Real Estate Market Pulse by Namneet Dhaliwal - Orange County Realtor


  Orange County Real Estate - Foreclosures in 4th Q 2006 Results

 

By Namneet Dhaliwal

Orange County Realtor

January 02, 2007

December 2006 tops the 4th Quarter Default rate in Orange County California. A Picture is worth thousand words. Its here for you. These numbers represents the number of NOD and NOS filed.

 

Orange County CA 4th Q 2006 Foreclosure

             Orange County CA 4th Q 2006 Foreclosure Report

             

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  Orange County Real Estate - Active and Pending Home sales Index (APHSI)

 

By Namneet Dhaiwal

Orange County Realtor

December 29, 2006

 

Active vs Pending Home Sales ratio can be used to measure the current state of Real Estate Market.

 

Date10-14-0611-12-0611-28-0612-12-0612-28-06
Active Residential Listings1540314343136321287811837
Pending Residential Listings27372726266125822299
APHSI5.65.265.114.95.16

Prepared by Nameet Dhaliwal

Date from SoCal MLS

 

Here ratio of active home listings /pending home listings, abbreviated as APHI will be used to monitor the market activity.  Higher number of APHSI will mean a poor market performance, lower number will show a stronger market. For now there is not a big difference in the market from Oct. 2006 to Dec. 2006, even though there are fewer homes in the market, but so are the sales. Over all we have sluggish market at this time.

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Effects of Housing Industry Slowdown

How deep and how fast?

By Namneet Dhaliwal

Orange County Realtor

December 20, 2006

One may see the effects of housing slowdown on the surface as being a shift to the slower sales and some shift in the pricing. Actual effects are deeper and if the slowdown persists through year 2007; this depth will become very obvious.

After the dot com bust in 2001 our economy was fueled by housing market. It created a large number of jobs from realtor's to brokers, from loan officer to lending companies, from handymen to contractors. A tremendous out pour of money in remodeling increased sales at the building warehouses. This brought a new form of old economy, real-estate offices opened just like starbucks on every corner, every 50th person in California became Realtor, and influx of sub prime lenders generated jobs and money. Due to abundance of money available thorough different financial plans, home owners dug deeper into their pockets and flooded that money back into the economy. Realtor paid humpty some of money to different lead generating companies, as more leads one got more money it brought or if it did not generate the income, income was enough to take it as a tax deduction. Real Estate Boom became the economic boom after dot com crash.

If this fuel continues to dry down in 2007 it will influence different segments with same results: slowdown. Sub prime lenders could be the hardest hit, when a 100% mortgage of 80 – 20 loans goes into default, there would be no money to cover the Realtor’s cost and sales cost, so the second with 20 percent is going to suffer the damage and many lending companies could go out of the business effecting every one employed by them. Lack of money could reduce the remodeling projects effecting laborers, contractors and the store sales which sell the materials for such projects. Many Realtors, loan officers and other related to the field would have to go out there to find a traditional job to make ends meet, unless they have reserves. This could change the unemployment rates in the nation.

Decreased number sales could effect all above and the ones who depend upon the above including the suppliers and factory workers related to housing industry. Even during the normal pace of sales volume some people would have to exit the industry, as pie will not be as big to share as it has been during the boom. If this trend continues for another six months to a year, slowdown of housing industry could shift into a slowdown of economy.

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Real Estate Slump and its Effects on Core Inflation and Economy

By Namneet Dhaliwal

Orange County Realtor

December 5, 2006

Core inflation is the measurement of evaluating the economy and is calculated as Consumer Price Index. One of its measures is XFE, total price consumers pay for services and goods excluding food and energy. Another one that is widely used is WMI, Weighted Median Inflation, excludes the widely fluctuate variables that causes large and sudden amount of change in prices in a given period.

Rise or fall in housing prices is not expressed directly in CPI terms, because home ownership cost is not the part of the calculation. As there have been a record number of home ownerships during the 2005-2006, and housing being a long term investment except for flippers, it is a very important variable to be left behind or ignored when calculating CPI or Core inflation.

Housing expenditure is only measured as owner's equivalent rent, which is the cost of renting not owning. Rents do not rise substantially until housing starts to fall. As the purchase demand diminishes, rental demand increases. Applying simple supply and demand principal, rents rise and so does the owner’s equivalent rent, reflecting a delayed increase in CPI hence increase in core inflation.

According to a report released by US Department of Labor on   Wednesday, November 8, 2006 the housing expenditure rose to 9.0 for 2004-2005 as compared to its value of 3.6 for 2003-2004. As the home prices in 2006 have not increased, there has been an increase in rents and slowdown in sales, leading to have even higher rents for 2006-2007 and making housing expenditure a part of Core Inflation figures

 

 

Percent change

Item

2003

2004

2005

2003-2004   

2004-2005 

Housing

13,432  

13,918  

15,167

3.6

9.0

 

 

 

 

 

For complete chart refer to http://www.bls.gov/news.release/cesan.nr0.htm

Increase of consumer spendings in housing sector accompanied with decrease in home equity can causes decrease of consumer spending on goods. Consumers with maximize credit cards and equity debts would have to cut the corners on their expenses, resulting in decrease of the consumer confidence, increase in core inflation and leading to a slower economy if not recession.

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Orange County California Real Estate Market and Different Opinions

By Namneet Dhaliwal

Orange County Realtor

November 28, 2006

S&P states 7.1% increase in Orange County and Los Angles County home prices. National association of Realtors says 2.9 percent decrease in home prices. These statistics are very confusing for the buyers and sellers.

Inside story of today’s market is different. What do you say when $500,000.00 condo selling for $450,000.00, properties that are listed now at 3-5% less than the last sales are still sitting in the market? We know these are not going to sell at the full price. In case of new homes, builders have reduced their one million dollar home prices by $100,000.00 or giving away this amount in upgrades. There are 3/2/1 buy down programs in effect. Some of the sellers are paying for the expense of above programs. Because we are coming from a higher priced market, its easier to get higher appraisal value than what buyer is willing to pay in today’s market. Banks allow up to 6% percent of property value amount to be paid by the seller for above incentive and it never gets reported as a decrease in price. When you add the incentives and compare to the market when buyers paid higher than the listed value, the actual drop in the price seems to be much deeper than one sees on the surface.

If we take 2.9% drop stated by NAR for month of October 2006 and add above stated 6% expense, it adds up to total of 8.9% drop in the market. Now use this 8.9% loss to above said 7.1% gain by S&P; there is a 15.9 % difference of opinion about the actual market value of homes.

We will experience more news about the price drop in coming months, as today’s sales and market conditions will becomes tomorrow’s statistics.

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Future of Real Estate in Orange County California

By Namneet Dhaliwal

Orange County Realtor

November 23, 2006

The soaring inventory is one of leading triggers of down turn of the real estate market. Starting early summer of 2006 every one wanted to sell to get the highest and the best price and triggered by the fear of Fed increasing the interest rates, causing pop up of so called Real Estate Balloon. Buyers sat on the side lines waiting for this pop, not worried about interest rates as much, waiting for the right time to buy.

Combo of sellers greed and buyers patients lead to this down turn. This correction was much needed and over due. There are still enough sellers out there who are ignoring the market conditions and are stuck to the price their neighbor got. After loss of a qualified buyer, no one showing up for next three months, seller decides to lower the price, now being at the same position as three months ago. As we saw during the past years, sellers were asking 5-10 percent higher than the last sale and buyers paid higher price. Market is in a reverse gear now, its time for sellers to ask less and not to expect the full price offer on their house.

Even though there are some short sales, number of foreclosures has gone up, but current interest rates could keep things under control. No one wants to loose their house, unless there is no way out. Every one needs a roof over their head, and it costs. Orange County rents are not cheap either, one bedroom studio costs about $1150 per month, single family home 3 bedrooms and 2 bathrooms costs $2000-3000 depending upon the location. Even though it will kick out the investor who were there for a quick buck, people still want to own a house, and it is a long term investment.. There are a lot of buyers sitting on the fence ready to jump in as they get the feeling of market being stable. The biggest question is when, could it be next 6 months or a few years.

 

Modest job growth, slower appreciation, slower sales pace, stable 30 year mortgage, these are good ingredient for buyers and not bad for sellers either. Problem is that we are so caught up with 10-20 percent per year appreciation in housing sector that it is difficult to absorb the fact that there is not going to be an appreciation any more for some time, and housing market have to give up some of the gain. The drop we see is not going to stay there for ever, 10 years from now people will say, “We should have bought then”. Key is not to buy over your budget and remember that housing is a long term investment, do not need to give it away unless it is an absolute necessity.

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Is Booming Real Estate Market over! How to cope with changing market, for buyers and sellers?

Monday, June 05, 2006

By Namneet Dhaliwal Realtor

Real Estate Market is at a stands still right now, here in Southern California. Properties are selling but taking much longer to sell. Buyer's are on a caution and sellers still think if neighbors house sold at one price why not mine. Although there has not been a substantial decrease in price during the first quarter, gains are going to stay flat, if any thing a small decrease could be possible at the end of second and third quarter A lot of it is due to the recent increase in interest rate on top of the substantial increase in prices during the last few years.

There are three obvious variables in today’s market: 1) price 2) interest rate, that effects the affordability. Any increase in 1st and 2nd variable will adversely effect the affordability, that will in turn effect the real estate market in the short term and long run.

Price × Interest Rate =1/Affordability

Pretend yourself as a buyer look at these variables, compare the interest rates at the time when your neighbors houses were sold and now when you are selling yours. You have to factor it in. My suggestion to sellers is that do not list the property higher than the last three recent sales and you will get your reasonable price.

For buyers, you have to compare the recent sales and factor in the condition of the property as compared to the ones recently sold. Do not buy over your budget; do not get trapped into teaser interest rates. Make sure that you will be able to afford the payment when your adjustable loan adjusts to the newer rates. If you buy it wisely, you should be fine. There is no place like your own home. For more information call Namneet at 714-932-9409 or visit http://www.namneet.com

Contact me for FREE Appraisal of your house or to pre-qualify for your next purchase.


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