Orange County Home Buyer Affordability Index Improves Dramatically!

The California Association of Realtors (C.A.R.) just released a report that shows the percentage of households that could now afford to buy an entry-level home in Orange County, CA grew to 48% in the fourth quarter of 2008. A huge improvement as compared to the 27% reported for the same period a year ago. Just two years ago the index showed that home affordability was at an all time low of 11% of households!

California as a whole also showed a large increase in affordability. The state in total checked in with a household entry level affordability index of 59% as compared to 33% just one year ago!

As we become more in line with home affordability with other states, we could soon see an influx of people relocating from out-of -state. California will always be a highly desired place to live due to the climate and proximity to sandy beaches and therefore real estate will always sell at a premium to many other states…..just not as a high a premium as we were use to seeing over the last couple of years.

Is the premium now low enough to attract an influx of home buyers? Only time will tell!

California Passes $10,000 New Home Buyer Tax Credit

The state of California just passed a $10,000 tax credit for any home buyer that buys a newly built home.

I thought the state was broke? Where is this money coming from? Why only newly built homes? These are questions a lot of Californians are asking?

The state believes that building a new home generates more tax revenues than the credit will cost the state. The CBIA (California Building Industry Association) stated that a study co-authored by a former state finance director shows that, “on average, every home built in California generates $16,000 in state revenues and another $3,000 in revenues to local governments. That means that even after providing the tax credit, the state will receive a net $6,000 in additional revenues. Furthermore, the $16,000 will be generated when the home is built, and the credit will be spread over three years.”

Now, if you are a home buyer shopping for a newly built home, this is going to help you out tremendously (along with the home builders). And if you are a first time home buyer you also are eligible for the $8,000 tax credit from the federal government! $18,000 in total tax credits!!!

Here are some of the specifics behind the state tax credit.

• The state tax credit is for $10,000 or 5 percent of the purchase price of a newly built home, whichever is less.

• The home must be the principal residence of the home buyer, and the sale must close between March 1, 2009 and March 1, 2010.

• The credit will be provided in equal amounts (up to $3,333) per year, over three successive tax years. It will begin with the year the purchase is made.

• The taxpayer must live in the home as their principal residence for at least two years…. or he/she will have to repay the credit.

• State tax credits are limited to $100 million fund and is available on a first-come, first-served basis until the funds are exhausted. So it is recommended that if you are in the market for a brand new home you may not want to wait too long as the funds may run out.

If you would like to get additional information about this tax credit and find out about some of the incredible deals some of the local builders are offering home buyers in the area, click on the following link “CLICK HERE” .

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

Orange County home prices hit 5 1/2 year low

Dataquick’s November stats show Orange County median home price are now at $400K…a 5 1/2 year low and a 34.4% decline year over year. Prices not seen since May of ‘03! Single family OC homes dropped to a median of $420K and condos are now at a median of $260.5K.

On the positive side sales popped up by almost 39%! This was mainly a result of banks dumping foreclosures on the market and bargain hunters and investors swooping in and buying. This was the fifth straight month of home sales increasing on a year-over-year comparison. A good sign! If sales continue to increase this will gradually soak up the inventory as long as foreclosures don’t increase at a more rapid pace than we had in 2008.

If you want specific statistics about your city, please email me at brad@so-cal-dreamhomes.com and tell me what city you would like a report for.