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Real Estate: Market Time Report for 3/22


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  • Real Estate: Market Time Report for 3/22

    The latest market time report is out. Looks like the market is reacting to the tightening credit market. However, unless you're in the 15% of borrowers considered "subprime", this is probably a good time to look at buying, especially in the lower price ranges.

    If you're looking to buy or sell your home, or have a friend or family member who is, I am never too busy for my MiceChat family. PM me or contact me through my website, and let's get the ball rolling for you!


    Market Time Report: Subprime Slows Housing Demand

    March 22, 2007

    Good Afternoon!
    With the collapse of the subprime market taking center stage, the Orange County real estate market has slowed considerably. February 2007 gave every indication that the Spring market was going to be a mirror image of 2006. Demand was almost identical in year over year comparisons. However, this month has been marked by news of subprime lending gone bad. Bankruptcies, lenders closing their doors, lender layoffs, Congressional hearings, fraud, foreclosures and more have all been heavily reported over the past few weeks. For now, the national spotlight is currently on real estate and it is having an immediate effect on Orange County demand. As the national attention shifts to the next big news story, will demand bounce back? We will all have to wait and see. Keep in mind that only 15% of all outstanding loans are subprime.

    The current active inventory increased by 753 homes in the past two weeks to 13,373. That is a huge jump in the inventory. Demand, the number of homes placed into escrow within the prior 30 days, dropped by 193 homes in two weeks to 2,195. In the past four week, demand dropped by 459 homes. The market time increased from 5.26 months two weeks ago to 6.09 months today. The market is back in the neighborhood of a buyers market. The year over year comparisons tell the real story. Last year at this time, the active inventory was at 12,194 homes, 815 fewer than today. Demand was at 2,874 homes last year, 679 additional homes. The market time was at 3.5 months last year versus 6.09 months today. In comparing this year to two years ago, the differences are even more dramatic. In March 2005, the active inventory was at 5,040 homes, 8,333 fewer than today. Demand back then was at 4,090 escrows, 1,895 fewer than today. The market time two years ago was at 1.23 months. The two markets are worlds apart.

    The condominium and detached home markets are still very similar, but the detached market is a bit slower. For condominiums, the inventory is at 6.03 months compared to 6.12 for detached homes. There are far more vacant condominiums actively on the market, 31.8%, compared to detached homes, 22.7%. The effect of the subprime market may equate to tighter lending parameters, which could cut into demand for the entry level market, condominiums below $500,000, which accounts for 59% of all condominiums. This will play out in the evolution of the market in the coming weeks.

    What can we expect in the coming months? What was once seen as the market stabilizing and revving up for the Spring has evolved into something completely different. This week Bernanke and the Federal Reserve left rates unchanged and are beginning to change their posture on increasing rates in the future due to the housing market. It just depends upon whether or not the housing market begins to affect the overall national economy. For the rest of the Spring, now through May, demand is dependent upon the national and local spotlight diverting their attention to the next huge story and how far lenders will ratchet down their lending requirements. We can expect demand to increase in April, but by how much is the true question. We will have to wait and see how the market digests the coming weeks. With so many sellers banking on a decent Spring market, the active inventory could blossom substantially like it did in the prior two weeks. We could reach the 16,000 mark, the height of the active inventory in 2006, in May, and then set a new record for 2007 in August. At the current rate of demand, we can expect more of the same in the Summer, flat demand around 2,000 homes placed into escrow per month. In the Autumn, demand will soften when the kids go back to school and the active inventory should begin to drop as frustrated sellers throw in the towel and pull their homes off of the market. After Halloween, the market will transition into the slowest time of the year, the Holiday market. The Holiday market is marked by the lowest demand of the year as the inventory continues to drop with more sellers pulling their homes off of the market. Demand may be buoyed by a decrease in rates during the second half of the year by Bernanke and the Federal Reserve.

    How should a seller approach the market?Based upon current demand, 11,178 sellers will not be successful over the course of the next month. If a seller is truly motivated to sell, then they should do what it takes to sell their home.

    How should a Buyer approach the market? With so many options and less competition from other prospective buyers, buyers can afford the time to patiently approach isolating the home that best matches their individual wish list. Once a buyer finds the right home, they should offer a realistic price according to the most recent comparable sales and escrows. They should not hesitate to write; otherwise, they invite competition from other buyers and they could ultimately pay more for a home or lose the home altogether to another buyer. Buyers should not attempt to time the bottom of the market. Very few experts predicted the current slowdown to occur right now in the middle of the Spring market. The experts will also be unable to predict the precise bottom of the market. Instead, they will be able to report on when it occurred in the past. In attempting to time the market, buyers run the risk of waiting on the sidelines as the market passes them by. Buyers should also take great comfort in the fact that Southern California has historically been a fantastic investment for homeowners besides a great place to live.

    The following areas have inventories of less than or equal to five months: Aliso Viejo, Anaheim Hills, Brea, Cypress, Dove Canyon, Foothill Ranch, Fountain Valley, Fullerton, Huntington Beach, Mission Viejo, Portola Hills, Rancho Santa Margarita and Villa Park.

    The following areas have inventories greater than eight months: Anaheim, Canyon Areas, Corona Del Mar, Costa Mesa, Laguna Beach, Newport Beach, San Clemente, Santa Ana, Talega and all ranges above $2 million.

    Unusually and exceedingly peculiar and altogether quite impossible to describe...

  • #2
    Re: Real Estate: Market Time Report for 3/22

    By the way guys... I've just started a real estate blog. I'll be posting the market time reports there as well, along with updates on things I come across, neighborhoods I preview, or thoughts about the market.

    Please check it out, and if you're already a livejournal user, you're welcome to "friend" me!

    Unusually and exceedingly peculiar and altogether quite impossible to describe...


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