Tag Archives: orange county realtor

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

Spotlight On: Best Golf Courses in South Orange County

Monarch Beach Golf Links (Dana Point)
50 Monarch Beach Resort N, Dana Point, CA 92629

Arroyo Trabuco Golf Club (Mission Viejo)
26772 Avery Pkwy, Mission Viejo, CA 92692

San Juan Hills Golf Club (San Juan Capistrano)
32120 San Juan Creek Rd, San Juan Capistrano, CA 92675

Ben Brown’s Golf Course at The Ranch Laguna Beach (Laguna Beach)
31106 Coast Hwy, Laguna Beach, CA 92651

Shorecliffs Golf Course (San Clemente)
501 Avenida Vaquero, San Clemente, CA 92672

San Clemente Municipal Golf Course (San Clemente)
150 E Avenida Magdalena, San Clemente, CA 92672

Talega Golf Club (San Clemente)
990 Avenida Talega, San Clemente, CA 92673

Bella Collina Golf Course (San Clemente)
200 Av. La Pata, San Clemente, CA 92673

Finding a good home inspector

Is Your Home Inspector Legit? Why Buyers Should Inspect Their Inspectors

Of the roughly 30,000 U.S. home inspectors nationally, those in about 15 states don’t need to be licensed, according to the American Society of Home Inspectors. Among the non-licensure states—you guessed it includes California.

How to inspect the home inspectors—and find a winner

Good sources to finding a Home Inspector are professional trade associations. There are two quality associations available in California: the California Real Estate Inspection Association, CREIA and the American Society of Home Inspectors, ASHI. Both organizations require their members to pass an exam showing competence in the home inspection profession along with requiring that each member maintains continuing educational credits each year, CREIA requiring 30 hours per year and ASHI requiring 20 hours per year.

The client should interview all potential Inspectors they are considering and ask the following:

  • Is the inspector a member of CREIA and/or ASHI?
  • What does the inspection cover? Make sure the inspection and the inspection report meet all applicable requirements and comply with the CREIA and/or ASHI Standards of Practice. Both Standards of Practice are recognized by the California Legislature
  • How long has the inspector been practicing and how many inspections have they completed?
  • Does the inspector’s company offer to do repairs or improvements based on the inspection? This is against the CREIA and ASHI Code of Ethics as it is a defined conflict of interest
  • How long will the inspection take? The average for a single inspection is 2 to 3 hours for a typical single-family house; anything less may not be enough time to do a thorough inspection. Some inspection firms send a team of inspectors and the time frame may be shorter
  • Does the inspector prepare a written report? Ask to see samples and determine whether or not you can understand the inspector’s reporting style
  • Does the inspector encourage the client to attend the inspection? This is a valuable educational opportunity, and an inspector’s refusal to allow this should raise a red flag
  • Does the inspector participate in continuing education programs to keep his or her expertise up to date? One can never know it all, and the inspector’s commitment to continuing education is a good measure of his professionalism and service to the consumer

As for what to do if problems crop up that the inspector should have found, the first course of action should be to contact the inspector directly to discuss the issue. No corrective work should be undertaken before the inspector has an opportunity to review the report and be given the chance to revisit the property. Good inspectors will make good on their services if they missed something that should have been discovered during the course of the inspection. Keep in mind that the inspector is operating per an accepted Standards of Practice which states what is required to be inspected and what is not. Also many Inspectors carry professional liability, errors and omission insurance (although it is not required).


Beginner’s guide to loans

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

How much home can you afford? There are several loan programs available, and depending on your credit history, there is bound to be one that is perfect for you. Here are a few examples of the most popular programs offered today:

Fixed-Rate Loans

The fixed-rate mortgage is the most popular mortgage program in use today. Fixed-rate loans offer the borrow a fixed interest rate for the life of the loan, typically 15 to 30 years. Borrowers have peace of mind knowing that their monthly payment will not change over time. Conventional fixed-rate mortgages have underwriting requirements established by Freddie Mac and Fannie Mae, and require certain down-payment and debt-to-equity ratios to qualify. Fixed-rate loans are especially attractive to buyers who plan to stay in their home for more than a few years.

Adjustable Rate Loans

With an Adjustable Rate Mortgage (ARM), the interest rate changes periodically, and payments go up or down accordingly. Rates are tied to an index that reflects the cost of money at any given point in time. Generally speaking, lenders charge a lower initial interest rate for the ARM than for the fixed rate mortgage. If you are expecting interest rates to decrease in the future, or if you are trying to maximize your purchase power today knowing your income will rise in the future, then this loan may be right for you. Adjustable rate loans are attractive for buyers who expect to be in the home for a short period of time.

FHA and VA Loans

The Federal Housing Administration (FHA), offers loans for low-to-moderate-income home buyers. FHA loans have lower down payments, and have relatively easier requirements than conventional fixed-rate mortgages. FHA mortgages have no income restrictions and even those with lower credit scores may be considered. Past bankruptcy does not necessarily disqualify borrowers from using this program.

In addition, the Department of Veterans Affairs (VA) offers a zero-down mortgage program. To take advantage of this program, borrowers need to be among those listed as veterans and service personnel in the U.S. military. One of the biggest benefits of this program is that it eliminates the need for private mortgage insurance.

>> Review common mortgage terms

People still flock to California, despite high costs

As a follow-up to my post earlier this week…

Don’t Buy the Hype; California is Still a Top Destination for Homeowners

Source: Orange County Register

I tend to believe the idea that larges masses of Californians are moving out of the State may be a bit overstated.  California certainly has its faults, notably a high cost of living and steep educational and professional requirements for many of its fast-growing professions. But the latest Census Bureau data actually shows California’s per-capita out-migration percentage to be among the lowest nationwide.

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

When the Census Bureau recently reported California had a “negative out-migration” to other states – 129,233 in 2015, largest since the recession ended and second largest in the nation – many people said “I told you so.” But when you account for California’s largest-in-nation population (38.7 million in 2015), you find the net departures equal a barely perceptible 3 folks leaving us per 1,000 residents. (And by the way, 14 states performed worse.)

California did lose 3.5 million people to other states in the 2010-2015 period. People move. And big states will lose plenty of people, no matter what. But that number is tiny in comparison. Remember, California is huge. So, that outflow of 3.2 million folks translates to an average annual 1.55% of California residents moving out of state during the 2010-15 period. No state had a lower per-capita movement rate than California. Yes, we Californians are the least likely to move out! Next best state for keeping its citizens? Texas at 1.6 percent annually, then Ohio and Michigan at 1.8 percent.

So how does California consistently have significant net out-migration to other states? We’re definitely not good at attracting people from other states. California took in 2.9 million people from other states in 2010-15. Only Florida (3.2 million) and Texas (3.1 million) had more. But look at arrivals on a per-capita basis and you’ll see that in those six years California got new residents from other states at a yearly rate averaging 1.3% of its population. That’s well below the U.S. rate 2.3 percent of residents moving interstate and the worst in the nation, with Michigan and New York next at 1.4 percent.

So how does California’s population grow if we’re not attracting fellow Americans?

Well, new babies help, but the state’s birth rate is historically low. The real secret is California’s attractiveness to folks from foreign lands. In 2010-15, California totaled 1.7 million new residents from outside the U.S. That’s well ahead of Texas, 1.2 million, and Florida, 1.1 million. Foreigners added to the population at a 0.76% annual rate since 2010, a pace running above the nation’s 0.6% rate and 8th highest in the Union over that span.

California may look crowded and costly to other Americans. There’s a different view in the rest of the world.

It’s getting harder to afford a house in Orange County

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

Source: Orange County Register

The California Association of Realtor’s measure of what it took to buy a local home in the fourth quarter shows three of four Southern California counties with falling affordability. This index tracks what share of households can afford a median-priced, single-family house.

  • Los Angeles County: It was the only local county with improving affordability, as 28% of households could afford to buy. At year’s end, an L.A. household must earn at least $99,230 to afford the typical monthly house payment of $2,480 on the $503,400 median-priced home.
  • Orange County: The least affordable county in the region with 22% Households must earn $146,880 to comfortably pay house payments of $3,670 on the $745,160 median-priced house.
  • Riverside County: Affordability fell to 41%. Households must earn $70,250 to comfortably pay the house payment of $1,760 on the $356,380 median-priced home.
  • San Bernardino County: This is the region’s affordability hotspot at 54%. Households must earn $49,500 to comfortably pay house payments of $1,240 on the $251,100 median-priced home.

Statewide affordability in the fourth quarter was 31%, the same as the previous quarter but up a notch from 30 percent in 2015’s fourth quarter.

Least affordable counties? San Francisco (13%), San Mateo (15%) and Santa Cruz (17%.)

2017 real estate predictions

Source: OC Housing News

Bold 2017 Real Estate Predictions

Whatever is going to happen in the housing market in 2017 depends entirely on the course of mortgage rates. If mortgage rates remain below 4.25%, both sales and house prices will rise next year. The economy is improving, and with an improving economy will come increased demand. If this demand is amplified by super-low rates, housing will do well. If mortgage rates settle between 4.25% and 4.75%, sales will be down while prices drift slowly upward. A reduction in sales volume always proceeds price, and as long as mortgage rates stay below 4.75%, the pressure on pricing won’t be enough to overcome the inventory.

If Mortgage Rates Rise a Lot

If mortgage rates rise above 4.75%, sales volumes will be severely impacted and prices may drift gently lower. The increased cost of financing will not allow buyers to bid high enough to support current prices. The discretionary sellers active in the market will be forced to lower their prices if they want to sell. The activity of these few discretionary buyers will cause prices to drift down at higher mortgage rates.

What’s ahead in 2017

My first prediction is above: sales will be weaker in 2017 than 2016 due to rising mortgage rates. This will surprise all the pundits who claim that rising wages and an improving economy will overcome the impact of rising rates.

Perhaps this one isn’t controversial, but I haven’t heard it articulated elsewhere: First-time homebuyers will be priced out of every market in California. The median home prices will rise above the FHA loan limit across the state leaving first-time homebuyers without inventory within their price range.

Nearly all new construction in California will be high-density, mostly apartments, but some attached for-sale product as well.

Dodd-Frank and the Consumer Financial Protection Bureau will survive unscathed by Republican assaults (as will most of ObamaCare). Credit standards will not loosen significantly.

Trump will pass tax reform that includes a higher standard deduction, weakening support for the home mortgage interest deduction.