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Red Hot Housing Market?

Red Hot Housing Market?

The OC Register this week garnished the front page with a giant “O.C. Housing Market Red-Hot” headline. I think this columnist is late to the party, or maybe I don’t understand her definition. In the last 45 days or so since the interest rates increased over one point the market has “cooled” substantially. “Robust supply of homes leads to 42% sales increase.” For the last year the supply has been extremely low as well as interest rates. This has led to multiple offers and increasing median prices that were referred to. Those in the trenches realize that it was the low interest rates and more importantly the loss of the supply of “distressed listings” that has created the increase number of sales. Robust supply is now becoming more of a reality and we are headed to a more normal market because of two things. The interest rate increase means the borrowers can only qualify for 90% of the house that they could qualify for two months ago. In addition many sellers have come late to the party and have built into their pricing additional increases which are NOT now occurring due to the interest rate hike. Many homeowners that have been underwater or who bought at the peak of the market are hoping that they can now sell at previous peak prices which may not happen. Many listings are now coming on the market at unreasonable prices. My observation is that we have recovered to 70% to 90% of peak pricing (depending on neighborhood and price range) but we are not completely back to those peak numbers. I have...

The Rate Rush is Over and Home Buyers Rethink Their Positions

Home buyers in Laguna Niguel and Dana Point rushed to get that much-desired home and lock in the all-time low rates this spring. This combined with very low inventory created multiple offers on any properties that were desirable and affordable (relative terms, I know). Half way through June the rates began to rise from the mid 3s to the mid 4s and higher. During this rise some buyers were lucky enough to get in contract and lock rates. One of my buyers caught it on the rise and locked at 4.2%. She is very happy she did. Home buyers seem to be cautious right now, wondering if the rates will bounce back a little or keep on climbing. I certainly can’t tell you. During the term of my real estate career we were always thrilled to see rates below 5.5% and below 5 was almost unheard of. Yes, I have the story of getting 9.75% on my first house and bragging about it but we all know the prices were much lower back then. The other thing I have noticed over my sixteen years in real estate is that when rates and markets change it takes a while for the buyers to process the information and get used to the idea. I think that is what we are seeing right now. Since rates have risen the buyers are now paying 25% more for their borrowed money so the purchasing power is less. Back to the lender they go to figure out just how much home they can qualify for in this new environment. Added to that is the August...