If You're Waiting For Prices to Come Down ....

Last Wednesday the Federal Reserve decided to leave the federal funds rate alone, for the time being.

"The Fed is in a quandary. The economy has slowed, led by a decline in home sales and rising inflation, stemming primarily from increasing energy prices. The Fed's primary role in relation to the economy is to combat inflation and preserve economic growth. To combat inflation, the Fed will ultimately have to increase interest rates in coming months. What Does This Mean to You?"

Here's what my colleagues at You Should Own have to say:

"If you're looking to buy a house, consider these key points:

• Home prices in some areas are at five-year lows, while personal incomes in that same period have increased.
• Homes are more affordable for many right now, particularly first-time home buyers.
• Sellers are extremely motivated and many buyers in our area have benefited from the unbelievable deals that exist today.
• Experts foresee a strong rebound in home prices when the economy
  begins to recover, according to a new report from the Joint Center for Housing
  Studies.
• That means buyers today will be sitting on valuable properties tomorrow."

Much is made of the recent foreclosures and subprime loan issues that have stalled the market, but due to the overall streamlining of loan underwriting due to uniform credit scoring and automated underwriting, the largest rise in homeownership occurred between 1994 and 2001. According to Harvard's Joint Center for Housing Studies' 2008 report, unless another one million homeowners lose ownership it will not dip below the 2000 level of ownership. Even if that does occur, "once the oversupply of housing is worked off and home prices start to recover, the use of automated underwriting tools, a return to more traditional mortgage products, and the strength of underlying demand should put the number of homeowners back on the rise."

It's been noted for several years now that the formation of new households due to changes in the population will impact the demand for housing over time (including the current Harvard report), so I'm still betting that "buyers today will be sitting on valuable properties tomorrow."

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Southern California Cities in Escrow

Here's the general trend of current pending sales of several cities noted through the SoCalMLS record, first taking all residential and commercial properties at all prices, and second looking at condos and houses in escrow and listed over $750,000 (second group for some cities):

• Long Beach - 19% (approx. 576 plus 2499 active); 12% (30 pending, 213 active)


• Norwalk - 21% (approx. 134 plus 493 active)


• Cerritos - 31% (approx 65 plus 147 active); 21% (76 pending, 281 active)


• Bellflower - 20% (approx 82 plus 319 active);


• Cypress - 24% (approx. 57 plus 166 active);


• Lakewood - 29% (approx. 115 plus 283 active); 17% (2 pending, 10 active)


• Stanton - 24% (approx. 51, plus 160 active);


• Seal Beach - 18% (approx. 50 plus 221 active); 23% (10 pending, 33 active)


• Downey - 20% (approx. 135 plus 554 active); 6% (6 pending, 97 active)


• Huntington Bch - 20% (250, plus 1014 active); 21% (76 pending, 281 active)

For properties over $750,000, Downey appears to be the least successful in that market. Both Huntington Beach and Long Beach escrows range up to the $5,000,000 price.

This is an "unscientific" local market assessment to take a look at general trends in the area, with the only price breakdown for residential being over or under the $750,000 mark, a completely arbitrary price point based on my personal experience with buyer comments about their affordability.

The first-time buyers and others in the $300,000-$350,000 price range are out in full force, recognizing that with the buyer affordability index at 44% (California Association of Realtors), now is the time to buy. Sales activity is historically higher at this time of year, but my opinion is that the second half of 2008 will fare better than the first half of 2008 and all of 2007. "Short Pay" sales seem to be more than half the market in some areas, but the good news is that some banks are becoming faster and more efficient in handling their approvals and closings on these properties.

Are higher end properties over $750,000 selling slow in all areas (see Dataquick article)? Not in Seal Beach or Huntington Beach--whereas that seems to be true in Long Beach, Downey, Lakewood, with Cerritos doing better in that price range.

Many bank-owned properties right now are a poor reflection on the market, most of them are sold in poor condition with no attempt at any basic carpet and paint clean-up, a minimal cost, so those either invite lowball offers or sit longer on the market.

Yep, More News on California's Rise In Sales, and Prices

I hope all buyers are taking note of the following right now, because if this buying trend is true as a lot of recent sales indicates it is, the trickle-up effect will take place for homes in the higher price ranges.

From Associated Press today:

As foreclosures push down California housing prices, first-time home buyers surge into the market. The California median home price fell 30 percent in May, the sharpest decline in 20 years, since DataQuick Information Systems began keeping records. The drop in home prices has sparked a home-buying rally that's beginning to reverse more than two years of monthly year-over-year sales declines. "Inland markets hit hardest by foreclosures and falling prices are now the most likely to post higher sales than last year," says Andrew LePage, a DataQuick analyst. "These communities have been attracting first-time buyers, first-time move-up buyers and investors." Richard Cosner, president of Prudential California Realty, says buyers of homes whose prices have declined in the last 18 months from $400,000 to $200,000 must compete with multiple bidders. "For the first-time homebuyers and for that bottom tier of homes, we've found what the bottom of the pricing is," Cosner says.

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Recent Market Activity in Long Beach--It's A "Sold" Time

The constant reporting on the number of foreclosures, i.e., such as this today from Inman News:
"California had the highest volume of foreclosure filings, with filings reported on 71,930 properties" is not saying what else is going on.

Unfortunately, I've had less time recently to devote to writing as many posts, but in checking the local Southern California MLS today for all residential and commercial listings, including leases, there are 2,473 active listings, with 555 in escrow (backup and pending categories).

Since April 1st, 564 properties have closed escrow; of that same number, in the last 30 days, 238 properties have closed escrow. Is it just because it's Spring and Summer, or is the market actually picking up. Another casual statistic overheard today is that Long Beach's inventory has in the past few weeks been reduced by one-third.

If activity in recent weeks is any indication, $300,000 is the bottom of the market in many areas for single family residences and $200,000 is the bottom for 2-bedroom condos. The bank-owned properties are so attractively priced in many cases that the investors and first-time buyers are having to compete with each other in multiple offer situations. In the last week, one condo was on the market 4 days and received 15 offers, another single family received 30 offers, and the same story for two other houses in the South Bay, also just listed days before, in residential neighborhoods. The winning offers on these properties were as much as $50,000 over asking price (in the case of the condo) and $20,000-$30,000 for the houses in this scenario, as-is, no repairs.

In spite of more activity, loan requirements are not necessarily that much easier, for example, some banks are going to 15% down payment requirements after July 1 (for conventional loans), and all lender sources have tightened up their FICO requirements. If you're buying a condo, be aware that new FNMA guidelines are requiring a closer look at the HOA's financial reserve funding status, plus a few other issues.

So if you're interested in a property, maybe this is finally the time for you to find your new home. You can take a look at http://www.juliahuntsman.com, but for a more targeted search, go to HomeBuyers Market (where you can mute the auditory on the video if you want to just watch).

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Are Reductions Finally Leading to the Price Change Point?

Along with the general information from National Association of Realtors that April's pending sales were up 6.3%, Lawrence Yun, the chief economist, also says,

“Bargain hunters have entered the market en masse, especially in areas that have experienced double-digit price declines, but it’s unclear if they are investors or owner-occupants,” he says. “Sharp price reductions are leading to a quicker discovery of price equilibrium points. The West is already seeing year-over-year gains in pending contracts.” See the pending home sales by region since 2005.

Some buyers are already discovering this locally. Single family house properties under $400,000 and mid-$300,000's in previously desirable areas are getting multiple offers, while the condo market and new home sales may be sitting a while longer. Per Realist's tax data information, the Los Angeles County median single family price for April, 2008 is $445,000 ($570,000 one year ago); for condominiums, $405,000 ($459,000 one year ago).

While California is officially not a "declining market" as of June 1 per FNMA and Freddie Mac, the proof is in whether or not the lenders follow suit with appropriate programs which will benefit first-time buyers in particular. Right now FHA is the most viable product for first-time buyers or low-down payment buyers. For additional assistance, please contact me or search properties at http://www.juliahuntsman.com/.

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