Many buyers in Southern California area are currently looking to short sales, REO’’s, and pre-foreclosures, as part of their home search. Many home buyers have found fantasic deals on these “distressed” sale properties, but the real estate market has changed DRASTICALLY in the last few months. There is TONS of competition out there for these properties as home values have come down to historicallly affordable prices.
In general, it is no longer a “buyer’s market” for these kinds of homes. You will almost always find multiple offers on these properties (if priced right), sometimes even the same day the home is listed. However, remember what I just said…”in general”! Real estate market has many sub-markets (ie: cities, price levels, type of property, etc.) and some may or may not be as desireable as others in the current market.
Are there deals to be found? Yes!… but most of these sales are now closing at above the listed price (if priced under market value)! It look more and more like banks and short sellers are listing the houses well below the general market price and hoping to attract a flood of offer. Only then to counter back much higher on these offers to the potential buyers in an attempt to attract a bidding war. The banks are getting smarter!
If you are looking to purchase one of these bank owned, pre-foreclosures, or short sales PLEASE PLEASE get some consultation from an experienced real estate advisor! Make sure you find out what the “true” current market price is in the area and don’t over pay/over bid. Yes, you will probably have to bid higher than the listed price as this “list price”seems to me more and more a ploy to reel you in to make an offer, only to later trap you into a bidding war. So make your highest and best offer first and stick to it! Please feel free to call me if you have any question pertaining to these ‘distressed sales…or for that matter any real estate question in general.
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!
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” .
The proposed $15,000 tax credit looks more and more likely that it is going down to defeat from Congress. This is a drastic blow to what is needed to spur home buying and get home pricing stabilized.
But not all is lost! It looks likely that that a more modest tax credit of $7,500 to $8,000 will be passed. I’m not so sure that this is going to give much steam to the market as there is already a $7,500 tax credit in effect although it is really just a 15 year loan. The new tax credit is designed to be a tax deduction that is designed as a grant to any first time home buyer.
We’ll keep you up to date as more information comes about in stimulus bill.
I’ve been touting for some time now that the government needs to stimulate the economy with a big time tax credit to home buyers and now it looks like it may be coming!
The Senate today passed a tax credit of up to $15,000 for anyone who buys a house in 2009. Actually, the credit is for 10% of the purchase price up to $15,000. Obviously for us here in California that $15,000 will apply to just about any property as there are very few properties under $150K.
Previously the bill contained provisions for a tax credit of up to $7,500 for the purchase of a home but only for first time home buyers. The revised bill apparently does nto distinguish between a first time home buyer or a repeat home buyer as long as the home purchases a principle residence. No investment properties qualify.
Also, the previous bill was really just a 15 year interest free loan that needed to be paid back $500 per year. The amended bill is supposedly a real tax credit that does not have to be repaid (although there are some stipulations).
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!
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
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 thefirst quarter of 2009 and you will see that the 2nd 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!!!
This is the best diagram that I have seen so far explaining the subprime mortgage crisis and the processes the housing market, the financial markets, and the government are going through to respond to the crisis. Diagram courtesy of Wikipedia.
(Note: If diagram is blurry, click on diagram to be taken to source page.)
Last week 60 minutes ran an exclusive report on the mortgage crisis and how we may have a second wave of mortgage defaults in 2010 and 2011 from Alt-A loans and option arm resets. In the interview Investment fund manager Whitney Tilson says we may only be half way through the unwinding bursting of the bubble. He claims that the trouble now is that the insanity didn’t end with sub-prime loans. Two other types of exotic mortgages, namely Alt-A and “option arms” are now starting to default and he projects that number to increase significantly over the next 2-3 years.
Watch the video below….
It is very interesting listening to this interview and wondering how accurate his prediction is as there are so many variables that may affect this mortgage mess in the coming years. For instance, how many mortgages will be refinance before the resets? Will lower interest rates stem some of this pain? What will congress do over the next year to stimulate housing? What will the state of the economy be in the next year or two? How about the psychology of the home buyer and whether they think housing is a bargain? etc…..
So much to consider, but one thing is for sure……it will be one wild ride!
Many buyers in Southern California area are currently looking to short sales, REO’’s, and pre-foreclosures, as part of their home search. Many home buyers have found fantasic deals on these “distressed” sale properties, but the real estate market has changed DRASTICALLY in the last few months. There is TONS of competition out there for these properties as home values have come down to historicallly affordable prices.
