The Orange County Housing Report

Provided by: Steve & Karen Hakola, Hakola & Associates 877-4-HAKOLA, (949) 661-7653, Hakolas@Hakolas.com, www. HAKOLAS.COM Regency Real Estate Brokers, Inc. , DRE# 00604415, 00610273

Potential sellers are sitting on the sidelines, but that is not a wise move for those looking to move-up.
Move-Up Sellers: Timing is everything and the timing is perfect for move-up sellers.

Feb. 2013

There are a lot of homeowners that are waiting for a variety of reasons to place their homes on the market. Last year we witnessed 15% fewer homes come on the market compared to 2011 and 30% fewer compared to the average over the prior decade. January of this year continued the trend and 16% fewer homes came on the market compared to 2012. There are valid reasons to wait to list, but that is not the case in selling a home and moving up in price. Unless that seller turned buyer would like to lose net worth by waiting, it is strongly recommended to act now. Lets illustrate what waiting means in real dollars to that move-up seller. A homeowner looking to upgrade their $500,000 home to $750,000 decides to wait a year until their home increases a little more in value so that they have a bit more equity. What would happen if homes appreciate 10% in that year? Their home would be worth an additional $50,000, or $550,000. However, the $750,000 home would be worth an additional $75,000, or $825,000. The end result, the homeowner that waited paid an additional $25,000 by waiting, the higher the price, the bigger the penalty. It is human nature to want to wait until you have all of your ducks in a row. But, as humans, we often later look over our shoulder and realize that we did not make the correct decision. This always happens during an appreciating market and people kick themselves for being too passive. Heres another point to consider. Interest rates have been skidding along historical lows for about a year now and everybody has become accustom to these once in a lifetime levels. WARNING: do NOT take these low rates for granted. The current rates are unprecedented and they will not last. The government has been dumping an extraordinary amount of money into the economic system for quite some time now. Economics 101 states that continuously printing money (essentially what the government is currently doing now), eventually leads to an increase in inflation unless interest rates are increased to counter the threat. Inflation, especially runaway inflation, is not a good thing and the government will do everything in its power to prevent it from occurring. Even though economists and experts have been wrong on forecasting a rise in rates, they know that it is inevitable. As soon as the economy shows signs of life and recovery, rates will increase. Current improvements in housing and consumer confidence will have a strong influence on the economy as a whole. I forecasted an increase in rates from 3.5% to 4% by years end, sill incredibly low compared to historical standards. For the $750,000 earlier example, if a buyer puts down 20%, the difference between 3.5% and 4% is $170 per month, every month, year in and year out. That is $2,040 per year, or $10,200 in five years. Everybody can use an additional $10k. Remember, the move-up seller now has to pay $825,000 for the home as it appreciated 10%. Lets take a look at what happens to payments. First off, the loan amount at 20% down would be $660,000, which is jumbo financing, a higher rate (add an additional .375% today). The conventional loan limit is $625,500. The difference between jumbo and conventional in this example would be an additional $144 per month, $1,728 per year and $8,640 in five years. So, in this example, when you consider the additional jumbo financing and the increase in rates by a half of a percent, the additional payments for waiting would be $314 per month ($144 + $170). That is $3,768 in a year, a nice vacation, and $18,840 over five years, a large chunk of change. This may be an example, but in the case of moving up in an appreciating market like today, it is best to pull the trigger and make a move as quickly as possible. In reality, the absolute best time to move-up was last year. This year will be great too, but the longer one waits, the more it will cost them in the long run.

The Orange County Housing Report

Provided by: Steve & Karen Hakola, Hakola & Associates 877-4-HAKOLA, (949) 661-7653, Hakolas@Hakolas.com, www. HAKOLAS.COM Regency Real Estate Brokers, Inc. , DRE# 00604415, 00610273

Active Inventory: The inventory increase again, slightly. Two weeks ago, the inventory increased for the first time in 19 months. The trend continued this week, but by only 27 homes, less than 1%. The active listing inventory now sits at 3,276. The overall inventory remains at anemic levels. The combined increased over the past month total 115, or 4%. But that is like adding a quarter of a cup of gas to an empty gas tank. You wont get very far on a quarter of a cup. The anemic levels are here to stay until the Spring Market starts to rev its engine with more homes placed on the market, cyclically around now, after the Super Bowl. The inventory will not skyrocket higher though and will continue to be an issue throughout the year. Last year at this time there were 7,823 homes on the market, 4,547 more than today. Demand: Demand finally pushes upward by 20%. Even with fewer homes being placed on the market, essentially muting the number of homes placed into escrow over the past month, demand, it managed to climb by 424 homes in the past two weeks and now totals 2,596. When there is nothing to purchase, it is difficult to witness an increase in demand. Compared to last year at this time, there are 538 fewer pending sales. The market was taking off back then, but there were a lot more homes to choose from, more than double on the market and a lot more being placed on the market every day. More homes are starting to come on the market, which will increase as we propel into the Spring Market; but, it is a matter of time to see if there will be enough to satiate the ravenous appetite of buyers or if demand will remain muted.

The Orange County Housing Report

Provided by: Steve & Karen Hakola, Hakola & Associates 877-4-HAKOLA, (949) 661-7653, Hakolas@Hakolas.com, www. HAKOLAS.COM Regency Real Estate Brokers, Inc. , DRE# 00604415, 00610273

The Distressed Market: The distressed inventory dropped by 9 homes, a 3% drop. It is hard to believe that a 9 home drop in the distressed inventory, both foreclosures and short sales combined, is 3% of the inventory, but the inventory is so low that the slightest increase or decrease appears a lot bigger than reality. There are 350 distressed homes within the active listing inventory, a level not seen since April 2007, nearly six years ago. After increasing by three homes about a month ago for the first time in 15 months, the distressed inventory has shed an additional 50 homes, or 13%. Only 11% of the total active inventory and 28% of demand is distressed; compare that to 34% of the active inventory and 60% of demand last year. In the past two weeks, the foreclosure inventory decreased by 8 homes, totaling 93, and has an expected market time of 20 days. The short sale inventory decreased by 1 home in the past two weeks, totaling 257, and has an expected market time of 13 days. Short sales are the hottest segment of the Orange County housing market today.

Sincerely,

Steve & Karen Hakola

Hakola & Associates Regency Real Estate Brokers, Inc. 25950 Acero, #100, Mission Viejo 92691

If your property is currently listed, this is not intended as a solicitation.