The Ricky Report
January 2010
Happy New Year,
Note: if you or your friends want to look at homes; I will put the itinerary together and provide the transportation. Contact me.
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Quick overview; the real estate market in Southern California is steadying. We continue to let air out of the bubble; the repair persists. Last month we saw market data suggesting the value for Southern California Real Estate is at par. Southern California real estate appreciates by about 7% per year. The cost for properties has leveled off to about even with the appreciation trend-line.
Does that mean real estate prices will begin to increase again? No, it means that structurally the price point is even. The same pressures on the economy exist. Firstly, the unemployment picture remains slow. If the unemployment rate doesn’t go down, look for an “L-shaped” housing recovery; which means that home prices will trend below the appreciation rate. Secondly, the “shadow inventory” (i.e. foreclosed properties) is still evident. The pool of distressed properties is related to the employment picture; as jobs are necessary to pay financial obligations.
Does that mean the buyers market will continue? Yes and No. Yes, because realty prices will remain reasonable. No, because record low interest rates cannot stay low forever. The news suggests that the bank’s low borrowing rates from the Fed are eroding. The erosion will lead to higher borrowing rates. Keep an eye on interest rates. Every ¼ point of interest is equal to about $10,000 of real borrowing. That means as interest rates rise the real cost of a home increase proportionally. For people with lower down payments; your window of opportunity is smaller. For cash buyers; your window remains wide open. http://www.zillow.com/Mortgage_Rates/
Let’s look at the stats…
Month-to-Month Net Job Change
As we can see from this chart; California California
This chart shows that sales volume is picking up. The average median price is static (not adjusted for inflation). These are stats are positive.
| Southland Home Prices Year-to-Year | ||||||
| | Sales Volume | Median Price | ||||
| All homes | Nov 08 | Nov 09 | %Chng | Nov 08 | Nov 09 | %Chng |
| | 5,037 | 6,257 | 24.20% | $340,000 | $329,000 | -3.20% |
| | 2,177 | 2,528 | 16.10% | $400,000 | $432,250 | 8.10% |
| | 3,719 | 3,745 | 0.70% | $220,000 | $200,000 | -9.10% |
| | 2,385 | 2,751 | 15.30% | $185,250 | $160,000 | -13.60% |
| | 2,673 | 3,148 | 17.80% | $305,000 | $325,000 | 6.60% |
| | 729 | 752 | 3.20% | $355,000 | $365,000 | 2.80% |
| So | 16,720 | 19,181 | 14.70% | $285,000 | $285,000 | 0.00% |
The next charts show distressed properties. First the foreclosure chart; the chart says that foreclosures are down this year from last…good news. The second chart shows properties heading for default; the chart says defaults are up…bad news. Final result is mixed.
| Trustees Deeds Recorded (signal homes were lost to foreclosure) | |||
| houses and condos | |||
| County/Region | 2008 Q3 | 2009 Q3 | Yr/Yr% |
| Los Angeles | 11,690 | 7,927 | -32.20% |
| Orange | 3,997 | 2,238 | -44.00% |
| | 5,797 | 3,601 | -37.90% |
| | 10,813 | 6,776 | -37.30% |
| | 7,930 | 4,999 | -37.00% |
| | 1,420 | 793 | -44.20% |
| Imperial | 476 | 365 | -23.30% |
| So | 42,123 | 26,699 | -36.60% |
| Notices of Default (first step in foreclosure process) | |||
| houses and condos | |||
| County/Region | 2008 Q3 | 2009 Q3 | Yr/Yr% |
| Los Angeles | 17,073 | 21,850 | 28.00% |
| Orange | 5,692 | 7,436 | 30.60% |
| | 7,062 | 8,702 | 23.20% |
| | 11,714 | 12,113 | 3.40% |
| | 9,110 | 9,833 | 7.90% |
| | 1,676 | 2,146 | 28.00% |
| Imperial | 568 | 692 | 21.80% |
| So | 52,895 | 62,772 | 18.70% |
Looking at the graph below; this graph has not been adjusted for population growth in California
The 30-year mortgage rate remains historically low. The picture is deleted
The low rates is good news for buyers. The prices of properties are near or at bottom. The cost of rents is supporting the bottom. In many cases a mortgage is cheaper than rent. Interest rates are low and there is no immediate indication of them rising. However this can change at anytime. I have included a link for today’s mortgage rates. http://www.zillow.com/Mortgage_Rates/ Moreover, there are tax credits for first-time buyers (the $8,000 tax credit has been extended into 2010). Check with me; we will contact a loan officer to get us the necessary information. This time is a rare opportunity to invest. At the same time; we want to make sure we can afford the investment.
Lending Trends: talking with a top loan officer; he informed me that restrictions are beginning to ease in the lending market. However, the easing looks nothing like the lending market that helped create the bubble. In fact, lending restrictions are still tight but they are getting better.
Advice for buyers: make sure to get pre-approved before looking; don’t waste your valuable time without knowing how much you can buy. Moreover, by being pre-approved; it’s like having the money in your pocket, ready to act when you find what you want.
Advice for sellers: The market is still a buyers-market. Your property is worth what someone will pay for it. Make sure you do your homework to determine that right price. In addition, work with a professional (me and my teamJ) to stage your property correctly. Also, once your house is on the market, allow yourself about 21 days to monitor progress. During each 21-day duration the market will reveal if your property is properly priced. Many properties are seeing multiple offers when they are priced correctly.
Every month the market adjusts. The Ricky Report helps us stay on the beam.
I receive Real Estate news every day at my computer. I add the stories to my website as necessary. Click the “Real Estate News Link”. This is a good resource to get a quick refresher. Also I have the search engine links on the front page.
