Obama's mortgage relief program gaining traction

Even though the kids have gone back to school, the Orange County housing market has not really changed much over the course of the past several weeks.   It is a good time to take a look at the broader market and pinpoint the latest trends.  Here’s a breakdown of the top 10 current Orange County housing market trends (in no particular order):

1.  Below $750,000 is technically a seller’s market with an expected market time of approximately two months or less.  The activity below $500,000 is incredibly hot.  However, this is not a conventional seller’s market as values are not appreciating.  The sheer numbers of distressed properties, mainly short sales, is keeping a lid on any appreciation.   Buyers can expect multiple offers, a tremendous amount of competition, and the need to write offers to purchase on more than one property (often times several).

2.  The listing inventory has been dropping all year and is now just above the 8,000 mark at 8,064.  We started the year at 11,842 active homes on the market.  One year ago there were 5,110 additional homes on the market and two years ago there was more than double today’s numbers.  In the lower price ranges there is not a lot of new inventory coming on the market.

3.  Cash is king and so are buyers with larger down payments.  With so much competition in the lower ranges, buyers with very little down are having a hard time purchasing.  They are losing out to buyers that can afford larger down payments.  Many first time home buyers who are relying on the low down payments allowed by FHA financing simply cannot compete with more qualified buyers and investors.  That’s right.  Investors are back and taking away the ability for a lot of buyers to purchase.

4.  Foreclosures are EXTREMELY hot.  There are currently only 334 active listings that are foreclosures in all of Orange County, representing 4.1% of the total inventory.  The expected market time for foreclosures is 0.66 months, or between two and three weeks. 

5.  The average sale to list price ratio for foreclosures over the past three months is 103%.  That means that, on average, foreclosures are selling for 3% above the list price.  The sale to list price ratio for short sales and equity sellers is 98%.  And, if there weren’t so many appraisal issues, those numbers would be even higher.   Buyers in the lower ranges should not expect to offer that much less than the asking price.

6.  Prices are not dropping in the lower ranges, but they are in the upper ranges above $1 million.  The higher the price range, the higher the expected market time with less and less demand.  30% of the active inventory can be found above $1 million, yet the higher end represents only 7% of demand. 

7.  The rumors of a foreclosure moratorium have been rampant all year long.  There is truth to the moratorium, but it does not look like there will be a substantial increase in the number of foreclosures to hit the market until the first quarter of 2010.  Also, there is a tremendous amount of pent up demand where just about every agent has pockets filled with buyers who are actively looking, but, surprisingly, there just is not a lot of fresh inventory.  Any increase in foreclosures will most likely be offset by pent up demand.

8.  With pressure from the federal government, lenders are moving more and more towards short sales.  We can expect within the coming weeks for the Obama administration to announce something along these lines.  Currently most short sales, where home owners owe more than their homes are worth, take a very long time to obtain lender approval, delaying the ultimate close of escrow.  Lenders are creating procedures to speed up the process.  Short sales are a better route than foreclosures because they are in much better condition and save the lenders a lot on repairing and carrying costs.  There are currently 2,050 short sales on the market with an expected market time of 1.58 months, much different than just one year ago when there were 4,422 short sales with an expected market time of 6.2 months.

9.  There are currently more distressed sales within the upper ranges.  Last year only 6.5% of all distressed properties were above $750,000.  Today, 11.4% of all distressed properties are above that mark.  The upper ranges are not immune to distressed sales.  More and more prime borrowers are having trouble paying their mortgages.   A contributing factor to this trend is the increase in unemployment and the falling of property values where more and more borrowers are upside down in their homes.

10.  The total pending sale count , not just a snapshot of the past month (what I refer to as demand), has steadily increased by 56% over the last year.  It is taking longer to close pending sales primarily because there are a large number of short sales that are waiting on lender approval; thus, the count has really blossomed.  There are now 6,851 total pending sale versus 4,393 one year ago.

Here’s a breakdown of how the numbers look this week:  the active listing inventory dropped by 298 homes in the past two weeks to 8,064, its lowest level since January of 2006.  Demand, the number of new pending deals over the prior month, increased by 61 in the past two weeks to 3,464.  Last year’s demand was at 2,974, 490 fewer than today, and two years ago, it was at 1,180, 2,284 fewer than today.  The expected market time is currently at 2.33 months, a slight change from the 2.46 month mark two weeks ago.  The number of distress properties on the market dropped by 132 homes in the past two weeks, now totaling 2,384.  29% of the active inventory is distressed compared to 43% last year.  There are currently 2,050 short sales on the active market, a drop of 134 over the past two weeks.  The expected market time for short sales is currently at 1.58 months.