A year ago today, I posted my predictions for the Orange County real estate market in 2008. Today, I can look back and see that I got some right, and some wrong. (Isn’t that how it always is?)
Some things I got right :
The volume increased, (but not as much as I hoped.) As of today, there have been 24,237 closings in the MLS since 1/1/2008 in Orange County. It is about 20% above the 2007 volume of 20,000, but I had predicted it to come out between 25,000 and 30,000. Since there may be some more closings tomorrow, and many of the recently closed sales won’t get reported until the listing agent remembers to update the MLS, it is still possible to hit my “25,000” mark, but it won’t go much higher than that. I’ll admit that I was optimistic.
Prices decreased – even more and faster than I thought they would! The median price for a single family resale home now stands at $430,000 (off 34.4% from November 2007) and the median for a condo is $260,500 (off 38%). See the DQ News Chart
There were a lot of foreclosures, and there will be more to come. The big bailout, and help for homeowners has been a bust. Very few delinquent borrowers have been able to modify their loans and keep their homes. The foreclosures have slowed, but that is probably only due to the new California law that lenders have to document that they have worked with the borrowers prior to foreclosing. There will probably be a big flood of new foreclosures that will hit the market around March.
A lot of real estate agents have left the business. Final numbers won’t be available until late January, but I know many agents who have found other jobs and will not be renewing their local Association of Realtor®s memberships.
The Real Estate Industry has become more “transparent.” Let’s face it – there are too many places for consumers to do their research and credibility means a lot! If you aren’t honest and open with your advice and opinions, buyers and sellers will find someone else who will be.
Nobody is going to buy a house simply because they see an ad that says “Now is a good time to buy or sell!” DUH! Actually, I have gritted my teeth recently when I saw a full page newspaper ad that declared “Work with a Realtor® because they know your market!” The truth is, some do and many don’t! To become a Realtor®, you need to have a license and pay dues of $115 per year. You also agree to abide by the Code of Ethics, but there is no required education or additional testing to maintain your membership. I am a dues paying member of the National Association of Realtors, and I abide by the Code of Ethics and enjoy some benefits like access to research reports, and publications, but membership alone does not give me any knowledge or authority, and I hate that they waste my dues paying for ads like that! ( End of rant.)
The parts I got wrong:
The mortgage market has still not settled down completely. The FHA loans have made a big come-back, after being close-to-obsolete in California for the last few years, but they have also tightened up on their qualifications for many borrowers, and won’t approve a loan for a property that has changed ownership in the last 90 days. This puts investors in a riskier position if they want to buy a foreclosure, fix it and put it right back on the market. Loans of over $417,000 are difficult to approve, and the interest rates are substantially higher. This is causing problems for buyers (with good credit and documented income) to buy homes in the higher price ranges.
The lenders are pricing their inventory to get rid of it. I never would have guessed that they would take this agressive approach. I’ve been seeing REO properties come on the market at 10% below the most recent comps. This has created a frenzy for buyers who can’t resist what appears to be a real bargain. Multiple offers have become the norm for many of the REOs, and buyers have been bidding them up to an average of 102% above original list price. The REOs and short sales, especially at the lower end of the price ranges, have made up 42% of all sales for 2008.
Overall, my predictions weren’t too far off, so I’ll give myself a B+ for getting close. In the next few days, I will make my new predictions for 2009 and this time I will be more specific and try to get closer to actuals.