Home Prices Are Not As Bad As Reported!

Whenever the monthly Orange County real estate sales reports come out showing what the recent sales and median home price were from the prior month I am always cautious on the accuracy of the data. Actually, let me restate that – the data is correct, but is it a true reflection of the real estate market?

Being that the data is pulled only from “sold” properties, is it truly a reflection of the entire real estate market? Is there enough sales to really get a good median price as compared to other months? Is one or two of the sold properties skewing the median price up or down?

Just like a few years ago when all the new million dollar houses where being built and skewing the median price upwards, all the foreclosures, short sales, bank owned properties, etc., are now skewing the prices downwards. When 40% – 60% of the properties being sold in an area are “distressed sales”, the true average value of the typical home is not being properly accounted for in the monthly sales numbers and therefore I believe is overstating the severity of the price collapse. The majority of these homes that are currently being sold in the market are at the low end of the price spectrum and are therefore are overweighting the median home price and showing a larger percentage drop than is actually happening.

The only true way to measure a price change is compare a similar house year over year. Obviously this is sometimes difficult to do being that there are so many variables that go into pricing a property. Such things as square footage, lot size, upgrades, certain streets or neighborhoods, etc. can all affect the value of a property and can make price comparison very difficult.

As the Orange County real estate market stabilizes to a more market in the future, we will see a more accurate number that is stated in the monthly sales report. But for now, be cautious as what we see may not be totally accurate representation of the market. It’s not as bad as reported…..unless your in the bottom half of the pricing spectrum!

Is it time to Buy! Buy! Buy! or Sell Sell! Sell!?

For those of you who have followed me over the years you are familiar with my personal Orange County housing barometer. If you are new follower to my blog or my website, here it how it works:

Buy! Buy! Buy! (aka: Triple Buy!) = DON”T WAIT…Buy Now!
Buy! Buy! ( Double Buy!) = It’s a good time to buy
Buy! (single Buy!) = Market is volatile. Get ready as it’s about time to buy!
Sell! (single Sell!) = Housing is expensive but the general market is still very strong.
Sell! Sell! (Double Sell!) = Market is turning downwards or is showing signs fo peaking/softening.
Sell! Sell Sell! (Triple Sell!) = GET OUT NOW!

So where do I think we are now in Orange County’s real estate market? Good question!

In my opinion, we are just transferring over from a “Sell! Sell! Sell!” to a “Buy!” (single Buy!) market, and by year’s end we could be in a “Buy! Buy!” (double Buy!) market. There are still a lot of variables that could effect the market over the course of the year, but one thing is for certain…..prices are fundamentally attractive now! More so that they have been in many many years. And if the government throws enough housing stimulus’ into the market and the local economy by April, we could see the bottom of this market my the end of this year!

I do have one caveat though……housing has several sub-markets. We may have reached a bottom in some markets and/or some price points and still have some pain in other market segments. For more information about your market contact me at (714) 812-7883

Obama, Here are your housing goals for 2009!

President Elect Obama,

If you want housing to stabilize and the economy to strengthen, here are your economic goals for 2009!

1. Get interest rates on mortgages at or below 4.0% for all of 2009.

2. Convince banks to refinance homes with little or no (and even negative) equity. It’s better to refi homeowners at current interest rates than to foreclose on them, or worse yet…bail them out by eating hundreds of thousands of dollars in equity! There are many homeowners who want to refinance, but banks are telling them “No!” due to their lack of an equity position on their mortgage. These are people who actually want to stay in their home even thought they have no equity. As long as they qualify on income and credit scores, why not refinance the loan? If these homeowners were able to refinance it would reduce foreclosures and lessen the flood of distressed homes on the market.

3. Stimulate home buying by offering up to $20,000 for new home buyers in 2009 and possibly in to 2010. The current $7,500 tax credit is not even really a tax credit. It is an interest free loan from the governement It has to be paid back over 15 years. Offer a REAL tax credit!

4. Waive the future tax on capital gains from the gain on sale of investment property purchased in 2009. This will spur more investors to buy property NOW rather than wait.

Obama, if you get these passed in the first quarter of 2009 and you will see that the 2^nd quarter of 2009 will be the bottom of the current real estate market. If you don’t, then watch out!…..this housing slump could extend into 2010 and beyond!!!