“Steady as she goes!”… I hope.
I haven’t blogged in a while because, thankfully, I have been busy. Another reason is that “my crystal ball is cloudy”. It has been cloudy since the crash of 2007 or maybe even since the craziness that started in the hot market of 2006. Right this minute things in the local real estate market seem quieter than they should. I was wondering if it was my imagination or if it is really true.
After reviewing the charts on the OC Housing Market provided by Steven Thomas, I see that my gut feeling is right. Inventory is up year over year about 40% (but still low) and sales are down about 30% year over year. That tells me that we are in a more normal market and that many buyers still can’t find the right house. The chart below shows the housing inventory in blue and the pending sales in green.
Again my intuition tells me that it is very difficult to guess what the long term housing trends in the Orange County area will be. The one constant is that people need a place to live and there will always be movement in the housing market due to “life events”. For now the investors are gone, sellers are looking for peak prices and buyers don’t want to pay more than “FAIR Market Value”.
Mike Pallin, a local real estate trainer said recently,
“I want to offer my take on why an “up” real estate market is a thing of the past forever.
Because the real estate market is such an integral part of the economy, neither one is insulated from global economic forces. They used to be, back in the good old days. But ‘global economic uncertainty’ is now a permanent fact of life and we live in one big interconnected world economy.”
In the same article Mr. Pallin said,
“Real estate is a consumer market, and consumer confidence drives our financial markets. Feelings. Nothing more than feelings. And with the constant daily flood of market information, people feel unsettled and confused.”
Today I was reading a Bloomberg article by Megan McArdle, telling her personal home buying story as it is playing out in the Seattle area. Megan purchased in 2010 in a “transitional neighborhood,” which can be described as a rundown neighborhood being gradually renovated by enterprising home buyers who couldn’t afford the more upscale neighborhoods. She is pondering the Price Bubble she sees in the Seattle area.
Which of these stories is correct? I’m not sure I know, and indeed, the answer may be different for different cities. But there are two things I do know: I’m very glad we bought our house in 2010. And I’m not going to count on any of our new-found equity until I see what happens when the Federal Reserve really begins to tighten up the money supply.
My point is that the housing market here in the Orange County CA area is somewhat unsettled because home buyers are unsettled and uncertain about the future, both politically and financially. What is certain is that first you need a place to live. Secondly, the OC is a wonderful place to live. After all there are only five Mediterranean climates in the world and this is one of them. Look how people are coming from all over the world to live here. Thirdly, interest rates for now are still amazingly low. And fourthly we are at stable price levels that make financial sense for this area. In most neighborhoods we are still somewhat below the peak prices of 2006-2007.
I cannot guarantee lots of future equity for buyers and sellers in the OC but what a great place to live. I believe that it is a great time to buy or sell. (OK, maybe you expected me to say that). Remember “real estate markets are LOCAL”, so don’t translate every national article you read to our area.
Email me for more charts or local Orange County information or call 949-456-0505 for help buying or selling homes in Laguna Niguel, Aliso Viejo, Dana Point, Mission Viejo and Laguna Beach.