Future of Real Estate in Orange County California

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 gearnow, 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 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 form 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.

It started as a part of comment to OCreal estate finder's question "Tell us, 'What trend moved O.C. housing in '06?' http://blogs.ocregister.com/lansner/archives/2006/11/tell_us_what_trend_moved_oc_ho.html