Category Archives: Orange County

OC real estate forecast suggests smaller gains in 2018

Home for sale in Dana Point. Click photo for details.

As I said a couple posts back, the median sales price for homes in Orange County rose above $700K in September. But a recent forecast for the OC real estate market suggests that home prices might rise more slowly in the months ahead, around 1% through summer 2018.

Here are the home-price forecasts for the three largest cities in Orange County:

  • Anaheim: The housing analysts at Zillow expect home prices in Anaheim, California to rise by 1.4%. House values in Anaheim rose by 6.5% over the previous year.
  • Irvine: An even more modest forecast for the Irvine housing market, with an expectation for a 0.8% price increase over the next year.
  • Santa Ana: Economists predicted that home values in Santa Anna would rise by 2.1% between now and the summer of 2018. That was one of the highest forecasts they issued for cities within the broader Orange County real estate market. Santa Ana also had the highest increase in home prices over the last year, with values rising by 11%.

Is There a Price Bubble?
The Orange County real estate market is still constrained with limited supply available. According to local housing professionals, the county had about a 2-month supply of homes in May of this year. A “balanced” real estate market is considered to have about six months worth of supply. So from an inventory standpoint, Orange County is still a seller’s market due to limited supply. But homes aren’t selling as quickly as you might imagine, given the limited inventory. In May, the median number of days on market for listed properties was 40. That means houses in the area are selling a bit faster than the national average, but they’re not going like “hotcakes.” This reinforces the idea that the local housing market is becoming unaffordable to the majority of buyers.

Which brings us to the million-dollar question. Is the Orange County real estate market in a bubble, or will it enter one in 2018? Jim Doti, an economics professor at Chapman University recently told the Orange County Register that home prices in the area have reached an “irrational level.” This is because the median value is now eight times higher than the median family income. Doti went on to say: “We are in a balloon. No question.”

Source: Home Buying Institute

Do you qualify as “low income” in Orange County?

Source: OC Register

A family of four with an annual income of $84,450 or less now qualifies as low income in Orange County. A single person living alone qualifies as low income if he or she earns $58,450 or less a year.

Orange County has the fifth-highest income threshold in the nation, according to new income limits released last month by the U.S. Department of Housing and Urban Development.

Record-high rents and home prices are driving up Southern California income limits. Orange County apartment rents, for example, increased 20 percent over the past seven years, while the median sale price of an Orange County house has jumped 40 percent.

OC median home price tops $700k–a new record!

Home for sale in Dana Point. Click photo for details.

According to this article from the OC Register, property values throughout Orange County have risen to a record high for the third month in a row.

Highlights from the article:

  • The median price of a home hit $710,000 last month, up 10.9%
  • That’s up $25,000 from August’s median of $685,000, the sixth-biggest one-month price gain in records dating back to 1988
  • Home prices also rose in September throughout Southern California, pushing the regionwide median to its bubble-era high of $505,000 for the first time in a decade

Last month’s median almost elevates Orange County home values to Bay Area levels, where the nine-county median was $742,000 in August.

Will values keep going up? Only time will tell.

Listing of the week: 33541 Avenida Calita

My pick this week is a great family home in San Juan Capistrano.

33541 Avenida Calita
4 bed, 3 bath
3,266 square feet
$999,000 (price just reduced!)

Here’s why I think this is a great buy:

  • A property like this, nestled high in the hills of Meredith Canyon, doesn’t come on the market often
  • Excellent location–right in the middle of Dana Point and San Juan Capistrano, 5-minute drive to downtown San Clemente
  • Great ocean views
  • Peaceful, quiet neighborhood–ideal for a family
  • Low HOA dues ($98) and no Mello Roos

Want to check it out? Contact me today.

Listing of the week: 34731 Calle Loma

My pick this week is this remodeled tri-level in Capistrano Beach.

34731 Calle Loma
4 bed, 3 bath
3,100 square feet
$1,350,000

Here’s why I think this is a great buy:

  • So many great features–picturesque ocean views from multiple floors, enormous great room, fireplace, gourmet kitchen, well-manicured backyard
  • Great square footage (3,100!)
  • More than $200k in improvements
  • Great in-law or guest suite downstairs (includes kitchenette and separate entry)
  • Close to the beach and Pines Park

Want to check it out? Contact me today.

Are people fleeing southern California?

 

Home for sale in Dana Point. Click photo for details.

Source: OC Register

During the first 10 months of 2016, 5,706 residents of Orange, Los Angeles, Riverside and San Bernardino counties took out loans to buy a primary residence out of state, a CoreLogic analysis of mortgage applications shows.

Lower home prices and taxes, less congestion, family ties, or a more conservative environment are luring Southern Californians to leave the state, some transplants say. But housing costs clearly are the chief factor. Southern California’s housing market is one of the most expensive in the nation, with the median house price averaging $473,000 in 2016, double the U.S. average. And the costs are even higher in Orange and Los Angeles counties, which accounted for most of the region’s out-migration. The CoreLogic study showed one out of every four Los Angeles-Orange County homebuyers moved out of their county.

About 8.3 percent moved to the Inland Empire, while 8.2 percent left the state altogether. CoreLogic’s study is just the latest in a series of reports showing California among the nation’s leaders in out-migration, trailing only New York and Illinois in net out-migration numbers. About 266,000 more people left California than moved in from other states from 2010 to 2015, U.S. Census data show. Orange County lost nearly 11,000 residents to other California counties or other states. Los Angeles County lost almost 270,000 but Riverside County offset that loss with a net gain of 66,000 people.

To be fair, that doesn’t include people moving to California and the region from overseas, which more than offsets the loss to other states in California and Orange County. It also doesn’t take into account California’s largest-in-nation population. When taking population into account, net migration to other states accounted for 0.2 percent of all residents in 2015, 24th highest in the nation.

How much longer can southern CA home prices keep going up?

 

Home for sale in Dana Point. Click photo for details.

Source: OC Register

For 62 straight months, Southern California home prices have gone in one direction. Up. Five years ago, you could snatch up a median-priced condo in Orange and Los Angeles counties for about $280,000, 76 percent less than today’s prices. A median-priced house cost $323,000 in L.A. County five years ago and $495,000 in O.C., about $260,000 less than today’s prices in both counties.

What should a buyer do now? Will prices keep rising? Or are prices close to the top?

The OC Register asked a half-dozen economists and industry analysts what the future holds for home prices in the region. Among their answers:

  • Southern California home prices aren’t about to drop. In fact, they believe prices will keep rising for two more years, at least, and possibly longer.
  • The market isn’t in a bubble — yet — although bubble talk is starting to “raise its ugly head” at cocktail parties, one economist said. Some analysts are saying Southern California home prices are showing signs of being overvalued.
  • If you’re thinking about buying a home, now just might be the time to act — provided you don’t overextend yourself and you plan to live there awhile.

Here are five key questions about where Southern California home prices are heading in the future.

Q: Are we at the peak?

A: Not one of the economists interviewed thinks we are, at least not for entry-level homes. Luxury homes, priced at $2 million and up, may have reached a price peak and are facing an oversupply of listings, analysts said.

Nominal home prices have surpassed pre-recession highs in Orange and Los Angeles counties. Riverside and San Bernardino counties are about 18 percent below their price peaks. But none of those counties has reached pre-recession peaks in inflation-adjusted dollars.

If home prices were to keep rising at the current appreciation rate, and inflation were to continue at the current rate, Orange County’s median home price won’t get back to the pre-recession peak after inflation for about two to three years.

Another fact to consider: During the last market run up, Southern California home prices increased year over year for 126 consecutive months, or 10½ years. That’s twice as long as the current streak in home price gains.

Lastly, analysts say home prices aren’t rising that much. Price increases averaged 6.3 percent in Southern California in the past year, ranging from a low of 5.4 percent In Orange County to a high of 7.9 percent in San Bernardino County.

Q: How much longer will home prices go up?

A: Two years at least, most economists interviewed said. Possibly longer.

Projections by the California Association of Realtors show a gradual decrease in home price appreciation over the next few years, said Oscar Wei, a senior economist for the group. For example, CAR projects prices will go up 5 percent statewide in 2017, 4 percent in 2018, and 2.5 percent in 2019.

Assuming the Gross Domestic Product continues to grow at 2.5 percent and mortgage interest rates stay below 4.5 percent, Southern California home prices could be going up at 6 percent a year for the next six to seven years. At 6 percent a year, the median home price could reach almost $700,000 in Southern California by 2023, $500,000 in Riverside County, $800,000 in Los Angeles County and nearly $1 million in Orange County.

Q: Are we in a bubble now?

A: No.  Los Angeles and Orange counties had an 11½-month supply of homes for sale in the spring of 2007 compared with under four months available this year. Riverside County had an 8½-month supply of listings for sale, vs. just under four months today; San Bernardino County had a 16½-month supply, vs. four months today.

In California as a whole, 43 percent of borrowers had second mortgages in 2006, vs. 4.8 percent last year.  California’s median down payment was 11.8 percent of the purchase price in 2006, vs. 18.6 percent last year. To sum up, we don’t have as many people over-leveraging their homes.

Q: When is the next recession?

A: Not for at least two years, economists said. “Over the next two years, the recession probability is very low,” said UCLA economics professor William Yu, a member of the team producing the UCLA Anderson Forecast. “But beyond two years, that is very difficult to say.”

A major global calamity — like a new Korean War, a messy breakup of the European Union or a surge in oil prices — could trigger a recession, but forecasting exactly when is an extremely murky business, said Joachim Fels, a Pimco managing director and global economic adviser.

Q: Is it too late to buy a home?

A: Industry analysts have advised renters for the past four years to get into the housing market while interest rates and prices still are low. While it’s definitely more expensive to buy a home today than it was a few years back, the cost of buying will be even greater down the road.

If you wait, home prices probably will go up about 8 percent or so in the next couple of years. Plus you’re probably going to see some increase in mortgage rates. Analysts predict mortgage rates will go up half a percentage point this year and half a percentage point next year.

Source: OC Register