Sunday, August 26, 2012
August 6th 2012 Realestate News Letter
WHAT DOES THE BIG PICTURE LOOK LIKE THIS MONTH
The
Orange County residential real estate market generated some intriguing
developments in the month of July. Last month’s email was written on the
heels of a poor jobs headline, while today’s is written on the heels of
a “depends-on-the-spin-you’re-
One
of those intriguing developments in the last thirty days has been a
sudden awakening of the “universal press corps” to the primary subject
of last month’s email—WHAT’S REALLY GOING ON IN HOUSING. All of a sudden
there seem to be many stories written or reported about “signs of life”
in the national housing market, and increasing stories about various
markets with “inventory shortages and multiple offers.” But, of the
many, many reports I read in a month there are still many experts
talking about the horrors of the “shadow inventory.” And, since that’s
one of the first things that people want to bring up in a conversation
let’s spend a paragraph on the subject.
First
fact: I don’t know how big the “shadow inventory” really is. Second
fact: I don’t exactly know what the definition of “the shadow inventory”
really is. Third fact: Apparently no one else does either, because
there doesn’t appear to be any two “experts” who share the same
definition, the same numbers, or the same formulas for ascertaining or
using the numbers. In a very broad general sense “they” all seem to
agree that it is large “pool” of houses on which there are mortgages
that have not been paid and are in some state of “foreclosure” or
“pre-foreclosure,” plus houses that have been foreclosed upon,
are owned by a lender, who, for some reason, is just holding onto to
them instead of selling them, plus those houses that people live
in who are “upside down” on the mortgage (what they owe versus what the
house is worth), and who are apparently waiting for a “strategic” time
to default. The first group above, foreclosures and pre-foreclosures,
seems to now have some consensus as to definition and the numbers of
units included. The second group, houses being held at bay by the
lenders who repossessed them, seems to be highly flexible, with some
quite reasonable sounding numbers and with some wild-eyed catastrophic
sounding numbers. One of the reasons for being skeptical of these
rumored numbers of “lender owned units about to be released in enormous
quantities” is that we’ve been hearing the same reports over and over
again for FOUR YEARS. Well, it might be true, but it isn’t
information that I can use to run my own “personal economy.” (If any of
you reading this have seen a truly sound formula for arriving at some of
these more off-the-chart scary numbers please pass it along. Since the
stories never go away we would all like to know a “definitive” true
number.)
Now
let’s look at the third group above, and for those of you counting I do
realize that this is a second paragraph. This third group is worth
examining; the folks who are “under water” and most of whom won’t
(according to the cynics) keep paying on a mortgage that is higher than
the value of their house. I personally believe the experts predicting
wide scale defaults on these homes which, in their modeling, will hold
the housing recovery down for many years to come are flat out wrong, in
every way at every level. I think they are wrong in their cynicism that
most people, when they realize their mortgage is higher than their
home’s value will stop paying it. I believe the vast majority of
American home owners have a lot more integrity than that. I believe that
for the vast majority of American home owners the concept of their home
and their family and their place in their community is far more noble
and meaningful—in every way at every level—than the cynical behavioral
patterns predicted by these “experts.” Lastly, not just because I
believe it, but because we are now starting to see data that supports
it, the American home owner is a “breed” never before seen in the
history of the world, people for whom private property, which they hold
title to, people for whom “home” means something far more than lumber
turned into shelter, something of the heart and fiber of the American
dream, and it is not being so casually tossed aside as the cynics
predicted, and it will not be in the future. The cynics predicting that
these Americans will hold back the housing recovery because they will be
defaulting in huge numbers have it all wrong. It’s not because their
math is wrong, but because they don’t understand the faces behind the
numbers, the American character, the American spirit and the American
dream.
WHAT ARE THE TRENDS THAT WILL IMPACT YOUR LIFE—NOW
The
first chart attached to this month’s email tells an interesting story.
Here’s what this graph tells us: for the houses and condos in Orange
County that sold for a price of $400,000-999,000 (what I term the sweet
spot) in the month of July the average “days on market” was 68! Repeat, 68! “Sold” means
closed escrow. That means from the day the house (or condo) was listed
for sale to the time it closed escrow was 68 days. So, what do we get
from this number of 68 days on market? What I get is this; a.) Short
sale escrows are processing faster and faster, b.) Standard sales (and
the financing therein) are processing pretty fast, and c.) The time
between a listing hitting the market and an accepted offer going to
escrow HAS to be very, very fast. Moreover, that’s what I see every day;
it’s what I’m hearing throughout the industry; and it’s what we are now
starting to see reported in the news. Houses coming to market at a
proper price are quickly (very quickly) receiving multiple offers from
well qualified buyers.
Here
are few more highlights from the July numbers. The total sweet spot
inventory (graph attached) shows the inventory at the end of July
continuing at a level just below 2 months. The third graph attached is
one that should catch everyone’s attention, but especially anyone
thinking of selling a condominium in the $200,000-500,000 range. And,
although I’m just attaching the Irvine chart, this 200-500 condo market
looks pretty much the same all over Orange County. Having a 30 day
supply of inventory in this particular segment, the segment that starts
the climb up the “trade-up” ladder is very meaningful. It should, at
this point, be pretty obvious that anyone thinking of selling their
house should consider this a perfect opportunity to act.
Call
to investors: Every week I encounter at least one opportunity that has
slipped under the radar for a variety of reasons, some obnoxious problem
with the property, poor marketing, etc. If you have a desire to
selectively invest in residential real estate please call me. These
opportunities almost all require the following: being able to quickly
break free for a couple of hours to take a look, being able to do a
quick analysis (I will help) and make a quick decision, being able to
provide current proof of funds to complete the transaction, and
sometimes being patient for a long convoluted escrow. These
opportunities come one at a time and anywhere from $200,000 to
$2,000,000. It doesn’t matter if you want to buy just one, or one a
year, or one a month, we should talk.
Interesting
quote put out by TD Bank (original source unknown): “84% of today’s
younger renting generation (ages 18-34) intend to buy a home.” Do you
remember the talking heads just two years ago reporting that the “home
ownership dream of America” is now dead, replaced by a new generation of
permanent renters? NOT TRUE! NEVER WAS, AND WON’T BE! (back to the
fourth paragraph)
Till next month…
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Contact Information
Michael Shepard
Estate Represenative
Mobile: 949-395-6640
Email: mikeshepard@cox.net
First Team Realestate
Laguna Beach, CA
Estate Represenative
Mobile: 949-395-6640
Email: mikeshepard@cox.net
First Team Realestate
Laguna Beach, CA
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