a dramatic increase in sale inspections.

Trouble is, we experienced a similar bump last winter, but it petered out as interest rates went up in the spring. Then it fell apart as the subprime mortgage mess exploded, making it difficult to impossible to get a mortgage. Long term mortgage rates are rising again, as our elected officials try to borrow their way out of a recession, especially with an election breathing down their necks. And the “other shoe” of the subprime mess is dropping as I keyboard, with foreclosures only increasing their record pace.

Then there’s the annual cycle–busy spring, slow fall, prices dropping by winter. Put it all together, and it’s our opinion that sellers need to “make hay while the sun shines.” And it could stop shining sooner than you’d like. If you’d like more info, leave a comment or give us a call at 562.822.SOLD.

What about buyers? Prices, and even interest rates, could well be lower this coming December. In fact, the whole thing might fall apart in 2009, once the election’s behind us. But we wouldn’t be too surprised if prices continue to slowly move upwards, at least in the coastal plains of L.A. and Orange Counties. So, if you find a home that you really like, and you can afford with a 10 - 30 year fixed loan, and it’s in a good location, go ahead & buy it now. If not, keep saving up a down, paying down credit card debt, & looking around. If you want a direct portal to the Southern California Multiple Listing Service, just click on the link you prefer under “Multiple Listing Services” near the top of the right column.  We suggest you start with “Info & Tips on M.L.S. Searches.”

Finally, a word about timing. We’re talking about current activity–homes going into escrow. What the media usually reports is closed sales, which take place roughly 45 days after a home goes into escrow, then get reported in DataQuick’s confusing median price summaries about two weeks after the end of the month in which they close, which is about 60 - 90 days after they went into escrow. So the increases we’ve seen over the last few weeks won’t be reported until long after they close in April and late March.

Just mark your calendar–around 4/15 DataQuick (or “DataSlow,” as we prefer) will report a remarkable increase in sales for L.A. and Orange County homes, which will continue into the April closings they report mid May. You read it here first.

So, that’s today’s word from the front lines. We’d appreciate your thoughts & comments. Personally, we hope the Anaheim Ducks repeat last year’s spring performance, but the So Cal real estate market takes a more steady, less bumpy road this year. If not. . . there’s always baseball! Anybody up for a Freeway World Series?

7/15/08 update: Lots has happened since we wrote this post back in February. It has certainly been an interesting ride, and plenty of opportunities are still out there. For our latest posts on what’s going on, simply click “front page” in the upper left corner, then scroll down, or check out the “recent posts” in the upper right below our “search” box. We’ll continue giving you straight talk from real estate’s front lines, with the perspective of 30 years experience.

The Federal Reserve’s latest rate cuts may well have just radically shortened the present housing slump. The “bottom” may be a lot closer than anyone suspected just two weeks ago.

That may mean the time to buy is actually now, for several reasons.

First to get the lowest interest rates. Right now, you can get 30 year fixed mortgages well around 5.7%. That’s outstanding. . . but rates were a little lower a few days earlier. Why? Well, the Fed really can’t control long term rates–they’re set by market forces.

So, when the bond market thinks we’re headed into a recession because the Fed hasn’t lowered short term rates enough, long term rates drop. And when the Federal Reserve reduces the risk of recession by aggressively dropping the rates they control, long term rates move up. That’s one reason all the Fed rate increases back in 2003 - 05 didn’t reduce long term rates. And it’s why that much-expected additional lowering by the Fed could mean today’s mortgage rates may be the lowest we’ll see in a long time.

Second, this may be the time to buy because the best time to buy isn’t at the bottom, but a little before the bottom. I know first hand there are tons of potential buyers waiting to jump in once they think the market bottoms. The trick is to jump in before they do. Because the below market properties are the first to go. Plus, once sellers think things are moving up, they become much harder to negotiate with.

The truth is, almost nobody buys at the very bottom, or sells at the very top. And they didn’t know they were doing it until they looked back. I know–I bought several properties near the bottom of the last cycle around 1995, but I didn’t realize how fortunate I was until several years later. Likewise, I also once locked a long term interest rate at a bottom, but had no way of knowing it at the time. I just knew it was an interest rate I could live with.

A third reason this may be the time to buy relates to what we call the “annual real estate cycle.” You see, the forces of supply and demand are influenced by annual events. Buyers are way too busy to look for a home with the holidays around the corner, so demand slackens in December. Once the New Year begins & they’ve resolved to get that first home, demand picks up. Especially after they see how much they’re paying in taxes. As we move into late spring, the push is on for many to move to a better school district. Parents want to get the home in escrow & lock in the address before the school administration is gone for the summer.

But as good weather & summer vacations kick in, buyers get other things on their mind & demand slows. That’s too bad, because that seller who resolved to get her home on the market in January is finally finishing their pre-listing painting & cleaning, & supply is finally increasing.

All of which means that, all things being equal, prices go up dramatically from Feb. - May, level in the summer, & decline in fall & early winter. Which means the annual cycle just bottomed. Then the Fed dropped rates. Twice. And Congress is working on a stimulus package. And maybe it’s time to start looking for bargains.

We love Southern California, we love real estate, and we also love to write. So we’ve been writing about the Southern California real estate market since 1980. Through this blog we can now deliver our thoughts, perspective, and insights at the speed of light. Even better, now you can add your thoughts, insights and questions too.

Who are we? Well, we’re both native Southern Californians, SoCal homeowners, and Realtors ™ who have also served as professional educators.

Dave Emerson, the lead writer, grew up in Lakewood, CA, graduated from UCLA back when their football teams didn’t routinely lose to unranked teams, and currently live in Los Alamitos. He’s an investor who owns dozens of local rental units, primarily in Long Beach, and he’s been #1 in sales out of 500 agents in his company seven different years and has been elected “Agent of the Year” by his peers 4 times.

Blair Newman has the perspective of a younger generation. He has helped dozens of his friends and clients buy and sell property, and is a member of Prudential California’s “Cutting Edge Society,” putting him in the top 15% of all agents. He graduated from Biola University in La Mirada, then lived in Anaheim until buying his present home in Lakewood.

Over the years, we’ve sold homes everywhere from the San Fernando Valley to Orange County. We specialize in Southeast Los Angeles County (Long Beach, Lakewood, Norwalk, etc.) and West Orange County (Los Alamitos, Rossmoor, Cypress, Garden Grove, etc.).

Over the years we’ve developed contacts in most So Cal areas we don’t service ourselves. We’re excited about finding this fast, interactive way to share our perspective on what we see going on every day in the So Cal Real Estate Market.

We’ll also use the expertise of others we know in real estate and related fields, from finance to property management. And we’ll gain the expertise of our readers as well, as you choose to contribute.

Our non-blog website, which features a direct link into the SoCal Multiple Listing Service and more info about us, including brief resumes. We can be contacted directly by phone, 562.822.7653, and we also respond promptly to all comments and questions left on this blog.

Thanks for visiting.