home prices – OC Neighborhoods

Facts About Real Estate in a Recession

Ever since the Great Recession from 2008-2009, Orange County, California’s housing market still hasn’t completely come back. The number of home sales is still low, as well as employment gains.

Each kind of residential construction category continues to have challenges in this high-cost county, leaving prospective home buyers looking for more quality in existing homes for sale. Not everyone wants to buy a home and then start a home renovation project. Most of the time searching for a home is a challenging task.

As the recession in 2020 passes through, savvy and experienced agents already positioned for the slowdown in sales volume and home appreciation continue their job here in Orange County and across the state. In the next three decades, it’s estimated that mortgage rates will be rising. The reason why is because lowering interest rates is not possible anymore since we are basically at zero in early 2020.

Here’s the trends ReportsOnHousing found in the region’s counties …
Los Angeles County: Listings of 8,648 residences, a 32% drop. Escrows of 5,387 — a 12% increase. Market time of 48 days, down 31 days.
Orange County: Listings of 4,161 residences, a 35% drop. Escrows of 2,583 — a 14% increase. Market time of 48 days, down 36 days.
Riverside County: Listings of 6,762 residences, a 27% drop. Escrows of 3,140 — an 18% increase. Market time of 65 days, down 39 days.

With the Corona Virus shutting down the US economy and other countries worldwide, it goes without saying what the next few months will bring is anyone’s guess. The economic impact of the virus will be wide ranging, influencing everything from the desire to go to open houses by home buyers and real estate agents, employment rates, to whether sellers decide to list their property for sale or hold off until the economy improves.

Lots of home buyers were trying to analyze numerous factors back in 2008 as well. Home prices in the US, including California, and the stock market fell precipitously. The S&P 500 eventually lost half its value from its all-time high.

Recessions and falling home prices aren’t anything new. Housing prices took a nosedive during the Great Depression of 1929 and in hindsight, that housing recession wasn’t really a good time to buy real estate in the short term because it lasted 10 years.

Each recession on average lasted a period of 11 months.
1 A lot of these periods featured high interest rates, declining home values, double-digit rates of unemployment, and very low levels of consumer confidence. What each downturn offered was a great time to buy real estate.

It’s advised that you be well aware of the advantages and disadvantages before deciding to buy.

Buying Homes in a Housing Recession
Your thought process should not be how low will prices go in a recession. It should be before prices go back up in Orange County how much home you can afford to buy.

Advantages of Buying During a Recession
Sellers listing their homes for sale too high in a down market is not uncommon; Sometimes they are simply in denial. The local market determines the price you will sell your home.

Although, it might be a good idea if you find a home that’s been sitting still on the market for a longer than 90 or 10 days. At that time, the seller may be prepared to agree to a lower price reduction, even if their list price was basically unchanged the last few several months

Downsides to Purchasing During a Housing Recession
Not every home you find for sale is going to be a good deal. Some homes will need to have wide-ranging repairs, or the neighborhood is not acceptable. The major point when buying a home is the location, no matter the state of the current economy.

Less Bidding Wars for Orange County Home Buyers

When two or more buyers make offers on the same property it’s considered a bidding war. The seller usually accepts the highest and best offer among the multiple buyers along with terms they like as well. Over recent years this was the typical situation in Orange County depending on the price point. That’s when the housing market was unquestionably in a seller’s market and the inventory of homes was lower.

This is fantastic news for potential buyers. They no longer have to be concerned with competing against as many as 20 offers when the seller’s market was at its peak. In addition, there’s more homes for sale to pick from, and mortgage interest rates have been recently dropped. This is becoming a great time to buy a home.

The findings of a February 2019 report by Redfin reveals:

Only 13 percent of offers written by Redfin buyer’s agents were in a bidding war. That number represents a 53 percent drop from the previous year.
In every market where Redfin agents serve home values decreased.
California housing markets that had the largest percentage declines in home bidding wars were: San Francisco (-64%); Los Angeles (-57%).
One major California city is still among the most competitive and that’s San Diego; yet only one out of five offers by a Redfin agent had buyers that were involved in a multiple offer situation. That number is down by more than fifty-percent versus a year ago ¹.

Meanwhile, since January 2019 housing supply has been increasing.

According to the most recent RE/MAX National Housing Report, sales of homes have declined for six straight months and is the biggest increase in ten years.
• RE/MAX analyzed 54 different markets and it showed an average inventory rise of 6.4 percent.

On March 26th, additional evidence of home sales slowdown came out when the S&P CoreLogic Case-Shiller index showed home prices in Los Angeles and Orange counties rose 2.9% in January from a year earlier, but that was substantially lower than other months ². In Orange County, sales dropped 17.1% and prices fell 1.4% to $700,000.

What is occurring is actually quite natural according to experts. Through the past few years, home prices went up quickly until they reached a price level that many buyers became unwilling to pay the high prices. Meanwhile, interest rates were rising and topped out in November 2018. Homes started getting less and less offers and did not sell as quick.

Inventory of homes is also climbing due to buyers sensing the market is near a top, and people don’t want to buy at the peak.

What does this data mean for home buyers?
It’s actually good news if you’re shopping for a home. There is less pressure for home buyers to accept a house without their desired features such as a large kitchen, a true bedroom with a closet, two-full baths, or a two-car garage.

Market conditions are in your favor get a home soon
Many experts agree: If you qualify, make the most of today’s housing market prices and purchase a home since multiple offers are way down. Real estate is a long-term investment. So if you come across the house you want, do it now.

Then again, make sure you’re in the right financial position to take advantage. Know what’s on your credit report and make sure there’s not any errors. Get pre-approved for a mortgage prior to searching for a home. Use an experienced real estate agent to achieve your goal.

Sources:
1. Orange County market slowdown – https://www.ocregister.com/2019/03/27/market-slowdown-lingers-as-february-home-sales-drop-12-corelogic-reports/
2. SoCal Home Prices: https://www.latimes.com/business/la-fi-southern-california-home-prices-20190327-story.html

Orange County’s Most Affordable Neighborhoods

Orange County’s Neighborhoods that are the most affordable with decent commutes to the work hub of Irvine.

Trying to find an affordable place to live in Orange County has become gradually harder as of late even if year over year sales have declined. According to Redfin the average sale price for a single-family home in Orange County is $690,000. Although, there are still areas in Orange County where you can buy a home for a reasonable price and still commute to work to its work hub, Irvine.

Some of these areas are scheduled for redevelopment, so buying a home soon could become a smart investment choice. The following are some of Orange County’s most affordable neighborhoods, based on recent data of the average home sales price. Some of these communities are true Orange County gems!

Rancho Santa Margarita
Average Sales Price: $604,834
Median Home Value: $660,700

Rancho Santa Margarita 92688: $575,000 median, down 7.3 percent. (OC Register Nov 26, 2018)

A master-planned community with a population of approximately 50,000 residents with a very high median household income of $102,975. It offers enchanting scenery, safe neighborhoods, newer homes, and a great school district. The city’s local businesses have been a big part of the city’s growth dating back to 1999.

Whether you’re a resident of esteemed neighborhoods like Dove Canyon, Melinda Heights, Rancho Cielo, or any of the other neighborhoods, you’ll find single family homes and condos available.

Rancho Santa Margarita always a variety of festivals, concerts, and other family-friendly activities going on that make living there really enjoyable. Residents use the 241 and 133 toll roads or carpool and use the HOV lanes to and from Irvine.

Aliso Viejo
Average Sales Price: $630,451
Median home value in Aliso Viejo is $632,229

Features a lot of newer built homes with interesting architecture and scenic views. Bordered by Laguna Beach, Laguna Woods, Laguna Niguel and Laguna Hills, Aliso Viejo is a very nice neighborhood with homes enabling buyers to purchase at a very attractive price tag.

Santa Ana
Average Home Price: $566,474
Median Home Value: $549,900

Santa Ana is the underdog that’s seen major improvement over the past year. It was once considered more of a rough area with a long road ahead, but the turn-around has been dramatic and fast. Young people have put a lot of energy into turning this section of the area around, and the ripple effect has been seen across the city. Its additions of hip, new restaurants and pubs and, especially, their contributions to the community with their artistic endeavors will continue to make this area popular for both students and young professionals for years to come.

The French Park, Floral Park, and Park Santiago neighborhoods

Garden Grove
Average Sales Price: $604,834
Median Home Value: $615,100

Garden Grove’s neighborhood known as Little Saigon, has the largest Vietnamese community in the US. This translates to some of the best Vietnamese restaurants in the country.

A part of the city is just 1 mile away from Disneyland, seven miles from Knott’s Berry Farm, only nine miles to the local beaches and 10 miles to Irvine and John Wayne Airport. Another Garden Grove popular area “Little Korea” runs east to west on Garden Grove Blvd. mainly between Brookhurst Street and Harbor Blvd.

This wonderful city is a great place to call home with all the nearby entertainment, eateries, festivals, and events.

The city has an array of home choices from single-family home to condos and townhomes, and manufactured homes. With this variety also comes a range in price. Home appreciation since 2008 to 2018, has been approximately 8% annually.

The median home price in southwestern Garden Grove zip code 92845 is $673,500. Yet that is still good news for home buyers, as it’s below the $726,525 FHA and conforming loan limits. This means borrowers may qualify for a 3.5-5% down financing.

Lake Forest
Average Sales Price: $604,834
Median Home Value: $718,900

Lake Forest is located off Lake Forest Drive and Bake Parkway, where the 5 and 405 freeways split going north

The city is full of young professionals, families, coffee shops, highly-rated public schools, and features over twenty-six public parks. Among them is the Regional Wilderness Park which offers a wide variety of outdoor recreation the entire year including hiking, jogging, swimming, biking, boating, and basketball.

Homeowners are very satisfied they live in a fun and safe area with low property taxes and varied architectural styles. For residents who live very close to the 5 freeway in Lake Forest or Mission Viejo, you can be in Irvine in 15-minutes or less as long if the brief stretch of freeway is not too congested.

Tustin
Median Home Value:$720,500 ** Zillow
Median Sales Price: $678,750 ** Trulia

Tustin is located north of Irvine and east of Santa Ana is referred to as the “City of Trees” thanks to the tree-lined streets seen throughout the city. The city has highly rated public schools in North Tustin and the foothills. Architecture tends to be Contemporary, Ranch, European, Tuscan, and Mediterranean styles.

Westminster
Average Sales Price: $604,834
Median Home Value: $660,700

Another leading city with an affordable home values compared to other OC cities, Westminster has a fairly stable housing market. It has many local conveniences. With its close proximity to the LA metropolitan area and Little Saigon, Westminster offers great fun for families.

Popular neighborhoods include Bishop Place, Boulevard Gardens, Civic Center, Del Prado Bolsa, Edinger, Garden Grove, Green Lantern Village, Huntington Manor, Midway City, North Huntington Center, Smeltzer,Windjammer, Westminster, Westminster Abbey, and The Pointe.

Although not as close to the 405 freeway, additional values and deals can be found in adjacent cities such as Cypress, La Palma, West Anaheim, and southern part of Buena Park.

As Orange County Housing Sales Slow, Will Sellers Pay Buyer Closing Costs Again?

During recent months, there’s been various reports and data that indicate a slowing trend in the Orange County housing market. The reason is a larger supply of homes have been listed by agents and even for sale by owners. Sellers dropping their asking price is becoming more typical. The result is home prices are still increasing but at a slower rate than during the years of 2012 through 2016.

Another trend that tends to occur when this situation happens is that home sellers in Orange County are more willing to pay some or all of the buyer closing costs.

Will ‘Sellers Concessions’ Return in the Near Future?
In a real estate market where there are multiple offers or when properties are under contract quickly seller concessions or contributions are uncommon.

The housing market in Orange County has been a slow fractional decline in the last couple of years.

In a buyer’s market, eager homeowners are more amenable to cover the buyer’s closing costs for the simple fact that they want the home off their hands. Nowadays, they will consider all offers even the one with the weak financing and the contingencies included.

As the data suggests, housing demand has dropped off a bit. And while inventory is still a buzz word among agents in certain parts of Orange County, homes are remaining active (not under contract) longer today than the last couple of years (on average). Price reductions are commonplace in the Orange County housing market.

Lowering the list price is among the numerous strategies sellers utilize to improve the odds of selling their homes. Offering to put money in to help with the buyer’s closing costs is an additional solution.

The majority of mortgage programs offered to borrowers today allow sellers to contribute a specific amount of money to be applied to the buyer’s closing costs. In some cases, homeowners apply this method to bring in more offers, simply to sell their home faster.

Changes in the Orange County Housing Market
These type of seller contributions have been unheard of during the past few years, due to the fact that the market mostly favored sellers than buyers. However, there is apparently a gradual shift occurring in the Orange County housing market. It’s logical to think that a growing number of sellers will begin to contribute to the buyer’s closing costs to entice buyers, especially if the homes are not getting any offers.

A November 2018 press release from the Southern California Multiple Listing Service stated:
“A lot of sellers are sensing the change. Prolonged times to get under contract make sellers stressed about a quick sale,’ he explained. Additionally, it said, brokers are reporting some sellers’ pricing is still accommodative ‘despite a price decrease as buyers capitalize on the seller’s motivation to get their home sold.’”

Home-price appreciation is another sign that the Orange County housing market is at long last beginning to slow down. There was a period when the median home value in the area was going up by double digits annually each year. Nonetheless price growth has decreased somewhat.

As a matter of fact, a recent housing report forecasted that home values in the Orange County would rise somewhere between 1% and 2% during 2019. That’s a huge difference from the ten-percent plus price appreciation that homeowners and prospective buyers experienced through 2016 and 2017. The slowdown in price is probably due to several unique factors, such as the ability to afford for some potential home buyers.

The main takeaway is that the Orange County housing market in late 2018 is changing from two- to- three years ago. Sellers understand this aspect and are adjusting heir method of selling and marketing their home.

Orange County Real Estate in the Next 2 Years: Up or Down?

The housing markets of Los Angeles, Orange County, San Diego, San Jose, San Francisco and Sacramento are bursting at the seams with an overall price growth rate of 10% annually since 2012.

The most recent forecasts for the Orange County housing market indicates that home prices will continue to rise in 2018 & 2019, attributable to low inventory and strong demand in both North and South County.

Orange County Housing Market During The Last Two Years
In 2016, the median home price for a single family home in Orange County went up by four percent from 2015. The same four-percent increase happened in 2017 too. In mid-2018, the median home value in Orange County is $761,700, based on data from multiple sources. In comparison to June 2007, Orange County’s median home selling price touched $645,000 — in that crazy period of high-risk lending and home buying frenzy.

Avg. Home Price 3/2018 MtM Yoy

Orange County $824,000 2.4 8.5

*MtM – Month to month percentage change
YoY – Year over year percent change

California housing market to Modestly Rise in 2018
Inventory is partially responsible for the increase in home values. There’s more than enough demand from prospective buyers, but there’s a lack of homes for sale to satisfy that demand. Home buyers are fiercely competing for low inventory, especially for homes priced at the lower end where multiple offers thrive.

A Two-Month Supply of Homes for Sale
From a home inventory perspective, Orange County has 2-month supply of homes for sale as of May 2018. That’s far lower than the 5- to 6-month inventory level that real estate economists deem a “balanced” housing market. However, the two-month supply is a 10 percent increase from a year ago.

Perhaps the NIMBY’s (Not in my back yard) are correct in that there is enough inventory. There’s no need to build in or near ecologically sensitive areas.

Home Affordability
Yes, it can be challenging for the average household to afford an Orange County home. According to data from the Orange County Register, it was worse in 2007. A comparison shows 21 percent of Orange County household are able to comfortably purchase a home this spring vs. just 12 percent in 2007.

Another statistic shows that 14 percent of homes were considered “affordable” in 2017 vs. 4.4 percent a decade ago. Keep in mind, interest rates are 2.8 percentage points less than 2007 and Orange County median household incomes are 12 percent higher!

As a home buyer in a market with strong demand, you’ll need to put forth your best possible effort when bidding in this market. Start the process of getting pre-approved for a mortgage, researching the neighborhood where you want to live, and hire a real estate agent to help you successfully buy a home in this tight, highly competitive market.