AROUND THE CORNER NewsLetter By Renee Baccaro

February 2008

February 2007 newsletter – individualWHAT DOES ONE BELIEVE ABOUT THE HOUSING MARKET?… If all you did was read the papers, you would be very confused about what’s going on.  One paper says it’s sluggish, another says ups and downs, one says don’t hold your breath.  WANT SOME RELIABLE INFORMATION?  THEN, READ ON… The truth is the market is fluctuating and depending on what day an article is written, will depend on the spin.  There is no spin here, only facts.  The facts are the numbers in terms of volume and median price are going to bounce around a little.  That’s normal for a stabilizing market.  Experts from USC to UCLA to The Kiplinger Editors have all weighed in on the market and the consensus from the experts is that this is the recovery year and we should see full stabilization by the beginning of 2008.  But real estate isn’t like stocks, which are a passive investment that you can hold for as long as necessary.  You don’t celebrate birthdays in your stocks or outgrow your stocks with the birth of your next child.  We live in our homes and situations come up which require that we sell or buy now.  Thus is the current market and it’s ok if you need to buy now, or sell now.  If the price is a little soft on your sale, you will recoup it on your buy whether here or out of state.  If you are moving out of state, don’t lament the money you’re “losing” by selling now.  Instead, celebrate the 20% annual appreciation you received the 5 years prior to 2006.  This is going to be a positive year for California real estate.  That doesn’t mean we are going back to a red hot appreciating market.  That would be bad for Californians right now.  It’s positive because buyers know they have a good market to buy in and they also know that prices aren’t going to tumble anytime soon.  They are adjusting and that’s all they’re going to do.  Sellers have accepted that the hot market is over and that they must be realistic about their list price.  Increased competition will also keep prices curbed even as we enjoy great interest rates.  Read on to see what happened since last month’s letter and why there is reason to be optimistic.  ORANGE COUNTY INCOMES ARE UP… The average income went up 4.4% for 2006 and it is projected to go up 4.2% for 2007.  Specifically, the average Orange County household reported an adjusted gross income of $71,188 in 2004.  This is the most current data available.  The increase ranked Orange County seventh in the state in average household income and number one in Southern California.  As incomes continue to grow, the affordability index will rise and pent up demand for housing will begin to grow.  This is part of every real estate cycle. (The Kiplinger Letter)  (Internal Revenue Service) INFLATION TAME AS ECONOMY SHOWS VIGOR… Inflation figures released at the end of January show the annual mark to be hovering in the low two percentile.  In other words, this is exactly what experts consider “normal” inflation.  According to an article in the Orange County Register consumer prices in Southern California rose 4.3% in 2006, a slight decrease from the inflation rate of 2005.  As for the vigor part of the headline, national economic reports implied that the US economy was regaining its steam as 2007 gets under way but without generating inflation.  Even better news for the housing market was the Commerce Department report that said housing starts unexpectedly climbed 4.5% in December. WHAT WERE THE ACTUAL NUMBERS… The total number of sales was 2,719.  There were 1,593 single-family resale, 581 condominium resale and 545 new home sales.  The median price was $642,000 and that was up 4.2% from November.  The single-family median price was flat at $665,000 as were condos at $440,000.  The increase came largely from new home sales.  There were only 234 properties sold under the $400,000 mark.  There were 277 sales from $400,000 to $500,000.  The number grew a little to 417 sales from $500,000 to $600,000.  The number actually dropped for the next range which was $600,000 to $700,000.  Finally, as expected, the biggest number was for the over $700,000 price range with 834.  The total number of sales was a 28.9% decline over December 2005.  But if numbers were compared with 1998 or 1999 (at the time considered solid performance years), December 2006 would compare above average.Notices of Default were up 102% with 688.  Remember, they had no where to go but up having been so low for so long.  That being said, the increase is due in no small part to consumers who bought more house than they could actually afford through interest only no money down loans that had 2 to 3 year teaser interest rates.  These consumers have seen their payment more than double.  This is causing the distress market to increase rather than a drastic turn in the economy or real estate cycle.  Actual foreclosures came in at 121.  Still a low number considering there are over 600,000 properties in Orange County.  The monthly payment index remained basically unchanged at $2,815. AS YOUR REALTOR, I WILL WATCH ALL MARKET INDICATORS… Please call me with any questions and concerns regarding the market and how it might impact decisions you need to make.  I am committed to keeping fully informed so I may better serve my clientele.  I am current with today’s technology and make sure that my marketing strategies reflect the current market trends.  See you next month.