The current market is very slow now, but it is typical for this time of year. Traditionally, August and September are the months when people’s attention is focused on vacations, returning from vacations, or back-to-school activities, and football, so this is not unusual. Next month the pace should pick up a bit as buyers will try to get moved and settled in before the holidays.
In Lake Forest today, there are 256 single family homes on the market. The lowest end is now priced under $500K, with 3 currently available, and several others that are “value range” priced from $499K to mid-$500s. Last month, one actually closed at under $500,000 which is the first for this year. There have only been 2 others since October 2004! The upper end of the market includes 5 homes that are listed above $1 million. Lake front homes, with boat docks, are now available from a low of $849,900 up to $1,975,000. Out of the 256 houses available, 24 of them are classified on the MLS as either bank-owned “REO”, or pre-foreclosure “short sales,” although I suspect there are more and the listing agents just didn’t know to check the right box on the MLS form. None of them are outstanding bargains, so I’m not expecting them to sell soon.
The condo market today offers a choice of 191 properties. Pricing runs from $215,000 for a 610 square foot one-bedroom without a garage up to $599,900 for a 1900 square foot newer condo near, but not “on” the waterfront of Lake I. At the moment, for the condos listed above $500K, I see very little hope of selling in the foreseeable future.
Market reaction to the Fed meeting tomorrow will probably be a big yawn, as the mortgage market has already “priced in” a 1/4% reduction, and even a 1/2% reduction has been rumored. A rate reduction may help a few buyers at the lowest end of the market, but probably won’t be significant to the “move-up” buyers, unless it means that they can finally sell and get their remaining equity that has been evaporating for the last year. Affordability is still the biggest issue with real estate nationally, but in California it is much worse. With a conforming loan amount of $417,000 at 6.25%, the payment on a 30 year fixed mortgage is $2,567. For a buyer with 5% ($22,000) down, this gives a total payment of over $3450 per month to cover taxes, HOA dues, and mortgage insurance on a purchase price of $439,000. (Since this number is lower than the single family home prices today, I have assumed that this would be a condo with HOA dues of $250 per month that includes the fire insurance.) With 10% ($46,300) down on a $463,000 purchase, the payment on a single family home with no HOA dues comes out to about $3,100 per month, assuming insurance at $75/month and no mortgage insurance. At that price, I would expect the house to be small and also require substantial remodeling.
Over the next few days, I will be adding year-to-date statistics and comparisons to prior years for both the single family home and the condo markets in Lake Forest.
As always, I welcome your comments, questions or suggestions.