South OC Real Estate Market Improves, Despite Dire Predictions

What's happening with interest rates? Has the wave of foreclosures hit? Where are all the homes to buy on the Orange County coastline?

Now that we are all comfortably rolling along in the summertime groove, it appears that the current real estate environment is also traveling the same tracks that have carried us through spring. 

Interest rates continue to touch and hold new record lows, purchase business is steady and the expected boost of new inventory has yet to show. 

What gives? Wasn't there supposed to be a wave of new inventory that would crush any hopes of a rebound?  A flood that many on the sidelines had predicted and banked on, one that would have so much inventory hitting the market that we would see another 10- to 15-percent drop in prices across the board?

What happened? Many have stood by and watched as rates plunge and inventory continues to thin, hoping that now is finally the time.

Well, it has not quite worked out that way to the surprise of many. A quick look at the chart shows that we have indeed started to see a measurable recovery.

Huh? Recovery? Where is the double dip crash?   

Now I use the term "measurable recovery" very carefully. It does not mean we will see home values start racing skyward as we did back when Alan Greenspan famously coined the term "irrational exuberance," but what we have seen is a shift towards a seller's market.

In fact, if you are currently in the market and seriously looking for a home, I would be willing to bet that many of you have made an offer on a home where you were one of several, if not many offers, on a home that you missed out on.

It is a fact of this new market, that after looking long and hard for the perfect home for you and your family, you will have some competition. 

The year-over-year chart attached to this blog post measures sold real estate activity in the cities of San Clemente, Dana Point and Laguna Beach.

Each year, going back to 2002, measuring the total number of closed sales up to the mid-point of July. 

You can see that in all three cities we are well off our lows of 2008. Sales continue to improve from one year to the next but without that feeding frenzy driving prices soaring towards unsustainable growth.

You can see in this next link, exactly what they are selling for and at what percentage in relation to the list price. This chart covers Laguna Niguel, Dana Point, Corona Del Mar, Newport Beach, San Clemente and Laguna Beach: Market Report - San Clemente, Dana Point, Laguna Beach, Corona Del Mar, Newport Beach & Laguna Niguel  

To get an idea of what interest rates are and what payments would be using mortgage calculators, check out this link: Interest Rate and Mortgage Calculators.

We first saw some indicators of the increase in sales volume in the industry trade magazines, web sites and industry blogs over the last six months. Now it is much more mainstream, many of those in the national press and regional media are claiming that we are finally and measurably, on the road to recovery.

The San Francisco Chronicle claims "After several years of false starts, the evidence is finally starting to point to signs of a real recovery."

Housing Wire magazine states that JP Morgan Chase economists are calling for real estate prices "to rise 12 percent by 2016."

Soon we will be seeing it consistently on all the major news channels, monthly, weekly, then daily, with all the talk of real estate being back. Finally.

Well, the truth is that it is back, and it has been for a little while now.  The key is do you want your piece of the pie, now or later.  Wait much more and there will be more offers to compete with and possibly, even higher prices. Smaller pieces of pie and more expensive. Don't wait,  NOW is the time.

To view any property listed on the Orange County MLS, check out Buy South OC Homes.

This post is contributed by a community member. The views expressed in this blog are those of the author and do not necessarily reflect those of Patch Media Corporation. Everyone is welcome to submit a post to Patch. If you'd like to post a blog, go here to get started.

Mike Jones July 24, 2012 at 09:25 PM
Matt, Sorry to be the bearer of bad news or realistic thinking, But what happends when rates increase? They are artificially low and Inflation is looming, this will certainly plunge home prices further. Government Debt/High Unemployment are all very scary to me. That being said I do think your article was well written and I wish you all the best.
Matt Davis July 26, 2012 at 05:27 PM
Hi Mike, One major premise of that line of thinking is that when the rates do rise, and they will for sure, it will cause home prices to again plummet. While the debt burden and unemployment outlook certainly factor into that, Fed Chief Bernanke has already weighed in on the issue stating in an April 26 Wall Street Journal online article ""It's a little premature to declare victory," Chairman Ben Bernanke said Wednesday in a news conference following Fed officials' two-day policy meeting. "Keeping interest rates low is still appropriate for our economy." The factors that could support a higher rate environment would include continued economic recovery in the jobs sector along with managed inflation. We are definitely not out of the woods yet but with the Federal Reserve closely monitoring the situation and again ready to take corrective action per today's Wall Street Journal Online, "Central Bank Prepares Steps to Spur the Economy Unless the Recovery Picks Up" - http://online.wsj.com/article/SB10000872396390444025204577547173267325402.html?mod=WSJ_hpp_LEFTTopStories It can reasonably be expected that in looking at actual sales statistics, the demand should continue to increase, even if home prices fall further. Dealing with higher rates will keep some on the sidelines but I remember my first mortgage back in the late 80's having a 9%+ rate on an adjustable. Things will still move and demand should keep steady until the Fed pulls the training wheels off.
Kevin Kellerman September 18, 2012 at 09:59 PM
Matt: I think you were lucky to have a 9% interest rate in the late 80's. In the early 80's your rates were double digit, and you were earning 15-18% in your savings account at the bank! Inflation will affect real estate and prices will increase. Interest rates will slow down sales as less people will be qualified to buy, but prices are not necessarily going to dip because of the increase in rates. History tells us the opposite.
Matt Davis October 21, 2012 at 06:40 PM
Hi Kevin, Lucky was not a word I would have used but it was certainly market rate for the newly introduced "Option Arm" loans. It quickly went from 9% to 11% and hovered around there for a year or so. Rates are of course a huge component of the real estate market and they will have some sort of impact when they start their eventual rise. As banks have done since the beginning of time, they will adjust to market forces to ensure lending continues. They have to, regardless of where the rates are at, stagnation in lending is far worse than rate fluctuations. Up or down people will always need cash and that is not necessarily bad thing. All we can do as real estate professionals is to advise our clients to the best of our abilities using the info as the market presents it to us. Fortunately for us, it is starting its slow return to the new normal. Best, Matt


More »
Got a question? Something on your mind? Talk to your community, directly.
Note Article
Just a short thought to get the word out quickly about anything in your neighborhood.
Share something with your neighbors.What's on your mind?What's on your mind?Make an announcement, speak your mind, or sell somethingPost something
See more »