The Problem with Macro-Real Estate

The media has painted the real estate market with one broad stroke, releasing national statistics on a weekly basis. One week, it appears that the problems are just beginning, while the very next they claim that the worst may be over. The problem is that the national market is not a good indicator or what is happening in your hometown. The market is not some untamed animal, but made up of the dreams, hopes and desires of millions of families, not to mention the local economies. What happens in Orange County, California is going to be in stark contrast to what is happening in Detroit, Michigan.

The key to where you should be focused on is what is happening in your "neck of the woods." In Orange County, we have seen a huge increase in the number of buyers looking for new homes. Home sales increased 43.4% compared to the same period last year. At the same time, the median home price fell 40.3% as reported by the California Association of Realtors. The decrease in median price is due to two factors, (1) Distressed property sales have made up to 40% of available home inventory (2) The availability and affordability of mortgage financing is still biased toward properties selling below $417,000.

The GOOD News.

There is evidence out there that a bottom may have formed for real estate. Over the last week, the pending home sales report showed signs of strength by shooting up to a reading of 89, which was unexpected by all market commentators. This is the highest reading since October of last year. It is becoming a seller's market for lower end properties. For instance in Garden Grove, the number of active properties represents only a three to four month supply for properties under $500,000.

The "Subprime Meltdown" that that has been blamed for the real estate problems is slowly going away. The number of Suprime mortgage rate resets has been a foreclosure driver and according to First American CoreLogic, the number of resets should drop dramatically by October. This, coupled with new federal and state laws to protect foreclosure prone homeowners will surely be support for stabilization of the market. With the holiday upon us signaling the end of summer, have a happy and safe Labor Day.

If you have any thoughts or comments, I would love to hear them.

Wishing You Wealth in all its Greatest Forms

Your Friend,

Alex